AS Economics Paper 2
1/9
, AS Economics Paper 2
1. What are the determinants of AD. Which is the most significant in boosting
UK economics growth?: AD = C + I + G + (X-M)
Consumer Spending + Capital Investment + Government Spending + (Exports
- Imports) Consumer Spending is the most important.
2. Define the marginal propensity to consume.: This measures the proportion of extra
income that is spent on consumption. The change in consumption divided by the change
in income.
3. What factors determine the Marginal prospensity to consumer?: Income levels - at
low income an increase is likely to see a high MPC.
Temporary/permenant - may be more inclined to save if only a bonus
rather than a raise Interest rates - higher interest rates encourage saving
rather than consumption..
Consumer confidence - high confidence will encourage people to spend. Low MPC if
pessimistic.
4. How does MPC and the multiplier effect relate?: The size of the MPC determines the
magnitude of the multiplier effect.
5. What are the determinants of investment?: - expected return on investment
- rate of interest
- business confidence
- change in national income
6. Define absolute poverty.: When a household does not have sufficient income to
sustain even a basic acceptable standard of living.
7. Define relative poverty.: A level of household income that is considerable lower than
the median level of income within a country
2/9
1/9
, AS Economics Paper 2
1. What are the determinants of AD. Which is the most significant in boosting
UK economics growth?: AD = C + I + G + (X-M)
Consumer Spending + Capital Investment + Government Spending + (Exports
- Imports) Consumer Spending is the most important.
2. Define the marginal propensity to consume.: This measures the proportion of extra
income that is spent on consumption. The change in consumption divided by the change
in income.
3. What factors determine the Marginal prospensity to consumer?: Income levels - at
low income an increase is likely to see a high MPC.
Temporary/permenant - may be more inclined to save if only a bonus
rather than a raise Interest rates - higher interest rates encourage saving
rather than consumption..
Consumer confidence - high confidence will encourage people to spend. Low MPC if
pessimistic.
4. How does MPC and the multiplier effect relate?: The size of the MPC determines the
magnitude of the multiplier effect.
5. What are the determinants of investment?: - expected return on investment
- rate of interest
- business confidence
- change in national income
6. Define absolute poverty.: When a household does not have sufficient income to
sustain even a basic acceptable standard of living.
7. Define relative poverty.: A level of household income that is considerable lower than
the median level of income within a country
2/9
