Economics (AS & A Level) · May / June 2026 · Paper 31 · Question 18

In a closed economy, the equilibrium level of income is $25 million and the full employment level of income is $30 million. The marginal propensity to consume is $\dfrac{4}{5}$. What is the deflationary gap?

1. A$1 million
2. B$4 million
3. C$5 million
4. D$6.25 million

As printed in the paper