ATAR Notes: Forum

HSC Stuff => HSC Humanities Stuff => HSC Subjects + Help => HSC Economics => Topic started by: gusm03 on July 11, 2021, 04:01:10 pm

Title: Economics - Changes in National Income and Investment Q
Post by: gusm03 on July 11, 2021, 04:01:10 pm

Can someone help me out, please?
  :-\ :-\

Title: Re: Economics - Changes in National Income and Investment Q
Post by: zbolland on July 16, 2021, 10:55:51 am

For this equation, you need to become familiar with the MPC/MPS and change in national income formulas, as well as the simple multiplier.

To calculate the MPS, it is the (change in savings between 2 years)/(change in national income between 2 years) = 100/500 = 0.2

Therefore, we can calculate the simple multiplier, which is k = 1/MPS --> so k = 1/0.2 = 5

Since the government wishes to raise the level of national Y by $1000, we need to apply the change in the national income formula, which is, in this case: $1000 = 5 x (what we need to find)

Divide 1000 by 5 and you'll realise that the government will need to increase investment by $200.

The answer should be B.

These questions are very common, so it's definitely worth revising others if you are still confused. Hope that helps.