Economics 2014 HSC Q18

[helkit98]

Not sure how to do this question from multiple choice

[isaacdelatorre]

Not sure how to do this question from multiple choice

Hey there,

Firstly you have to find the marginal propensity to consume using the formula "change in Consumption / change in Income) which gives you and MPC of .8
To find the value of the multiplier we use the formula k = 1/(1-MPC) --> this gives you 1/.2 = 5

We know that a change in exports made national income increase by 100m
Using the formula change in National Income = k x Change in AD
                                                                   100 = 5 x Change in exports
                                            Change in exports = 20

Therefore the answer is A, I'm pretty sure. Hopefully someone can verify or show you the correct answer

[hermansia12]

Therefore the answer is A, I'm pretty sure. Hopefully someone can verify or show you the correct answer

I can't find fault in your answer isaacdelatorre. Perfect response