27 February – IB Economics
• Practice test question
• Go over circular flow of income worksheet
• Examine how circular flow of income
applies to GDP
• Assess possible IA articles
How does the circular flow of income
connect to GDP?
Will the NEV oust the SUV? - California
• Do this externalities problem without reference
to your textbook or notes.
• You have 15 minutes.
• Hint for d): Think about marginal costs and
benefits (social and private)
Syllabus Item 78
• Identify the four factors of production and their
respective payments (rent, wages, interest and
profit) and explain that these constitute the
income flow in the model.
• Outline that the income flow is numerically
equivalent to the expenditure flow and the value
of output flow.
• Explain how the size of the circular flow will
change depending on the relative size of
injections and leakages.
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
A website useful for its diagrams…
http://www.s-cool.co.uk/alevel/economics/aggregate-demand-andaggregate-supply/revise-it/the-circular-flow-ofincome
The bathtub metaphor
How is the
circular flow of
income like a
bathtub?
Draw your
bathtub.
Business basics: Declan Curry explains
what GDP is
http://news.bbc.co.uk/2/hi/business/8637712.s
tm
What is the definition of GDP?
How can GDP be measured using
the circular flow of income?
Heuristic (rule of thumb) for choosing an IA
article (from Mr. Barrett)
1. Data (for graphs ideally)
2. 1-2 page article
3. Policy/Strategy (could challenge, contradict)
4. Econ terminology
5. Stakeholders
With a partner, rate the 3
articles using these 5 points.
Syllabus
http://ibeconomics-isd.weebly.com/