1. In your opinion, are you better off saving money or spending money? Why? Please explain.
Hint: Given what we have learned this quarter, are you happier/better off spending money or saving money from your personal perspective? Then take the question from a more macroeconomic perspective…does your spending or saving make the economy as a whole better off (and thus indirectly you)? How or why?
2. Say you are watching your favorite television program, and a commercial comes on. A soothing voice begins to describe your imaginary vacation in the lush, tropical paradise of Timbucktoo (a remote island in the South Pacific-fictitious of course), while pictures of rain forests and secluded beaches flash across your T.V. screen.
The commercial begins to describe your daily itinerary while showing you the “gentle and friendly” native peoples of Timbucktoo, performing native dances and other activities to the delight of the tourists.
You begin to think (sadly enough!) about macroeconomics. You wonder about these “gentle and friendly” people of Timbucktoo living on an island thousands of miles away from anything out in the middle of the South Pacific, and you ask yourself why the people of Timbucktoo would desire tourism to come to their peaceful and secluded island? What could they possibly do with that added aggregate income (generated by tourism) when they are out in the middle of nowhere. What could they possibly spend their money on? What about the pollution and the noise? The hustle and bustle, the crime! And what about their peaceful and gentle way of life? Is it worth sacrificing for more income?
As we have discussed, increases in GDP and aggregate income do not always mean the level of well-being and happiness increase as well for all citizens of a society. With this in mind, please explain your thoughts or insights regarding this hypothetical commercial.
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