Neco Model Questions Vol1 2025 Economics Question 10
Practice objective / multiple choice question 10 from the 2025 Neco Model Questions Vol1 Economics examination.
In an economy the marginal propensity to consume is 0.75 and the marginal tax rate is 20 %. The government wishes to raise aggregate demand by ₦150 billion. It can do so by increasing government spending (\(\Delta G\)) and/or reducing taxes (\(\Delta T\)). Determine the combination of \(\Delta G\) (in billions of naira) and \(\Delta T\) (in billions of naira, negative for a tax cut) that achieves the target with the smallest total fiscal effort, measured by \(|\Delta G| + |\Delta T|\).
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About This Question
This is Neco Model Questions Vol1 2025 Economics Question 10. It is one of the objective questions from the 2025 Neco Model Questions Vol1 Economics examination.
Difficulty level: Medium .
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