Short Essay Questions

1. Define national income equilibrium

GDP- The final value of goods and services created by FOP within a country in one year, without taking into account whether the fop is owned by local citizens or not.

GNP - The final value of goods and services produced by fop owned by citizens of a country, whether they are within the country or abroad, within one year.

2. Explain THREE factors that can influence the level of household consumption in an economy. (6m)

• The level of disposable income or national income
• Pattern of income distribution
• Wealth charts

3. Define an open economy (2m)

• An open economy is an economy in which international trade takes place. There are economic activities between domestic and international communities.