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2 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2014 · Paper 2 · Question 2(c)(ii)

The following information relates to the aggregate expenditure (AE) for an economy: Consumption (C) = 100 + 0.8 Y, Investment (I) = 200, Government spending (G) = 50.

State the multiplier of the economy.

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Other parts of this question

  1. 2(a)(i)Define the macroeconomic variable 'Investment'.[2 marks]
  2. 2(a)(ii)Define the macroeconomic variable 'Interest rate'.[2 marks]
  3. 2(b)(i)Distinguish between 'savings' and 'consumption'.[4 marks]
  4. 2(b)(ii)With the use of an example, explain the term 'marginal propensity to consume'.[3 marks]
  5. 2(c)(i)Calculate the equilibrium level of income.[3 marks]
  6. 2(d)(i)Explain Durability as a determinant of the variability of investment.[3 marks]
  7. 2(d)(ii)Explain The accelerator as a determinant of the variability of investment.[3 marks]
  8. 2(d)(iii)Explain Irregularity of innovation as a determinant of the variability of investment.[3 marks]

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