Given the contraction that that was experienced, real GDP for instance fell from $900.0M Adam Island Dollars in 2020 to $750M Adam Island dollars in 2021. Expressed in market prices (or nominal prices), GDP for 2020 was $1,150M while in 2021 it was $975M Adam Island Dollars.

In 2020, Adam Island had a labor force of 55,500. Of this amount 50,000 were employed while the rest was categorized as being unemployed. As a result of the economic contraction unemployment increased significant. Statistics showed that while the labor force remained the same in 2021 as it did in 2020, the amount of persons that were employed decreased to 30,500 in 2021. Given the fact that a general election was due within the next 18 months, policy makers were overly concerned that many persons were out of work as this would make the government unpopular. While the macro economy contracted, there were still some overall increases in prices as measured by the CPI. In 2018 for instance, the inflation rate was 1.5 per cent, 1.8 per cent in 2019, 2.2 per cent in 2020, 3.4 per cent in 2021 and 2.9 per cent was projected for 2022. Despite the contraction in economic activity which is expected to last at least 3 years, some unions still wanted wages to increase since some of the major sectors they represented hadn't seen a wage increase since 2005. Unions wanted workers in Adam Island to have a real increase in wages of 5.5 per cent in 2022. On average it is expected that a typical household in Adam Island will earn $180,500 annually in 2022.

On the fiscal side, after running small current account surpluses, the finances of the government saw a rapid deterioration in 2021 with current revenue collections totaling $450.0M Adam Island Dollars and current expenditure totaling $790.5M Adam Island Dollars. The contraction in revenue was due to a decrease in tax revenue given the contraction in tourism. As a result of the reduced revenue collection, the Government of Adam Island had to borrow from both domestic and international creditors such as the International Monetary Fund and the World Bank. The country's balance of payments also deteriorated significantly as exports amounted to $350.0M in 2020 while imports amounted to $945.0M.

Given the contraction in GDP, policy makers were concerned about the potential social and economic cost this could potentially bring since a large percentage of the population was now unemployed. As a result it created some pressure of the government to provide some form of stimulus package, which so far has proven to be costly.

According to the statistics department for 2022, Adam Island should have a potential output of $980.0M Adam Island Dollars, but based on the low demand for goods and services, in 2022 actual GDP is expected to reach $730M Adam Islands Dollars. Considering this to be a primary concern, the government intends to stimulate economic activity by decreasing net taxes by $125.0M Adam Island Dollars to help close out the gap. For 2022 the MPC of Adam Island is estimated to be 0.50. According to one senior ranking member of the Adam Island Government, rather than reducing taxes, the Government should consider increasing spending by $125.0M Adam Island Dollars in 2022 as this would have more of a bigger impact on the on the economy.

Some policy makers within the economy advised that rather using fiscal policy, the Central Bank should use monetary policy. It was suggested that the Central Bank should either change the discount rate or change the cash reserves ratio.

1. What nominal increase in wages would the union and employers settle for in 2022 in order for real wages to increase by 5.5 per cent?

2.What was the balance on the Central Government current account for Adam Island in 2021?

3.What was the value of the balance of trade in 2021?