Question
Consider the Kenyan economy with a Kenya Shilling (KSH) as the domestic currency. Using well-labelled diagrams, of demand and supply of foreign currency, describe the
Consider the Kenyan economy with a Kenya Shilling (KSH) as the domestic currency. Using well-labelled diagrams, of demand and supply of foreign currency, describe the effect of following events on the KSH and Balance of Payment of the Kenya's economy. (Use a different diagram for each event)
1.Reduction of income tax rate from 30% to 25% which causes the average income to raise in Kenya relative to average income in Rwanda, ceteris paribus.
2.Due to COVID-19 pandemic, Kenyans expect a high exchange rate against the US dollar, ceteris paribus.
THREE
The following data is from country XYZ. The figures are in millions of KSH:
Million Kshs.
Income accruing to the public sector 30.0
Retained business earnings 70.2
Gross domestic product at market prices - 1665.5
Export of goods and services - 272.0
Income payments to foreigners - 20.9
Direct taxes -350.4
Transfer payments - 20.9
Public sector consumption expenditure 495.0
Indirect taxes -290.5
Capital consumption allowance 10.2
Factor payments from abroad 9.8
Subsidies 18.6
Gross domestic capital formation 50.7
Import of goods and services 300.3
Required:
Derive the following for country XYZ showing all calculations:
1.National Income
2.Net Investment
3.Personal Income
4.Disposable Personal Income. (12 Marks)
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