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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 74

The table below shows the components of aggregate demand in an economy that is initially in equilibrium.

£ billion
Consumer expenditure720
Investment140
Government expenditure210
Exports130
Imports150

Following a sudden decline in business confidence, private investment decreases to £115 billion. If the multiplier in this economy is 2.4, what is the new equilibrium level of national income?

A

£990 billion\text{£}990\text{ billion}£990 billion

B

£1025 billion\text{£}1025\text{ billion}£1025 billion

C

£1110 billion\text{£}1110\text{ billion}£1110 billion

D

£1290 billion\text{£}1290\text{ billion}£1290 billion

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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