CAIE A-Level Economics 9.1.1 Multiplier Process

CAIE A-Level Economics 9.1.1 Multiplier Process
Cambridge International AS & A Level Economics 9708 syllabus for exams in 2026, 2027 and 20282026–2028

Practise calculating marginal propensities and closed or open economy multipliers, deriving income changes and evaluating how saving, taxation and imports weaken repeated spending.

How this is tested

  • calculate MPC, MPS, MPM or marginal tax rates from changes rather than average levels
  • choose the multiplier formula for the economy's sectors and total marginal leakages
  • multiply an autonomous injection by the multiplier or divide an income gap to find the required injection

Question 17

[Maximum number: 1]

In a two-sector economy, autonomous consumer expenditure increases by $ 100 billion, autonomous investment expenditure increases by $ 200 billion, and the marginal propensity to consume is 0.5.

What will the increase in National Income be?

A

$ 150 billion

B

$ 300 billion

C

$ 450 billion

D

$ 600 billion