Aggregate demand and aggregate supply

The table presents some information about an economy. At what point are injections and withdrawals in equilibrium?

Feb/March 2016

What would constitute a rise in leakages or withdrawals from the circular flow of income?

Feb/March 2018

The government pays money to a worker who is unemployed as a benefit. Why is this known as a transfer payment?

Feb/March 2019

What is one example of a transfer payment?

Feb/March 2020

In a closed economy without a government sector, under what conditions will an increase in investment spending produce the greatest rise in equilibrium national income?

Feb/March 2020

In a closed economy, the marginal propensity to save is 0.1 and the marginal propensity to pay taxes is also 0.1. Both of these remain constant and do not change as income changes. What will be the increase in national income if $100 million is injected into the circular flow?

Feb/March 2021

Which row correctly shows the injections into a country’s circular flow of income?

Feb/March 2021

Which statement concerning the circular flow of income is correct?

Feb/March 2023

In the circular flow of income, what would be the immediate effect of a rise in the value of a country's exports?

Feb/March 2024

The diagram illustrates the link between household income and household consumption. What would be likely to make the household consumption curve move from C1 to C2?

May/June 2010

The diagram illustrates a consumption function for a closed economy with no government. What conclusion can be drawn from the diagram?

May/June 2010

The diagram illustrates a consumption function for a closed economy without government. What conclusion can be drawn from the diagram?

May/June 2010

If national income is $40 000 million and government spending is $15 000 million, the economy is at equilibrium but remains below full employment. For each rise of $100 in national income, $15 goes in taxes, $30 is used on imports and $5 is saved. In order to lift national income to the full employment level of $50 000 million, to what level must the government increase its own spending?

May/June 2010

The diagram illustrates a consumption function. When income rises, what occurs to the average propensity to save and the marginal propensity to save?

May/June 2011

The diagram illustrates a consumption function. When income rises, what happens to the average propensity to save and the marginal propensity to save?

May/June 2011

Which of the following is an injection into an economy’s circular flow of income?

May/June 2012

Which of the following represents an injection into an economy’s circular flow of income?

May/June 2012

Which option correctly names injections into a country’s circular flow of income?

May/June 2013

Which option correctly shows the injections into a country’s circular flow of income? (private sector, where S > I; public sector, where T > G; trade sector, where X > M)

May/June 2013

Which of the following is not considered a leakage from the circular flow of income?

May/June 2014

In a closed economy with no government, if investment rises by $100 million and consumption rises by $300 million, what is the marginal propensity to consume?

May/June 2014

Which of the following is not counted as a leakage from the circular flow of income?

May/June 2014

Explain what is meant by a country’s national income multiplier and two reasons why the value of the multiplier might fall.

May/June 2014

Which option shows an injection into the circular flow of income of an economy?

May/June 2015

In a closed economy without a government sector, investment rises by $100 million and real income rises by $500 million. What is the marginal propensity to consume?

May/June 2015

Which of the following is not an injection into a country’s circular flow of national income?

May/June 2015

National income starts out at equilibrium. If exports rise, what change of the same amount would bring national income back to its original equilibrium level?

May/June 2015

In 2013, a new aircraft, the Boeing 787 Dreamliner, was assembled in the United States (US). United Airlines, an American private company, placed an order for 50 of these aircraft, with each one costing more than US$200 million. Suppose the US were a closed economy with no government intervention. Analyse why the rise in national income from this investment in new aircraft could be different from what would happen in an open, mixed economy.

May/June 2015

During 2012, high street shops saw sales decline when domestic demand in an economy weakened. Even so, the effect on the wider economy was not as negative as had initially been expected. What could have reduced the impact on the economy?

May/June 2016

Which of the following counts as a transfer payment?

May/June 2016

For an economy with no government sector, let C represent consumption, I investment, X exports, M imports and Y national income. Given that C = 20 + 0.75Y, I = 60, X = 120 and M = 120, what is the equilibrium value of Y?

May/June 2016

Which option correctly shows leakages from a country’s circular flow of income? (private sector (S > I); public sector (T > G); trade sector (X > M))

May/June 2016

Within a 4-sector economy made up of households, firms, government and foreign trade, national income is in equilibrium when C + I + G + (X – M) = Y. What does Y need to contain for equilibrium to be possible?

May/June 2016

If all other factors remain unchanged, what would cause the level of national income in an economy to fall?

May/June 2017

The table concerns an open economy that has a government sector. In which situation is the economy not in equilibrium?

May/June 2017

What indicates net injections into a country’s circular flow of income? (Statements: I > S; X < M; G < T)

May/June 2018

Out of any extra national income, 20% is used for imports, 25% is paid as taxes, 5% is saved and the remainder is spent on domestically produced goods. Using the multiplier effect, if exports rise by $100 million, what will be the ultimate increase in residents’ spending on domestically produced goods?

