Economics (AS & A Level) · Feb / March 2021 · Paper 32 · Question 24

In a closed economy, the marginal propensity to save is 0.1 and the marginal propensity to pay taxes is also 0.1. These values are constant and do not vary with the level of income. What will be the increase in national income if there is an injection of $100 million into the circular flow?

1. A$1000 million
2. B$500 million
3. C$100 million
4. D$80 million

As printed in the paper