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Given: National Income as $Y = C + I + G + (X - M).$ (i) If National Income, without imports and exports, is €1,500m calculate national income if exports are €70m and imports are €100m - Leaving Cert Economics - Question b - 2010
Question b
Given: National Income as $Y = C + I + G + (X - M).$ (i) If National Income, without imports and exports, is €1,500m calculate national income if exports are €70m a... show full transcript
Worked Solution & Example Answer:Given: National Income as $Y = C + I + G + (X - M).$ (i) If National Income, without imports and exports, is €1,500m calculate national income if exports are €70m and imports are €100m - Leaving Cert Economics - Question b - 2010
Step 1
If National Income, without imports and exports, is €1,500m calculate national income if exports are €70m and imports are €100m.
Answer
To calculate the National Income , we will use the formula:
- Given that ,
- Exports ,
- Imports .
Now plug in the values:
- Calculate the value:
Thus, the National Income is €1,470m.
Step 2
The economist John Maynard Keynes developed the concept of the Multiplier to help understand how an economy works. Explain, using an example, the underlined term.
Answer
The Multiplier is a concept that explains how an initial change in spending can lead to a larger overall increase in national income.
For instance, if the government injects €10m into the economy, and the multiplier effect is 2, this means that the total increase in national income will be:
In our case:
This example illustrates that even a small initial investment can lead to a significant overall impact on the economy.