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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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