Gce Model Questions Vol1 2019 Economics Question 50

Practice objective / multiple choice question 50 from the 2019 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2019 Economics Objective / Multiple Choice Medium Difficulty
Question 50 GCE_MODEL_QUESTIONS_VOL1 • 2019 • ECONOMICS • objective

In a closed economy the marginal propensity to consume (MPC) is 0.75 and the marginal tax rate is 20 %. The government plans to increase autonomous spending by \(\$100\) million. (a) Calculate the fiscal multiplier for this economy. (b) Using this multiplier, determine the resulting change in equilibrium output (in million dollars).

Answer Options

Correct Answer A. Multiplier 2.5, Output increase 250
B. Multiplier 2.22, Output increase 222
C. Multiplier 4, Output increase 400
D. Multiplier 3.2, Output increase 320
Correct Answer
A
Correct Option:
Multiplier 2.5, Output increase 250

About This Question

This is Gce Model Questions Vol1 2019 Economics Question 50. It is one of the objective questions from the 2019 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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