The Circular Flow, the Multiplier and Economic Growth and Sustainability A Level Economics MCQ Online Test, Set 1 (with Solutions)

The Circular Flow, the Multiplier and Economic Growth and Sustainability: Practice Set 1

Instructions

10 questions: multiple-choice questions, AS and A Level
Time: 15 minutes. The countdown runs at the top right; the test submits by itself when time is up.
+1 for each correct answer, no negative marking
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National income is 400 billion and consumption is 300 billion. What is the average propensity to consume?

(a) 0.25(b) 1.33(c) 100(d) 0.75

In a closed economy with no government, the marginal propensity to consume is 0.8. What is the multiplier?

(a) 0.2(b) 1.25(c) 5(d) 8

Which of the following is a withdrawal from the circular flow of income?

(a) government spending on hospitals(b) spending on imported goods(c) investment by firms in new machines(d) export sales to other countries

What is autonomous consumption?

(a) consumption that does not depend on the level of income(b) consumption that rises as income rises(c) consumption of imported goods(d) consumption financed by government

In an open economy, mps = 0.1, mrt = 0.2 and mpm = 0.2. What is the multiplier?

(a) 10(b) 2(c) 5(d) 1.25

Which is most likely to cause induced investment?

(a) the invention of a new technology(b) a government grant for research(c) a rise in national income and sales(d) a fall in business taxes

An economy uses previously unemployed workers and machines so that real GDP rises. What type of growth is this?

(a) potential growth(b) actual growth(c) a rise in the long-run aggregate supply(d) an outward shift of the production possibility curve

The consumption function of an economy is \(C = 60 + 0.8Y\). What is the value of autonomous consumption?

(a) 0.8(b) 0.2(c) 60(d) 48

What does the accelerator theory state?

(a) consumption depends on the level of income(b) an injection causes a multiplied rise in income(c) investment depends on the rate of interest(d) net investment depends on the rate of change of national income

Which change would shift the consumption function upwards?

(a) a rise in the rate of interest(b) a rise in income tax rates(c) a fall in the value of households' wealth(d) a rise in consumer confidence