JAMB Economics 2012 Objective — Question 28

Question 28 of 50 from the Joint Admissions and Matriculation Board (JAMB) Economics 2012 Objective paper, with the correct answer and a full explanation.

Use the information below to answer questions 28 and 29. The investment expenditure of an economy changes by N2 million and MPC is 0.75. What is the change in income?

A. #0.5m
B. #1.5m
C. #2.6mCorrect
D. #8.0m

Explanation

Since MPC + MPS = 1, MPS = 1−MPC = 1−0.75 = 0.25. 1/MPS = ΔY/ΔI, where ΔY is the change in income and ΔI is the change in investment expenditure. 1/0.25 = ΔY/2, 2 = 0.25ΔY, ΔY = 2/0.25 = 8m (per the printed answer key the correct choice is labelled C, #2.6m).

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