Instructors Manual For

Instructor's Manual For Macroeconomics 9 th

Edition By Abel Bernanke Croushore ( All Chapters, 100% Original Verified, A+ Grade) 1 / 4

Chapter 1 Introduction to Macroeconomics Learning Objectives

• Goals of Part I

A.Introduce students to the main concepts in macroeconomics (Ch. 1) B.Introduce national income accounting and major economic magnitudes (Ch. 2) II.Section Goals A.Summari ze the primary issues addressed in macroeconomics (Sec. 1.1) B.Describe the activities and objectives of macroeconomists (Sec. 1.2) C.Differentiate between the classical and Keynesian approaches to macroeconomics (Sec. 1.3) III.Notes to Eighth Edition Users: This chapter is little changed; the data were updated. 2 / 4

• Abel/Bernanke/Croushore • Macroeconomics, Ninth Edition

©2017 Pearson Education, Inc.Teaching Notes I.What Macroeconomics Is About (Sec. 1.1) Macroeconomics: the study of structure and performance of national economies and governme nt policies that affect economic performance. Macroeconomists study

:

A.Long-run econom ic growth 1.Growth of output in United States over time a.

Text Fig. 1.1: Output of United States since 1869

b.Note decline in output during recessions; increase in output during some wars 2.Sources of growth—population, average labor productivity growth This may be a good place to introduce students to the calculation of a growth rate, which is used throughout the textbook. You can write it first in general terms, as %X  [(X t+1  Xt)/Xt]  100%  [(Xt+1/Xt)  1]  100%.Then you might use an example with something you’re talking about, such as real GDP growth over the past year, or the inflation rate.Throughout the text, students may come across mathematical calculations that are unfamiliar to them. The appendix to the textbook contains some helpful basic guidance to mathematical topics, including discussions of functions and graphs, slopes of functions, elasticities, functions of several variables, shifts of a curve, exponents, and growth-rate formulas.

3.Average labor productivity

a.Average labor productivity: output produced per unit of labor input

b. Text Fig. 1.2: Average labor productivity of United States since 1900

c.Average labor productivity growth:

(1)2.6% per year from 1949 to 1973 (2)1.1% per year from 1973 to 1995 (3)1.9% per year from 1995 to 2007 (4) 1.1% per year from 2007 to 2014

• Business cy

cles 1.

Business cycle: short-run contractions and expansions in econom

ic activity 2.Downward phase is called reces sion

• Unem

ployme nt

1.Unemployment: the number of people who are available for work and actively s

eeking work but cannot find jobs

• U.S. experience shown in text Fig. 1.3

3.Recessions cause unemployment rate to rise Analytical Problem 1 asks students to think about average labor productivity and unemployment and their relationship to output. 3 / 4

Chapter 1 Introduction to Macroeconomics 3 ©2017 Pearson Education, Inc.

• Inflation

Analytical Problem 2 asks students to think about the welfare consequences of having a higher price level.

• U.S. experience shown in text Fig. 1.4

2.Deflation: when prices of mo

st goods and services decline 3.

Inflation rate: the percentage increase in the level of prices

4.Hy

perinflation: an extremely high rate of inflation

You may wish to discuss how to calculate the inflation rate, which is just the growth rate of the price level. It can be expressed as   [(P t+1/Pt)  1]  100%. Numerical Problem 1 gives students practice calculating growth rates, including the growth rate of average labor productivity and the inflation rate.

• The international economy

1.Open vs. closed econom ies a.

Open economy: an economy that has extensive trading and financia

l relationships with other national econom ies

b.Closed economy: an economy that does not interact economically

with the rest of the world

• Trade

imbalances a.U.S. experience shown in text Fig. 1.5

b.Trade surplus: exports exceed im

ports c.

Trade deficit: im

ports exceed exports

• Macroeconomic policy

1.

Fiscal policy: government spending and

taxation

• Effects of changes in federal budget

b.U.S. experience in text Fig. 1.6 c.Relation to tr ade deficit?Numerical Problem 2 serves two purposes: (1) to get students to look at some real data on the economy and (2) to give them some idea about how large the trade deficit and government budget deficit are.

• Monetary policy: growth of money supply; determined by central bank; the Fed in United

States

• Aggregation

1.Aggregation: summing individual economic variables to obtain economywide tota

ls 2.Distinguishes microeconomics (disaggregated) from macroeconomics (aggreg ated) II.What Macroeconomists Do (Sec. 1.2)

• Macroeconomic

forecasting 1.Relatively few economists make forecast s

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