Multiplier and distribution (1 Viewer)

[Oluffy]

Hi, I just have two questions that I'm very confused about.

1. How can an increase in autonomous investment have a multiplier effect on the level of income in an Economy.

2. Assess the impact of globalisation on the global distribution of income and wealth. (5 marks)

Thanks, really appreciate any help.

 

[happyhunter]

1. Firstly Autonomous investment is investment independent of the level of economic growth. However if spent right can achieve higher income in the long term. For example spending on capital equipment such as a new plant will lead to increased spending in an economy. Through multiple rounds of spending, the final income increase will be the multiple of the increase in autonomous investment. e.g Autonomous investment increased by 200m and the multiplier was 3 then the final increase in come in an economy would be 600m

2. This one is a bit tricky but ill just give you some ideas:
i) The gap between the rich nations and poor nations e.g Africa population to wealth compared to advanced nations with lower populations
ii) How globalisaltion has helped this gap? Have African countries seen an decrease in people living on low incomes??
iii) Think about what happened when nations embraced globalisation e.g China and India.....decreased poverty

Remember to state points and make a judgement since that is what 'assess' is.