Neco Model Questions Vol1 2020 Economics Question 7

Practice essay / theory question 7 from the 2020 Neco Model Questions Vol1 Economics examination. This question covers National Income, Aggregate Demand, Keynesian Multiplier, Fiscal Policy .

Neco Model Questions Vol1 2020 Economics Essay / Theory
Topics: National Income Aggregate Demand Keynesian Multiplier Fiscal Policy
Question 7 NECO_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • essay

The following data describe the Nigerian economy for the year 2022 (values are in ₦ billions): - Consumption (C) = 12,000 - Investment (I) = 3,500 - Government expenditure (G) = 4,200 - Exports (X) = 2,800 - Imports (M) = 3,100 - Net factor income from abroad (NFIA) = –150 The marginal propensity to consume (MPC) is 0.75. Answer the questions that follow.

Question Parts

( a )
Calculate the equilibrium level of aggregate demand (AD) using the expenditure approach and briefly explain the economic role of each component.
( b )
If autonomous investment rises by ₦500 billion, estimate the resulting change in equilibrium national income using the Keynesian multiplier. Show all steps.
( c )
Discuss two major limitations of the expenditure approach when measuring national income in a developing economy such as Nigeria.
( d )
The government proposes to increase G by ₦200 billion while keeping taxes unchanged. Using the multiplier, estimate the expected rise in national income and comment on possible inflationary pressures that may arise.

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About This Question

This is Neco Model Questions Vol1 2020 Economics Question 7. It is one of the essay questions from the 2020 Neco Model Questions Vol1 Economics examination.

The question covers National Income, Aggregate Demand, Keynesian Multiplier, Fiscal Policy .

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