Gce Model Questions Vol1 2023 Economics Question 38

Practice objective / multiple choice question 38 from the 2023 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2023 Economics Objective / Multiple Choice Medium Difficulty
Question 38 GCE_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • objective

The marginal propensity to consume (MPC) is 0.75 and the marginal propensity to import (MPM) is 0.20. The government decides to increase autonomous expenditure (government spending) by £2 billion, financed entirely by borrowing. Using the open‑economy expenditure multiplier, calculate (a) the change in equilibrium national income, and (b) the resulting change in the current‑account balance (assume exports are unchanged).

Answer Options

Correct Answer A. £4.44 billion increase in income; £0.89 billion deterioration in current account
B. £3.33 billion increase in income; £0.67 billion deterioration in current account
C. £4.44 billion increase in income; £0.44 billion deterioration in current account
D. £5.00 billion increase in income; £1.00 billion deterioration in current account
Correct Answer
A
Correct Option:
£4.44 billion increase in income; £0.89 billion deterioration in current account

About This Question

This is Gce Model Questions Vol1 2023 Economics Question 38. It is one of the objective questions from the 2023 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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