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2 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2013 · Paper 2 · Question 1(c)(iii)b)

An economy has: C = 40 + 0.90Y, G = 500, I = 50, NX = 10 - 0.20Y.

State whether the multiplier will be smaller or larger than the government spending multiplier. Justify your response.

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Other parts of this question

  1. 1(a)(i)Explain the term 'Gross Domestic Product (GDP) deflator'.[2 marks]
  2. 1(a)(ii)State the purpose of the GDP deflator.[1 mark]
  3. 1(b)(i)State ONE reason why an individual buying a used textbook will or will NOT be included in the calculation of a country's GDP.[2 marks]
  4. 1(b)(ii)State ONE reason why a dealer selling $400 worth of illegal drugs will or will NOT be included in the calculation of a country's GDP.[2 marks]
  5. 1(b)(iii)State ONE reason why a meat processing plant building a new factory will or will NOT be included in the calculation of a country's GDP.[2 marks]
  6. 1(c)(i)a)Determine the autonomous consumption.[1 mark]
  7. 1(c)(i)b)Determine the marginal propensity to consume.[1 mark]
  8. 1(c)(ii)Calculate the equilibrium level of real GDP.[4 marks]
  9. 1(c)(iii)a)Calculate the multiplier.[2 marks]
  10. 1(d)(i)Briefly describe Net National Product (NNP) and state how it is measured.[3 marks]
  11. 1(d)(ii)Briefly describe Personal Disposable Income (PDI) and state how it is measured.[3 marks]

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