The Economic Advisory Department of Exam land has estimated that its country?s marginal propensity to consume equals 0.6, investment in millions of shillings equals 2,000,...

      

The Economic Advisory Department of Exam land has estimated that its country‟s marginal propensity to consume equals 0.6, investment in millions of shillings equals 2,000, Government spending 8,000, autonomous consumption 10,000 and net exports 1,000.
If the currency of Exam land depreciated, what would likely happen to the National Income? Why?

  

Answers


Wilfred
Depreciation of the currency of Exam land would increase the nominal value (monetary value) of National Income; since depreciation constitutes a reduction in the relative value of the domestic currency of Exam land, the tendency is for prices to increase, thereby increasing the nominal value of National Income. Nominal value, in this case, refers to the value of NI at current prices (which have not been adjusted for inflation). This is where the GNP deflator (the ratio of nominal GNP to real
GNP) is required to remove the impact of inflation to give real values.
Wilfykil answered the question on February 7, 2019 at 10:35


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