Explain the likely effects on the circular flow of income of the change in unemployment between 2013 and 2015.

(Context - a graph is provided showing unemployment falling by around 3%).As unemployment fell by 3% between 2013 and 2015, there will be an increase in money in the circular flow of income as more people are now receiving wages. This increase in income will result in an increase in consumption as there is an increase in demand for goods and services produced by firms. This increase in economic activity may result in injections into the circular flow of income such as through overseas investment. There may however be leakages due to the fact that consumers may spend this money on imports instead.

Answered by Sanjay S. Economics tutor

10138 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Why does the demand curve slope downwards?


What is a possible result of a reduction in the budget deficit on the circular flow of income?


Explain two ways in which central banks use monetary policy to influence the economy.


Can firms in a perfectly competitive market make supernormal profits?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo
Cookie Preferences