Gce Model Questions Vol1 2017 Economics Question 18

A developing country wants to raise its real GNI per capita from \(\$2{,}000\) to \(\$2{,}500\) within five years. The economy's output response to investment is given by the multiplier relationship \(\Delta Y = k\,\Delta I\) with \(k = 3\). The current total investment is \(\$150\) billion and the population (constant) is 50 million. The government plans to increase investment by the same amount each year. Assuming no depreciation and that the multiplier effect applies each year to the cumulative increase in investment, determine the constant annual increase in investment (in billions of dollars) required to meet the GNI per‑capita target after five years. Also state whether this required annual increase exceeds 5 % of the initial investment.