Consider a capitalist economy which has two sectors: one producing food and the other machine-tools. Assume that capitalists and workers spend their entire earnings on the food. A worker earns $40, 000 in year in either sector. In the food sector, 200 workers work with machines/tools worth $4,000,000 and produce food worth $ 14,000,000 in a year. In the machine/tool sector 100 workers work with machine tools worth $8,000,000 to produce machine/tools worth $18,000, 000 in a year.

2. What is aggregate demand for food in the economy as a whole:
4. What is the aggregate demand for machine/ tools in the economy as a whole:
6. Does the economy meet the condition required for simple reproduction? Explain.
8. If we now assume that capitalists consume only 1/4 of their profit earnings and reinvest the unconsumed portion (use it to buy new machine tools) what is the aggregate demand for food in the economy as a whole?
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Lets break down the information given and calculate the aggregate demand for food and machinetools in the given capitalist economy Aggregate Demand fo... View the full answer