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Worksheet Macro CH1

The document is a worksheet for a macroeconomics chapter on the circular flow of income, featuring case studies and questions related to money flow, real flow, and the roles of households and firms in the economy. It explores concepts such as factor payments, consumption expenditure, and the relationship between income and expenditure. The worksheet includes questions designed to assess understanding of these economic principles.

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6 views2 pages

Worksheet Macro CH1

The document is a worksheet for a macroeconomics chapter on the circular flow of income, featuring case studies and questions related to money flow, real flow, and the roles of households and firms in the economy. It explores concepts such as factor payments, consumption expenditure, and the relationship between income and expenditure. The worksheet includes questions designed to assess understanding of these economic principles.

Uploaded by

gaurangaggarwalishere
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ECONOMICS (030)

MACROECONOMICS
Work Sheet –I
DATE: 28TH APRIL 2025
CHAPTER-1 CIRCULAR FLOW OF INCOME

CASE STUDY-1:
Answer the following questions on basis of below given diagram of circular flow of income.

Questions:
1. From the diagram, name the items which are called money flow.
2. From the diagram, name the items which are called real flow.
3. How money flow different to real flow?

CASE STUDY-2:
There are only two sectors in the economy: Households and Firms. It means the government and foreign sector.
Household sector supplies factor services only to firms and the firms hire factor services only from households. Firms
produce goods and services and sell their entire output to the households. Households receive factor income for their
services and spend the entire amount on consumption of goods and services. There are no savings in the economy,
i.e. neither the households save from their incomes, nor the firms save from their profits.

Questions:
1. Name the two dominant sectors of the economy?
2. What are factor payments?.
3. What is the importance of consumption expenditure?
4. What would happen if householders will be removed from the two sector model of economy?

CASE STUDY-3:
Since in a monetary economy, all payments are made in money the real flow turns itself into money flow of income.
When firms get factor services from households, they make monetary payments against these services to the
households. These payments are made in the form of wages to workers, rent to landowners, interest to capitalists,
and profit to entrepreneurs. These monetary payments are factor incomes for households. Households spend this
income on the purchase of goods and services from the firms for their consumption. As the households spend all their
income on consumption of goods and services, total money receipt of the firm is the same as the total income of the
households. In other words, the money delivered to households by firms as factor payments come back to them when
households spend their income on consumptions.

Questions:
1. National income is a _______ concept. (Stock / Flow)
2. Choose the other name of real flow.
(a) Nominal flow (b) Money flow
(c) Cash flow (d) Physical flow
3. Which two sectors of the economy are being talked in the above paragraphs?
4. Choose the odd one out.
(a) Entrepreneur (b) Capital

(c) Profit (d) Labour

CASE STUDY-4:
One’s ability to buy commodities comes from the income one earns as labourer (earning wages), or as entrepreneur
(earning profits), or as landlord (earning rents), or as owner of capital (earning interests). In short, the incomes that
people earn as owners of factors of production are used by them to meet their demand for goods and services.

Questions:
1. The statement above is based on the notion” one’s expenditure is other man’s income. (true /false)
2. This exchange is depicted as ____________ (real flow/money flow)
3. Using up of incomes earned in consumption of goods is called ___________ ( income distribution/income disposal)
4. All the factors of production are owned by _______________. (household/firms)

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