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Consider a closed economy of WIzardland that produces three goods only: books. wands. and potions. The following table shows production and prices of each good
Consider a closed economy of WIzardland that produces three goods only: books. wands. and potions. The following table shows production and prices of each good between 2005 and 2008. (a) Evaluate the following statements. Use 2005 as a base year. [8] 0 Since the country is producing more potions each year and it is the most expensive good, the economy must be growing between 2007 and 2008. a If 1Vizardland's total consumption expenditures is $3150n1h1 and investment is $20001nln, the government expenditures must be $850 in 2005. (b) Suppose the Central Bank of Wizardland increased money supply by 3.89% between 2005 and 2006. Do you expect prices would be changing? If so1 explain by using an appropriate theory. [5]
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