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2.4 National income

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Question 25

An economy is initially closed to trade and has no government sector, with a marginal propensity to consume (MPCMPCMPC) of 0.75. The government then introduces a flat-rate income tax, resulting in a marginal propensity to tax (MPTMPTMPT) of 0.10. Simultaneously, the economy opens to international trade, leading to a marginal propensity to import (MPMMPMMPM) of 0.15.

Assuming the marginal propensity to save (MPSMPSMPS) remains at its original rate out of national income, what is the new value of the national income multiplier?

A

1.331.331.33

B

2.002.002.00

C

2.502.502.50

D

4.004.004.00

Markscheme

2.4 National income Questions

  1. A Level
  2. /Economics
  3. /2.4 National income

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.

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