Download pdf - Mankiw Solution

8/10/2019 Mankiw Solution

1/259

Principles of Economics chapters Principles of Principles of Microeconomics Macroeconomics

chapters chapters1. Ten Principles of Economics 1 12. Thinking Like an Economist 2 23. Interdependence and the Gains from Trade 3 34. The Market Forces of Supply and Demand 4 45. Elasticity and Applications 5 56. Supply, Demand, and Government Policies 6 67. Consumers, Producers and the Efficiency of Markets 7 78. Application: The Costs of Taxation 8 89. Application: International Trade 9 910. Externalities 10 --11. Goods and Common Resources 11 --12. The Tax System 12 --13. The Costs of Production 13 --14. The Competitive Firm 14 --15. Monopoly 15 --16. Oligopoly 16 --17. Monopolistic Competition 17 --18. The Markets for the Factors of Production 18 --19. Earnings and Discrimination 19 --20. The Distribution of Income 20 --21. The Theory of Consumer Choice 21 --22. Measuring a Nation's Wealth -- 1023. Measuring the Cost of Living -- 1124. Production and Growth -- 1225. Financial Markets: Saving, Investment, -- 13 and Interest Rates --26. Unemployment -- 1427. The Monetary System -- 1528. Inflation: Its Causes and Costs -- 1629. Open-Economy Macroeconomics: Basic Concepts -- 1730. A Macroeconomic Theory of the Open Economy -- 1831. Aggregate Demand and Aggregate Supply -- 1932. Monetary and Fiscal Policy Determinants of -- 20 Aggregate Demand33. The Short-Run Tradeoff between Inflation -- 21 andUnemployment34. Five Debates over Macroeconomic Policy -- 22


2/259

1-1


3/259

1-2


4/259

1-3


5/259

1-4


6/259

1-5


7/259

1-6


8/259

Q u a n

t i t y o

f M i l k P r o

d u c e

d

PPF 1

PPF 2

Quantity of Cookies Produced

2-1


9/259

2-2


10/259

c. $7a. $1

c. $7a. $1

b. $4.50d. $10,000

b. $4.50d. $10,000

a. Quart of milkc. Movie ticket

a. Quart of milkc. Movie ticket

d. Acmes capitalb. One hour of work

d. Acmes capitalb. One hour of workMarkets for

Factors of Production

Markets forGoods and Services

Firms Households

C l e a n l i n e s s o

f E n v

i r o n m e n

t

PPF 1

PPF 2

Income

2-3


11/259

2-4


12/259

2-5


13/259

2-6


14/259

3-1


15/259

E c o n o m

i c s

P a g e s

Sociology Pages

100

250

3-2


16/259

C a r s

( m i l l i o n s

)

Grain (millions of tons)

400

1000500

U.S.

