Consider an economy where the marginal propensity to save is 0.15; the marginal propensity to import is 0.05 and the marginal propensity to tax is 0.2. If there is an increase in government spending of $150 million, by how much would national income increase?    (a) National income would increase by $350 million (b) National income would increase by $375 million (c) National income would increase by $210 million (d) National income would increase by $240 million

ECON MACRO
5th Edition
ISBN:9781337000529
Author:William A. McEachern
Publisher:William A. McEachern
Chapter11: Fiscal Policy
Section: Chapter Questions
Problem 1.7P
Question

Consider an economy where the marginal propensity to save is 0.15; the marginal propensity to import is 0.05 and the marginal propensity to tax is 0.2. If there is an increase in government spending of $150 million, by how much would national income increase? 

 

(a) National income would increase by $350 million

(b) National income would increase by $375 million

(c) National income would increase by $210 million

(d) National income would increase by $240 million

 

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