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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 7

The table below shows the planned change in government spending, the size of the initial output gap, and the size of the multiplier in four economies: Alpha, Beta, Gamma, and Delta.

EconomyPlanned change in government spending (£bn)Initial output gap (£bn)Multiplier
Alpha+150-3602.4
Beta-80+1802.0
Gamma-120+3602.5
Delta+250+4501.8

All other things being equal, in which one of the economies, Alpha, Beta, Gamma, or Delta, will the planned change in government spending eliminate the economy's output gap?

Alpha

Beta

Gamma

Delta

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