terrichichester-BU204-homework-unit4

terrichichester-BU204-homework-unit4 - HOMEWORK UNIT 4...

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HOMEWORK - UNIT 4 MACROECONOMICS : THE BIG PICTURE & TRACKING THE MACROECONOMY Chapter 6: Problems 2 and 4 on page 157 Chapter 7: Problems 2 and 11 on pages 183 and 185 Chapter 6 / MACROECONOMICS : THE BIG PICTURE /25 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. When one person saves that person’s wealth is increased, usually when people save the money is placed in a bank, the bank gets to use this savings in exchange for paying interest. When everyone saves then that means no one is spending money, if money is not being spent then businesses will not be able to sell their products and close their doors. Thus no more income, making everyone poor, people will then have to use what they have saved for the future to survive now.
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