Question - By describing the circular flow of income in your essay, write five paragraphs on the following:

• Give one example of a decision that a government can take or has taken in the aftermath of the Covid-19 pandemic, which would financially affect two households differently.
• Then describe the indirect effects that this decision may have on the flow of money between the two households and corporations.

Guidance - This is a short piece of writing, not an essay, so please do not write introduction or conclusion. The aim of Part B is to demonstrate that you can organise your thoughts into a series of logical and well-constructed paragraphs. This serves as a building block towards writing a full essay in later assessments.

The question is about describing the model of the circular flow of income and applying it to an example of your choice. Read the question carefully and address all of its parts; chiefly the flow of money between the relevant sectors and its effects, both directly and indirectly.

When looking at the household sector, you should consider two different types of household that are differently affected by the government's decision related earlier policies. Then you should consider how the two households might react to this decision or might be indirectly affected, with potential changes in flows of money between them and the corporation sector. Recall that households can vary according to, for example, income, age, location or household composition and people interact with corporations in a variety of ways such as employees, consumers, savers, etc, and with the government sector as taxpayers, benefit recipients or public sector employees.

Consider a government decision that has a direct effect first on households (e.g. increase in cash benefits, wage replacement, hiring policies, access to public services), rather than on corporations (such as closures of some industries or recovery subsidies).

Relevant material for answering Part B can be found in Chapter 1 of Personal Finance (especially Section 4) and Week 3 (especially Section 4).

You are not asked to look for sources outside the module materials to substantiate your answer, but if you do so for the sake of your illustration (for example, by using a story in the news) remember to refer to any external work appropriately.

Remember to include references to the module materials when you refer to them. This is equally as important as referencing external material. You will find an introduction to referencing in Section 6 of Week 3, and guidance at the end of the 'References' section of each chapter and online study week on how to refer to that part of the module materials.