Skip to content

Course home

A Level
Economics Edexcel A
Question bank

2.4.4 The multiplier

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Question 21

An economy is operating with a marginal propensity to save ( $M P S$ ) of 0.08, a marginal propensity to tax ( $M P T$ ) of 0.10, and a marginal propensity to import ( $M P M$ ) of 0.07. The government subsequently reduces the basic rate of income tax, causing the $MPT\,$ to fall to 0.08. Simultaneously, a rise in consumer confidence causes the $MPS\,$ to fall to 0.05, while the $MPM\,$ remains unchanged.

What is the resulting change in the value of the national income multiplier?

An increase of $1.0$

An increase of $0.05$

A decrease of $1.0$

A decrease of $0.05$

2.4.4 The multiplier Questions

A Level
Economics
2.4.4 The multiplier