Economicsoutcomeguide.docVIP

Assessment task instructions The UK economy is made up of millions of people and billions of economic activities. Within these activities, goods and services are created and exchanged. It can be complicated at times but a simple model explaining in general terms how an economy is organised and how those involved interact is a good start. Question 1 Draw a diagram showing the participants of the Circular Flow of Income and explain how it operates. The simple model is sufficient for a beginning, but an economy is more complex and involves external influences, which can raise or lower economic activity. Question 1 A circular flow diagram clearly identifying the following in their correct places: Firms: Households: Markets for factors of production: Land, labour, capital and wages, rent, profit and income. Firms Production inputs Land, labour, capital Goods and services sold Goods and services bought revenue spending Wages, rent, profit income Households Question 2 Identify three injections and three withdrawals from the Circular Flow of Income; give examples of each, and how they affect levels of economic activity. In the following table, there are examples of the growth rate of various countries over nine years Country199419951996199719981999200020012002United Kingdom4.72.92.63.43.02.13.11.91.6United States4.02.73.64.44.34.13.80.32.4Bulgaria1.82.1-9.4-5.64.02.35.44.03.5Switzerland0.30.60.31.72.41.63.01.30.6 Question 2 Injections: Investment Government spending Exports Withdrawals: Savings Taxation Imports Appropriate examples: Investments: New factory being built Government spending: New school buildings /roads /hospitals are built . Government spending that provides collective services and welfare payments to the communityan injection into the economy can be when the government redistributes this income in the form of welfare payments, Exports: Supply products to the foreign firms Savings: Higher