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EnglandEconomicsQuick questions
Theme 2: The UK economy - performance and policies
Quick questions on National income and equilibrium: the circular flow and the multiplier - Edexcel A-Level Economics A
3short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is adjustment towards equilibrium?Show answer
The adjustment is automatic. Suppose injections rise above withdrawals: firms see stocks fall and orders unmet, so they raise output and hire more workers. Higher output means higher household incomes, which raises withdrawals (more saving, tax and imports) until withdrawals climb back to match injections at a new, higher equilibrium income. The reverse happens after a fall in injections: unsold stock builds up, firms cut output, incomes fall and withdrawals shrink until balance returns at a lower income.
What is q1?Show answer
State two injections and two withdrawals from the circular flow. [4 marks]
What is q2?Show answer
If the MPC is , calculate the multiplier and the effect of a bn rise in government spending. [3 marks]
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