How The Macroeconomy Works

Question 1

National income

Answer 1

The total value of output in an economy

Question 2

Injections

Answer 2

External flows of money that increase national income

Question 3

Withdrawls

Answer 3

Flows of money that are deducted from national income (leakages)

Question 4

Classical LRAS

Answer 4

A vertical LRAS curve, assuming the economy is operating at maximum capacity

Question 5

Keynesian LRAS

Answer 5

An upward sloping LRAS, allowing for an outout gap in the eocnomy

Question 6

Marginal Propensity to Consume (MPC)

Answer 6

The proportion of additional income that is spent on consumption

Question 7

Factors that influence SRAS

Answer 7

Changes in cost of raw materials and energy
Changes in exchange rates
Changes in tax rates

Question 8

Factors that influence LRAS

Answer 8

Tech advances
Relative productivity
Education and skills
Government regulation

Question 9

Determinants of AD

Answer 9

C+I+G+(X-M)

Question 10

Multiplier effect

Answer 10

When there is an injection in the economy, the overall increase in output can be greater than initial injection