Households
Households provide this to firms in return for income.
Labour (or resources).
Firms sell these to households in exchange for money.
Goods and services.
Households put their savings into these institutions.
Banks/financial institutions
Name one way government injects money into the economy.
Spending on infrastructure, healthcare, education, etc.
Money spent by foreigners on NZ goods and services is called what?
Exports.
If households save more and spend less, this happens to firms’ sales.
sales decrease
What happens to firms when household consumption rises?
Firms earn higher revenue.
What is it called when banks lend money to firms?
Investment (an injection).
Taxes are a type of leakage or injection?
Leakage.
Imports are a leakage or an injection?
leakage
Name one Real and One Money Flow Between Households and Firms.
Real Flow; Labour Or Goods & Services
Money Flow: Wages and consumption expenditure
If firms invest in new machinery, what type of flow is this? and does it increase the flow (Injection) or decrease the flow(leakage)
Real Flow - Injection (investment).
Due to the recent strike, teachers' salaries have increased. how will this affect the Financial sector?
Increase in savings by households(teachers) as more disposable income.
FS - high cost as more interest paid out to households
Increase in Loan - as teachers increase spending, more need for investment by firms.
FS - high revenue earned through Firms payment on interest
If government lowers income tax, what happens to household disposable income?
It increases.
If NZ exports increase, what happens to firm revenue?
Firm revenue rises.
Explain how a decrease in price for Raw materials will affect households
More Income - as firms' costs have reduced, so they will produce more, resulting in the need for more labour.
Increase in consumption of goods and Services.
Increase in saving too.
Firms often borrow money for expansion. Which sector provides these funds?
Financial Institutions.
Explain how household savings can indirectly boost jobs.
Banks lend savings to firms → firms invest → more jobs.
How does higher government spending on roads affect firms?
Firms in construction and supply industries earn more revenue.
Reduce freight cost- increase in production-more jobs - increase in revenue.
Name one way overseas tourism affects households.
More jobs/income in tourism industries.
Unemployment rises in Auckland, resulting in many households having less income. Explain its impact on all five sectors.
Household- decrease consumption expenditure and savings
Firms- decrease in revenue
Financial - decrease in savings and loans issued.
Government - decrease in revenue from taxes, increase in spending due to transfer payments.
Overseas - decrease in import payment and export receipts
A fall in export demand reduces firm revenue. Trace the next two effects.
Firms cut production/decrease in jobs → Households lose income → Government collects less tax.
Trace the effect: households stop saving money in banks.
Banks have fewer funds to lend → firms invest less → fewer jobs → lower household income.
More tax revenue (GST due to increase in consumption), more company tax collected due to higher profits from producers.
results in to increase in government spending.
Trace the ripple: imports rise sharply because of cheaper foreign goods.
Money flows out more import payments (leakage) → NZ firms lose customers → firms cut jobs → households have less income → less spending and less taxes for the government.