CHAPTER 5
INTRODUCTION TO MACROECONOMICS
SOLUTIONS TO END OF CHAPTER PROBLEMS
1. Each national economy has its own “rules of the game,” that is, its own laws, regulations,
2. The economy moves through periods of expansion and periods of contraction. Contractions
include recessions in which total output and employment decline over a six-month period
3. The demand and supply curves in Chapter 4 describe the relationship between the price of
an individual product or product category, such as textbooks or food, and the quantities of
4.
a. Neither curve would shift. A change in the price level would cause a movement along the
curves.
5. (1) The Great Depression and Before: The Great Depression and earlier depressions
prompted John Maynard Keynes to argue that the economy is unstable, largely because
Chapter 5 Introduction to Macroeconomics 2
6.
Lower tax rates were intended to increase after-tax earnings and thus increase incentives
for resource owners to provide labor and capital. The above graph shows the impact of a