Neco Model Questions Vol1 2024 Economics Question 5

Practice objective / multiple choice question 5 from the 2024 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2024 Economics Objective / Multiple Choice Medium Difficulty
Question 5 NECO_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • objective

The marginal propensity to consume (MPC) in an economy is 0.8 and the marginal tax rate is 25 %. The government decides to increase autonomous expenditure (government spending) by ₦200 million. Using the appropriate fiscal multiplier that incorporates the tax rate, calculate (a) the resulting change in equilibrium national income, and (b) the increase in tax revenue that arises from the higher income.

Answer Options

Correct Answer A. ΔY = ₦500 million; ΔTax revenue = ₦125 million
B. ΔY = ₦600 million; ΔTax revenue = ₦150 million
C. ΔY = ₦500 million; ΔTax revenue = ₦50 million
D. ΔY = ₦400 million; ΔTax revenue = ₦100 million
Correct Answer
A
Correct Option:
ΔY = ₦500 million; ΔTax revenue = ₦125 million

About This Question

This is Neco Model Questions Vol1 2024 Economics Question 5. It is one of the objective questions from the 2024 Neco Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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