Economics (AS & A Level) · Oct / Nov 2021 · Paper 31 · Question 24

In a closed economy with no government there is an initial equilibrium level of national income of $500 billion. The economy's households always spend a constant fraction of every $1 of income they receive. When investment spending increases by $20 billion the economy moves to a new equilibrium level of national income of $600 billion. What is the marginal propensity to consume of the economy's households?

1. A0.20
2. B0.80
3. C0.83
4. D1.00

As printed in the paper