Japan

3-3


17/259

3-4


18/259


19/259

3-6


20/259

3-7


21/259

4-1


22/259

P r i c e o

f P i z z a

Quantity of Pizza

S

D1D2

4-2


23/259

P r i c e o

f O r a n g e s

Quantity of Oranges

D

S 1

S 2

P r i c e o

f C a r i

b b e a n

H o

t e l R o o m s

Quantity of Caribbean Hotel Rooms

S

D1

D2

4-3


24/259

P r i c e o

f U s e

d C a

d i l l a c s

Quantity of Used Cadillacs

S 2

S 1

D1

D2

P r i c e o

f G a s o l i n e

Quantity of Gasoline

S 1

S 2

4-4


25/259

P r i c e o

f N o

t e b o o

k s

Quantity of Notebooks

S

D1

D2

P r i c e o

f N o

t e b o o

k s

Quantity of Notebooks

S

D1

D2

4-5


26/259


27/259

P r i c e o

f S w e a

t s h i r t s

Quantity of Sweatshirts

S

D1D2

P r i c e o

f S w e a

t s h i r t s


S

D1D2

4-7


28/259

P r i c e o

f S w e a

t s h i r t s


D

S 1S 2

P r i c e o

f B a

b y s

i t t i n g

S e r v

i c e s

Quantity of Babysitting Services

S

D1 D2

4-8


29/259

P r i c e o

f B a

b y s

i t t i n g

S e r v

i c e s

Quantity of Babysitting Services

D

S1 S 2

P r i c e o

f C i g a r s

Quantity of Cigars

S

D1D2

4-9


30/259

P r i c e o

f P i z z a

Quantity of Pizza

S

D1

D2

4-10


31/259

P r i c e o

f C o m p u

t e r s

Quantity of Computers

D

S 1S 2

P r i c e o

f S o

f t w a r e

Quantity of Software

S

D1D2

4-11


32/259

P r i c e o

f B a g e

l s

Quantity of Bagels

D

S 1 S 2

P r i c e o

f C r e a m

C h e e s e

Quantity of Cream Cheese

S

D1

D2

4-12


33/259

P r i c e o

f C r e a m

C h e e s e

Quantity of Cream Cheese

D

S 1S 2

4-13


34/259

P r i c e o

f B a g e l s

Quantity of Bagels

S

D1D2

P r i c e o

f B a s

k e t b a

l l T i c k e

t s

Quantity of Basketball Tickets

S

D

$8

8,000

4-14


35/259

P r i c e o

f C h a m p a g n e

Quantity of Champagne

S

D1D2

4-15


36/259

D

Q

S 1

S 2P

D

Q

S 1 S 2

P

DQ

S 1

S 2P

DQ

S 1 S 2

P

D

Q

S 1S 2P

D

Q

S 1 S 2

P

DQ

S 1S 2P

DQ

S 1S 2

P

4-16


37/259

P r i c e

Quantity

S

D

Q

PArea of rectangle= total spending by consumers= total revenue received by producers= P x Q

