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Summaries · Grade 7 EMS › Money, banks and the circular flow
Free summary · Grade 7 EMS

Money, banks and the circular flow

The circular flow, what banks do, interest, inflation and tax. Read one part at a time and tap “I know this”. Then test yourself in the quiz.

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The circular flow

HouseholdsBusinessesLabour (work) →← Wages and salaries(money)Payment for goods →(money)← Goods and services
Money flows one way; labour and goods flow the other way.

Households work for businesses and earn wages. They spend them at businesses on goods and services. So money flows round and round. The state takes tax and gives back public services.

The bank keeps money safe and lends it out.
The bank keeps money safe and lends it out.
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Banks and accounts

WordMeaning
Savings accountFor saving and earning interest
Current accountEveryday payments and debit orders
Debit cardDraws from your own account
Credit cardBuy now and pay later
DividendA share of profit paid to a shareholder

If a loan is not repaid, the debt and interest grow. Too much debt: the interest eats up the income.

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Save and budget

  • Save for unexpected costs.
  • A budget keeps spending within income.
  • Income is money that comes in regularly; cash is money in hand.
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Remember this and test yourself

Remember this: your summary
  • The circular flow: households give labour and get wages; businesses give goods and get payment.
  • A bank keeps money safe and lends it out; interest on savings you earn, interest on a loan you pay.
  • Inflation is prices rising over time: R20 bread + 10% = R22. Savers’ buying power falls.
  • Tax pays for public services such as schools; the Reserve Bank manages the country’s money.
  • Debit card: your own money. Credit card: buy now, pay later (with interest).

Write these points in your book. Read them again the night before the test.

Memory trick

In the circular flow the money goes one way and the things (work and goods) go the other way.

Flash cards · Tap to turn over

Important words

First say what the word means, then turn the card over.

Test yourself · Part 2

True or false?

Read the question and the answer. Is the answer right? Tap True or False.

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    Follows CAPS for Grade 7 Economic and Management Sciences (EMS). Always check your teacher’s notes and textbook too.

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