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Economics (AS & A Level) · May / June 2023 · Paper 31 · Question 22

9708The circular flow of income

In a closed economy with no government sector, when will an increase in investment spending generate the largest increase in equilibrium national income?

  1. Awhen households have a high level of autonomous consumption
  2. Bwhen households have a high level of compulsory saving
  3. Cwhen households have a high marginal propensity to consume
  4. Dwhen households have a high marginal propensity to save

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Correct answer: C. when households have a high marginal propensity to consume

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