The main components of National Income are: Consumption, Investment, Government Expenditure, Exports, Imports - Leaving Cert Economics - Question 6 - 2007

1. Consumption: Influenced by disposable income, interest rates, and consumer confidence. Higher disposable income generally leads to increased consumption.

2. Investment: Determined by interest rates, expected returns, and business confidence. Lower interest rates tend to encourage more investment.

3. Exports: Affected by global demand, competitiveness, and exchange rates. An increase in foreign demand can lead to higher exports.

4. Imports: Influenced by domestic income levels and consumer preferences. Higher domestic income typically increases the demand for imports.

From the table, the level of Exports in Year 2 is given as £1,200.

To calculate the Marginal Propensity to Import (MPM):

$MPM = \frac{\text{Change in Imports}}{\text{Change in National Income}} = \frac{£300}{£1,200} = 0.25$

To determine the Marginal Propensity to Save (MPS):

Calculate MPS using the formula:

$MPS = 1 - MPC$

Where; MPC (Marginal Propensity to Consume) can be calculated as follows:

$MPC = \frac{\text{Change in Consumption}}{\text{Change in National Income}} = \frac{£900}{£1,200} = 0.75$

So,

$MPS = 1 - 0.75 = 0.25$

The size of the Multiplier can be calculated using:

$Multiplier = \frac{1}{MPS} = \frac{1}{0.25} = 4$

Economic Meaning: This means that for every £1 injected into the economy, the national income will increase by £4.