The investment expenditure of an economy changes by N2 million and MPC is 0.75
What is the change in income?
-
N0.5m
- N1.5m
- N2.6m
- N8.0m
The correct answer is: A
Explanation
MPC is a proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it.
Investment expenditure = 2,000,000
MPC = 0.75
0.75 x 2,000,000 = 1,500,000
change in income = 2,000,000 - 1,500,000 = 500,000