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8 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2016 · Paper 2 · Question 2(d)

Discuss TWO ways in which the economy adjusts withdrawals if the level of GDP is in disequilibrium.

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  1. 2(a)Describe the relationship between the marginal propensity to consume (MPC) and marginal propensity to save (MPS).[2 marks]
  2. 2(b)Copy and complete Table 2 to show the 'consumption' and the 'average propensity to consume' (APC).[6 marks]
  3. 2(c)(i)From your completed Table 2, draw ONE graph to show the consumption schedule and ONE graph to show the saving schedule.[8 marks]
  4. 2(c)(ii)Determine the break-even level of income.[1 mark]

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