Economics- Edexcel 2.4.1
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| households in the circular flow of income | receive factor incomes through earning wages and salaries from jobs and income from investments, buy goods and services supplied by firms
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| businesses in the circular flow of income | hire land, labour & capital inputs when making products for which they pay wages and rent, firms receive payments from consumers
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| governments in the circular flow of income | collect taxes to fund spending on public services(government purchases to firms and social transfers to households
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| circular flow of income in closed economy with no government sector | only leakage is saving and only injection is investment, so is a simple two-sector circular flow of income model
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| three-sector circular flow includes | government sector, households, firms
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| circular flow of income with an external trade sector | imports are also a leakage and exports are also an injection
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| circular flow with financial sector | financial sector helps channel savings into funding productive investment
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| income | flow of money going to factors of production
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| wealth | value of a stock of assets owned by someone or society as a whole
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| examples of income | wages/salaries, rental income from property, interest from savings, profits flowing to shareholders
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| original income | income from jobs, private pensions & interest from savings
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| gross income | original income + cash benefits
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| disposable income | gross income minus direct taxes
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| post-tax income | disposable income minus indirect taxes
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| nominal income | measures income at current prices
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| real income | measures the true purchasing power of someone’s income adjusted for inflation(measured at constant prices)
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| mean income | average income per person across a population
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| median income | income of middle household if all are ranked from lowest income to highest
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| examples of wealth | savings in bank accounts/ownership of property/shares or stocks in businesses/wealth held in occupational pension schemes
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| Gini coefficient | measure of income inequality that condenses the entire income distribution for a country into a single number between 0 and 100(higher=more income inequality)
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| Palma ratio | ratio of the income of richest 10% of households to the income of the poorest 40% of households
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| S80/S20 ratio | ratio of total income received by the richest and poorest 20% of people
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| P90/P10 | ratio of incomes of the person at the 90th percentile and person at 10th percentile
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