Marginal propensity to save data for an economy. Okay. And explain one. Possible reason for the changes in the marginal apprentices save as shown in the table. Okay, you've got control. You can go back and forward. So it's two Marks. Why would be changes as shown in the table for the marginal propensity to save? Why would there be changes in the marginal propensity safety thing? The possible reason for the changes in the marginal propensity to, say, marginal propensity save, as shown in this table, one reason. So with what happened there. 0.120 point zero four. So. Investment because more investment as. Because more because there is more injections, so the marginal propensity to save is less. No, that would make a difference on. The stuff going in. But the maral propensity to say is like the the people, isn't it? So what would what would be happening that would mean the people would be saving less, so taking less out of the money cycle consumption more maybe more government spending. So there's more consumption confidence and more people willing to investment. So injection increase and and there's less marginal propensity to save. Good, good, good. Yeah, Yeah or the other thing would be what about interest rates? What would that do to marginal propensity to save? Marginal propensity sity to save. If interest rates are high, will people save more? Well, save more. Let me think so. Maybe. Okay. There's no, I think maybe be the marginal propensity, the government spending on infrastructure. So there is small workers to live in the hotels and buy goods and services in at hotel or shops or supermarkets. And so there is more marginal propensity to consumption and marginal propensity to save is equal to one minus a marginal propensity to consume. So more M. B. C, less M P. S. So maybe that is one factor, very good. And the other way, you're right. But another factor for you to consider, you know if you have to write a longer essay on it, is if interest rates are high, people get more money back for saving. So they often save more. So if marginal, printed to save normally increase if interest rates are high or decrease if interest rates are low. But Yep, you weren't wrong. Just another thing to sort of think about if it was a longer question, explain the likely effect of a fall in the marginal propensity to save on the value of the multiplier if other things remain equal. Nah. Effect on the fall in the marginal prosity to save on the value of the multiyer if others saying remain equal. I'll give you a clue. You've kind of said a bit of it before, but the multiplier looks at the marginal propensity to consume, doesn't it? So this is asking about the marginal propensity to save. So do say what you said in that previous one, you know about the link between the two and then talk to me about then the multiplier. Does that make sense? I. Find the marginal propensity to save. On the value of the multiplier. Safe value as they makes feel. Oh. If the other things remain equal, multiplier, if anything. Can you can you remember the multiple okay for in the marginal purses? So firstly, I will write down the equation in multiplier, which is one divided by M P S. Yeah. And. I will say that propensity. And I will say that if there is a four, the marginal propensity save that means. There is less withdrawals in the. In the circuit circular like a circucircular. Yeah Yeah circular circular what? Circular flow of income? Circular flow of income. So there's less withdrawals and that will increase the multiplier because less and ps more multiplier. Perfect. Yeah exactly right. Well done. Sorry, my mouse has run out of batteries, so I've taken it off. So I'm now using the one on my laptop and I hate that. So I'm not pretty. Yeah, I have not broken, just the laptop mounts, right? Economy has a marginal propendensity to save 0.1, marginal pendensity to tax of 0.2 and a marginal propensity to import of 0.1. Which of the following is the correct size of the multiplier? Marginal propensity of two. That will withdraw rules arenthat. We're all taken it out. M P S, M P T, M P I, so multido you apply save tax imports, note, note point one, 0.2, note point one, 0.4, one zero, divided by note point four. So that is 2.5. I choose c very good. You just get that in your head. I'm impressed. Yeah, actually I can I can calculate some some simple questions with my hand. Yeah, with my head. Yeah, very good at your mental maths. Very good. Hang on. You might be better to do the up and down. So I'm making a complete mess of it. The chart below shows the results from a survey of uk customers confidence in the consumers confidence in their financial situation. A negative balance means that on average, consumers reported their financial situation got worse. A positive balance means they reported it improved and in zero balance means no change, right? So this is about consumers confidence. Oh dear, they weren't very confident, were they? Dear, all below zero. Okay, what's the question? Which Oh my goodness, which one of the following is most likely to result from an improvement in uk consumer confidence? The marginal propensity two. What do people do is decrease consumption. Decreasing the margin improves consumer confidence. Consumer confidence, Yeah people are more confident. So they. As they save less. That's right, they save less because they spent more basically, don't they? In the simplest terms? Yeah, very good. Define the term national income. National income. The g dp the sum of g dp and C P I Yeah or certain amount of spending or goods and services. Very good. Which one following is an injection