Edexcel A Level Economics A - National Income Assignment
National Income
Edexcel A Level Economics A - Topic 2.4
Name:_______________________________
Class:_______________________________
Date:_______________________________
Instructions
Answer ALL questions. Show all your working for calculation questions. Diagrams should be clearly
labelled and explained.
Total Marks:75 marks
Time Allowed:1 hour 30 minutes
Section A: Multiple Choice Questions (10 marks)
[Link] of the following is an injection into the circular flow of income?(1 mark)
A. Savings
B. Taxation
C. Imports
D. Investment
[Link] to classical economists, what happens to the economy in the long run?(1 mark)
A. The economy can remain at any level of output
B. The economy always returns to full employment output
C. Prices are completely rigid
D. The government must intervene to maintain equilibrium
[Link] multiplier effect occurs because:(1 mark)
A. One person's spending becomes another person's income
B. Government spending always increases GDP
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Edexcel A Level Economics A - National Income Assignment
C. Savings increase economic growth
D. Imports stimulate domestic production
[Link] MPC = 0.8, what is the value of the multiplier?(1 mark)
A. 2
B. 4
C. 5
D. 8
[Link] the Keynesian model, the LRAS curve becomes elastic at low output levels because:(1 mark)
A. Prices cannot fall below a certain level
B. Resources are fully employed
C. The economy always operates at full capacity
D. Wages are perfectly flexible
[Link] of the following would shift the AD curve to the right?(1 mark)
A. An increase in interest rates
B. A decrease in consumer confidence
C. An increase in government spending
D. An appreciation of the exchange rate
[Link] withdrawals exceed injections in an economy:(1 mark)
A. Real GDP will increase
B. Real GDP will decrease
C. The economy will experience inflation
D. The multiplier effect will be strengthened
[Link] marginal propensity to save (MPS) is calculated as:(1 mark)
A. Change in consumption / Change in income
B. Change in savings / Change in income
C. Total savings / Total income
D. 1 - MPC
9.A negative output gap occurs when:(1 mark)
A. Actual output exceeds potential output
B. Actual output is less than potential output
C. The economy is at full employment
D. Inflation is rising rapidly
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Edexcel A Level Economics A - National Income Assignment
[Link] determinant would cause the LRAS curve to shift right?(1 mark)
A. An increase in minimum wage
B. Improved education and training
C. Higher corporation tax
D. Increased import tariffs
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Edexcel A Level Economics A - National Income Assignment
Section B: Short Answer Questions (25 marks)
Question 11 (8 marks)
Explain the difference between the Classical and Keynesian views of long-run equilibrium in an
economy. Use diagrams to support your answer.
Question 12 (8 marks)
Distinguish between injections and withdrawals in the circular flow of income. Explain how the
relative size of injections and withdrawals affects the level of real GDP.
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Edexcel A Level Economics A - National Income Assignment
Question 13 (9 marks)
Explain the factors that determine the size of the multiplier in an economy. Discuss why the
multiplier effect may be smaller in practice than in theory.
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Edexcel A Level Economics A - National Income Assignment
Section C: Data Response and Calculations (20 marks)
Question 14 (12 marks)
An economy has the following marginal propensities:
Marginal Propensity to Save (MPS) 0.2
Marginal Propensity to Tax (MPT) 0.15
Marginal Propensity to Import (MPM) 0.15
(a) Calculate the value of the multiplier in this economy. Show your working. (4 marks)
(b) If the government increases spending by £50 million, calculate the total increase in GDP. (3 marks)
(c) Explain TWO factors that could reduce the size of the multiplier in practice. (5 marks)
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Edexcel A Level Economics A - National Income Assignment
Question 15 (8 marks)
The diagram below shows an economy in equilibrium.
(a) Draw a diagram showing the effect of an increase in aggregate demand using the Classical model.
Label the new equilibrium price level and output. (4 marks)
(b) Explain why the impact on real output differs between the Classical and Keynesian models when
AD increases. (4 marks)
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Edexcel A Level Economics A - National Income Assignment
Section D: Essay Question (20 marks)
Question 16 (20 marks)
Evaluate the importance of understanding the multiplier effect for government economic policy
decisions. In your answer, you should consider:
1. How the multiplier effect influences the impact of fiscal policy
2. The factors that affect the size of the multiplier
3. Limitations of using the multiplier in policy decisions
Use appropriate diagrams and real-world examples to support your evaluation.
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Edexcel A Level Economics A - National Income Assignment
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