1) Explain why national income figures cannot be used accurately to measure people's standard of living.

2) Discuss Milton Friedman's permanent income hypothesis and differentiate it from the life cycle hypothesis and differentiate it from the permanent income hypothesis.

3) The following information is from the national income accounts of country

Y = C+I+G+(XM)

C = 20+0.8 yards

T = 30

sol = 22

X = 20

M = 4+0.3Y

Yd = YT

yo=30

i) From the above model, list all the endogenous and exogenous variables.

ii) Determine the equilibrium values for all endogenous variables.