Gce Model Questions Vol1 2018 Economics Question 9

Practice objective / multiple choice question 9 from the 2018 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2018 Economics Objective / Multiple Choice Medium Difficulty
Question 9 GCE_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • objective

Country X's export earnings from coffee are \$200 billion. They increase by 10 % due to a rise in world coffee prices. The marginal propensity to import (MPI) for Country X is 0.25. Assuming that the increase in export earnings translates directly into an equal increase in national income, determine the resulting increase in import expenditure. If the average price of imported wheat is \$50 per tonne, calculate the additional quantity of wheat that will be imported.

Answer Options

Correct Answer A. Import expenditure +$5 billion; wheat imports increase by 100 million tonnes
B. Import expenditure +$4 billion; wheat imports increase by 80 million tonnes
C. Import expenditure +$6 billion; wheat imports increase by 120 million tonnes
D. Import expenditure +$5 billion; wheat imports increase by 90 million tonnes
Correct Answer
A
Correct Option:
Import expenditure +$5 billion; wheat imports increase by 100 million tonnes

About This Question

This is Gce Model Questions Vol1 2018 Economics Question 9. It is one of the objective questions from the 2018 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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