February/March 2026 Paper 12

2026 · 30 questions · 30 parts · 30 marks

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16Circular Flow MultiplierHard1 mark

What do the numbers represent on the diagram?

Circular-flow-of-income diagram. An inner loop shows firms and households linked by two arrows: "factor services" flowing from firms to households, and "goods and services" flowing from households to firms. An outer loop adds four numbered boxes on withdrawals and injections: box 1 sits on the arrow from firms up to households; box 2's arrow points down into that same arrow, labelled from outside as flowing toward households; box 4's arrow leads away from firms, labelled from outside as taxes and imports leaving toward box 4; box 3 sits on the arrow from households round to firms, with government spending and exports arrows pointing into it from outside.

	1	2	3	4
A	factor payments	saving	investment	consumer spending
B	factor payments	investment	consumer spending	saving
C	factor payments	consumer spending	saving	investment
D	saving	factor payments	investment	consumer spending