Q35 · Practice questionSimple familiar5 marks
QUESTION 35 (5 marks)
Calculate APC and APS at each income level, then MPC between the two observations. Explain why using APC in the simple multiplier would be inappropriate.
WORKED SOLUTION
5 marksPractice marking scheme
Answer
APC: 0.95 then 0.90; APS: 0.05 then 0.10; MPC: 0.70.
Working
At $800, APC = 760/800 = 0.95 and APS = 40/800 = 0.05. At $1000, APC = 0.90 and APS = 0.10. MPC = (900 − 760)/(1000 − 800) = 0.70. Multiplier rounds depend on the proportion of additional income spent, rather than the average share of all income spent.
Marking criteria
- Calculates the two APCs and APSs. [2 marks]
- Calculates MPC = 0.70. [1 mark]
- Explains marginal rather than average spending in subsequent rounds. [2 marks]
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