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JAMB Economics 2010 Question 29

Question 29

National Income

If MPC is 0.7 while government expenditure increased by ₦150m, the equilibrium national income is

  1. A.₦214 million
  2. B.₦45 million
  3. C.₦105 million
  4. D.₦500 million.
Show the answer and explanation

Answer: D (₦500 million.)

Explanation

Multiplier = 1/(1 − MPC) = 1/0.3 = 3.33. Change in income = 3.33 × ₦150m = ₦500m.