Pearson Edexcel International AS Level · Economics (XEC11)

National income: Practice Questions

5 multiple-choice questions marked as you go, and 3 written questions with worked solutions. All on National income.

8 questions15 marksFree, no account

Question 1

1 mark

In the circular flow of income, which of the following is classified as an injection into the economy?

Question 2

1 mark

In the circular flow of income, if an economy's total injections ($I + G + X$) are less than its total withdrawals ($S + T + M$), which of the following is the most likely outcome?

Question 3

1 mark

In an open economy with a government sector, the marginal propensity to consume ($MPC$) is $0.8$, the marginal propensity to tax ($MPT$) is $0.1$, and the marginal propensity to import ($MPM$) is $0.1$. Calculate the value of the multiplier.

Question 4

1 mark

According to the Keynesian view of the Long-Run Aggregate Supply (LRAS) curve, what happens when Aggregate Demand (AD) increases while the economy is operating in the horizontal section of the curve?

Question 5

1 mark

The following data represents an economy's circular flow (in $\$bn$):
Savings (S) = $40$
Taxation (T) = $60$
Imports (M) = $50$
Investment (I) = $35$
Government Expenditure (G) = $75$
Exports (X) = $45$
Based on this data, what is the net impact on the level of national income?

Question 6

2 marks

Define the term national wealth and distinguish it from national income.

Write your answer out first, then check it against the worked solution.

Question 7

4 marks

Calculate the value of the multiplier ($k$) if the marginal propensity to save (MPS) is $0.15$, the marginal propensity to tax (MPT) is $0.2$, and the marginal propensity to import (MPM) is $0.05$.

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Question 8

4 marks

In the circular flow of income for an economy, money flows between different sectors.
(a) Distinguish between income and wealth.
(b) Explain the impact on the equilibrium level of national income when the value of total injections is greater than the value of total withdrawals.

Write your answer out first, then check it against the worked solution.

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