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University of Toronto Scarborough
Management (MGT)
Chris Bovaird

MGTA03 October 2006 Mid_Term – Model Answers Question 1 What are the benefits of a growing economy? Answer 1 In a growing economy, more goods, and more new goods, are produced. This means that people should have enough of basic goods, and have new goods that they have not purchased before. As well, productivity should be rising, so people (workers especially) have more income to purchase the new goods. A growing economy also employs more people, which gives workers more income to purchase goods. People can therefore purchase more, and this tends to raise the standard of living. More thoughtful answer includes the above, and: The government can then tax more, as people and businesses have more income. This means the government has more money to spend on social goods such as infrastructure (roads, hospitals, schools) and social programs to help those who cannot enjoy the benefits of working. Very thoughtful answer adds: A growing economy will have a more lively international trade, with imports from lower-cost jurisdictions giving consumers more to choose from. Exports also increase, which means money flowing into the country and a positive balance of payments. Question 2 Explain why a partnership agreement is normally considered to be a good thing to have in a partnership Answer 2 A partnership agreement lays out the procedures and agreements in case of disputes arising between partners. Potential disputes could arise over: “who has responsibility for what?”, “How much does each partner take in salary and/or profits?”, “what procedures need to be followed if one or more partners wish to withdraw from the firm”, “how do we settle disputes”. A well managed busi
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