Distinguish between saving and investment.
"Saving is a leakage from, and investment is an injection into, the circular flow of income." Identify:
(a) two further examples of a leakage
(b) two further examples of an injection
Using a three sector open circular flow of income model:
(a) Explain what is meant by equilibrium
(b) Describe the conditions for the circular flow of income to be in equilibrium
Explain what you would expect to happen to the size of the circular income flow if there was an increase in the amount of government spending into the flow.
Explain why GDP may not always be the best measure of economic welfare.
Analyse two possible factors that will lead to GDP understating the level of economic welfare.
Analyse two possible factors that will lead to GDP overstating the level of economic welfare.
Explain the main problems with using GDP as a measure of economic welfare.
Evaluate two measures of economic welfare and compare these to GDP.