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Question: WHAT IS THE CIRCULAR FLOW OF INCOME? EXPLAIN AND ILLUSTRATE UNDER WHAT CONDITIONS THE FLOW WILL EXPAND OR CONTRACT AND THE CONSEQUENCES FOR INCOME AND THE PRICE LEVEL. MAKE CLEAR ANY ASSUMPTIONS YOU MAKE.

Answer: The purpose of this essay is to explain what the circular flow of income is and show the several conditions, under which the flow will expand or contract. Furthermore, via examples and diagrams, we are going to illustrate the consequences for income and price level. The circular flow of income is very useful as a model for understanding the working of an economy. It shows how national income can increase or decrease because of changes in the various flows....(short extract)

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  • Subject: Economics
  • Course: Economics
  • Level: A-Level
  • Year: Not applicable
  • Mark: 61%
  • Words: 1649
  • Date submitted: March 21, 2009
  • Date written: Not available
  • References: No
  • Document type: Essay*
  • Essay ID: 1095

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