Please answer the followed 4 question,

In order to develop an understanding of the way an economy functions. let's attempt to build a simple economy around a single vending machine in your school cafeteria. On a large piece of paper. carefully draw a diagram of this economy as we build it together. Use two coloured pencils to note all of the economic activity that takes place in our simple economy. Use one colour to note all activities involving money payments {we'll call this colour #1). and a second colour {colour #2) to note all activities involving the supply of a good or a service. As the rst step in building our model economy. draw a black box {3 cm x 3 cm} in the centre of the page and label it \"vending machine.\" With no economy yet in place, the machine is empty. No cold drinks for you! To build an economy, the owner of the vending machine must purchase soft drinks and juices from a producer and use these to ll the machine. So let's draw a black circle 3 cm in diameter and about 6 cm to the right of the vending machine. Label this circle \"producer.\" Since the owner of the vending machine gives the producer money. draw an arrow in colour #1 from the vending machine to the producer to represent this event. Draw an arrow in colour #2 to represent the products coming to the vending machine operator in return for the money being paid. The machine is now full. but the economy is still not in place. We need consumers for the cold drinks. and this is where you come in. Draw a black circle 3 cm in diameter and about 6 cm to the left of the vending machine. Label this circle \"consumer.\" Even though you are very thirsty. before you can buy a cold drink you must have money. The most satisfying way to get money is to earn it. and one way to do this is by nding a part-timejob. As luck would have it. the local beverage manufacturer (the producer) happens to be hiring students. Draw an arrow in colour #2 to represent the service of labour that you provide to your employer. Draw another arrow in colour #1 to represent the wages that your employer pays you in return for the work you do. Now that you have money in your pocket. you might decide to quench your thirst 'om time to time with a nice cold drink. Draw an arrow in colour #1 to represent the money you put into the vending machine to purchase cold drinks. Draw a #2- coloured arrow to represent the cold beverages you receive from the machine. At this stage. we are starting to see our economy come to life. GUISLIIER PIIIIDULIBI ,-/ hm Plldun: rm . 'l'EIlilIB FEM "d; -"' ' a MINE ' ' [lac-lial Building a model economy around a vending machine. As a salaried employee, you cannot expect to spend all the money you earn in wages because you must pay a percentage of that money to the government in taxes. Don't feel too bad about thisthe operator of the vending machine and the beverage producer must also pay taxes on their income. First draw a black rectangle 3 cm long and about 3 cm below the vending machine. Label this rectangle \"government.\" Then draw three arrows, using colour #1, to represent the income taxes paid to the government by the consumer, the producer, and the seller. In return for your tax dollars, the government will supply your economy with important goods and services, such as the school you attend, the roads you use to get to that school, and the laws that set quality standards for the foods you out. Using colour #2, draw three arrows to represent the products and services that consumers, producers, and vending machine operators receive from the government. Oddly enough, the government also plays the role of consumer in our model economy because the government itself rarely does the work it sponsors, for example, building bridges and roadways. Instead, the govemment contracts the work out to the lowest bidder. In our case, the government purchases large quantities of beverages for meetings and conferences. Draw the two coloured arrows to represent this transaction. It would be very foolish to spend your whole paycheque as soon as you made it. If you did, how could you ever afford the really expensive things such as cars, housing, and tuition? For this reason, our economy needs a bankan institution that allows people to save some of their money for a later use. In return for depositing our money there, we receive nancial services from the bank. First draw a black rectangle 3 cm long and about 3 cm above the vending machine. Label this rectangle \"bank,\" then draw two colour-coded arrows to represent this transaction: savings going into the bank and services coming back in return. Producers will also need the services of a bank from time to time, so draw two more arrows to represent this relationship. Similar to the government, banks play more than one role even in a simple economy such as ours. 'v'ending machines are very expensive, so where did the operator nd the money to nance the purchase of a vending machine? In this case, our owner borrowed the money from the bank; in other words, the loan allowed the owner to spend money the owner did not actually have at the time. In return, the owner signed an agreement to repay the bank over a period of time and with interestthe additional sum of money the owner had to pay for receiving the loan. Draw two colour-coded arrows to represent this nal transaction. There are other transactions that could be included in our model, but by now the pattern and complexity of the economy are obvious. Questions 1. Study your diagram. Based on the simplied model created, explain what an economy is in your own words. 2. Does the simplied model you have created contain all of the features listed in the textbook denition in Figure 1.2 on page 7'? 3. How comprehensive is your denition compared to the one found in the text {above}? Can you expand on the above denition? 4. Why would economists use simplied models, like this one, when they can be challenged as being too simple to be realistic