Neco Model Questions Vol1 2018 Economics Question 30

A developing country is evaluating three policies. Their expected impacts are: - Policy X: increase average schooling by 2 years, raise annual GDP‑per‑capita growth by 1.5 percentage points, and reduce the Gini coefficient by 0.02. - Policy Y: raise annual GDP‑per‑capita growth by 2.5 percentage points, with no change in schooling or Gini. - Policy Z: increase household consumption by 5%, reduce the Gini coefficient by 0.05, and raise annual GDP‑per‑capita growth by 0.5 percentage points. The inclusive growth index (IGI) is defined as \( IGI = \frac{\Delta GDP\%}{1 + \Delta Gini}\times\bigl(1 + 0.05\,\Delta schooling\bigr) \), where \(\Delta GDP\%\) is the change in the annual GDP growth rate (in percentage points), \(\Delta Gini\) is the change in the Gini coefficient (negative values indicate a reduction), and \(\Delta schooling\) is the increase in years of schooling. Calculate the IGI for each policy (rounded to three decimal places) and identify which policy yields the highest IGI.