2.4 - National Income

Question 1

What are the injections and the withdrawals?

Answer 1

Injections are government spending, investment and exports.

Withdrawals are taxation, imports and savings.

Question 2

What is the multiplier

Answer 2

This shows the final change that an initial injection has on the economy.

It is calculated by the change in gdp/inital injection

Question 3

What are the other equations for the multiplier?

Answer 3

K = 1 / 1- MPC

K = 1/ MPW

K = 1/ MPM + MPT + MPS

K = change in injections / injection

Question 4

Effect of the multiplier

Answer 4

If there is a change in any of the injections or leakages, the initial change will have a larger final change on ad. We can show this graphically by more than 1 shift of AD. This is done by shifting ad to ad1 with a small shift amd then shifting ad1 to ad2 which a larger shift.