Day: November 23, 2022

In an economy, the marginal propensity to consume of the unemployed is higher than that of taxpayers.

The government increases both expenditure on unemployment benefits and taxation by £10 million.

What will be the impact on aggregate demand?

Select ONE answer:

1. It will be unchanged.
2. It will increase by less than £10 million.
3. It will increase by £10 million.
4. It will decrease by £10 million.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 2

1. Not correct
2. Correct
3. Not correct
4. Not correct

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