2.4 National income

Question 1

a) The circular flow of income

Question 2

b) The distinction between income and wealth

Question 3

a) The impact of injections into, and withdrawals from, the
circular flow of income

Question 4

a) The concept of equilibrium real national output

Question 5

b) The use of AD/AS diagrams to show how shifts in AD or
AS cause changes in the equilibrium price level and real
national output

Question 6

a) The multiplier ratio

Question 7

b) The multiplier process

Question 8

c) Effects of the multiplier on the economy

Question 9

d) Understanding of marginal propensities and their effects
on the multiplier:
o the marginal propensity to consume (MPC)
o the marginal propensity to save (MPS)
o the marginal propensity to tax (MPT)
o the marginal propensity to import (MPM)

Question 10

e) Calculations of the multiplier using the formulae
1/(1-MPC) and 1/MPW, where MPW=MPS+MPT+MPM

Question 11

f) The significance of the multiplier for shifts in AD