Topic Questions (EASY): Introduction to Circular Flow of Income

Which of the following would not exist in a free market, open economy?

Household saving

Import spending

Indirect taxation

If a country experiences an increase in exports, which of the following actions of equivalent value will return national income to its initial equilibrium level?

a decrease in imports

a decrease in investment

an increase in government expenditure on goods and services

a decrease in taxation

Which of the following implies leakages from a country's circular flow of income?

A

B

C

D

Which of the following does not affect the level of withdrawals from a country's circular flow of income?

A rise in the rate of income tax resulting in more of households' income being taken in tax

A currency appreciation leading to households spending more on imported cars

Households taking money from their savings to spend on a celebration

Transferring money from an account in one bank to a different bank