C = 100 + 0.

8Y I = 200 G = 300 X = 500 M = 200 + mY where C denotes Consumption; Y denotes income; I denotes investment; G denotes government expenditure; X denotes export; M denotes import and m denotes marginal propensity to import. 1. Assuming a closed economy with government, the equilibrium level of income is A. B. C. D. 2. 3000 600 2400 750

Assuming the government imposes a tax on income of 20%, the new level equilibrium of income is A. B. C. D. 3000 1666.66 2400 600

3.

Following the introduction of the tax on income of 20%, the multiplier is A. B. C. D. 2.77 5 1.25 2.05

4.

Following the introduction of foreign sector, if new level of income is 26,000 (with the tax on income of 20% maintained) then the marginal propensity to import, i.e. m, is A. B. C. D. 0.45 0.33 0.64 0.26

5.

What is the new level of multiplier following the introduction of the foreign sector? A. B. C. D. 1.45 1.24 1 2.5

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