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2.4 National income

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Question 26

During a period of fiscal consolidation, the government of a developing nation reduces its annual expenditure on public infrastructure by £160 million. The nation's Treasury estimates the marginal propensity to consume (MPC) to be 0.6.

Calculate the total reduction in this economy's Gross Domestic Product (GDP) resulting from this decrease in government spending.

[4]

2.4 National income Questions

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