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2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts

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Question 49

Following an infrastructure stimulus, a government injects £8 billion into an open economy. This injection results in a £20 billion cumulative increase in the equilibrium level of national income.

In this economy, the marginal propensity to import (MPM\text{MPM}MPM) is estimated to be 0.15, and the marginal rate of taxation (MPT\text{MPT}MPT) is 0.10.

Assuming all other things remain equal, what is the marginal propensity to save (MPS\text{MPS}MPS)?

A

0.15

B

0.25

C

0.40

D

0.60

Markscheme

2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts Questions

  1. A Level
  2. /Economics
  3. /2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts

222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.

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