Consider the classical model of national income

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Consider the classical model of National Income.

a. What determines the total output of the economy?

b. Why is GDP such an important metric/variable in macroeconomics?

c. State two assumptions that underline an economy’s long-run output supply.

d. What determines the distribution of income in this model? []

e. If immigration raises the labour force, what is the expected effect of this on the return to labour (real wages) and capital (rental rate) according to the neoclassical theory of income distribution?

f. State two conditions under which firms will earn non-zero economic profit?

g. How is the output produced in this economy used? In other words, what determines aggregate demand in this economy?

Reference no: EM13998866

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