Practise calculating multipliers and propensities, balancing injections and withdrawals, identifying national-income gaps and applying the accelerator to investment changes.
According to the accelerator theory, what would cause investment in an economy to be lower than in the previous year?
a lower marginal propensity to consume than in the previous year
a lower marginal propensity to save than in the previous year
a smaller fall in national income than occurred in the previous year
a smaller rise in national income than occurred in the previous year
What leads to an inflationary gap?
Aggregate demand is greater than the maximum potential output of the economy.
Investment increases at a greater rate than profits received by a firm.
The economy is operating below its full capacity.
Innovation results in increased productivity in the economy.
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?
$ 150 billion
$ 300 billion
$ 450 billion
$ 600 billion
