The Multiplier

What does an increase in investment or government spending lead to?

• An even greater increase in national income

• A proportional increase in national income

• A decrease in national income

• No change in national income

How is national income usually calculated?

• Using the GDP measure

• Through total national investment

• Via the total export value

• By summing all household incomes

What are leakages in the context of the circular flow of national income?

• Exports

• Government spending

• Investments by firms

• Savings and taxes

What is the impact of an increasing 'Marginal Propensity to Save' on the multiplier?

• Increases the multiplier

• Decreases the multiplier

• Has no effect on the multiplier

• Makes the multiplier negative

What could cause the Marginal Propensity to Save to increase?

• Economic uncertainty

• Increased government spending

• Lower interest rates

• Higher consumer confidence

Which government policy aims to increase the Marginal Propensity to Consume?

• Increasing taxes

• Reducing unemployment benefits

• Lowering interest rates

• Raising the retirement age

If firms invest £100 million in the economy and the MPC is 0.9, what is the final increase in National Income?

• £900 million

• £1 billion

• £100 million

• £90 million

What factors significantly impact the multiplier on National Income?

• Government spending and exports

• Interest rates and inflation

• Marginal Propensity to Consume and Save

• Investment and savings

Why is it difficult for the government to predict the exact increase in National Income (Y) through spending?

• Due to fixed interest rates

• Because of variable factors and time-lags

• Due to unpredictable consumer behavior

• Because of constant economic variables

What is believed to be the range of the multiplier in terms of its size?

• Between 3.0 and 4.0

• Between 2.0 and 3.0

• Between 1.0 and 2.0

• Between 0.5 and 1.0