May/June 2018

In a four sector economy that is in equilibrium, the following figures are given. $m investment 15 exports 40 government expenditure 50 savings 15 imports 45 taxes X What is the tax revenue, $X m?

May/June 2018

Which row shows the leakages from a country’s circular flow of income? (private sector (S > I); public sector (T > G); trade sector (X > M))

May/June 2019

A movement of the consumption–national income curve upwards could be brought about by

May/June 2020

Given an economy with no government sector: C = consumption I = investment X = exports M = imports Y = national income. If C = 40 + 0.5Y, I = 80, X = 100 and M = 100, what is the equilibrium level of Y?

May/June 2021

What would count as a rise in leakages or withdrawals from the circular flow of income?

May/June 2021

Which statement explains the multiplier process as it works in a closed economy with no government sector?

May/June 2021

For an economy that has no government sector: C = consumption I = investment X = exports M = imports Y = national income. If C = 40 + 0.5Y, I = 80, X = 100 and M = 100, what is the equilibrium level of Y?

May/June 2021

Which change would represent a rise in leakages, or withdrawals, from the circular flow of income?

May/June 2021

Which factor does not alter the level of withdrawals from the circular flow of income?

May/June 2022

What can be used to balance out a leakage from the circular flow of income?

May/June 2022

The diagram illustrates a simple two-sector circular flow of income. What conclusion can be drawn about the direction of the flows?

May/June 2023

The table gives the amounts for the components of an economy’s circular flow of income. component value $m government spending 6 exports 8 investment 9 imports 7 saving 10 tax 5 What conclusion can be drawn about the economy from these figures?

May/June 2024

Country X’s marginal propensity to consume (MPC) is 0.7. Its marginal propensity to save (MPS), marginal rate of taxation (MRT) and marginal propensity to import (MPM) are all 0.1. Which change would be most likely to produce the largest rise in the national income multiplier?

May/June 2024

In an open economy that includes a government sector, the economy is at equilibrium. Households in this economy save $100 million, and firms devote $150 million to investment. Which combination of the budget balance and the current account balance would produce an equilibrium position in the circular flow of income?

May/June 2025

Explain how the circular flow of income in an economy alters when it changes from a closed to an open economy and judge what affects the size of the change.

May/June 2025

An initial injection into the circular flow of income brings about a much bigger rise in GDP. What term does this define?

May/June 2025

Which of the following is not counted as a leakage from the circular flow of income?

Oct/Nov 2010

The diagram illustrates the link between consumption expenditure and income. Which of the following statements is correct?

Oct/Nov 2010

The diagram illustrates the relationship between consumption expenditure and income. Which statement is correct?

Oct/Nov 2010

Which option is not a leakage from the circular flow of income?

Oct/Nov 2010

The diagram illustrates how consumption expenditure is related to income. Which statement is correct?

Oct/Nov 2010

The table contains some data for an economy. What is the equilibrium level of national income?

Oct/Nov 2011

Which of the following is a leakage from an economy’s circular flow of income?

Oct/Nov 2012

The diagram illustrates how consumption expenditure and income are related. Which statement is correct?

Oct/Nov 2012

Which row gives the correct net leakages in the circular flow of income? (trade surplus (exports - imports); government budget deficit (government spending - taxes); private sector surplus (saving - investment))

Oct/Nov 2012

Take C to represent consumption, I to represent investment, X to represent exports, M to represent imports and Y to represent national income in an economy with no government sector. If C = 20 + 0.9Y, I = 60, X = 120 and M = 100, what is the equilibrium value of Y?

Oct/Nov 2012

If national income is $30 000 million and government expenditure is $15 000 million, the economy is at equilibrium but still below full employment. For each extra $100 added to national income, $10 goes to taxes, $25 is used on imports and $15 is saved. In order to increase national income to the full employment level of $50 000 million, to what level must the government increase its own spending?

Oct/Nov 2013

Which option correctly names the leakages in a country’s circular flow of income?

Oct/Nov 2013

The diagram indicates a movement in the economy’s saving function from S1 to S2. What may be deduced from the diagram?

Oct/Nov 2014

Which of the following is an injection into a country’s circular flow of income?

Oct/Nov 2015

The table presents the level of consumption at different levels of national income for a closed economy without government. What happens to the average and marginal propensities to consume as income rises?

Oct/Nov 2015

The table gives some figures for an economy (investment, exports, government expenditure, savings, imports, taxation, national income). What is the level of national income at equilibrium?

Oct/Nov 2015

The table presents consumption expenditure and savings at different family income levels. Across the disposable income range shown, when income increases, what happens to the marginal propensity to save?

Oct/Nov 2016

An increase in which one of the following would cause national expenditure to rise immediately?

