Economics (AS & A Level) · May / June 2024 · Paper 32 · Question 19

Country X has a marginal propensity to consume (MPC) of 0.7. Its marginal propensity to save (MPS), marginal rate of taxation (MRT) and marginal propensity to import (MPM) are each 0.1. What is likely to lead to the biggest increase in the national income multiplier?

1. Aa 5% increase in the MPC together with a 5% fall in the MRT
2. Ba 5% increase in the MPM together with a 5% fall in the MRT
3. Ca 5% increase in the MPS together with a 5% fall in the MPM
4. Da 5% increase in the MRT together with a 5% fall in the MPS

As printed in the paper