into this circular flow of income? Sorry, I really me and the mouse are not getting on this one injection into the circular. Yes, define the term circular flow of income. Circular flow of income. It's a circle it a circle of. It is circutary account ts, the money flowing between consumer and firms and all government consumer and government yetalk to me about withdrawals and injections. So here's has forms and is that forms? Ms, Yeah. Consumers and firms. Yeah. So remember, it's just like. Then you've got. So Yeah, the consumer and firms so the consumer can give firms the import. No no. No led to the rest of the world, the consumer and firms. So consumer will give firms the money and firms can give consumer goods and services. And in this circle, some money will flow outside that is will flow outside. That is that is withdrawals Yeah with withdrawals. That is saving taxation and imports. And some money will flow into the circle that is injections. That is government spending. That is government spending. Investment and exports. Very good, and don't be scared to draw it, remember? Because that would you could have just written those things and gone you know in the diagram you can see there's the injections and withdrawals. But perfect. You were perfect. Okay. Yep. Oh, der mal? Oh my goodness, it's going to make a sick that me doing this right. In 20 and 14, the bank of England estimated the marginal propensity to consume of uk consumers to be 0.5. Really. In 2014, the chancellor of the exjector announced a 15 billion investment program into uk road infrastructure using information increase the total, calculate the total increase in national income resulting from the 15 billion investment. So this one information Google is total increase in national income resulting for. 15 billion pounds investment. So total increase total increase okay. One divided by 0.5 is 0.5 yes I was just a tics a very funny it's a funny point five Yeah it's a funny number to give it in it sorry I was just thinking that why would you ever write an exquestion would do that anyway Yeah when do I mean by not point five that is two so the final is 30 billion pounds that I know you've just worked that out in your head and I'm just like being just for an exam and you were right your spot on right but make sure you write your working down when you're doing your exam not for now but when you do it properly. Yeah just make sure you write your steps down I always I often check to my answer when I calculate to my mind because I think some process I don't need to use calculator because that is a wawaste of time Yeah but just make sure you write down your steps don't just write 30 billion make sure you write down your Yeah that was a Marks Marks Yeah Yeah that's all that's all get Marks Yeah perfect no no no that's all I was gonna to say right what we got here. Soaring house prices, right? What's the question? Didn't I explain two factors that might cause a rise in the value of the multiplier? Once in the multiplier, we need to increase the mpc. So if we want to increase nc, we can use two factors. But Yeah, I see these six Marks are rise in the value of a multiplier. Now for me. Hi. One. Yeah is it little? No, I don't think no, I don't think so. It just seems funny. Yeah Yeah so Yeah two factors. Firstly, the multiplier shows shows how the injection can influence the change in the national income. The second point is multiplier equal to one over m ps or one over one minus npc. Yeah. The third part, the third point, Oh, no, no, no, no, no. We need, we need this. We need this particle. Yeah, we need this. Do we need it? Doesn't say which one. Doesn't say bit which thing. Maybe we should. I'm not sure what's this one. Maybe maybe that is question ten. So maybe about figure two, household savings. Nice. So Yeah, it shows the graph about a wish about household saving from 2010 to 2015. So in 2010 it is it was 11% and 20, 2015 that is 5.8%. And the figure three shows that the price, the you can average house prices and from 20, from 26, from 26 to 2016 it shows, firstly it was 160 pthousand pthousand pounds to, and it was. And and it was that it was 210000 in 2016. So the house price house prices is increasing and house saving is is decreasing. So it increasing. So the two factors that might arise in that. So maybe first of all. Maybe there is a uk government spending on or maybe there's an investment in the circular. Flow of income. So that will increase the injection and decrease Yeah and increase the injection and increase the nps and soon increase the multiplier. Another point is that there is less saving. That is a question. That is a graph given so that that can take less mpps so that there is lot more multiplier over. Good. What about consumer confidence? Can you put that in somewhere? Another point. Confidence. Yeah if there's more investment, so there's more consumer confidence to consume the house, although the house price is higher. Yeah Yeah Yeah Yeah good, good yes know that is animal spirit your animal spirit you good I think you're you're good with these aren't you you know these right? Because I did it ideas this afternoon Oh, so you've done it this afternoon and now you're doing all the questions. You it Yeah and I get five Marks on these six Marks. So that is why I know I know how to how to find it and where is the graph? Very good. Very good. Are you feeling more confident now with how to approach exam questions like, Yeah, I'm more confident. Yeah, I think so. With reference to figure one, explain the term real income. So real income figure one, four Marks. So you're going to need