Oct/Nov 2016

Which row accurately shows the net leakages in the circular flow of income?

Oct/Nov 2016

The table presents consumption expenditure and savings levels for the family incomes given. Within the disposable-income range shown, as income increases the marginal propensity to consume

Oct/Nov 2016

In a closed economy without a government, the equilibrium level of income is reached when

Oct/Nov 2016

Which option correctly shows net injections into a country’s circular flow of income? government expenditure > taxation savings > investment exports > imports

Oct/Nov 2017

For an economy with no government sector: C = consumption I = investment X = exports M = imports Y = national income. If C = 40 + 0.5Y, I = 80, X = 100 and M = 100, what is the equilibrium value of Y?

Oct/Nov 2017

What flows from households to firms in the circular flow of income?

Oct/Nov 2017

What does the term real Gross Domestic Product mean?

Oct/Nov 2017

In a two sector economy, autonomous consumption expenditure rises by $100 billion, autonomous investment expenditure rises by $200 billion, and the marginal propensity to consume is 0.5. What increase in National Income will result?

Oct/Nov 2018

The table lists categories of annual government spending. $ million: army pay 35; civil servants’ salaries 125; farming subsidies 15; pension payments 75; welfare benefits 50. What is the total amount of government spending on transfer payments?

Oct/Nov 2019

Within a 4-sector economy made up of households, firms, government and foreign trade, national income is at equilibrium when C + I + G + (X – M) = Y. For equilibrium to be present, what must Y contain?

Oct/Nov 2019

Which item counts as an injection into a country’s circular flow of income?

Oct/Nov 2019

Evaluate how the relative size of injections into and leakages from the circular flow of income can affect the ability of a government to achieve its macroeconomic aims.

Oct/Nov 2019

Which statement correctly shows net leakages from a country’s circular flow of income? (private sector S > I, government sector T > G, trade sector X > M)

Oct/Nov 2020

In a closed economy with no government, the initial equilibrium level of national income is $500 billion. Households in the economy always spend a fixed proportion of every $1 of income that they receive. If investment spending rises by $20 billion, the economy reaches a new equilibrium level of national income of $600 billion. What is the marginal propensity to consume of the economy’s households?

Oct/Nov 2021

Which of the following is not counted as an injection into the circular flow of income of an economy?

Oct/Nov 2021

Which condition indicates net injections into a country’s circular flow of income? (I > S; X < M; G < T)

Oct/Nov 2021

Consider, with the aid of a circular flow diagram, why an export-led growth policy is likely to succeed when a developed economy experiences recession.

Oct/Nov 2022

General equilibrium in the macroeconomy occurs when total injections match total leakages. What is most likely to lead to disequilibrium in the macroeconomy in the short run?

Oct/Nov 2023

Which changes would expand the circular flow of income? greater imports / greater investment / greater taxation

Oct/Nov 2023

Which change is most likely to raise a country’s circular flow of income?

Oct/Nov 2024

In the circular flow of income model of an economy, Y, C, I, G, X, S, T and M stand for total income, consumption, investment, government expenditure, exports, saving, taxation and imports, respectively. Which statement is correct?

Oct/Nov 2024

The aggregate demand (AD) curve in an economy moves leftward. What is the most likely reason for this shift?

Oct/Nov 2025

The diagram illustrates the AD and AS curves for a low income country. Oil and gas account for 90% of its exports. The initial equilibrium level of national income is $Y_1$. What is the most likely new equilibrium point if the worldwide prices of oil and gas rise dramatically?

Oct/Nov 2025

The diagram illustrates the aggregate demand and aggregate supply curves for an economy. What would bring about a change in aggregate demand from AD to AD$_1$?

Oct/Nov 2025

From June until the end of July 2016, the UK pound sterling fell in value by 11% against a basket of currencies used by the UK’s main trading partners. The diagram illustrates the initial aggregate demand curve $AD_1$ and the initial aggregate supply curve $AS_1$ for the UK economy before June 2016. The equilibrium is at X. What would the new equilibrium have been for the UK economy as a result of the depreciation of the pound sterling?

Oct/Nov 2025

What is needed to stop the price level from rising as a result of an increase in aggregate demand?

Oct/Nov 2025

At equilibrium, an open economy that has a government records a national income of $900 million. Households consume $700 million and put aside $50 million. Firms allocate $100 million to investment. The government’s spending is $150 million, and its budget is balanced. What amount is spent on exports and imports?

Oct/Nov 2025

Using an aggregate demand and aggregate supply (AD/AS) diagram, explain why two parts of AD might rise and assess the extent to which a rise in AD will always cause inflation.

Oct/Nov 2025

What is most likely to rise if an economy moves into a negative output gap?

Oct/Nov 2025