Cards (54)

    • What is the multiplier effect in economics?
      Larger change in national income
    • Key concepts of the multiplier effect include MPC and MPS
    • The multiplier can be calculated using the formula: Multiplier = \frac{1}{1 - MPC}</latex>
    • If the MPC is 0.8, what is the value of the multiplier?
      5
    • The marginal propensity to consume (MPC) is the proportion of additional income that is spent
    • Match the concept with its definition:
      Multiplier effect ↔️ Initial change in spending leads to larger change in national income
      Marginal Propensity to Consume (MPC) ↔️ Proportion of additional income spent
      Marginal Propensity to Save (MPS) ↔️ Proportion of additional income saved
    • How does the multiplier effect generate a larger increase in national income?
      Series of spending rounds
    • Arrange the rounds of spending in the multiplier effect:
      1️⃣ Initial Injection
      2️⃣ First Round
      3️⃣ Second Round
      4️⃣ Subsequent Rounds
    • The multiplier effect can be reduced by factors like import spending and taxation
    • An initial injection of £100 million with a multiplier of 5 generates a total increase in national income of £500 million.
    • What is the effect of taxation on the multiplier effect?
      Reduces overall impact
    • The multiplier effect occurs because spending by one firm becomes income
    • The marginal propensity to consume (MPC) is the proportion of additional income spent.
    • What does the marginal propensity to save (MPS) measure?
      Income saved
    • Match the concept with its definition:
      Multiplier effect ↔️ Initial change in spending leads to larger change in national income
      MPC ↔️ Proportion of additional income spent
    • The multiplier effect describes how an initial change in spending leads to a larger overall change in national income
    • What does the multiplier effect describe in economics?
      Larger change in income
    • The Marginal Propensity to Consume (MPC) is the proportion of additional income that is spent
    • The Marginal Propensity to Save (MPS) measures the proportion of additional income saved.
    • What is the formula to calculate the multiplier using MPS?
      Multiplier=Multiplier =1MPS \frac{1}{MPS}
    • If the MPC is 0.8, the multiplier is 5
    • Steps in the multiplier effect mechanism
      1️⃣ Initial Injection: Company invests £100 million
      2️⃣ First Round: Workers earn additional income and spend £80 million
      3️⃣ Second Round: Recipients of £80 million spend £64 million
      4️⃣ Subsequent Rounds: Spending decreases proportionally
    • The multiplier effect occurs because spending by one entity becomes income for others.
    • Why does an initial investment lead to a larger overall change in national income?
      Spending becomes income
    • If the MPC is 0.8, an initial £100 million investment increases national income by £500 million.
    • What does the multiplier effect describe?
      Increase in national income
    • The multiplier effect works through a series of spending rounds
    • If the marginal propensity to consume (MPC) is 0.8, workers spend £80 million from an initial injection of £100 million.
    • What is the multiplier when the MPC is 0.8?
      5
    • The multiplier can be calculated using the formula Multiplier = \frac{1}{1 - MPC}
    • What is the formula for the multiplier using the marginal propensity to save (MPS)?
      Multiplier=Multiplier =1MPS \frac{1}{MPS}
    • The multiplier effect occurs through a series of spending rounds
    • What is the multiplier when the MPC is 0.8?
      5
    • What are the two formulas for calculating the multiplier?
      Multiplier=Multiplier =11MPC \frac{1}{1 - MPC} and Multiplier=Multiplier =1MPS \frac{1}{MPS}
    • What does the multiplier effect describe in macroeconomics?
      Larger change in national income
    • The multiplier effect using MPC is calculated as \frac{1}{1 - MPC}
    • A higher MPC leads to a larger multiplier effect.
    • If the MPC is 0.8, what is the multiplier effect?
      5
    • The multiplier effect using MPS is calculated as \frac{1}{MPS}
    • As MPS increases, the multiplier decreases.