Test Index

JAMB Economics 2012 Paper

Question : 22

Total: 49

The multiplier is

Solution:

Concept:

The multiplier measures how much national income changes when investment changes.

Explanation:

The multiplier is

k = \frac{1}{1 - MPC}

Given

MPC = 0.75

, substitute it into the formula:

k = \frac{1}{1 - 0.75} = \frac{1}{0.25} = 4

The change in investment of N2 million is not needed to find the multiplier itself.

Answer:

The multiplier is

4

Correct option: B.

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