2.4: National Income

Question 1

Define:

Positive multiplier

Answer 1

When an initial increase in an injection (or decrease in a leakage) leads to a greater final increase in GDP

Question 2

Define:

Negative Multiplier

Answer 2

When an initial decrease in an injection (or an increase in a leakage) leads to a greater final decrease in GDP

Question 3

What is the multiplier

Answer 3

The numerical size of the multiplier effect

Question 4

MPC is the marginal…

Answer 4

marginal propensity to consume

Question 5

MPW is the marginal…

Answer 5

marginal propensity to withdraw

Question 6

Which 3 components make up MPW

Answer 6

MPS, MPT and MPM
Marginal propensity to save, tax and import

Question 7

Formula for the multiplier

Answer 7

1/(MPS + MPT + MPM)
= 1/MPW
=1/(1-MPC)