o

p
G r e e n G D P
n
e
c
o
n
o
G m
N y
I

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The GNI, similar to aggregate demand, consists of C (personal consumption expenditure), I (private
investment), G (government expenditure), and X – M (net exports of goods and services). However, it also
includes net income from assets abroad. How- ever, unlike GNP, GNI deducts indirect business taxes from
the calculations (to make international comparisons of national output more meaningful).
True

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True

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Stagflation is when the economy experiences growth and inflation at the same time

Exogenous means external

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Read the multiplier for what the sheet calls ‘Keynesian multiplier’

ΔG * [1 / (1 – MPC) ] = 15 * (1 – 0.8) = $3bn

 False

True

False

j The multiplier will diminish if inflation occurs

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+$70m [$30m * [(MPC/(1 – MPC) = 30 * (0.7/0.3)] = +70$m

$8.75bn [Required cut in G = $35bn * (1 – 0.75) = $8.75bn]

$62.33bn $121bn * [(1 – MPC)/MPC] = 121 * 0.34/0.66 = 62.33$bn

 0.75 (MPC = ΔC / ΔY = 0.75 Yd = 0.75)

$1,225 (C = 100 + 0.75 (1,500) = $1,225)

0.816 (APC = C / Y = 100 + 0.75 (1,500) = $1,225 / $1,500 = 0.816)

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Read the file S7 Holiday Reading in
Teams before you do this
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• A wider range of vocational training programmes
• Greater access to a wider range of university courses
• More off-the-job and on-the-job training opportunities
• Improve incentives for people to search and accept paid work, such as the use of reforms to the tax system and
entitlement to welfare benefits
• Flexible working patterns, such as part-time employment, shift working, teleworking and homeworking
Government spending might fuel aggregate demand without any corresponding increase in real national
output, thereby simply causing inflation
• It might not deal with the root cause, i.e. incentives to work and accept paid work at the prevailing wage rate
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