An economy has a marginal propensity to save (MPSMPSMPS) of 0.15 and a marginal propensity to import (MPMMPMMPM) of 0.15. The government decides to reduce the marginal rate of income tax (MPTMPTMPT) from 0.20 to 0.10.
What is the resulting change in the value of the economy's national income multiplier?
It decreases by 0.50.50.5
It increases by 0.50.50.5
It decreases by 1.01.01.0
It increases by 1.01.01.0
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.