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NATIONAL INCOME ACCOUNTING

ECONOMICS YEAR 11: WEEK 1. NATIONAL INCOME ACCOUNTING. Circular Flow of Income. Skills & Keywords. Skills : Knowledge with Understanding, Divergent Thinking Keywords: Income (earned income/unearned income) Injection Withdrawal economy. Objective : At the end of this lesson,

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NATIONAL INCOME ACCOUNTING

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  1. ECONOMICS YEAR 11: WEEK 1 NATIONAL INCOME ACCOUNTING Circular Flow of Income Skills & Keywords Skills : Knowledge with Understanding, Divergent Thinking Keywords: Income (earned income/unearned income) Injection Withdrawal economy • Objective: At the end of this lesson, • All learners will be able to understand the meaning of the circular flow of income. • Most learners will be able to explain how income flows in an economy. • Some learners will be able to distinguish between injections and withdrawals from the circular flow.

  2. DO NOW & STARTER ACTIVITIES • Do Now Task: Play this word game with 2 0r 3 0ther people. Write each word in turn on a plain paper; show to one of them; let the person you have shown the word ask the other to guess the word after he/she had given some clues. Ask for synonyms of the word from them. The words are: Income – Clue: starts with “í” and end in “e”, and is usually received. (Syn. - earnings, proceeds, revenue, money). Injection – Clue:Is associated with syringes. (Syn. – shot) Withdrawals – is connected with taking something away from where it is kept economy - is connected with different sectors which produce goods and services. Syn. -? • Starter Task: Draw a simple flow diagram (or describe in words) exchanges made among your family members of money, items (goods) or services in the last 4 weeks. • Clue: Draw sketches showing members of family first . Then use arrows to show who gave what (e.g. Daddy gave money to mummy; uncle bought Jude an ipod, Jude washed car for uncle etc ). Write what was given on top of the arrows. • Can you describe the flow diagram?

  3. MAIN TEACHING ACTIVITY Teacher Activity Teacher Activity Contd. We shall characterise the economy as being made up of four economic units or sectors and how these interact through 3 markets: Simple model – involving Households and Firms (no Government or Rest of the World) • National income accounting is a study of methods of measuring the total income of an economy. • The basic principle of national income accounting is that the value of total output is identically equal to the value of total income.

  4. MAIN TEACHING ACTIVITY CONTD. Learner Activity Learner Activity Contd. • Discussion: Consider your school. Describe the flow of money and services between the parents and the school. • Look at the following diagram. Explain what is happening at each stage. Explain why spending of households is the firms’ income. Describe the nature of the flow of spending and income between households and firms.

  5. MAIN TEACHING ACTIVITY CONTD. Teacher Activity Teacher Activity • Complex model – In practice, the simple model is not realistic. In modern world, there is always a government and rest of the world (other countries) as ‘no one can afford to be an island’. • Complex model would look like the following diagram:

  6. Learner Activity. Assume a UK economy. Discuss what would happen if the government placed a tax of £1 on all goods and services?

  7. PLENARY • What does national income accounting measure? • Describe the pattern of the flow of income in a nation. • What makes up the simple and complex models of the flow of income in an economy? • Income flow into firms and households in an economy is known as ---- • Income flow out of firms and households in an economy is known as ----

  8. HOMEWORK • Use the diagram below to list 4 examples each of injections and withdrawals into the circular flow.

  9. HOMEWORK CONTD 2. The figure shows some of the money payments in an economy. Draw arrows to represent the following: • Payment of taxes • Payment for exports • Consumers’ spending on goods and services • Payment for imports • The governments payment of wages and salaries to its own employees 3. What happens to the national flow of income if government expenditure increases (6 marks) Government Firms Households Rest of the world

  10. Success Criteria for Homework • 1. 1 mark each for injections and withdrawals from the diagram. Total – 8 marks • 2. 2 marks each for (a) – (e). Zero mark if all flow lines are not shown for each of • (a) – (e). Total – 10 marks • 3. Up to 6 marks for sound explanation of injections and withdrawals and their • impact on the circular flow of income if government increases its expenditure. • Max. of 4 marks for impact of only injections or withdrawals. • Max. of 3 marks for listing of the points. Total maximum mark – 24 marks Due date – 22nd September, 2014. Enquiries: onyeka_madu5@yahoo.com

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