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Short questions

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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.