WendyEller-Assignment-Unit 4

WendyEller-Assignment-Unit 4 - Wendy Eller BU 204-02AU...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Wendy Eller BU 204-02AU November 11, 2009 Assignment-Unit 4 Chapter 6 Problem 2 When one person saves, that person’s wealth is increased, meaning that he or she can consume more in the future. But when everyone saves, everyone’s income falls, meaning that everyone must consume less today. Explain this seeming contradiction. Answer: What is most of the time true for an individual may not always hold true for our whole economy. When an individual saves, they add to their wealth which will increase consumption in the future. But if everyone saves, businesses lose sales, which will lead to laid off workers. As a result of this, individuals have lower incomes and now have to consume less. Chapter 6 Problem 4 Why do we consider a business-cycle expansion different from long-run economic growth? Why do we care about the size of the long-run growth rate of real GDP versus the size of the growth rate of the population? Answer: Long run economic growth is arising trend in aggregate output over long periods of times. Long run growth per capita is key to rising wages and rises the standards of living. A business cycle expansion results in a short run rise in Gross Domestic Product, but long run growth
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

WendyEller-Assignment-Unit 4 - Wendy Eller BU 204-02AU...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online