Neco Model Questions Vol1 2017 Economics Question 7

Practice objective / multiple choice question 7 from the 2017 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2017 Economics Objective / Multiple Choice Hard Difficulty
Question 7 NECO_MODEL_QUESTIONS_VOL1 • 2017 • ECONOMICS • objective

In an open economy, the marginal propensity to consume is 0.75, the marginal propensity to import is 0.10 and the income tax rate is 20 %. The government decides to increase its spending by ₦50 million, financed entirely by foreign aid (i.e., no additional taxes). Assume that each additional ₦1 million of income creates 30 new jobs. (a) Determine the change in equilibrium national income, (b) the corresponding change in employment, and (c) the change in the trade balance. Present your answers in millions of naira and number of jobs.

Answer Options

A. ΔY = 110 million naira; ΔEmployment = 3,300 jobs; ΔTrade balance = -12 million naira
B. ΔY = 95 million naira; ΔEmployment = 2,850 jobs; ΔTrade balance = -9 million naira
C. ΔY = 90 million naira; ΔEmployment = 2,700 jobs; ΔTrade balance = -8 million naira
Correct Answer D. ΔY = 100 million naira; ΔEmployment = 3,000 jobs; ΔTrade balance = -10 million naira
Correct Answer
D
Correct Option:
ΔY = 100 million naira; ΔEmployment = 3,000 jobs; ΔTrade balance = -10 million naira

About This Question

This is Neco Model Questions Vol1 2017 Economics Question 7. It is one of the objective questions from the 2017 Neco Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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