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Economics help notes for students, Study notes of Volcanology

Economics help notes for students

Typology: Study notes

2021/2022

Uploaded on 04/11/2025

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Economics Notes: The Circular Flow of Income
1. Basic Model
Shows how income flows between households and firms.
Households provide factors of production (land, labour, capital,
enterprise).
Firms pay wages, rent, interest, and profits in return.
Households spend income on goods/services produced by firms.
2. Injections and Withdrawals
Injections (add money to the economy):
oInvestment (I)
oGovernment spending (G)
oExports (X)
Withdrawals (remove money from the economy):
oSavings (S)
oTaxes (T)
oImports (M)
3. Equilibrium
National income is stable when injections = withdrawals.
If injections > withdrawals economy grows.
If withdrawals > injections economy shrinks.
4. Importance of the Circular Flow
Helps understand how changes in spending affect the economy.
Forms the basis for calculating national income.
End of Notes
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Economics Notes: The Circular Flow of Income

1. Basic Model  Shows how income flows between households and firms.  Households provide factors of production (land, labour, capital, enterprise).  Firms pay wages, rent, interest, and profits in return.  Households spend income on goods/services produced by firms. 2. Injections and WithdrawalsInjections (add money to the economy): o Investment (I) o Government spending (G) o Exports (X)  Withdrawals (remove money from the economy): o Savings (S) o Taxes (T) o Imports (M) 3. Equilibrium  National income is stable when injections = withdrawals.  If injections > withdrawals →economy grows.  If withdrawals > injections →economy shrinks. 4. Importance of the Circular Flow  Helps understand how changes in spending affect the economy.  Forms the basis for calculating national income. End of Notes