2.4

Question 1

Circular flow of income

Answer 1

Firms provide G+S and wages for households which then give firms expenditure and factors of production

Question 2

Injections

Answer 2

Investment government spending exports

Question 3

Withdrawals

Answer 3

Savings Taxes Imports

Question 4

Income

Answer 4

flow of money that goes to the factors of production

Question 5

Wealth

Answer 5

stock of assets

Question 6

Economy equilibrium

Answer 6

rate of withdrawals = rate of injections , AD = AS

Question 7

Net injections

Answer 7

expansion of output

Question 8

Net withdrawals

Answer 8

contraction of production

Question 9

Multiplier

Answer 9

Ratio of the rise of national income to the rise in AD
1/1-MPC or 1/MPW MPW = MPS + MPT + MPM

Question 10

Multiplier effect

Answer 10

when there’s new demand in an economy leading to an injection of more income into the circular flow of income leading to economic growth

Question 11

Effects of MPC on the multiplier

Answer 11

higher mpc higher multiplier

Question 12

Effects of MPS on the multiplier

Answer 12

MPS + MPC = 1 more saving smaller multiplier

Question 13

Effects of MPT on the multiplier

Answer 13

higher tax less income smaller multiplier

Question 14

Effects of MPM on the multiplier

Answer 14

spending on imports than domestics withdraws from circular flow of income smaller multiplier