## National Income: Keynesian national income equilibrium - Question Bank

Question Bank ''National Income: Keynesian national income equilibrium'' with interactive revision questions on a variety of economics topics.

## Question Bank - Economics

### National Income: Keynesian national income equilibrium

 Q1. The principle of the multiplier states that (Select one answer) (a) any increase in aggregate spending that causes the aggregate demand curve to shift will result in a larger increase in national income (b) in the long run, the aggregate demand curve becomes relatively flat as the economy approaches full employment (c) any increase in national income will result in a larger increase in aggregate spending (d) for any given increase in income, there will be a less than proportional increase in consumer spending

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 Q2. Assuming there is no government or foreign sector, if the MPC is .8, the multiplier is (Select one answer) (a) 0.2 (b) 0.8 (c) 1.25 (d) 5

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 Q3. If injections are less than withdrawals at the full-employment level of national income there is (Select one answer) (a) a deflationary gap (b) hysteresis (c) hyperinflation (d) an inflationary gap

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 Q4. Suppose that the government increases its spending by 10 per cent and also increases taxes by 10 per cent. We would expect this policy to (Select one answer) (a) essentially have no effect on the level of national income (b) have a contractionary effect on national income (c) decrease the marginal propensity to save out of each extra pound of income (d) have an expansionary effect on national income

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 Q5. A £1 increase in government spending will have a larger impact upon national income than a £1 cut in taxes since (Select one answer) (a) the government prints the pound it spends (b) not all of a tax cut is spent (c) when taxes are cut, so too is government spending (d) taxes are an injection into the system

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 Q6. Assume there is no government or foreign sector. If the MPC is .75, a £20 million decrease in planned investment will cause aggregate output to decrease by (Select one answer) (a) £15 million. (b) £20 million. (c) £26.67 million. (d) £80 million.

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