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ANSWERS, SOLUTIONS, AND EXERCISES
PROBLEM SET
2. According to Table 1 in the text, the recessions of 1974, 1980, 1990 and 2008 were
3. Figure 2 shows no consistent patterns. In some cases, such as the recession of
1981-1982, the employment rate began to rise even before the recession ended. In
4. No, total lending during the year would not be zero, precisely because additional
saving is not the same as total saving. In Figure 5, we assume that the households save
5. If 40% of additional $100 billion savings is supplied to the loanable funds market and
30% of this $40 billion dollars is lent out, then $12 billion will go into increased
6. If saving increases by $0.75 trillion, but the interest rate does not fall; there will be a
EXPERIENTIAL EXERCISES
1. The National Bureau of Economic Research maintains a Web page devoted to business
cycle expansions and contractions at http://www.nber.org/cycles.html . Take a look at
241
242 Instructor’s Manual for Economics: Principles and Applications, 6e
2. Review the Summary of Commentary on Current Economic Conditions by Federal
Reserve District (Beige Book), available through the Federal Reserve System at
http://www.federalreserve.gov/FOMC/BeigeBook/2009/ (change the year in the URL
for whichever year you choose).
a. Summarize the national economic conditions for the most recent period covered in
b. Go to the summary applicable to your district. Summarize the economic conditions
