A major manufacturing plant closure in a regional economy leads to an initial fall in autonomous investment of £160 million. Economists estimate that the marginal propensity to consume (MPC) within this region is 0.6.
Using the information above, calculate the total contraction in this regional economy's GDP resulting from this decrease in investment.
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.