The Circular Flow of Income
The economy ‘consists of households, firms, governments and the rest of the world’ (Parkin et al. 2005.Pg439). These economic agents cause the flows of goods/services and incomes in the economy.
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This demand-driven model identifies the major contributors to aggregate demand in the economy. The sum of these flows is UK GDP.
2.1 UK GDP 2008: Expenditures. (Source: UK National Accounts: The Blue Book. ONS.2009)
2.1 UK GDP 2008: Expenditures. (Source: UK National Accounts: The Blue Book. ONS.2009)
Consumption accounting for 64.1% of GDP means that household’s spending is vital for the growth and stability of the UK economy.
Source: M Young. 2010. UK household sector spending: the significance of UK households accumulation of assets and liabilities.
Source: M Young. 2010. UK household sector spending: the significance of UK households accumulation of assets and liabilities.