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Question 1 Suppose you are given the following information about some hypothetical economy and its national income accounts. Use this information to answer the questions

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Question 1 Suppose you are given the following information about some hypothetical economy and its national income accounts. Use this information to answer the questions that follow. (Amounts are in billions of dollars). Indirect Business Taxes 919 Corporate Profit 1206 Corporate Income tax 469 Proprietor's Income 1038 Rental Income 62 Net Interest 1171 Exports 1686 Imports 2380 Income Receipts from the rest of the world 856 Income Payments to the rest of the world 755 Compensation of employees 3457 Government expenditure on goods and services 2717 Consumption Expenditure 4359 Investment 1006 Subsidies 395 Capital Consumption 288 A. Explain the main elements used to calculate GDP, using the Expenditure approach. B. Using the information in the table, calculate the following: i. Total Domestic Expenditure ii. Total Final Expenditure C. Calculate GDP using Income Approach. D. Identify THREE (3) uses of GDP statistics. E. Discuss TWO (2) limitations of GDP statistics. Question 2 A. With the use of examples/illustration, clearly explain the concept of the circular flow of income in an open economy. B. Given the following information for an economy: C= 40+0.75Yd G=400 I= 50 T=0.2Y X-80 M=0.125Yd i. Calculate the equilibrium level of National Income using the Income-Expenditure approach ii. Calculate the value of the Multiplier. iii. Analyze the implications of the size of the multiplier for an economy. Question 3 A. Outline the THREE (3) purposes for which people demand money. B. Explain THREE (3) tools that can be used by the central bank to reduce the money supply. C. With the aid of diagrams, explain how an expansionary monetary policy is transmitted through the economy. Question 4 A. Explain with the use of an example the theory of comparative advantage. B. Discuss TWO (2) arguments for and TWO (2) against barriers to trade. C. Explain TWO (2) ways in which a Balance of Payments deficit may be corrected

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