25 February – IB Economics
• Review
• Introduce 2.1: The level of overall economic
activity
• Examine circular flow of income
• If time: Apply the circular flow of income to
GDP
How does the circular flow of income
change in an open economy?
Syllabus Item 78
• Describe, using a diagram, the circular flow of
income between households and firms in a
closed economy with no government.
• Describe, using a diagram, the circular flow of
income in an open economy with government
and financial markets, referring to leakages/
withdrawals (savings, taxes and import
expenditure) and injections (investment,
government expenditure and export revenue).
Possible ways to show circular flow
of income
“The circular flow of income is a neoclassical
economic model depicting how money flows
through the economy.”
Source:
http://www.investopedia.com/terms/circularflow-of-income.asp
Source: http://www.dineshbakshi.com/images/economics_diagrams/circular-flow-ofincome-2.jpg
Source: http://2.bp.blogspot.com/_-LUlXoF3oOY/SJxzXg8zNI/AAAAAAAAAGg/DOutaYPIv5A/s1600/CirFlow.jpg
Source: http://thepeaktimes.files.wordpress.com/2013/03/circular-flow-of-income.png
Business basics: Declan Curry explains
what GDP is
http://news.bbc.co.uk/2/hi/business/8637712.s
tm
Syllabus
http://ibeconomics-isd.weebly.com/