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15 cards from this deck
When a change in expenditure causes a greater final change in real GDP
1MPW\frac{1}{MPW}MPW1 or 11−MPC\frac{1}{1-MPC}1−MPC1
Proportion of change in income that leaks from circular flow
MPM=ΔimportsΔincomeMPM = \frac{\Delta \text{imports}}{\Delta \text{income}}MPM=ΔincomeΔimports
MRT=Δtaxed incomeΔincomeMRT = \frac{\Delta \text{taxed income}}{\Delta \text{income}}MRT=ΔincomeΔtaxed income
When MPW is low (low MPS, MRT, and MPM)
Increase in national income induces firms to increase investment
APC=CYAPC = \frac{C}{Y}APC=YC (Consumption / Total Income)
Proportion of additional income spent on consumption
MPS=ΔSΔYMPS = \frac{\Delta S}{\Delta Y}MPS=ΔYΔS (Change in savings / Change in income)
k=11−MPCk = \frac{1}{1-MPC}k=1−MPC1
k=1MPSk = \frac{1}{MPS}k=MPS1
Actual output below potential; underutilised resources & unemployment
Actual output exceeds potential; inflationary pressure
Initial spending increase causes 5× greater rise in national income
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