Neco 2023 Economics Question 39

Practice objective / multiple choice question 39 from the 2023 Neco Economics examination.

Neco 2023 Economics Objective / Multiple Choice Medium Difficulty
Question 39 NECO • 2023 • ECONOMICS • objective

In a closed economy the marginal propensity to consume (MPC) is 0.75. The government simultaneously increases autonomous spending by \( \Delta G = 200 \) million naira and cuts taxes by \( \Delta T = 150 \) million naira.\n(a) Calculate the change in equilibrium national income using the appropriate fiscal multipliers.\n(b) If the economy is open with a marginal propensity to import of 0.2, recompute the change in equilibrium income under the same fiscal actions.

Answer Options

A. Closed economy: \( \Delta Y = 350 \) million naira. Open economy: \( \Delta Y \approx 210.0 \) million naira.
Correct Answer B. Closed economy: \( \Delta Y = 350 \) million naira. Open economy: \( \Delta Y \approx 194.4 \) million naira.
C. Closed economy: \( \Delta Y = 400 \) million naira. Open economy: \( \Delta Y \approx 222.2 \) million naira.
D. Closed economy: \( \Delta Y = 300 \) million naira. Open economy: \( \Delta Y \approx 166.7 \) million naira.
Correct Answer
B
Correct Option:
Closed economy: \( \Delta Y = 350 \) million naira. Open economy: \( \Delta Y \approx 194.4 \) million naira.

About This Question

This is Neco 2023 Economics Question 39. It is one of the objective questions from the 2023 Neco Economics examination.

Difficulty level: Medium .

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