Gce Model Questions Vol1 2024 Economics Question 25
Practice objective / multiple choice question 25 from the 2024 Gce Model Questions Vol1 Economics examination.
In an economy the marginal propensity to consume (MPC) is 0.75. The government decides to increase autonomous spending by \(\$30\) billion, financing the increase by borrowing. However, each \(\$1\) billion of additional spending raises the interest rate enough to reduce autonomous investment by \(\$0.2\) billion. Using the simple Keynesian multiplier, calculate the net change in equilibrium GDP resulting from this policy.
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This is Gce Model Questions Vol1 2024 Economics Question 25. It is one of the objective questions from the 2024 Gce Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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