21 - CHAPTER 21 THE REALM OF MACROECONOMICS 1 2...

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C HAPTER 21 T HE R EALM OF M ACROECONOMICS 1. Microeconomist: (a) and (d); Macroeconomist: (b) and (c) 2. There are many examples, such as “the country is turning conservative,” “football players are faster these days,” and “the students at this college think the classes should be smaller.” When one makes a statement like this, one usually has in mind an average, or a typical member of the larger group. One would not mean that every member of the group fit the statement. 3. Figure 21-1 shows an economy with a fixed aggregate demand curve, and an aggregate supply curve that shifts out each year, from S 0 to S 1 to S 2 , etc. Prices would drop continuously, from P 0 to P 1 to P 2 , and production would increase, from Y 0 to Y 1 to Y 2 . FIGURE 21-1 4. Most students were born after 1978, and in that period prices have increased every year, so their experience is that inflation is normal. But there have been long periods of deflation in the United
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