AQA A Level · Economics 7136

How the macroeconomy works: the circular flow of income, AD/AS analysis and related concepts: Practice Questions

5 multiple-choice questions marked as you go, and 1 written questions with worked solutions. All on How the macroeconomy works: the circular flow of income, AD/AS analysis and related concepts.

6 questions9 marksFree, no account

Question 1

1 mark

In the circular flow of income model, which of the following represents an injection into the flow?

Question 2

1 mark

An economy has a Marginal Propensity to Consume (MPC) of 0.8. If the government increases its spending by £10 billion, what is the final increase in national income, assuming no other changes?

Question 3

1 mark

An economy is currently operating at full employment. If the government implements an expansionary fiscal policy by increasing spending without increasing taxes, what is the most likely long-run outcome according to the vertical LRAS model?

Question 4

1 mark

Which of the following would most likely cause a rightward shift in an economy's Long-Run Aggregate Supply (LRAS) curve?

Question 5

1 mark

In the context of the circular flow of income, if total planned injections (I + G + X) are greater than total planned withdrawals (S + T + M), then:

Question 6

4 marks

In a circular flow of income model, if an economy has a marginal propensity to consume (MPC) of \( 0.8 \), calculate the value of the multiplier and state the total increase in national income resulting from an initial injection of \( \pounds 20 \) billion.

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