QUESTION 1 [25 MARKS]

1.1 Draw a production possibility frontier (PPF) showing a combination of two goods that a country could produce, as well as an area of inefficiency, and another that is unattainable. (8)

1.2 List and briefly explain the four participants who influence the flows of production, income, and expenditure in an economy. (12)

1.3 Country X has a term of the trade (TOT) of 17% and their neighbor, Country Y, has a TOT of nearly 100%. What does this mean for the citizens and the economic well-being of the respective countries?