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CAIE A-Level Economics AS 4.2 Introduction to the Circular Flow of Income Questions

Practise using circular flow models to track income, injections, leakages and equilibrium changes in closed and open economies.

Syllabus
2026–2028
Course
Economics 9708
Level
AS

Exam points

  • explain how moving from a closed to an open economy changes income flows and leakages
  • use tables to decide when planned injections equal planned withdrawals

Covered syllabus points

4.2.1—Circular flow of income4.2.2—Injections and leakages4.2.3—Circular flow equilibrium

Question 1

[Maximum number: 1]

The diagram shows a basic two-sector circular flow of income.

Figure for Question 1 — CAIE A-Level Economics AS

What can be concluded about the direction of flows?

A

Consumer expenditure flows anticlockwise.

B

Goods and services flow clockwise.

C

Incomes flow anticlockwise.

D

Resources flow anticlockwise.

Question 2

[Maximum number: 1]

Which changes will increase the circular flow of income?

higher

imports

higher

investment

higher

taxation

yes

no

no

yes

yes

no

no

yes

yes

no

yes

no

Question 3

[Maximum number: 1]

An economy in equilibrium has a trade deficit of $ 20 bn and a budget surplus of $ 20 bn. Investment spending is $ 50 bn.

What is the total saving?

A

$ 5 b n

B

$ 10 b n

C

$ 15 b n

D

$ 20 b n

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