Ryerson University - ECN 204Answers to Assignment One

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Answer to Assignment One 1.Assume that in year 1 an economy produces 1000 units of output and they sell for $100 a unit, on average. In year 2, the economy produces the same 1000 units of output, a... nd sells it for $110 a unit, on average. Use year 1 prices to calculate real GDP in Year 1 and Year 2. What happened to real GDP between years 1 and 2? Why? 2. Compare and contrast the characteristics of economic growth in ancient or preindustrial times with modern economic growth today. 3. Why are savings and investment so important for economic growth? How do savings and investment affect present and future consumption? Explain. Savings and investment are extremely important for economic growth because the amount of economic investment that takes place in an economy is limited to the amount of money available (savings) to fund investment projects. There is then a direct relationship between savings and investment, and present consumption must be sacrificed, in the form of savings, to allow for economic inv [Show More]

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