CC2

Question 1

Aggregate demand (AD)

Answer 1

The total planned expenditure in an economy at any given possible overall price level

Question 2

Aggregate supply

Answer 2

The total quantity of goods and services firms are willing to produce at each price level

Question 3

The multiplier

Answer 3

Where an increase or decrease in AD leads lo a larger final change in National income (GDP)

Question 4

Marginal Propensity to Consume

Answer 4

Proportion of a change in disposable income which is spent in the domestic economy

Question 5

Marginal Propensity to Save

Answer 5

Proportion that is saved after a change in disposable income

Question 6

Multiplier Formula 1

Answer 6

K = 1/1-mpc

Question 7

Multiplier Formula 2

Answer 7

1/MPW (MPS+MPM+MPT)

Question 8

Injection

Answer 8

Putting money into the Economy.
e.g Exports, Government Spending, Investment

Question 9

Withdrawal

Answer 9

Taking money out of the economy
e.g Tax, Imports, Savings

Question 10

Marginal Propensity to Import (MPM)

Answer 10

The proportion of a change in disposable income which is spent on imports
(MPM = ∆M/∆Yd)

Question 11

Marginal propensity to tax (MPT)

Answer 11

The proportion of a change in income which is paid in tax
(MPT = ∆T/∆Y)

Question 12

Marginal propensity to withdraw (MPW)

Answer 12

MPS + MPM + MPT

Question 13

Change in GDP

Answer 13

K × injection / withdrawal