Lower sixth Microeconomic Help

Question 1

What is Positive externality

Answer 1

Someones actions that help others without getting anything in return

e.g., someone fixing up their house to make the neighborhood look nicer

Question 2

What is Negative externality

Answer 2

An effect that is harmful to others without the consideration for society

e.g., Pollution in the air

Question 3

Define Multiplier effect + Multiplier Ratio

Answer 3

Multiplier effect = initial spending leads to more spending causing economic growth

Multiplier ratio = ratio of total change in GDP to initial change

Question 4

Equation for value of multiplier

Answer 4

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

Question 5

Define the 5 Multipliers

Answer 5

MPC = proportion of additional income that is spent

MPS = proportion of additional income that is saved

MPT = proportion of additional income that is taxed

MPM = proportion of additional income that is spent on imports

MPW = proportion that is withdrawn from the circular flow of income in imports, savings, or savings