ECN 321 ECN321 Module 2 Homework Solution (AAU Online)

ECN 321 ECN321 Module 2 Homework Solution (AAU Online)

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PART I: SHORT RESPONSE

1.Explain the relationship between consumption and saving.

2.Explain the difference between autonomous consumption and induced consumption.

3.Since the 1950s a massive shift in consumption patterns with respect to nondurable goods and services has taken place.  What is this shift and how can it be explained?

4.How little do Americans save?  Why do they save so little?

5.How is it possible for a nation's consumption to sometimes exceed its disposable income?

6.The marginal propensity to consume (MPC) for a nation is .85.  Explain what this means.

7.Why is the demand for consumer nondurable goods more stable than that for consumer durable goods?

8.What are the advantages and disadvantages of the corporation as a form of business organization?

9.Explain how the capacity utilization rate and the interest rate affect the level of investment.

10.Explain why building up capital takes a great deal of sacrifice.

11.What has happened to our personal savings rate in recent years, and how has that affected our level of investment?

12.Why are virtually all large business firms corporations?

13.The Swanson Company, a partnership, was formed in 1999 by Jill Swanson, Jenne Swanson, Duke Swanson, Gage Swanson, and Maggie Swanson.  In 2000, Holly Swanson and Missy Swanson were taken into the partnership.  In 2001 Duke Swanson left the partnership and Brenda Swanson and Jerry Swanson joined it.  In 2002 Jill Swanson left the partnership and Buddie Swanson joined it.  In 2003 Forrest Swanson joined the partnership.  Explain why it would have been easier for this company to have begun as a corporation rather than as a partnership.

14.You and three friends have saved $100,000 and decided to form a computer repair business.  Would you form a partnership or a corporation?  Explain why you made this choice.

15.You own a furniture manufacturing company that employs 200 people, many of whom have worked for you for over 20 years.  Although your company is profitable, you could raise your profits by 20 to 30 percent by shifting your production to Southeast Asia.  Will you move your operations abroad?  Explain why or why not.

PART II: ESSAY


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