Question

Consider the hypothetical example of Dominion Island that has firms producing only two goods, gold and cotton, the proceeds of which it uses to purchase other goods and services from neighbouring islands through its banks. Assuming that all other required institutions in an economy are prevalent in this island, discuss the circular flow of income and spending in Dominion Island

Answer 1

Explanation:

that has firms producing only two goods, gold and cotton, the proceeds of which it uses to purchase other goods and services from neighbouring islands through its banks. Assuming that all other required institutions in an economy proceeds of which it uses to purchase other goods and services from neighbouring islands through its banks. Assuming that all other required institutions in an economy are prevalent in this island, discuss the circular flow of income and spending in Dominion Island.

Answer 2

The firms are only producing two goods that are gold and cotton and the income generated by selling these products in the domestic market.

Explanation:

• The circular flow of income and spending shows connections between different sectors of an economy .
• It shows flows of goods and services and factors of production between firms and households .
• The circular flow shows how national income or Gross Domestic Product is calculated.
• Businesses produce goods and services and in the process of doing.
• So, incomes are generated for factors of production, that is land, labour, capital and enterprise.
• Example is wages and salaries going to people in work.
• Injections into the circular flow are additions to investment, government spending or exports so boosting the circular flow of income leading to a multiplied expansion of output.

To Learn More...

1.Consider the hypothetical example of Dominion Island that has firms producing only two goods, gold and cotton, the proceeds of which it uses to purchase other goods and services from neighbouring islands through its banks. Assuming that all other required institutions in an economy are prevalent in this island, discuss the circular flow of income and spending in Dominion Island. No diagram is required

https://brainly.in/question/18534923