Aggregate Demand and Economic Activity (AQA A-Level Economics): Flashcards

Production & consumption + use of productive resources

Ratio: change in national income ÷ initial spending change

Fraction of extra income spent on domestic consumption

Fraction of extra income saved rather than spent

Always equals 1

$k = \frac{1}{1 - \text{MPC}}$

Large multiplier (more respending, less leakage)

Government spending & tax multipliers

Always negative (withdrawals from circular flow)

Real is smaller (part of effect becomes inflation)