Circular Flow Model

Question 1

Injections into the circular flow

Answer 1

cause an increase in GDP, AD and incomes.

Question 2

Impacts of injections into the circular flow are:

Answer 2

Investment increases, Investments in export receipts, increase in consumptions, decrease in income tax, increased government spending.

Question 3

Leakages from the circular flow cause..

Answer 3

A decrease in GDP, AD and incomes.

Question 4

Impacts of leakages from the circular flow cause..

Answer 4

Decrease in GDP, decrease in AD and decrease in incomes.

Investment decreases, increase in import payments, decrease in consumption, increase in income tax, decreased government spending.

Question 5

GDP = AD =

Answer 5

Y = C + I + G + (X - M)