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[mathslover]

Outline how the simple multiplier can affect economic activity.

when attemptin to answer this i never know whether ive answered the question.

 

[Jackets]

Outline how the simple multiplier can affect economic activity.

when attemptin to answer this i never know whether ive answered the question.

The simple multiplier is a mathematical concept which means that with an increase in income, there is a multiplied effect on spending. In turn, this extra revenue stimulates Aggregate demand which thereby stimulates economic activity.

 

[BackCountrySnow]

use C+I and C+I+G graph and state the 1/MPS formula. Then just briefly outline how an injection of governemnt spending will circulate around the economy, increasing economic activity by a greater amount than the increase in spending.

 

[Matt Palmer]

Outline how the simple multiplier can affect economic activity.

when attemptin to answer this i never know whether ive answered the question.

The concept of the simple multiplier is based on the marginal propensity to consume; that is, the portion of extra income spent on consumption. Having a high MPC (as Australians do) will mean that for any extra income earnt will be spent on consumption, and will stimulate aggregate demand more and more. The effect of the initial increase in income will eventually play itself out as most individuals save a portion of their income. It is widely know that low income earners and pensioners have a high MPC, so often the government will give these groups extra income through social welfare because as they consume, it will have a wider affect on the economy - thanks to the principle of the simple multiplier.

 

[vmoore]

none of thoes answer the question... you all outline what it is but not how it affects national income.

By knowing the simple multiplier, governements are easily able to affect economic activity through expenditure and revenue. If the multiplier is known, governemnts know the correct amount of spending needed to solve a deflationary gap, and similarly know how much the increase revenue by to solve an inflationary gap. By not knowing the level of the multiplier, the level of spending or revenue will be distorted and afect the economy in an undesired way (ie. a deflationary gap into an inflationary or vice versa). Hence, the correect chane in the structual component of the budget deficit/surplus can successfuly achieve economic objectives by knowing the affect the simple multiplier will have on economic activity.

 

[mathslover]

none of thoes answer the question... you all outline what it is but not how it affects national income.

By knowing the simple multiplier, governements are easily able to affect economic activity through expenditure and revenue. If the multiplier is known, governemnts know the correct amount of spending needed to solve a deflationary gap, and similarly know how much the increase revenue by to solve an inflationary gap. By not knowing the level of the multiplier, the level of spending or revenue will be distorted and afect the economy in an undesired way (ie. a deflationary gap into an inflationary or vice versa). Hence, the correect chane in the structual component of the budget deficit/surplus can successfuly achieve economic objectives by knowing the affect the simple multiplier will have on economic activity.

i think ur the most on track so far.. :S

 

[8th1da]

none of thoes answer the question... you all outline what it is but not how it affects national income.

By knowing the simple multiplier, governements are easily able to affect economic activity through expenditure and revenue. If the multiplier is known, governemnts know the correct amount of spending needed to solve a deflationary gap, and similarly know how much the increase revenue by to solve an inflationary gap. By not knowing the level of the multiplier, the level of spending or revenue will be distorted and afect the economy in an undesired way (ie. a deflationary gap into an inflationary or vice versa). Hence, the correect chane in the structual component of the budget deficit/surplus can successfuly achieve economic objectives by knowing the affect the simple multiplier will have on economic activity.

You still havent answered the question properly! The question asks how the multiplie affects variations in the economic and makes no reference to economic objectives or inflation. You wrote way 2 much aswell especially since this is a 2 mark question (2003 HSC question 23 part c)

The multiplier is the term used to describe the multiple times an increase (or decrease) in an injection (such as investment) impacts on income. If an economy has an MPC of .6 the value of the multiplier will be 2.5.
if investment was to rise from 200 to 220 in an economy, income may rise by 20 × 2.5 = 50

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[mathslover]

You still havent answered the question properly! The question asks how the multiplie affects variations in the economic and makes no reference to economic objectives or inflation. You wrote way 2 much aswell especially since this is a 2 mark question (2003 HSC question 23 part c)

The multiplier is the term used to describe the multiple times an increase (or decrease) in an injection (such as investment) impacts on income. If an economy has an MPC of .6 the value of the multiplier will be 2.5.
if investment was to rise from 200 to 220 in an economy, income may rise by 20 × 2.5 = 50

ur right, nione of them have answered it correctly. im not sure u have either.

