Neco Model Questions Vol1 2023 Economics Question 37

Practice objective / multiple choice question 37 from the 2023 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2023 Economics Objective / Multiple Choice Hard Difficulty
Question 37 NECO_MODEL_QUESTIONS_VOL1 • 2023 • ECONOMICS • objective

In a closed economy the consumption function is \( C = 200 + 0.8(Y - T) \) where tax is \( T = 0.1Y \). Investment \( I = 150 \), government spending \( G = 250 \) and net exports \( NX = -50 \) (all in billions of naira). Find the equilibrium national income \(Y\). Then suppose the government raises spending by 50 (to 300) while the tax rule remains unchanged. Compute the new equilibrium income and the change in income.

Answer Options

A. Initial equilibrium ≈ ₦2,000 billion; New equilibrium ≈ ₦2,180 billion; Increase ≈ ₦180 billion
B. Initial equilibrium ≈ ₦1,850 billion; New equilibrium ≈ ₦2,020 billion; Increase ≈ ₦170 billion
Correct Answer C. Initial equilibrium ≈ ₦1,964.3 billion; New equilibrium ≈ ₦2,143 billion; Increase ≈ ₦179 billion
D. Initial equilibrium ≈ ₦1,900 billion; New equilibrium ≈ ₦2,050 billion; Increase ≈ ₦150 billion
Correct Answer
C
Correct Option:
Initial equilibrium ≈ ₦1,964.3 billion; New equilibrium ≈ ₦2,143 billion; Increase ≈ ₦179 billion

About This Question

This is Neco Model Questions Vol1 2023 Economics Question 37. It is one of the objective questions from the 2023 Neco Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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