Economics Multiple Choice Question – 29 September 2017

The home of multiple choice questions for all your KS3, KS4 and KS5 Business Studies, Economics and Accounting requirements.

Economics

Which ONE of the following is a likely cause of an increase in the value of an economy’s multiplier?

Select ONE answer:

  1. An increase in the marginal propensity to save
  2. An increase in the basic rate of income tax in the economy
  3. A decrease in the marginal propensity to import
  4. A decrease in investment in the economy
  5. An increase in the propensity to import

In 2011, the Bank of England estimated that the marginal propensity to consume for UK households was on average 0.4. Calculate the value of the multiplier for the UK in 2011. You are advised to show your workings:
……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This is multiple choice question is suitable for Economics KS5 classes.

The answer is 3 – The value of the Multiplier depends upon if people spend a high % of any extra income, then there will be a big multiplier effect. However, if any extra money is withdrawn from the circular flow the multiplier effect will be very small. Where k = 1 / 1-mpc =  1 – mpw. Marginal Propensity to Consume (mpc) = a persons willingness to spend money, if a worker saved all his money there wouldn’t be an increase in GDP. Marginal Propensity to Withdraw (mpw) = when money is withdrawn from the circular flow – includes: Marginal Propensity to Tax + Marginal propensity to Import + Marginal Propensity to Save

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Author: stuart001uk2014

Referral marketing, business, economics and accounting s​pecialist & corporate mentor

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