two quotes. Real income figure one. Up a bit. Where is it? The fever one? There you go. Sorry you do the up and down because I'm just making a mess of it. Sorry about the figure one so the question is real income and really weekly household the real income so firstly I should keep the naviation of income maybe the in the real income is the income which the income without taxation and another payment it's not taxation real always means adjusted for inflation inflation the real in the income which will influence with inflation Yeah the income so it's the money earned. So I would I would define it something like the money earned. By household, is it households? Yeah. Yeah. Okay, so now that's your definition. So now you need to tell me something about it. Gone up, gone down. Give me a year etcec. Earned by households suggested for inflation the money, the money earned by a. It's basically how much people get paid adjusted for inflation. Because obviously, if you compared 2006 to 2013, inflation would advertiagainst the highest in that. So it gets get as the highest number in 20, 28, 2008. So so what's so what's that? I mean, it gets the highest the real income. So that means there's less, there's the least inflation. No, it's adjusted for inflation. So instead of basically inflais being taken out least so is so that is that the most inflation and the least purchasing power? No, it is inflation. No, inflation is being taken out. You're not worried about inflation. What you're saying is you can directly compare 2006 with 2013 without worrying about inflation. Anything real has been adjusted to remove inflation, to remove the impact of inflation. So what this allows you to do is directly compare years. So actually, how much did people earn adjusted to make inflation? Right? So in 2008, people were the richest of all the years. They aren't the most. Here. So if you actually compared those numbers, hang on, let's do our 2006. How much did a what should we do a car cost in 2006? The average okay, the average for a new car was 17000 pounds, right? Hold on. And then we need 2013. Let me just show you. This is just a silly sort of thing to show you. So. In 2013, the cost of things had gone up. A car had gone up to, the average car had gone up to 27000 from 17000. So in 2000, was it seven? The average car costs 17100 or 2006, sorry. And in two and 13, the average car cost 27000. So the inflation rate between 2000 72013 is the increase in price, roughly, of goods and services, okay? And you can see they've gone up in price. But what this has done, because it's real, it shows real income. Although people's wages might have gone up, they've taken out the increase in inflation. They've already accounted for that. They've looked at actually how much did they earn taking out inflation, the increase in inflation. So this is the one where they, this was the year that your money could buy you the most stuff. This was the year your money could buy you the least stuff. Okay? Is anything real has been adjusted for inflation. So don't talk about inflation in your answer. Just apart from your definition, this has been adjusted for inflation. Yeah. Assess the likely tly impact of falling real incomes on consumers. So what? Would be the impact of your real income falling? Because if you look at that graph, your income comes is going down all. So from here your real income is decreasing, isn't it? 有。We got any other stuff. So what do you think would be the impact on falling real incomes? Only in real wait, miss, I want to make sure one point, that if if there is more real, real income, is that a good thing or bad thing? Okay, real income. Okay, man, you'll learn it. You're earning less. You can buy less next year than you can this your income is effectively going down. So that can happen in two ways. Either your wages are going down or your wages are staying the same. But the price of the inflation is big. So it's higher than your wages. So you actually can buy less stuff. Yeah so you're poorer. Basically your purchasing power has decreased yethink consumer confidence. Think purchasing power, think decreasing in savings. Think about imports, exports, other things. See see what you come up with, what you think. Any points you can give me about this? So more so more real incomes represents a more real income. Increasing real income is good. So folding decreasase is back. Yeah decreasase is back. Yeah impact of falling impact, unlikely impact the folding real income of so that means if fallding real incomes Yeah the question is what is the effect. On people when real income. You. What is the effect on people when real income. If the real income falls, the purchasing power of each people is decreasing. And the goods of the the price of goods will increase. So that is low income. So that will cause lead to the inflation. Is there something else? Oh, Yeah. So prosing power decrease. There is less consumption. So there is more unemployment rate because the firms do not need so more people. And mpyeah mpc will decrease, so multiplier will be less. Inferior goods will Yeah infinferior goods will increase and then maybe there is something else. So consumption decrease agdemand ds decreasase GDP decrease because many because more unemployment rates. So Yeah, the firms do not need so more people and people. This is a different point, but Yeah, keep your point. And then these are just other things we think about and consumer confidence less so Yeah, the same answer. The same answer. Investment decrease and ad decrease and economic recession caused by the less GDP mover. And people want more wage. So