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8 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2009 · Paper 2 · Question 2(b)

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

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Other parts of this question

  1. 2(a)(i)Distinguish between the Marginal Propensity to Consume (MPC) and the Average Propensity to Consume (APC).[4 marks]
  2. 2(a)(ii)State how the APC and the MPC are calculated.[4 marks]
  3. 2(c)(i)Define the term 'autonomous consumption'.[2 marks]
  4. 2(c)(ii)Draw a graph illustrating the concept of autonomous consumption and explain the Keynesian consumption function.[8 marks]
  5. 2(d)(i)State FOUR determinants of consumption, other than income.[8 marks]
  6. 2(d)(ii)Explain how EACH of the four determinants impacts on consumption.[16 marks]

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