SOLUTIONS MANUAL
TU
Macroeconomics
VI
Campbell R. McConnell, Stanley L. Brue, and Sean Masaki Flynn
──────────────────────────────────────────────────
A2
23rd Edition
6_
AP
PR
OV
ED
??
,ST
TABLE OF CONTENTS
UV
Solutions Manual: Macroeconomics, 23rd Edition
By Campbell R. McConnell, Stanley L. Brue, and Sean M. Flynn
Part 1 Introduction to Economics and the Economy
IA
Chapter 1 Limits, Alternatives, and Choices
Chapter 2 The Market System and the Circular Flow
26
Part 2 Price, Quantity, and Efficiency
Chapter 3 Demand, Supply, and Market Equilibrium
Chapter 4 Market Failures Caused by Externalities and Asymmetric Information
_A
Chapter 5 Public Goods, Public Choice, and Government Failure
Part 3 GDP, Growth, and Instability
Chapter 6 An Introduction to Macroeconomics
PP
Chapter 7 Measuring Domestic Output and National Income
Chapter 8 Economic Growth
RO
Chapter 9 Business Cycles, Unemployment, and Inflation
Part 4 Macroeconomic Models and Fiscal Policy
Chapter 10 Basic Macroeconomic Relationships
Chapter 11 The Aggregate Expenditures Model
VE
Chapter 12 Aggregate Demand and Aggregate Supply
Chapter 13 Fiscal Policy, Deficits, and Debt
D?
Part 5 Money, Interest Rates, and Monetary Policy
Chapter 14 Money, the Federal Reserve, and Interest Rates
Chapter 15 Monetary Policy, GDP, and the Price Level
?
Chapter 16 Financial Economics
Part 6 Extensions and Issues
Chapter 17 Extending the Analysis of Aggregate Supply
Chapter 18 Current Issues in Macro Theory and Policy
Part 7 International Economics
1
,ST
Chapter 19 International Trade
Chapter 20 The Balance of Payments, Exchange Rates, and Trade Deficits
UV
Chapter 21 The Economics of Developing Countries
IA
26
_A
PP
RO
VE
D?
?
2
, Chapter 01 - Limits, Alternatives, Choices
TU
Chapter 01 - Limits, Alternatives, and Choices
McConnell Brue Flynn 23e
DISCUSSION QUESTIONS
VI
1. What is an opportunity cost? How does the idea relate to the definition of economics?
Which of the following decisions would entail the greater opportunity cost: allocating
a square block in the heart of New York City for a surface parking lot or allocating a
A2
square block at the edge of a typical suburb for such a lot? Explain. LO1.1
Answer: An opportunity cost is what was sacrificed to do or acquire something
else. The condition of scarcity creates opportunity cost. If there was no scarcity,
6_
there would be no need to sacrifice one thing to acquire another. The opportunity
cost would be much higher in New York City as the alternative uses for that
square block are much more valuable than for a typical suburban city block.
AP
2. Cite three examples of recent decisions that you made in which you, at least
implicitly, weighed marginal cost and marginal benefit. LO1.1
Answer: Answers will vary, but may include the decision to come to class, to
skip breakfast to get a few extra minutes of sleep, to attend college, or to make a
PR
purchase. Marginal benefits of attending class may include the acquisition of
knowledge, participation in discussion, and better preparation for an upcoming
examination. Marginal costs may include lost opportunities for sleep, meals, or
studying for other classes. In evaluating the discussion of marginal benefits and
OV
marginal costs, be careful to watch for sunk costs offered as a rationale for
marginal decisions.
3. What is “utility” and how does it relate to purposeful behavior? LO1.1
ED
Answer: “Utility” refers to the pleasure, happiness, or satisfaction gained from
engaging in an activity (eating a meal, attending a ball game, etc.). It is an
important component of purposeful behavior because people will allocate their
scarce time, energy, and money in an attempt to gain the most utility possible.
??
4. What are the key elements of the scientific method, and how does this method relate
to economic principles and laws? LO1.2
Answer: The key elements include the gathering of data (observation), the
formulation of possible explanations (hypothesis), testing the hypothesis,
determining the validity of the hypothesis, and repeated testing of the hypothesis
that have appeared to be valid in prior tests.
