AS Economics - Circular Flow of Income

Independent Study:

Go back over notes and practice using Circular Flow of Income diagram. Use PAJ Holden's video clip, remember to use pause and take notes: http://www.youtube.com/watch?v=gaEY-p-21F8

Stretch yourself: Investigate 'Says Law' and 'Paradox of Thrift.'

Remember to use the basic scaffold for 8 marks: If, then, so...

 

•If households fear recession and the loss of their job, then they save more to be able to cope with a loss of income as witnessed by a rise in the savings ratio by 8 percentage points in 2007-2009. As consumption declines firms have to cut back. As profits fall they reduce workers wages and making workers redundant, known as cyclical unemployment. If national income declines for more than six months, as shown in the circular flow of income diagram, so the very recession people feared will come true.