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5 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2012 · Paper 2 · Question 1(d)(ii)

Using the simple Keynesian consumption theory, explain the effect of a rise in income on the MPC and APC.

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Other parts of this question

  1. 1(a)Explain the difference between 'Gross Domestic Product (GDP)' and 'Gross National Product (GNP)'.[4 marks]
  2. 1(b)(i)Define the income approach for measuring GDP, and outline how it is used.[3 marks]
  3. 1(b)(ii)Define the expenditure approach for measuring GDP, and outline how it is used.[3 marks]
  4. 1(c)Discuss TWO ways in which growth in a country's GDP may negatively impact the country's standard of living.[6 marks]
  5. 1(d)(i)Distinguish between 'marginal propensity to consume' (MPC) and the 'average propensity to consume' (APC) and state how EACH is calculated.[4 marks]

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