SECTION B
1. Describe the circular flow of the economy by discussing the two markets where
households and firms meet.
ANSWER
a.
b.
c.
d.
Define Circular flow
Describe the two markets – Goods market & Factors markets
Name the two primary agents – Household & Firm
Function of each agent –
a. Who supply/demand in each market
e. Real flow and money flow
Measuring GDP
2. Using the above table calculate GNP, NNP, National Income, Personal Income and Disposable
income.
ANSWER:
GDP
Receipt of factor inc
Payment of factor inc
GNP
Depreciation
NNP
Indirect taxes & Sub.
National Income
Corporate profit-div
Social Insurance Pymt
Interest Recieved
Transfer pymt
Personal Income
Personal Taxes
Disposable Income
8,000
250
- 300 ‘
7,950
- 900 ’
7,050
- 500 ‘
6,550
- 500
- 700
+300
+ 1,100 ‘
6,750
- 1,000 ‘
5,750