Economics 9708 · AS & A Level · Fiscal policy

Fiscal policy — practice question

If national income is $30 000 million and government expenditure is $15 000 million, the economy is at equilibrium but still below full employment. For each extra $100 added to national income, $10 goes to taxes, $25 is used on imports and $15 is saved. In order to increase national income to the full employment level of $50 000 million, to what level must the government increase its own spending?

  • A$20 000 million
  • B$25 000 million
  • C$30 000 million
  • D$35 000 million

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