Short questions
Question 1
Distinguish between saving and investment.
Question 2
"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
Question 3
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
Question 4
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.
Question 5
Explain why GDP may not always be the best measure of economic welfare.
Question 6
Analyse two possible factors that will lead to GDP understating the level of economic welfare.
Question 7
Analyse two possible factors that will lead to GDP overstating the level of economic welfare.
Question 8
Explain the main problems with using GDP as a measure of economic welfare.
Question 9
Evaluate two measures of economic welfare and compare these to GDP.