MGEA06H3 Chapter Notes - Chapter 7: Gdp Deflator, Autarky

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA06H3
• Professor: Iris Au

Document Summary

In this question, we will include the firms and the government into consideration. In a simple, closed economy, only three goods were produced and consumed. Both good 1 and good 2 were purchased by households only while good 3 was equally split among households, firms and government. Instead of looking at a closed economy, we will consider what happens to an open economy in this question. The following table shows the quantities of goods exchanged and their prices in 2000 and 2013. The economy produced most of the goods itself; however; half of good 1 was purchased from abroad. Households consumed all of good 1 and 60% of good 2. The economy sold the remaining amount of good 2 to foreigners. The consumption of good 3 was equally split between the firms and the government. The following table shows the levels output and prices for these goods in 2000 and 2013.