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The multiplier and the accelerator

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Question 3

An economy has the following marginal leakages:

  • Marginal propensity to save = 0.05
  • Marginal rate of taxation = 0.12
  • Marginal propensity to import = 0.08

Its government plans to increase national income (GDP) from 750bn750\text{bn}750bn to 890bn890\text{bn}890bn. By how much should government spending increase in order to achieve this objective?

105bn105\text{bn}105bn

35bn35\text{bn}35bn

140bn140\text{bn}140bn

560bn560\text{bn}560bn

The multiplier and the accelerator Questions

  1. A Level
  2. /Economics
  3. /The multiplier and the accelerator