Circular Flow and Multiplier

What is the circular flow of income?

• The circular flow of income is a model that shows the flow of goods and services within a single firm

• The circular flow of income is a model that shows the flow of goods and services between producers and consumers

• The circular flow of income is a model that shows the flow of goods and services between countries

• The circular flow of income is a model that shows the flow of goods, services, and money between households and firms in an economy.

Name the leakages in the circular flow of income.

• The balance of income within the economy and income available for spending.

• Savings, taxes, and imports.

• Government spending, exports, and investments.

• Savings, taxes, and exports.

How does government intervention affect the circular flow of income?

• Government intervention has no impact on the circular flow of income

• Government intervention always leads to an increase in the circular flow of income

• Government intervention only affects the production sector of the circular flow of income

• Government intervention can either increase or decrease the flow of income within the circular flow, depending on the specific policies implemented.

Define the multiplier effect in economics.

• The multiplier effect in economics is the phenomenon where an initial decrease in spending leads to a larger increase in national income and economic growth.

• The multiplier effect in economics is the process of reducing the national income and economic growth.

• The multiplier effect in economics refers to the phenomenon where an initial increase in spending leads to a larger increase in national income and economic growth.

• The multiplier effect in economics is the process of stabilizing the national income and economic growth.

What is the formula for calculating the multiplier?

• Multiplier = 1 + MPC

• Multiplier = 1 / (1 - MPC)

• Multiplier = 1 - MPC

• Multiplier = MPC / (1 - MPC)

Explain the concept of marginal propensity to consume (MPC) in relation to the multiplier.

• The marginal propensity to consume (MPC) is related to the multiplier through the formula: Multiplier = 1 / (1 - MPC)

• The multiplier is inversely proportional to the marginal propensity to consume (MPC)

• The multiplier is equal to the marginal propensity to consume (MPC)

• The marginal propensity to consume (MPC) has no impact on the multiplier

Discuss the relationship between the multiplier and the level of consumption in an economy.

• The multiplier and the level of consumption in an economy are negatively related.

• The multiplier and the level of consumption in an economy are positively related.

• The level of consumption in an economy is determined solely by government spending.

• The multiplier has no impact on the level of consumption in an economy.

How does the multiplier impact the equilibrium level of income in an economy?

• The multiplier only impacts the equilibrium level of income in a recession

• The multiplier has no impact on the equilibrium level of income

• The multiplier impacts the equilibrium level of income by increasing it when there is an increase in spending or investment, and decreasing it when there is a decrease in spending or investment.

• The multiplier impacts the equilibrium level of income by decreasing it when there is an increase in spending or investment

What are the limitations of the multiplier concept?

• Assumptions of unlimited resources

• Inclusion of technological advancements

• Assumptions of constant prices, full employment, and no government intervention.

• Consideration of international trade

What are injections into the circular flow of income?

• Savings, taxes, imports.

• Government spending, exports, savings.

• Government spending, investment, exports.

• Government spending, investment, imports.