CFoI & Multiplier

What will increase the multiplier effect of an increase in government spending on national income?

• an increase in direct taxation

• an increase in interest rates

• an increase in the marginal propensity to consume

• an increase in the marginal propensity to import

Which row correctly identifies net leakages from the circular flow of income?

• A

• B

• C

• D

The table shows the levels of consumption expenditure and savings for given family incomes.

Over the range of disposable income shown, as income rises the marginal propensity to consume

• falls and then rises.

• falls continuously.

• rises and then falls.

• rises continuously.

The table shows the levels of consumption expenditure for given family incomes.

Over the range of disposable income shown, as income rises what happens to the marginal propensity to consume?

• It falls and then rises.

• It falls continuously.

• It rises and then falls.

• It rises continuously.

What represents a leakage from the circular flow of income in an economy?

• a balance of trade surplus

• a government budget surplus

• reduction in funds for research and development

• re-investment of a firm’s profits