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JAMB Economics 1998 Question 40

Question 40

National Income

A fall in the marginal propensity to save will lead to

  1. A.a decrease in national income
  2. B.an increase in national income
  3. C.no change in national income
  4. D.an increase in disposable income.
Show the answer and explanation

Answer: B (an increase in national income)

Explanation

If people save less of each extra naira, they spend more, so the multiplier (1 ÷ MPS) gets bigger and national income rises.