KEY TAKEAWAYS - CHAPTER 28 SUMMARY 1


Centrally Planned Economy


The government decides how resources are used and what is produced. Example: North Korea.


+ Guarantees essential goods and services for all citizens. – Little incentive for businesses to innovate.


2


Free Market Economy


An economic system where individuals and businesses are free to decide how resources are used. The government plays a very limited role. Example: USA.


+ Competition encourages innovation and increases choice.


– Essential services may not reach citizens who cannot afford them.


An economic system where both the government and private businesses produce goods and services. Example: Ireland.


3 Mixed Economy


+ Citizens have public services and freedom to set up a business. – Businesses may face regulation and high taxation.


4 Public Sector


Organisations owned and run by the government. Examples include schools, Gardaí, hospitals and An Post.


Businesses owned by individuals or companies. 5 Private Sector


Examples include employees in businesses such as Supermac’s and 4TH ARQ.


6


Circular Flow of Income


The movement of money around the economy between households and firms. Households provide resources to firms and receive income in return, which they then spend on goods and services.


7 Leakages


Money that flows out of the circular flow of income, reducing the amount of income circulating in the economy.


Examples include taxes, savings and spending on imports. 8 Injections


Money that flows into the circular flow of income from outside, increasing the amount of income circulating in the economy.


Examples include government expenditure, borrowing and income from exports.


318 2


STRAND 3


CHAPTER 28: The circular flow of income


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