IB Economics HL 3.6.4 Keynesian multiplier Question Bank

Practise IB Economics HL 3.6.4 by applying keynesian multiplier concepts to exam-style questions.

Exam points

identify the relevant model, concept or evidence
apply the correct subject framework to the question
evaluate the result using clear evidence and subject terminology

[Maximum number: 3]

The data in Table 2 refer to Kanyaland, a small, open, developing economy in 2019. All data are in billions of Kanyaland dollars (K$).

Table 2

If the government increased expenditures by $\mathrm{K}\$21$ billion, calculate the new level of GDP achieved.

multiplier $=\frac{1}{1-0.6}=\frac{1}{0.1+0.21+0.09}=2.5$
Identification of the value of the multiplier = 2.5 is sufficient for [1].
$\Delta Y=2.5 \times 21=52.5$

Any valid working is sufficient for [1].
Y 2=455+52.5
= $507.5 billion
An answer of $507.5 without any valid working is sufficient for [1].

Marking guidance:

OFR applies if the multiplier is calculated incorrectly and the resulting incorrect number is applied correctly to calculate the new level of GDP.

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3.6.4 (HL)—Keynesian multiplier question 1