hnd经济学outcome2.ppt

Diagram of circular flow of income Injections and withdraws Know definitions, examples, and influence on the circular flow of income. There are 3 sets of injections and withdrawals which can alter the circular flow of income in an economy. Injection (J) is money entering the flow. Injections include Investment, government spending and Exports. Withdrawal (W) is money leaving the flow. Withdrawals include saving, taxation and imports. Investment In economics, investment is buying and producing capital goods which are not consumed but are to be used for future production. Examples include tangibles (such as building a railroad or factory) and intangibles (such as a year of schooling or on-the-job training), etc. More investment means that more production and more employment, and more income circulate and thus economic activity is increased. Saving In economics, personal saving has been defined as personal disposable income minus personal consumption expenditure. For example, households deposit money into banks or other financial institutions, or just retain money in treasuries. If a country saves too much of its income this is withdrawn from the circular flow and the flow will decrease. This means that less income circulates and economic activity is reduced. Government Spending (G) and Taxation (T) Government taxes both the household and business, so that taxes (T) are withdraw. Example: direct tax (income tax) and indirect tax (sales taxes). In detail, value added tax (VAT), Capital gains tax, Corporation tax, Environment Affecting Tax, Inheritance tax, Property tax, etc. Increasing taxes will decrease disposable income, thus less income circulates and economic activity is reduced. The government purchases goods and services from the business, and gives transfer payments, so that government spending (G) is injection. (G) includes: investment directly into the economy in the form of grants, business allowances, investment in roads, hospitals, housing, investment i