Lesson 4.2.2.4

4.2.2.4 Aggregate demand and the level of economic activity Quiz: AQA Economics, Unit 2

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.2.2.4, Aggregate demand and the level of economic activity: 20 multiple choice questions for the AQA Economics (7136), Unit 2: The national and international economy, written with Revision Ninja.

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The 20 questions

  1. What term measures the fraction of extra income spent on consumer goods?

    • Average propensity to consume
    • Marginal propensity to consume
    • Marginal rate of taxation
    • Marginal propensity to save

  2. Which formula correctly represents aggregate demand in an open economy?

    • C + I + T + M
    • C + I + G + (X - M)
    • C + I + G + S
    • C + S + T + (X - M)

  3. What formula calculates the simple national income multiplier from the MPC?

    • 1 / (1 - MPC)
    • MPC / (1 - MPC)
    • 1 + MPC
    • 1 / MPC

  4. In a simple model with no taxes, savings or imports, which formula gives the size of the multiplier?

    • (1 - MPC)/MPC
    • 1/MPC
    • MPC/(1 - MPC)
    • 1/(1 - MPC)

  5. If the marginal propensity to consume is 0.75, what is the value of the simple multiplier?

    • 0.75
    • 1.33
    • 3
    • 4

  6. Which change increases the size of the national income multiplier?

    • Higher MPS
    • Higher MPC
    • Lower MPC
    • Higher taxation rate

  7. Why does an injection lead to a larger final increase in national income?

    • Lower price levels
    • Increased capital stock
    • Higher interest rates
    • Successive spending rounds

  8. An economy has a marginal propensity to consume of 0.6. Government spending on road building rises by 200 million pounds. Assuming no other leakages, what is the approximate change in national income?

    • 333 million pounds
    • 120 million pounds
    • 500 million pounds
    • 800 million pounds

  9. MPC is 0.8 and investment rises by 50 million pounds. What is the change in national income in this simple model?

    • 62.5 million pounds
    • 1000 million pounds
    • 250 million pounds
    • 40 million pounds

  10. MPC is 0.9 and an initial injection of 30 million pounds occurs. What is the total change in national income?

    • 33 million pounds
    • 300 million pounds
    • 3 million pounds
    • 270 million pounds

  11. If the marginal propensity to consume is 0.8, what is the value of the simple multiplier?

    • 4
    • 8
    • 1.25
    • 5

  12. MPC is 0.75. What change in national income results from a 20 million pound injection?

    • 60 million pounds
    • 26.7 million pounds
    • 80 million pounds
    • 15 million pounds

  13. If the marginal propensity to consume falls from 0.8 to 0.5, what happens to the multiplier?

    • Rises from 1.25 to 2
    • Rises from 2 to 5
    • Falls from 8 to 5
    • Falls from 5 to 2

  14. Household consumption rises from 400 million pounds to 460 million pounds when disposable income rises from 1000 million pounds to 1100 million pounds. What is the MPC?

    • 0.4
    • 0.6
    • 1.5
    • 0.06

  15. Why does cutting income tax have a smaller initial spending impact than government spending?

    • Some income saved
    • Imports absorb spending
    • Taxes lower investment
    • Prices inflate immediately

  16. An economy has an MPC of 0.7. Government spending rises by 60 million pounds. Which change in national income is closest to the simple multiplier estimate?

    • 200 million pounds
    • 60 million pounds
    • 420 million pounds
    • 42 million pounds

  17. What happens to circular flow leakages when the marginal propensity to consume increases?

    • They decrease
    • They reach zero
    • They stay constant
    • They increase

  18. Which of the following is a leakage from the circular flow of income?

    • Imports
    • Government spending
    • Investment
    • Exports

  19. A government wants to close a negative output gap of 2 billion pounds. The MPC is 0.75 and the economy has no other leakages. Approximately what increase in government spending is needed?

    • 500 million pounds
    • 1.5 billion pounds
    • 8 billion pounds
    • 2 billion pounds

  20. Why is it difficult for policymakers to precisely predict the multiplier effect?

    • Constant marginal propensities
    • Immediate economic impacts
    • Unpredictable spending behaviour
    • Fixed tax rates

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