2. In a farway country, banana is the most important crop exported to rest of the world.Data about economic indicators for farway country are given in Table 1.Table 1: Macro Economic Indicators of Farway Country (all figures in million$)Consumption InvestmentExpenditure ExpenditureYearGovernmentExpenditureExports Imports2012-13100205060702013-14120256065752014-15140307065782015-16160284050752016-17165253045752017-18170242040802018-1917020203580In recent years, a life style change, leading to more consumption of processed food,than raw food has led to reduction in demand for Bananas for consumption. Since themanufacturing sector in Farway Country is not developed, the country has to importmost of its processed food needs, leading to increase in imports.The Government of Farway country is contemplating inviting foreign investors toestablish industries to manufacture banana products such as candies, marshmallows,chips, cookies ete. to give boost to manufacturing sector in the economy. Mr. Brownruns Candie Floss inc., a leading company from Australia that manufactures candies,and sells across the world. Mr. Brown is approached by the External Affairs Ministerof Farway Country, inviting him to set up his unit in Farway Country. Mr. Brown isfor some advice, he approaches AIIM for consultation. As his consultant, writelookiyour answers in the space provided:Question 2. 1: What are your general observations about the Macroeconomic condition inFarway Country based on data in Table 1? Write 5 clear observations in the space providedQuestion 2. 2: There is a general observation that Consumption expenditure by people inFarway Country is increasing, since people in the import business (traders who import goodsand sell and earn margins) is flourishing. Do you support this observation based on data? Doyou think this observation fits well with Keynesian Consumption Function, as opposed toPermanent Income Hypothesis or Life-cycle Hypothesis (since increase in income fromImports is due to increase in demand for processed foods, which is transitory in nature)?

Consumption expenditure refers to the overall amount of cash spent by individuals or households…

Answered: manufacturing sector

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2. In a farway country, banana is the most important crop exported to rest of the world.
Data about economic indicators for farway country are given in Table 1.
Table 1: Macro Economic Indicators of Farway Country (all figures in million
$)
Consumption Investment
Expenditure Expenditure
Year
Government
Expenditure
Exports Imports
2012-13
100
20
50
60
70
2013-14
120
25
60
65
75
2014-15
140
30
70
65
78
2015-16
160
28
40
50
75
2016-17
165
25
30
45
75
2017-18
170
24
20
40
80
2018-19
170
20
20
35
80
In recent years, a life style change, leading to more consumption of processed food,
than raw food has led to reduction in demand for Bananas for consumption. Since the
manufacturing sector in Farway Country is not developed, the country has to import
most of its processed food needs, leading to increase in imports.
The Government of Farway country is contemplating inviting foreign investors to
establish industries to manufacture banana products such as candies, marshmallows,
chips, cookies ete. to give boost to manufacturing sector in the economy. Mr. Brown
runs Candie Floss inc., a leading company from Australia that manufactures candies,
and sells across the world. Mr. Brown is approached by the External Affairs Minister
of Farway Country, inviting him to set up his unit in Farway Country. Mr. Brown is
for some advice, he approaches AIIM for consultation. As his consultant, write
looki
your answers in the space provided:
Question 2. 1: What are your general observations about the Macroeconomic condition in
Farway Country based on data in Table 1? Write 5 clear observations in the space provided
Question 2. 2: There is a general observation that Consumption expenditure by people in
Farway Country is increasing, since people in the import business (traders who import goods
and sell and earn margins) is flourishing. Do you support this observation based on data? Do
you think this observation fits well with Keynesian Consumption Function, as opposed to
Permanent Income Hypothesis or Life-cycle Hypothesis (since increase in income from
Imports is due to increase in demand for processed foods, which is transitory in nature)?

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Step 3: Explain that this observation fits well with the Keynesian Consumption Function.

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