Sunday, July 06, 2008

Unit 3: The multiplier effect of increased Government spending: Aircraft carriers

The BBC reports that the purchase of 2 huge aircraft carriers will result in more money going to 7 firms in different locations around the UK

http://news.bbc.co.uk/1/hi/england/7490041.stm

a) What effect will this purchase by the Government have on aggregate demand?
b) How could the orders to the 7 firms result in multiplier effects in the regions identified on the map?
c) What would determine how large the multiplier effect would be in each region?

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