Assessment task instructions
The UK economy is made up of millions of people and billions of economic activities. Within these activities, goods and services are created and exchanged. It can be complicated at times but a simple model explaining in general terms how an economy is organised and how those involved interact is a good start.
Question 1
Draw a diagram showing the participants of the Circular Flow of Income and explain how it operates.
The simple model is sufficient for a beginning, but an economy is more complex and involves external influences, which can raise or lower economic activity.
Question 2
Identify three injections and three withdrawals from the Circular Flow of Income; give examples of each, and how they affect levels of economic activity.
从收入的循环流动中确定三个注射，三个提款，给各自举个例子，他们是如何影响经济活动水平。
In the following table, there are examples of the growth rate of various countries over nine years Country United Kingdom United States Bulgaria Switzerland
1994 4.7 4.0 1.8 0.3 1995 2.9 2.7 2.1 0.6 1996 2.6 3.6 -9.4 0.3 1997 3.4 4.4 -5.6 1.7 1998 3.0 4.3 4.0 2.4 1999 2.1 4.1 2.3 1.6 2000 3.1 3.8 5.4 3.0 2001 1.9 0.3 4.0 1.3 2002 1.6 2.4 3.5 0.6 Question 3
Choose any two of the following questions:
(a) Explain at least three difficulties encountered in measuring the National Income of a country. (b) Explain (using at least three reasons) why it is difficult to compare the growth rates of the countries in the table above.
(c) Explain how the multiplier effect could substantially raise the level of National Income. (d) Explain the difference between real and nominal growth using the table above.
Assessment task 2 Outcome(s) covered 2
Suggested solution and making an assessment decision
Question 1
A circular flow diagram clearly identifying the following in their correct places: Firms: Households:
Markets for factors of production:
Land, labour, capital and wages, rent, profit and income.
Wages, rent, profit revenue spending Goods and services sold Goods and services bought Firms Households Production inputs Land, labour, capital income Question 2
Injections:
Investment
Government spending Taxation
Exports
Withdrawals: Savings
Appropriate examples:
Imports
Investments: New factory being built 【built a new private enterprise (grow)】
Government spending: New hospital being built (not PFI or PPP)【built public schools (grow)】 Exports: Firm wins order to supply new computers to foreign firm【In cooperation
with foreign sales (grow)】
Savings: High interest rates result in more savings【a country saves too much of
its income (decline)】
Taxation: Government raise level of income tax 【government raise income tax (decline)】
Imports: Record numbers of holidaymakers go on overseas holidays 【spending
on foreign goods by more national】
Question 3
(a) Any three from the following: Errors/omissions from the data gathered. Black economy.
Non-recorded items, eg DIY, housework, barter. Transfer income. Double counting.
(b) Methods may change over time. Accuracy of figures. Inflation adjustments. Social conditions.
Work conditions.
Unequal distribution of income. Spending patterns, eg defence.
(c) Explanation of multiplier either in words or through use of algebra.
Explanation should show that an initial injection to National Income results in a larger level of NI than the original injection.
Propensity to save and consume.
(d) An explanation of the difference between real and nominal growth, identifying that in real terms inflation is taken into account. In 1998 the growth rate is shown as 3%. If this figure is the nominal rate and inflation is measured at 3.1%, then there is no real growth in the economy. Any similar example will suffice.
【GDP=Consumption+Capital investment spending+General Government spending+Exports+Imports of Goods(Services) GNP=GDP+NPIA(Net property income from abroad) National Income=GNP-Capital Consumption
Real Growth Rate=Nominal Growth Rate-Inflation Rate
(Real Growth is the grow adjusted for inflation, Nominal Growth is the grow in the current value of money, Inflation Rate is measure of rate of change in price index)
2000: 3.1-3.2=-0.1 no real growth 】
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