105-Multiplier_Revision_Worksheet - IB Economics...

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IB Economics www.tutor2u.com IB Economics Resources www.tutor2u.com Multiplier Revision Worksheet (Higher Level Only) This concept relates directly to the circular flow of income . The national income multiplier considers how an increase in injections into the circular flow will change the level of national income in the economy. To recap- Injections : Investment (I), Government Spending (G) and Exports (X) Withdrawals : Saving (S), Taxation(T) and Imports (M) If there is an injection into the circular flow the increase in national income will depend upon the level of withdrawals in that economy. Marginal Propensity The concept of marginal propensity considers the proportion of an increase in consumer’s income that will be spent on the variable under consideration. For example the marginal propensity to consume (mpc) measures the increase in personal consumption following an increase in income. E.g if the mpc is 0.6 this implies that if the individual receives an extra £1 of income they will spend 60p.
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105-Multiplier_Revision_Worksheet - IB Economics...

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