TASK 1The size of economy can be measured through Gross Domestic Product and the formula hasbeen mentioned in the below section. GDP is the value of output produced by domestic firmsthrough using resources. Use of national income information is vital for the business to comprehendthe overall level of demand in an economy (Armendáriz and Morduch, 2010). It is also a keyingredient in formulation of various business strategy. Higher income does not mean that country'sresource capability is better; however in such respect income distribution needs to be taken intoaccount. Hence, real level of income needs to be taken into account to take relative price inflationinto consideration. (GDP) Y = C + I + G + NXTASK 2Government spending reflects the flow of income in different counter parts and spending ininfrastructure is a key government tool that depicts the effects of recession. Infrastructure haseffects on the overall competitiveness of the nation; however it is also an alternative strategy thatreduces taxes in state benefits (De Grauwe, 2014). Government has been investing in such projectsso as to manage aggregate demand and aggregate supply. Aggregate demand is the quantity thatpeople want to buy in given price level; however aggregate supply is the quantity which firm sellsat a subsequent price level. Since, government spending is a part of GDP; therefore it enhancesmarginal propensity while consuming the goods and services. 8
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