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SS2: ECONOMICS - 3RD TERM

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  1. Public Finance I | Week 1
    5 Topics
  2. Public Finance II | Week 2
    7 Topics
    |
    1 Quiz
  3. Balanced and Unbalanced Budgets| Week 3
    5 Topics
    |
    1 Quiz
  4. Elements of National Income Accounting | Week 4
    5 Topics
  5. Elements of National Income Accounting II | Week 5
    6 Topics
  6. Income Determination | Week 6
    4 Topics
    |
    1 Quiz
  7. Financial Market | Week 7
    1 Topic
  8. Demand for and Supply of Money | Week 8
    8 Topics
    |
    1 Quiz
  9. Inflation | Week 9
    7 Topics
  10. Deflation | Week 10
    5 Topics
    |
    1 Quiz



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Evaluation Questions

1. Calculate the Marginal Propensity to Consume, if the total national income increases from 100m to 170m and the total consumption increases from 70m to 100m.

2. Discuss the theory of multiplier.

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Evaluation Questions

1. Calculate the Marginal Propensity to Consume, if the total national income increases from 100m to 170m and the total consumption increases from 70m to 100m.

Answer – 

MPC = \( \frac{\Delta C}{\Delta Y} \)

MPC = \( \frac{100m\: – \: 70m}{170m\: – \: 100m} \)

MPC = \( \frac{3}{7} \)

 

2. Discuss the theory of multiplier.

Answer – 

Multiplier refers to the ratio of change in national income to the change in the initial expenditure that brought about it. Multiplier is denoted by K. It is calculated as;

K = \( \frac{1}{1 \: – \: MPC} \)

or

\( \frac{1}{MPS} \)

 

Multiplier is divided into two types namely;

(a) Multiplier in a closed economy which is \( \frac{1}{1 \: – \: MPC} \)

(b) Multiplier in an open economy or foreign trade multiplier which is denoted by K1

K1 = \( \frac{1}{1 \: – \: MPC \: + \: MPI} \)

MPI = Marginal propensity to import

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