Question
Your island economy has been thriving for many years now and has grown large, with many people, services, goods, and trade available. In your island
Your island economy has been thriving for many years now and has grown large, with many people, services, goods, and trade available. In your island economy, you currently have no government. You know the following information:
People seem to spend about 80% of their income.
People import (from a neighboring island!) about 15% of their goods and services.
Business Expenditure is currently at $2,000.
Exports/year is worth $1,000
4. It has been estimated that your potential GDP () is approximately $12,000. Describe the effects of your current equilibrium GDP and your potential GDP - what will happen in your economy and why? What is our structural budget balance for this ?
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