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2.4 National income

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Question 24

An open economy with a government sector experiences the following changes over the course of a fiscal year:

  • Households increase their savings by £12 billion.
  • Domestic firms increase their expenditure on new capital equipment by £15 billion.
  • The government reduces its spending on public infrastructure projects by £8 billion.
  • Domestic consumers spend £5 billion more on imported consumer goods.
  • Foreign buyers purchase £10 billion more of the economy's exports.
  • Total tax revenues fall by £4 billion due to a tax rate reduction.

Assuming no other changes, what is the net effect of these transactions on the circular flow of income?

A

A net injection of £4 billion

B

A net withdrawal of £4 billion

C

A net injection of £12 billion

D

A net withdrawal of £8 billion

Markscheme

2.4 National income Questions

  1. A Level
  2. /Economics
  3. /2.4 National income

75 exam-style questions on Edexcel A A Level Economics 2.4 National income, covering 2.4.1 National income, 2.4.2 Injections and withdrawals, 2.4.3 Equilibrium levels of real national output, and 2.4.4 The multiplier. Each one has a worked solution and a mark scheme showing where the marks go.

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