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.
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.