The Circular Flow of Income
4 questions
With the help of a circular flow of income diagram, explain how equilibrium is determined in an open economy and consider whether a budget deficit or a trade deficit is more likely to cause lasting disequilibrium.
Assess whether an increase in investment in new infrastructure projects will always have a positive impact on the circular flow of income in an economy.
Explain how the circular flow of income in an economy changes when that economy moves from a closed to an open economy and consider what determines the extent of the change.
With the help of a diagram, explain what is meant by the circular flow of income in an open economy and consider the extent to which it can explain economic growth in such an economy.
Explain the circular flow of income in a closed economy and consider the extent to which the circular flow of income changes as an economy becomes an open economy.