The effect of changes in injections and withdrawals on national income
When injections into the economy rise above withdrawals, national income grows. When withdrawals exceed injections, national income falls.
Formula
ΔY = Multiplier × ΔInjection
Real World
The US government's $787 billion fiscal stimulus in 2009 under Obama injected spending into the circular flow; economists debated the size of the multiplier to predict how much national income would ultimately rise.
Exam Focus
Chain your causation explicitly: injection rises → spending rises → firms produce more → incomes rise → spending rises again — examiners reward developed chains.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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