they will they will be strike. Yeah, they will maybe they will strike. So. That is a factor of cost push inflation. So Yeah, still inflation. Yes, still the reason for inflation and moand about the aggregate supply when people are due strike. Yeah, people will move Boso if people are strike. So there's less people are working in the factory, in the firms, so the potential productivity will decrease and then shiand, then less ad shipped to the left, so people could move aboboard. So people could move aboboard. So there is less potential job because more potential professional workers will move to our board. So it is less experience, less technology. So the ppp f will maybe they will shift to the left because there is a risk Yeah a risk of the technology. Very nice. And do me this one. People's buying habits change and buy more of this. This could lead to this. What does that? Yeah, cheaper. Same next. Net exports decrease. So ad increase Yeah 8080 degrees. Good. Yep, good for inferior goods, they don't buy certain things. Very nice. Yeah, very good. What else? What else we got next? Explain the likely impact of a government budget deficit on the circular flow of income. All. So firstly, what you're going to do in a six mark question with budget deficit and circular flow of income. Government budgets are. So that means government borrowing is higher higher than its revenue. Just just hang on not borrowing. It's their spending is higher than their revenue which may lead to them borrowing is and their revenue, which mainly, I think it was just a slip of the words. Like I think you know it was just I just wanted to make sure Yeah go. Okay. Spending is higher than its revenue. So. Spanish. The horion revenue of government spending, which miss government spending, is higher than its revenue. Government spending okay so firstly circular flow of income is the relations relations between relations of the money flowing arbitrary which I should explain it so in 20 in what let me think firms consumers and the rest of the world and if device into injections show up withdrawals so yes saving imports and taxation is withdrawals and investment government spending and export is injections. So if the government spending increase there is more more injections in this circle. If there's more injections in this circle, that will increase the investment as more consumer confidence. So the more there is more consumption and there more npc and and more a aggregate demand, so there's more multiplier mothere is more there's more government spending. So and Oh no, no, there's more consumption, so there's more tax revenue. Yeah, yes. So I'm easy. No, you're good. You're good. The whole point is you need to realize, which you did, that the budget deficit means that they are spending is greater than their tax that they're receiving. The tax they're receiving, which means the money coming out is less than the money going in. And once you've got that, which is what you got, you can then talk about all the knockons. Yeah. Yeah, perfect. It was one of those questions, though, I have to be honest. You have to look at for a second and think, hang on, what link does it want there? And then it was it was quite a nice question actually. I quite like it. Using the concept of the multiplier, assess the contribution of one of factors such as the queen's Diamond Jubilee and London Olympics to economic growth. So you've got to talk about the multiplier and one off factors. Let's have a look at extract one. So this one. Wait, using the concept of the multifirstly, Oh my God, twelve Marks. Oh, my God. I don't like them. No, no, I don't. I heard it almost like that headache. Don't panic, don't panic. He's had again dizing. Physics can make me basic, physics can make me tired, math can make me hungry, economics can make me dizzy and headache. Oh, no. No, when I'm over, I mean, ielse can make me exciting, can make me excited. Oh. Oh, too funny. Too funny. You just, you're not an essay person, are you? You're a more a like question and an answer person, aren't you? Here's the question. Here's my answer. Like you're you're you're a factual kind of thinker, aren't you? Yeah, Yeah, I know, right? Let's do it right? Diamond Jubilee. So one off event. So all it's asking you is when thinking about the circular flow of income, the economy, aggregate demand, all this nonsense that you know lots about, what is the impact of one off things? So things that only happen once, so for example, the Olympics or the jubilee or say Covid, or I'm trying to think of some other things that only happen once, the World Cup, you know, every so often, like it has a big impact, but it's only, you know, that one off. But then we use the concept of the multiplier. So then you could say, actually, it only happens once, but depending on the multiplier, blah, blah, blah, blah, blah, has a longer term impact. Etcec, etcec, there's your quoting you'll be using in there. So let's have a exsee what we can find that you could quote. Yeah I see so firstly the multiplier. Yeah I see the concept of multipesses the contribution one of Yeah this sentence to economic growth. So maybe Yeah I see three, four wall factors such as queens Diamond Jubilee and the London Olympics also improved the third quarter figure, which was better than the note six economists predictive. You believe the queen's like it's a celebration for how long the queens be well, she's dead now, but it was a celebration for how long the queen had been a queen. It's like a birthday of being the queen. Okay, Yeah Yeah Yeah. And the London Olympics London olyics ics, 2013London