Edexcel A Level Economics A
Edexcel A Level Economics A 2.4 National Income Exam Questions
Free Edexcel A Level Economics A exam questions on 2.4 National Income, with mark schemes. Covers the circular flow, injections and withdrawals, equilibrium and the multiplier.
2.4 National Income exam questions
1 question pack of real past exam questions with its mark scheme. Answer every question without notes, then mark your answers line by line against the mark scheme.
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Edexcel A Level Economics A 9EC0 Flashcards (Anki & Quizlet)
Every answer is written in mark scheme wording, so you learn exactly what examiners give marks for. Use them on Anki or Quizlet, then test yourself with the questions on this page.
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About Edexcel A Level Economics A 2.4 National Income
2.4 explains how national income is determined and why a change in spending can have a bigger effect on GDP than the initial injection. Expect multiplier calculations.
What you need to know
- National income Income versus wealth: income is a flow and wealth is a stock. Know the circular flow of income between households and firms.
- Injections and withdrawals Injections are investment, government spending and exports. Withdrawals are savings, taxation and imports.
- Equilibrium National income is in equilibrium when injections equal withdrawals, shown as AD meeting AS.
- The multiplier The ratio of the change in real GDP to the initial change in an injection. Multiplier = 1 / (1 - MPC) or 1 / MPW, where MPW = MPS + MPT + MPM.
Common mistakes in 2.4 National Income
- Using 1 / MPC instead of 1 / (1 - MPC).
- Treating savings as an injection.
- Ignoring leakages to taxes and imports in an open economy, which makes the multiplier smaller.
- Assuming the full multiplier effect happens immediately.
Try three 2.4 National Income exam-style questions
1. The marginal propensity to withdraw is 0.4. Calculate the multiplier. (2 marks)
Show the mark scheme answer
Multiplier = 1 / MPW = 1 / 0.4 (1) = 2.5 (1).
2. Using the multiplier from your answer, calculate the final change in national income from a 10 billion pound rise in government spending. (1 mark)
Show the mark scheme answer
10 billion x 2.5 = 25 billion pound increase in national income.
3. Explain why the multiplier is smaller in an economy that imports a high proportion of goods. (3 marks)
Show the mark scheme answer
When income rises, a large share is spent on imports (1), which is a withdrawal from the circular flow (1). So less is passed on as further domestic spending, reducing the multiplier (1).
2.4 National Income FAQs
What does Edexcel A Level Economics 2.4 cover?
The circular flow of income, injections and withdrawals, equilibrium national income and the multiplier.
Which multiplier formula should I use?
Use 1 / (1 - MPC) in a closed economy, or 1 / MPW where MPW includes saving, taxation and imports.
Is income the same as wealth?
No. Income is a flow received over time. Wealth is a stock of assets owned at a point in time.
Revise this topic with flashcards: Edexcel A Level Economics A 9EC0 Flashcards, with mark scheme answers for Anki and Quizlet.