5-1


38/259

5-2


39/259

5-3


40/259

5-4


41/259

5-5


42/259

5-6


43/259

6-1


44/259

P r i c e o f

B e e r

Quantity of Beer

Supply

Demand

Q1

P 1

P r i c e o f

B e e r

Quantity of Beer

Supply

Demand

Q1Q2

P 1

P 2

P 2 $2

6-2


45/259

P r i c e o f

C h e e s e

Quantity of Cheese

Supply

Demand

Q1Q2 Q 3

P 1

P f

6-3


46/259

P r i c e o f

G a s o l

i n e


S 1

S 2

D2D1

Q1Q2

P 1P 2 50

P 2

6-4


47/259

P r i c e o

f G a s o

l i n e


Supply

tax

tax

D2

D1

Q1 Q 2

W a g e

Quantity of Labor

Supply

Demand

unemployment

D C

BA

Q1 Q3Q2

w1wm

6-5


48/259

P r i c e o f

G u n s

Quantity of Guns

Supply

D2

D1

Q1Q2

P 1P 2 tax

P 2

6-6


49/259

P r i c e o f

G u n s

Quantity of Guns

Demand

S 2

S 1

Q1Q2

P 1P 2 tax

P 2

P r i c e o

f G u n s

Quantity of Guns

Demand

Supply

Q1Q2 Q 3

P 1

P f

6-7


50/259


51/259

6-9


52/259

P r i c e o f I c e - C r e a m

C o n e s

Quantity of Ice-Cream Cones

Supply

D2

D1

Q1 Q2

P 1P D

P s

6-10


53/259

P r i c e

Equilibrium quantityQuantity

Equilibriumprice

Supply

Demand

Producersurplus

Consumersurplus

7-1


54/259

P r i c e

o f L e m o n s

Quantity of Lemons

Demand

S 2S 1

P 1

P 2A

B C

7-2


55/259


56/259

P r i c e o f

F l o u r

Quantity of Flour

Supply

D2D1

P 1P 2

DE F

7-4


57/259

P r i c e o f W

a t e r

Quantity of Water

A

B

1

$7

$6

$5

$4

$3

$2

$1

2 3 4

7-5


58/259

P r i c e o f

W a t e r

Quantity of Water

A

B

1

$7$6$5$4$3$2$1

2 3 4

7-6


59/259

P r i c e o f

C o m p u t e r s


Demand

S 2S 1

P 1

Q1 Q2

P 2D

GCB

A

E F

7-7


60/259

P r i c e o

f C o m p u

t e r s


S 2S 1

Demand

A

B

7-8


61/259

P r i c e o

f H a i r c u t

Quantity of Haircuts

A

B

C

D

1

$8$7$6$5$4$3$2$1

2 3 4

Sally

Phil

Geraldo

Oprah

P r i c e

Quantity

Supply

DemandQ1Q2

A

7-9


62/259

P r i c e

Quantity

Supply

Demand

Q1 Q 3

B

P r i c e o

f M e d

i c a l

P r o c e

d u r e

Quantity of Medical Procedures

Supply

DemandQ1 Q2

$100

$20

7-10


63/259

P r i c e o f

W a t e r

Quantity of Water

Demand

Shortage

S 2

S 1

Q1Q3

P 1

P 2

Q2

7-11


64/259

7-12


65/259

P r i c e

Quantity

Supply

Demand

Q1Q2

P1P s

P BA

B

E

C

DF

8-1


66/259

P r i c e o

f P i z z a

Quantity of Pizza

Supply

Demand

Q1Q2

P 1P s

P BA

B

E

C

D

F

8-2


67/259

8-3


68/259

P r i c e o

f R u

b b e r

B a n

d s

Quantity of Rubber Bands

Supply

Demand

A B

C D

P r i c e o

f R u

b b e r

B a n

d s

Quantity of Rubber Bands

Supply

Demand

AB

C D

8-4


69/259

8-5


70/259

P r i c e o

f S o c

k s

Quantity of Socks

Supply

Demand

Q1Q2

P 1P s

P BA

B E

C

D F

8-6


71/259

P r i c e o

f C a r s

Quantity of Cars

Supply

Demand

Q1Q2

P B2

P B1

P S1

P S2

A

B

E

G

C

D

F

H

8-7


72/259

P r i c e

Quantity

Supply

Demand

Q1 Q 2

P 1

P s

P B

AB

E H

I

C D

F G

8-8


73/259

T a x

R e v e n u e

0 300T

8-9


74/259

P r i c e

Quantity

Supply

Demand

200200

100 +

base = Theight = 2T3

2T3

2T3

100 100

T3

D e a

d w e

i g h t L o s s

0 300T

45,000

8-10


75/259

P

r i c e

Quantity

Domesticsupply

Domesticdemand

Worldprice

A

BC

D

Imports

Pricebeforetrade

Priceaftertrade

9-1


76/259

P r i c e o

f O r a n g e s

Quantity of Oranges

Supply

Demand

Q1 QoQs

P 1P w

A

B EC

D

9-2


77/259

P r i c e o

f W i n e

Quantity of Wine

Supply

Demand

P 1

P 2

A

B EC

D

9-3


78/259

p A

Country A Country BQA Q B

P 1

P w p B

P 2

S A

S B

DA DB

E

GCD F

H J

I

P r i c e

Quantity

Supply

Demand

P wP 1

P w+ t

9-4


79/259


80/259

9-6


81/259

P r i c e o

f S u g a r

Quantity of Sugar

S + quota

S

A

C

G

D E E

B

F

Demand

P w

P q

Q1s

Q1s+ quota

Q2s Q1DQ2D

9-7


82/259

9-8


83/259

P r i c e o f

S t e e l

Quantity of Steel

Supply

ACG

D

E

B

F

Demand

P w

P w+ s

Q1s Q2sQ1D

9-9


84/259

P r i c e

QuantityQoptimum Qmarket

Social cost

Supply(private cost)

Demand(private value)

10-1


85/259


86/259

P r i c e o f

F i r e E x t i n g u

i s h e r s

Quantity of Fire ExtinguishersQoptimumQmarket

Demand

Supply

(social cost)

Social value

10-3


87/259

P r i c e o f

S t u d d e d S n o w

T i r e s

Quantity of Studded Snow TiresQoptimum Qmarket

Demand

Supply

Social value

P r i c e o

f S t u d d e

d S n o w

T i r e s

Quantity of Studded Snow TiresQoptimum Qmarket

Demand

Supply

Social value

10-4


88/259

P r i c e o f

A l u m

i n u m

C a n s

Quantity of Aluminum CansQoptimum Qmarket

Demand

Supply

Social cost

Social value

P r i c e o

f A l c o

h o

l

Quantity of AlcoholQoptimum Qmarket

Demand

Supply(social cost)

