national income and multiplier effect

Question 1

three ways of measuring national income

Answer 1

1. national output
2. national expenditure
3. national income

Question 2

what is national output

Answer 2

value of the flow of goods and services from firms to houses

Question 3

what is national expenditure

Answer 3

value of spending on goods and services

Question 4

what is national income

Answer 4

value of income paid by firms to household

Question 5

what is the eqt nation income

Answer 5

national income = national output = national expenditure

Question 6

what is the circular flow of income

Answer 6

households - expenditure on goods / services - firms - wages

Question 7

what is the injections in the circular flow of income (3)

Answer 7

1. investment
2. government spending
3. exports

Question 8

what are the withdrawals in the circlar flow of income (3)

Answer 8

1. savings
2. tax
3. imports

Question 9

what is the multiplier effect

Answer 9

occurs when an injection into the circular flow stimulates furthers rounds of spending (which is bigger than the injection)
(i.e. £20 - economy - £50)

Question 10

what is a negative multiplier effect

Answer 10

when a withdrawal from the circular flow causes future rounds of spending to be cut

Question 11

how to calculate size of multiplier

Answer 11

K = 1 / 1 - MPC

Question 12

what affects size of multiplier

Answer 12

higher the MPC = higher the multiplier

lower API = higher the multiplier