Estimate the value of Gross Domestic Product at Market Price (GDP_MP), using the following information : "Disposition Phase of circular flow of Income involves flow of factor Income, which comprises of rent, wages, interest and profits from firms to households." Defend or refute the statement, giving valid reasons in support of your answer.

Question

Accepted Answer

Using Expenditure Method:
GDP_MP = PFCE + GFCE + GDCF + Net Exports
From table: Household Consumption = 1,200, Business Fixed Investment = 800, Government Final Consumption = ?, Net Exports = ?

GDP_MP can be calculated by summing the four components of final expenditure.

The statement is CORRECT. The disposition phase involves flow of factor income from firms to households:
- Compensation of employees (wages, salaries, bonuses)
- Rent and Royalty (income from property)
- Interest (income from lending)
- Profit (reward to entrepreneur)

These factor payments complete the income phase of the circular flow.