Introduction to the circular flow of income
4.2What the syllabus asks of you
- circular flow of income in a closed economy and an open economy: the flow of income between households, firms and government and the international economy
- injections and leakages (multiplier not required)
- equilibrium and disequilibrium (marginal and average propensities not required)
Drill this topic
Every question on Introduction to the circular flow of income, untimed, marked as you go.
Make a worksheet
Choose the years and how many questions, then print it with the answers on separate pages.
25 questions
1May / June 2026 · Paper 11 · Q18Show mark scheme →
Aan increase in imports
Ban increase in investment
Can increase in savings
Dan increase in taxation
Mark scheme
2May / June 2026 · Paper 12 · Q18Show mark scheme →
Agovernment spending, investment and exports
Bgovernment spending, savings and imports
Cinvestment, savings and exports
Dinvestment, taxes and imports
Mark scheme
3May / June 2026 · Paper 13 · Q17Show mark scheme →
Aa balance of trade surplus
Ba government budget surplus
Creduction in firm's spending on research and development
Dreinvestment of a firm's profits
Mark scheme
4May / June 2026 · Paper 14 · Q18Show mark scheme →
Ano, no, yes
Bno, yes, no
Cyes, no, yes
Dyes, yes, no
Mark scheme
5Oct / Nov 2025 · Paper 12 · Q15Show mark scheme →
Aconsumer spending on goods
Bexpenditure on a government construction project
Cspending by households on holidays abroad
Drepayment of loans to commercial banks
Mark scheme
6Oct / Nov 2025 · Paper 13 · Q19Show mark scheme →
AThe initial rise in injections is greater than the initial rise in leakages.
BThe initial rise in injections is greater than the initial fall in leakages.
CThe initial rise in injections is smaller than the initial rise in leakages.
DThe initial rise in injections is smaller than the initial fall in leakages.
Mark scheme
7May / June 2025 · Paper 11 · Q17Show mark scheme →
A$100m deficit budget balance; $50m deficit current account balance
B$100m deficit budget balance; $50m surplus current account balance
C$100m surplus budget balance; $50m deficit current account balance
D$100m surplus budget balance; $50m surplus current account balance
Mark scheme
8May / June 2025 · Paper 12 · Q17Show mark scheme →
AGovernment investment is equal to private investment.
BPlanned injections are equal to planned withdrawals.
CSpending by households is equal to taxes collected by government.
DValue of export earnings is equal to expenditure on imports.
Mark scheme
9Oct / Nov 2024 · Paper 11 · Q17Show mark scheme →
AIts budget deficit increases.
BIts imports increase.
CIts interest rates increase.
DIts exchange rate increases.
Mark scheme
10Oct / Nov 2024 · Paper 13 · Q16Show mark scheme →
AAt equilibrium, the levels of Y and C are always the same.
BGovernments always adjust G so that the economy is in equilibrium.
CIf I is not equal to S, it is still possible for the national income to be in equilibrium.
DIf the national income is in equilibrium, X must be equal to M.
Mark scheme
11May / June 2024 · Paper 13 · Q17Show mark scheme →
AIt has a budget surplus.
BIt has a trade deficit.
CIt is a mixed, open economy.
DIts circular flow is in equilibrium.
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12Feb / March 2024 · Paper 12 · Q17Show mark scheme →
Aimports would increase
Bnational income would increase
Csavings would increase
Dtaxes would increase
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13Oct / Nov 2023 · Paper 11 · Q24Show mark scheme →
Aan increase in government spending of $10bn and a decrease in exports of $10bn
Ban increase in investment of $30bn and a decrease in household savings of $30bn
Can increase in spending on imports of $40bn and an increase in government spending of $40bn
Dan increase in taxation of $40bn and a decrease in spending on imports of $40bn
Mark scheme
14Oct / Nov 2023 · Paper 13 · Q17Show mark scheme →
Ayes / no / no
Byes / yes / no
Cno / yes / yes
Dno / yes / no
Mark scheme
15Oct / Nov 2023 · Paper 13 · Q18Show mark scheme →
A$5bn
B$10bn
C$15bn
D$20bn
Mark scheme
16May / June 2023 · Paper 12 · Q21Show mark scheme →
AConsumer expenditure flows anticlockwise.
BGoods and services flow clockwise.
CIncomes flow anticlockwise.
DResources flow anticlockwise.
Mark scheme
17Feb / March 2023 · Paper 12 · Q18Show mark scheme →
AExports and imports do not affect the equilibrium level of national income because they always cancel each other out.
BThe greater the level of saving, the greater the level of injections in the form of investment must be.
CWhen consumers use past savings to increase their spending, there will be a rise in national income.
DWhen a government increases withdrawals by increasing the rate of income tax, there must be an equivalent increase in injections to compensate.
Mark scheme
18May / June 2022 · Paper 32 · Q25Show mark scheme →
Ahouseholds having more of their income taken in tax following a rise in the rate of income tax
Bhouseholds spending more on imported cars following a currency appreciation
Chouseholds taking money from their savings to spend on a celebration
Dhouseholds transferring money from an account in one bank to a different bank
Mark scheme
19May / June 2022 · Paper 32 · Q27Show mark scheme →
Aa reduction in domestic consumption
Ba reduction in government expenditure
Can increase in the rate of interest
Dan increase in investment
Mark scheme
20Oct / Nov 2021 · Paper 31 · Q18Show mark scheme →
Aa closed / with
Ba closed / without
Can open / with
Dan open / without
Mark scheme
21Oct / Nov 2021 · Paper 33 · Q23Show mark scheme →
Aa rise in exports of financial services
Bfirms investing in new production techniques
Cincreased government spending on health services
Dspending on hotels and entertainment by tourists visiting another country
Mark scheme
22Oct / Nov 2021 · Paper 33 · Q25Show mark scheme →
Ayes / no / no
Byes / no / yes
Cno / yes / no
Dno / yes / yes
Mark scheme
23May / June 2021 · Paper 31 · Q27Show mark scheme →
Aincrease in government spending on anti-smoking campaigns
Bincrease in spending on imports of luxury cars
Cincrease in spending on transfer payments
Dincrease in wages paid to government employees
Mark scheme
24May / June 2021 · Paper 33 · Q27Show mark scheme →
Aincrease in government spending on anti-smoking campaigns
Bincrease in spending on imports of luxury cars
Cincrease in spending on transfer payments
Dincrease in wages paid to government employees
Mark scheme
25Feb / March 2021 · Paper 32 · Q27Show mark scheme →
Ano; no; no
Bno; no; yes
Cyes; no; no
Dyes; yes; yes
Mark scheme