TU
Macroeconomics
VI
Campbell R. McConnell, Stanley L. Brue, and Sean Masaki Flynn
──────────────────────────────────────────────────
A2
23rd Edition
6_
AP
PR
OV
ED
??
,ST
TABLE OF CONTENTS
UV
Solutions Manual: Macroeconomics, 23rd Edition
By Campbell R. McConnell, Stanley L. Brue, and Sean M. Flynn
Part 1 Introduction to Economics and the Economy
IA
Chapter 1 Limits, Alternatives, and Choices
Chapter 2 The Market System and the Circular Flow
26
Part 2 Price, Quantity, and Efficiency
Chapter 3 Demand, Supply, and Market Equilibrium
Chapter 4 Market Failures Caused by Externalities and Asymmetric Information
_A
Chapter 5 Public Goods, Public Choice, and Government Failure
Part 3 GDP, Growth, and Instability
Chapter 6 An Introduction to Macroeconomics
PP
Chapter 7 Measuring Domestic Output and National Income
Chapter 8 Economic Growth
RO
Chapter 9 Business Cycles, Unemployment, and Inflation
Part 4 Macroeconomic Models and Fiscal Policy
Chapter 10 Basic Macroeconomic Relationships
Chapter 11 The Aggregate Expenditures Model
VE
Chapter 12 Aggregate Demand and Aggregate Supply
Chapter 13 Fiscal Policy, Deficits, and Debt
D?
Part 5 Money, Interest Rates, and Monetary Policy
Chapter 14 Money, the Federal Reserve, and Interest Rates
Chapter 15 Monetary Policy, GDP, and the Price Level
?
Chapter 16 Financial Economics
Part 6 Extensions and Issues
Chapter 17 Extending the Analysis of Aggregate Supply
Chapter 18 Current Issues in Macro Theory and Policy
Part 7 International Economics
1
,ST
Chapter 19 International Trade
Chapter 20 The Balance of Payments, Exchange Rates, and Trade Deficits
UV
Chapter 21 The Economics of Developing Countries
IA
26
_A
PP
RO
VE
D?
?
2
, Chapter 01 - Limits, Alternatives, Choices
TU
Chapter 01 - Limits, Alternatives, and Choices
McConnell Brue Flynn 23e
DISCUSSION QUESTIONS
VI
1. What is an opportunity cost? How does the idea relate to the definition of economics?
Which of the following decisions would entail the greater opportunity cost: allocating
a square block in the heart of New York City for a surface parking lot or allocating a
A2
square block at the edge of a typical suburb for such a lot? Explain. LO1.1
Answer: An opportunity cost is what was sacrificed to do or acquire something
else. The condition of scarcity creates opportunity cost. If there was no scarcity,
6_
there would be no need to sacrifice one thing to acquire another. The opportunity
cost would be much higher in New York City as the alternative uses for that
square block are much more valuable than for a typical suburban city block.
AP
2. Cite three examples of recent decisions that you made in which you, at least
implicitly, weighed marginal cost and marginal benefit. LO1.1
Answer: Answers will vary, but may include the decision to come to class, to
skip breakfast to get a few extra minutes of sleep, to attend college, or to make a
PR
purchase. Marginal benefits of attending class may include the acquisition of
knowledge, participation in discussion, and better preparation for an upcoming
examination. Marginal costs may include lost opportunities for sleep, meals, or
studying for other classes. In evaluating the discussion of marginal benefits and
OV
marginal costs, be careful to watch for sunk costs offered as a rationale for
marginal decisions.
3. What is “utility” and how does it relate to purposeful behavior? LO1.1
ED
Answer: “Utility” refers to the pleasure, happiness, or satisfaction gained from
engaging in an activity (eating a meal, attending a ball game, etc.). It is an
important component of purposeful behavior because people will allocate their
scarce time, energy, and money in an attempt to gain the most utility possible.
??
4. What are the key elements of the scientific method, and how does this method relate
to economic principles and laws? LO1.2
Answer: The key elements include the gathering of data (observation), the
formulation of possible explanations (hypothesis), testing the hypothesis,
determining the validity of the hypothesis, and repeated testing of the hypothesis
that have appeared to be valid in prior tests.