Olympics. Long only I just remember that maybe that it's 2024, not 2013. Maybe two Olympics, maybe so whatever. So the third quarter figure. So there is a there's. They Marmore, they are more, there are two important events. So contribution concept. So firstly, the multiplier shows that the inection hall injections can influence the national income. And it is the formula of it is equal to one over m por one over one minus M P C. Okay, so I see well factors such as that so Yeah there are 22 important events queens Diamond Jubilee and the London Olympics and and they will let and this and the article says that this give this this in is increase improved the third quarfigure and better than the 0.6 economists predicted. So that means the economic phenomenon is improved and that will make the that will let the. Wait. So these two are very important or even international. So is an international Yeah like London Olympics is is an international event. So it is like, so the government will give, there will be more government spending on these two events. So that will increase consumer confidence and there is more investment because more economists willing to pay for this. Good. Do you think Yeah, maybe there's more because I should link to economic growth if there is more investment. So I so Yeah, I will increase I mean c plus I plus J plus nx, I mean ad will increase and then they will be employing more people to work. So the potential productivity will increase as increase momoreover the mp c will increase because more workers will live in local hotels though mpc multiplier and they will be increased to increase the government spending Yeah and that will increase the ad as well and let ad shito the right and increase consumption because there there is more people to spending money. If people spend money more, they will be they can decrease unemployment rates and the they will be increased to human. Let me think there will be increase productivity and then boom, GDP increase, and there there is economic growth over good. Now do I talk to me about something like talk to me evaluation? Now I want you to think about. Okay. The impact is the same across the whole economy. Whole economy, the London Olympics the London Olympics are tourism. Increase national income. And exports there will be exports Yeah there will be some Olympics show goods to sell overseas. Bigger impact in London. Does it increase in Manchester, for example? Increase in Manchester, but Manchester, for example. Increase what? Let me write you a paragraph that I want you to start thinking about whenever you write these things. Okay? I want you to now start thinking about your evaluation. Okay? You've got everything else really good. This would be your next stage. So everything you said before was correct, okay? But I want you to say something like, however. This increase is not the same. No. Okay. So what you're doing here, let me just show you this paragraph says in increase across which global variations, not holiympimpact will be much greater and benefit those living in the local area in the north of the country. Although there will be some growth, it will be much less and probably for much shorter term Yeah because there's less impact. So can you see when you were talking earlier and you were doing exactly right, you were talking about the economy as a whole. To get your evaluation in there, you need to say, you know, you're not saying I'm not saying what you said was wrong that first time and you need to say it, but you need to say, however, this increase is not the same across the whole economy, blah, blah, blah. You know, it will have its very local variations. The impact will not be the same across the whole economy or if it was a different type of question, yousay. However, this impact would vary depending on which country this was happening in. It's a really good evaluation about is the impact the same everywhere? Yeah, Yeah. Does that make sense? Yeah, what was the other thing I was going to show to you? What about non one off events? What's what's more stable for an economy, one off events or continuous like investment? What gives more stability? I mean there's no right answer, but do you think it's better that you know the government does regular spending rather than these one off events? Yeah, Yeah. So you could say the one off events are good to have a positive impact, but da and also you can't rely on them, can ya? You can't just keep hoping there's gonna to be another one off event because how many one off events are there? You can't run an economy on one off one time things. I can't remember. I think you said about putting because we've done so many similar questions you said about multiplier formula. Make sure that was in there. Again, it depends. The multiplier depends on how much you know, is going out of the circular flow of income, how much of that money is going abroad, although it should bring more money in, especially the London Olympics, because people would come to the uk trying to think of anything else, anything else in that question? Or are you quite happy with that question? Yeah, okay. It's probably not worth a having a look at the next one but we will Carry on these. If you've got any other questions or anything about any of any of these, no, you're happy to Carry on with these. I know you're quite confident on them but I quite like it that if you get a subject you're totally confident on, it's great isn't it? Maybe a little confident for this maybe. Yeah, okay, okay, all right, then or I'll see you soon. Bye. Okay, bye. Hi frsorry. I was just finishing my tutoring.