The Income Machine

The circular flow of income is easier to believe when you can watch it. In this game money moves between households and firms in a closed economy, and then you open the valves: saving, taxation and imports drain money out, while investment, government spending and exports pump it back in. National income only settles when injections equal withdrawals.

Trouble with the game above? Open it in its own tab.

What it covers

• The circular flow of income in a closed economy (income = output = expenditure)
• Injections (I + G + X) and withdrawals (S + T + M)
• Equilibrium national income, where J = W
• The multiplier, shown round by round and as 1 ÷ MPW
• Applying fiscal and monetary policy to close an output gap

Edexcel A Level Economics A (9EC0), Theme 2.4 National income. It also fits AQA 7136 and other boards that cover the multiplier.