National Income

Question 1

What is the multiplier

Answer 1

The number of times a rise in national income is larger than the rise in the injection of AD

Question 2

What is the Marginal propensity to consume

Answer 2

The proportion of each additional pound of household income that is spent

Question 3

What is marginal propensity to save

Answer 3

MPS + MPC = 1

Question 4

What is marginal propensity to tax

Answer 4

The proportion of each pound taxed by the government

Question 5

What is marginal propensity to import

Answer 5

If consumers spend income on imports rather than domestic goods and services, income is withdrawn from circular flow of income, reducing the size of the multiplier

Question 6

How do you calculate the multiplier

Answer 6

1/(1-MPC) OR 1/MPW (marginal propensity to withdraw)

Question 7

What is the reverse multiplier

Answer 7

A withdrawal of income form the circular flow of income could lead to an even larger decrease in
income for the economy