Answer to Question #139466 in Macroeconomics for Musole Kapaku

Question

A closed economy with household, business and government sectors. Individuals
receive income of k760 and pay taxes of k100 to the government: consumer spending
is k560: gross investment is k110: depreciation is k40: government spending is k130.
i) Find GDP and household saving.
ii) What are the leakages and injections for this closed economy?
iii) What are direct and indirect taxes?
iv) If income increased by 100 given that your marginal propensity to consume is 0.80,
how much of the additional income would go to consumption?
v) Give a brief explanation why theoretically the national income figure should be the
same whichever method is used in its measurement.
vi) Give three reasons why national income accounts are not very useful in making
comparisons of living standards between countries.

Answer 1

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