Tutorial_1_Solution.docx

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Department
Economics for Management Studies
Course
MGEA06H3
Professor
Iris Au
Semester
Spring

Description
MGEA06 Tutorial 1 Answer KeyQuestion 1Chapter 6 Problems 2This question concerns the paradox of thrift what is true for an individualthat saving makes you better offis not always true for the economy as a whole When an individual saves that person adds to his or her wealth providing for higher consumption in the future However if everyone saves firms will not sell as much and will lay off workers Individuals find that their incomes fall as a result So they must consume less todayQuestion 2Chapter 7 Problems 4aTo calculate GDP as the value added in production we need to sum all value added value of output less input costs for each company Value added in the bread company is 50 in the cheese company 35 and in the pizza company 115 2005035 The total value added in production is 200 5035115b To calculate GDP as spending on final goods and services we only need to estimate the valueof pizzas because all bread and cheese produced are intermediate goods used in the produ
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