Question 1: Why is there a trade off between the amount of consumption that they can enjoy today and the amount of consumption that they can enjoy in the future? Why cant people enjoy more of both? How does saving relate to investment and thus to economic growth? What role do banks and other financial intstitutions play in aiding the growth process?
Question 2: Explain how an increase in your nominal income and a decrease in your real income might occur simultaneously. Who loses from inflation? Who loses from unemployment? If you had to choose between (a) full employment with a 6 percent annual rate of inflation and (b) price stability with an 8 percent unemployment rate, which would you choose? Why?