Reference no: EM133219407

Question -

(i) Suppose individuals own all businesses and economic resources, government does not tax or spend, and the business sector produces 9500 units at an average price of $20 per unit.

a) What is the money value of output in this economy?

b) What is the money income of individuals?

c) Find consumer spending when individuals spend 80 percent of their income.

d) What money revenues are received by the business sector from consumer spending?

e) What is the relationship of the cost of producing output and the money receipts of businesses when there are only consumer expenditures? What should happen to the level of output by the firms?

(ii) Given a hypothetical consumption function of the form: C=a + kYd where Page 3 of 3 Yd=Y - T and Y = Income, T = Taxes and that government spending and Investment are exogenously determined at G and I respectively;

Derive balanced budget multiplier and offer an interpretation for the same.

(iii) Examine measures that African countries can put in place to address persistent balance of payments deficits witnessed over the last few years.