 

[@who]

Outline how the simple multiplier can affect economic activity.

when attemptin to answer this i never know whether ive answered the question.

dude.... thats in the 2004 paper. i had similar troubles.
ok.
the simple multiplier is a measure of the greater than proportional increase in aggregate demand injected into the economy. Now, the thing that reduces the level of agg demand each time is the MPS. The simple multipler highlights the fact that one increase in agg demand will be injected into the economy until it is completely consumed. in other words, it will be aggregate demand will continuously increase until MPS > remaining agg demand.

its pretty hard to explain but u just have to know that it has a multiplied affect on the level of aggregate demand (C+I+G+(X-M))

 

[8th1da]

ur right, nione of them have answered it correctly. im not sure u have either.

This was in our half yearlies that was the answer i wrote and i got 2/2. How about we see how you have answered the question

 

[munchiecrunchie]

Outline how the simple multiplier can affect economic activity.

when attemptin to answer this i never know whether ive answered the question.

The multiplier concept asserts that a change in aggregate demand within the economy will then have a greater than proportional change in national income, hence affecting economic activity. This can be see through an increase in spending by the government to stimulate economic activity. This will then contribute to someone else's income, and by the multiplier effect, they will then spend a proportion of this income defined by the MPC, further stimulating economic activity, and this process continues. As a consequence, a small change in aggregate demand can perpetuate a greater than proportional effect on both national income and economic activity. The greater amounts of national income also equips consumers with greater amounts of disposable income, and hence they are able to further spend and further increase economic activity. The converse of this process is also true; a decrease in aggregate demand will then decrease the income of a recipient, who will then spend a lesser amount, decreasing economic activity.


There you go.

 

[mathslover]

The multiplier concept asserts that a change in aggregate demand within the economy will then have a greater than proportional change in national income, hence affecting economic activity. This can be see through an increase in spending by the government to stimulate economic activity. This will then contribute to someone else's income, and by the multiplier effect, they will then spend a proportion of this income defined by the MPC, further stimulating economic activity, and this process continues. As a consequence, a small change in aggregate demand can perpetuate a greater than proportional effect on both national income and economic activity. The greater amounts of national income also equips consumers with greater amounts of disposable income, and hence they are able to further spend and further increase economic activity. The converse of this process is also true; a decrease in aggregate demand will then decrease the income of a recipient, who will then spend a lesser amount, decreasing economic activity.


There you go.

winner
well done!

 

[mathslover]

This was in our half yearlies that was the answer i wrote and i got 2/2. How about we see how you have answered the question

sorry, i wasnt being rude.

 

[8th1da]

I just wonder how u can judge a winner when u are quite confused. Kudos to MunchieCrunchie 4 answering the question how ever writin 160 words 4 a 2 mark question is quite idiotic. These are short answer questtions NOT mini-essays

 

[munchiecrunchie]

I just wonder how u can judge a winner when u are quite confused. Kudos to MunchiekCrunchie 4 answering the question how ever writin 160 words 4 a 2 mark question is quite idiotic. These are short answer questtions NOT mini-essays

I'm sorry I didn't know the mark allocation for this, but that was intended for a 3/4 mark question.

I'd probably shorten it if it was only 2 marks, condense it a bit.

 

[BackCountrySnow]

if you read over what everyone has said you will find that we have all just reworded the same thing. everyone is right.

 

[mathslover]

if you read over what everyone has said you will find that we have all just reworded the same thing. everyone is right.

That you are.
Sorry guys + thanks for the help

 

[magik22]

Simply put - its just a measurement allowing the Government to judge how much money to put into the economy and its 'multiplied' effect on everyone's spending/consumption.