chapter:
6
>> Macroeconomics: The Big
Picture
Krugman/Wells
CHECK YOUR UNDERSTANDING
©2009  Worth Publishers
Check Your Understanding 6-1
Question 1
Which of the following questions involve microeconomics
and which involve macroeconomics?
1a) Why did consumers switch to smaller cars in 2008?
1.
2.
microeconomics
macroeconomics
1b) Why did overall consumer spending slow down in
2008?
1.
2.
microeconomics
macroeconomics
1c) Why did the standard of living rise more rapidly in the first
generation after World War II than in the second?
1.
2.
microeconomics
macroeconomics
1d) Why have starting salaries for students with
geology degrees risen sharply of late?
1.
2.
microeconomics
macroeconomics
1e) What determines the choice between rail and road
transportation?
1.
2.
microeconomics
macroeconomics
1f) Why has salmon gotten cheaper over the past 20
years?
1.
2.
microeconomics
macroeconomics
1g) Why did inflation fall in the 1990s?
1.
2.
microeconomics
macroeconomics
Check Your Understanding 6-1
Question 1*
NEW
CHECK YOUR UNDERSTANDING
1a*) Monetary policy involves:
1.
2.
NEW
changing government spending and
taxes.
changing the money supply and interest
rates.
CHECK YOUR UNDERSTANDING
1a*) Fiscal policy involves:
1.
2.
NEW
changing government spending and
taxes.
changing the money supply and interest
rates.
CHECK YOUR UNDERSTANDING
Check Your Understanding 6-1
Question 2
In 2008 problems in the financial sector led to a drying up
of credit around the country: homebuyers were unable to
get mortgages, students were unable to get loans, car
buyers were unable to get car loans, etc.
2a) Drying up of credit usually has little impact on the
economy beyond the financial sector.
1.
2.
True
False
2b) If you believed the economy was self-regulating, then you
would advocate decreasing taxes in response to the slump.
1.
2.
True
False
2c) If you believed in Keynesian economics, you would advocate
monetary and/or fiscal policy in response to the slump.
1.
2.
True
False
Check Your Understanding 6-2
Questions 1 and 2
1. We usually talk about business cycles for the whole
economy rather than as ups and downs of particular
industries.
1.
2.
True
False
2. Inflation is the most harmful effect of a recession.
1.
2.
True
False
Check Your Understanding 6-3
Questions 1 and 2
1. Countries with a high population growth rate:
1.
2.
3.
4.
typically have low unemployment
rates.
benefit from an increase in the work
force.
must experience above average
output growth in order to increase the
standard of living.
experience unprecedented rises in
living standards.
2. Argentina used to be as rich as Canada. Because
Argentina is poorer than Canada now, Argentina is
poorer now than it was in the past.
1.
2.
True
False
Check Your Understanding 6-4
Question 1
Which of these sound like inflation, which sound like deflation,
and which are ambiguous?
1a) Gasoline prices are up 10%, food prices are down
20%, and the prices of most services are up 1-2%.
1.
2.
3.
inflation
deflation
ambiguous
1b) Gas prices have doubled, food prices are up 50%,
and most services seem to be up 5 or 10%.
1.
2.
3.
inflation
deflation
ambiguous
1c) Gas prices haven’t changed, food prices are way
down, and services have gotten cheaper, too.
1.
2.
3.
inflation
deflation
ambiguous
Check Your Understanding 6-5
Question 1
Which of the following reflect comparative advantage,
and which reflect macroeconomic forces?
1a) Thanks to the discovery of huge oil sands in Alberta, Canada, it
has become an exporter of oil and an importer of manufactured
goods.
1.
2.
comparative advantage
macroeconomic forces
1b) Like many consumer goods, the Apple iPod is assembled in
China, although many of the components are made in other
countries.
1.
2.
comparative advantage
macroeconomic forces
1c) Since 2002, China has been running huge trade
surpluses, exporting much more than it imports.
1.
2.
comparative advantage
macroeconomic forces
1d) The United States, which had roughly balanced trade in the
early 1990s, began running large trade deficits later in the decade,
as the technology boom took off.
1.
2.
comparative advantage
macroeconomic forces