14a Circular Flow of Income and The Energy Market answers PDF

Preview

Summary

Circular flow worksheet...

Description

Synoptic Topic: Circular Flow of Income and The Energy Market ! Q1! Draw!a!diagram!showing!the!circular!flow!of!income!model,!including!all!withdrawals!and!injections.!

! Q2! In!the!UK!we!import!approximately!60%!of!our!energy!from!over!20!countries,!with!55%!of!our! electricity!requirements!being!satisfied!from!eight!countries.!!We!are!buying!coal!from!Russia,! shipping!in!uranium!from!Kazakhstan!and!piping!in!gas!from!Norway.! From!2015!onwards,!more!electricity!has!been!from!home-grown!renewable!sources,!with!up!to! 25%!of!power!in!the!grid!coming!from!the!sun,!wind!and!other!natural!sources.!!More!than!750,000! individual!households!across!the!UK!generate!their!own!power!and!this!figure!is!exploding!year-onyear.! Onshore!wind!and!solar!are!on!track!to!be!the!cheapest!sources!of!UK!power!with!the!potential!to! be!subsidy!free!by!2020.!!The!UK!has!a!central!status!of!being!at!the!heart!of!innovation,!emission! reduction!and!self-reliance!on!the!global!scene.! ! ! ! ! Goodenergy.co.uk! a)!!With!reference!to!the!circular!flow!of!income!model,!explain!the!effects!of!importing!energy!from! abroad.! When!we!import!energy!from!abroad,!there!is!a!net!outflow!of!money!out!of!the!circular!flow!in! the!form!of!a!leakage.!!This!can!lead!to!a!negative!multiplier!effect.! b)!!With!reference!to!the!circular!flow!of!income!model,!explain!the!effects!of!greater!‘home-grown’! or!domestically!produced!energy.! If!we!have!more!domestically!produced!energy,!we!will!not!need!to!import!so!much!in!the!future,! and!this!will!reduce!the!flow!of!money!out!of!the!economy.! !

© tutor2u

www tutor2u net

Synoptic Topic: Circular Flow of Income and The Energy Market ! c)!!With!reference!to!the!circular!flow!of!income!model,!explain!the!effects!a!reduction!in! government!subsidies!needed!for!renewable!energy.! Government!spending!is!an!injection!of!money!into!the!circular!flow!of!income.!!This!means!that! the!sum!of!money!spent!by!the!government!will!have!a!multiplied,!or!proportionately!greater,! effect!on!national!income.!!If!government!subsidies!for!renewable!energy!are!reduced,!this!means! that!future!injections!will!not!be!so!great,!and!thus!future!growth!rates!of!GDP!may!reduce.! d)!!With!reference!to!the!circular!flow!of!income!model,!explain!the!effects!of!investment!and! innovation!in!the!renewable!energy!market.! Investment!is!an!injection!of!money!into!the!circular!flow!of!income,!and!thus!will!create!a! multiplier!effect!for!the!economy.!!At!first!the!new!machinery!and!capital!required!to!generate! renewable!energy!will!create!new!income!for!the!producers!of!this!capital,!who!in!turn!will!spend! the!extra!money!paying!labour!and!buying!more!raw!materials!and!so!the!rounds!of!spending!will! multiply.!!This!should!create!a!rise!in!real!GDP.! Q3! Give!the!formula!for!the!multiplier.! !!!!!!!!!1____! !!!!!!MPW! Q4!

!

where!MPW!=!mpt+mps+mpm!

Calculate!the!final!impact!on!national!income!of!a!£250m!government!grant!into!the!renewable! energy!market!given!the!following!information:! Marginal!propensity!to!import! Marginal!propensity!to!save! Marginal!propensity!to!tax! ! !!!!!!!!!!!!!!1____! !

0.13! 0.08! 0.26!

=!!!!2.13!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!2.13!x!250m!!=!!£532.5m!RISE!in!national!income!

0.13!+0.08!+!0.26! Q5! State!three!factors!that!affect!the!size!of!the!multiplier.! • •

The!propensity!to!tax!/!import!/!save! The!amount!of!spare!capacity!in!the!economy!

•

Crowding!out!-!this!is!where!(for!example)!increased!government!spending!or!lower!taxes! can!lead!to!a!rise!in!government!borrowing!and/or!inflation!which!causes!interest!rates!to! rise!and!has!the!effect!of!slowing!down!economic!activity.!

© tuto...