An open economy is characterized by a marginal propensity to save of 0.10, a marginal propensity to tax of 0.20, and a marginal propensity to import of 0.20. If the government reduces the marginal rate of tax to 0.10, with all other propensities remaining constant, what is the resulting change in the value of the national income multiplier?
An increase of 0.50.50.5
A decrease of 0.50.50.5
An increase of 2.52.52.5
A decrease of 2.02.02.0
75 exam-style questions on Edexcel A A Level Economics 2.4 National income, covering 2.4.1 National income, 2.4.2 Injections and withdrawals, 2.4.3 Equilibrium levels of real national output, and 2.4.4 The multiplier. Each one has a worked solution and a mark scheme showing where the marks go.