Map sapling learnin sapling llearning Suppose that an economy consists of only t
ID: 1169620 • Letter: M
Question
Map sapling learnin sapling llearning Suppose that an economy consists of only two individuals. Leland has $1370 available to spend on goods. He decides to purchase $870 worth of produce from Krista in the current quarter. No other economic activity takes place during the current quarter. Using this information, answer the following questions. 1. For the current quarter, what is the economy's income? 2. For the current quarter, what is the economy's expenditure? Number Number 3. In an economy, how are income and expenditure related? O They are equal. Income is greater than expenditure ncome is less than expenditure O They are unrelated.Explanation / Answer
1. For the current quarter the economy's income is 870. The income method asks us to add all incomes from all sources. The income in our case will be 870 which Krista earned by selling the produce ot Leland. So the answer is $870. Because no other economic activity took place in this quarter we cannot say that 1370 is the income of the economy.
2. For the current quarter, the expenditure will be $870 which Leland spend to purchase produce from Krista.
3. In an economy income from all sources of all individuals is always equal to the expenditure of the economy. Whatever expenditure an economy incurs is bound to be from the income of the economy. It is also considered that whatever is saved is not kept idle and is invested in the banks and banks inturn invest in the business cycle.
So the correct answer is A. they are equal