Question
Answer the FF. questions 1. Describe the basic features of the circular flow model 2. Assume the following annual information about a hypothetical country -
Answer the FF. questions
1. Describe the basic features of the circular flow model
2. Assume the following annual information about a hypothetical country - Redland for 2020 (figures are in billions of dollars).
Transfer payments | $80 |
Government purchases | 250 |
Personal taxes | 140 |
Corporate income taxes | 20 |
Indirect taxes less subsidies | 40 |
Undistributed corporate profits | 70 |
Net income of farm and unincorporated business | 160 |
Wages, salaries, and supplementary labour income | 480 |
Personal consumption expenditures | 500 |
Capital consumption allowance | 100 |
Exports | 360 |
Profits of corporations and government enterprises before taxes | 120 |
Interest and investment income | 50 |
Dividends | 30 |
Imports | 310 |
Gross investment | 150 |
Net investments from non-residents | 60 |
a. Using this data, compute GDP for Redland by both the expenditure and income methods. (6 points)
b. Calculate the real GDP for Redland assuming that the CPI was 107 in 2020. (2 points)
c. If real GDP of Redland in 2019 was $995 billion, calculate the growth rate of its GDP . (2 points)
d. Calculate the numbers of years needed for Redland to double its GDP ? (2 points)
3. Identify at least four transactions which are not included in the GDP calculation.
4. Explain the determinants of a country's productivity. Describe ways in which a government policymaker can try to raise a country's productivity.
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