2. The circular flow of income and expenditure The income and expenditure approaches to measuring a nation's GDP can be combined using the circular flow model. Categorize each flow in the following table as part of either aggregate demand or national income. How Aggregate Demand National Income Disposable income (DI) O O Investment spending (!) O D Net taxes (NT) O Net exports (X - IM) O O Consumption (C) O Government purchases (9) O While national income and domestic product must be equal, income must also equal expenditure for each of the six sectors in the circular flow diagram: firms, consumers, government, financial system, investors, and the "rest of the world." For example, the amount of (options for blank: disposable income, investment spending, saving, taxes) flowing into the financial system sector must equal the amount of (saving, consumption plus savings, transfers plus government purchases, investment spending) flowing out of this sector