Revision: Consumption and
Saving
Define the term: Average Propensity to Consume (APC)
Ifsomebody earned £20,000 and spent £17,000 What
will their APC be? What will their APS be?
Define the term: Marginal Propensity to Consume (MPC)
Ifsomebody received a pay rise of £2,500 and spent
£1,500 of it. What would be their MPC? What will the
MPS be?
What would their new APC be? What will their APS
be?
, AS Economics
Theme 2 – The UK Economy –
Performance and Policies
The Multiplier
Teacher: Mr Moosajee
Twitter: @BusEconYMO_HGS
Office: Third Floor (between G39 and
B41)
, Lesson objectives
Explain average propensities and marginal propensities and their effects on the
multiplier. These include:
the marginal propensity to consume (MPC)
the marginal propensity to save (MPS)
the marginal propensity to tax (MPT)
the marginal propensity to import (MPM)
Explain what is meant by the multiplier ratio, and how changes to injections and
leakages can influence the multiplier ratio
Explain how increases in injections lead to increases in income – the multiplier
process
Explain the effects of the multiplier on national income, and appreciate how this can
lead to shifts in AD (aggregate demand)
Explain that the multiplier is the inverse of the marginal propensity to withdraw, and
can be calculated using 1/(1-MPC) and 1/MPW, where MPW=MPS+MPT+MPM
Explain the effects of the downward multiplier on national income
Saving
Define the term: Average Propensity to Consume (APC)
Ifsomebody earned £20,000 and spent £17,000 What
will their APC be? What will their APS be?
Define the term: Marginal Propensity to Consume (MPC)
Ifsomebody received a pay rise of £2,500 and spent
£1,500 of it. What would be their MPC? What will the
MPS be?
What would their new APC be? What will their APS
be?
, AS Economics
Theme 2 – The UK Economy –
Performance and Policies
The Multiplier
Teacher: Mr Moosajee
Twitter: @BusEconYMO_HGS
Office: Third Floor (between G39 and
B41)
, Lesson objectives
Explain average propensities and marginal propensities and their effects on the
multiplier. These include:
the marginal propensity to consume (MPC)
the marginal propensity to save (MPS)
the marginal propensity to tax (MPT)
the marginal propensity to import (MPM)
Explain what is meant by the multiplier ratio, and how changes to injections and
leakages can influence the multiplier ratio
Explain how increases in injections lead to increases in income – the multiplier
process
Explain the effects of the multiplier on national income, and appreciate how this can
lead to shifts in AD (aggregate demand)
Explain that the multiplier is the inverse of the marginal propensity to withdraw, and
can be calculated using 1/(1-MPC) and 1/MPW, where MPW=MPS+MPT+MPM
Explain the effects of the downward multiplier on national income
