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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 4

In an economy, the marginal propensity to consume is 0.75. All other things being equal, which one of the following statements is correct?

A

If injections into the circular flow of income rise by £8 billion, national income will rise by £6 billion.

B

A £40 billion reduction in the economy's national income will result in a £30 billion fall in consumption.

C

When the economy's income equals £200 billion, total consumption will equal £150 billion.

D

If injections into the circular flow of income rise by £10 billion, national income will rise by £12.5 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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