Social value

C

AB

10-5


89/259


90/259


91/259

10-8


92/259

10-9


93/259

11-1


94/259

11-2


95/259

11-3


96/259

11-4


97/259


98/259

12-2


99/259

12-3


100/259

12-4


101/259

12-5


102/259


103/259

C o s t s

Quantity

Averagetotal cost

Marginalcost

13-2


104/259

Q u a n t

i t y o f

F i s h

Hours Spent Fishing

30

25

20

15

10

5

00 2 41 53

13-3


105/259

T o t a l C o s t o f

F i s h i n g

Quantity of Fish

35

30

2520

15

10

5

00 20 4010 30

13-4


106/259


107/259

13-6


108/259

C o s

t s

Quantity of Juice

40

35

30

25

20

15

10

5

00

Average variable cost

Average total cost

Marginal cost

1 42 53 6

13-7


109/259

13-8


110/259

P r i c e ,

C o s

t sMarginal cost

Average total cost

Average variable cost

Q*

Quantity

P *

14-1


111/259

14-2


112/259


113/259

P r i c e ,

C o s

t s , R

e v e n u e

QuantityQuantity

IndustryFirm

Marginalcost Average

total cost

Q2 Q3q2 Q1q1

P 1

D2

S 1S 3

D1

P 2

P r i c e

14-4


114/259

P r i c e ,

C o s

t s

QuantityQuantity

IndustryFirm

Q2Q3q2 q3 Q1q1

P 1

S 1S 2

S 3MC2MC1ATC2ATC1

P 2P 3 P

r i c e

Demand

P r i c e ,

C o s

t s

Quantityimports

Quantity

IndustryFirm

q2 Q1q1

Supply

Demand

$30$25

P r i c e

Marginalcost

Averagetotal cost

14-5


115/259

P r i c e ,

C o s

t s

Quantity of PretzelsQuantity of Pretzels

IndustryFirm

q2 800q 2 1000q 1q1

S 2S 1

Demand

P 2ATC2

P 1 P r i c e

Marginalcost

Averagetotal cost

14-6


116/259

P r i c e , C

o s t s

QuantityQuantity

IndustryFirm

q2 Q1 Q2q1

D2D1

Supply

P 2

P 1 P r i c e

Marginalcost Average

total cost

P r i c e ,

C o s

t s

QuantityQuantity

Other refinerCalifornia refiner

Q0Qc

P *

ATCc

MarginalcostMarginal

cost Averagetotal cost

Averagetotal cost

P r i c e ,

C o s

t s

14-7


117/259

14-8


118/259

P r i c e ,

C o s

t , R e v e n u e

Marginal cost

Deadweightloss

Demand

Marginal revenue

QcQm

P m

Quantity

15-1


119/259

15-2


120/259

P r i c e ,

C o s

t , R e v e n u e

Marginalcost

Deadweightloss

Demand

Averagetotal cost

QMCQATC

P ATCP MC

Quantity

15-3


121/259

P r i c e ,

C o s

t , R e v e n u e

Marginal costAverage cost

Q1 Q2

D2

D1MR2

MR1

P 1

AC2AC1

P 2

Quantity of Bottled Water

P r i c e ,

C o s

t , R e v e n u e

Marginalcost

Demand

QC

P C

Quantity of Groceries

A

15-4


122/259

P r i c e ,

C o s

t , R e v e n u e

Marginalcost

Demand

QCQM

P C

P M

Quantity of Groceries

CB

DE

F

Marginalrevenue

15-5


123/259

15-6


124/259

P r i c e

Demand

800

8

Quantity of Crossings

Area= x 8 x 800= 3,200

12

P r i c e ,

C o s

t , R e v e n u e

Marginal cost

Average cost

Demand

Q1

AC1

P 1

Quantity of Drug Bottles

Marginal revenue

15-7


125/259

P r i c e ,

C o s

t , R e v e n u e

Marginal cost + tax

Average cost + tax

Demand

Q2

AC2

P 2

Marginal revenue

15-8


126/259

P r i c e , C o s

t , R e v e n u e Marginal cost

Average cost

Demand

QM QCQL

P LP C

P M

Quantity of DrinksMarginal revenue

P r i c e ,

C o s

t , R e v e n u e Marginal

cost

Demand

QCQM

P M

Quantity of Chips

C

BAD

E

Marginalrevenue

15-9


127/259

P r i c e ,

C o s t ,

R e v e n u e

Marginal cost= Average cost

Demand

QCQM

P M

Quantity

XX

Y Y

Z

Marginalrevenue

15-10


128/259

15-11


129/259

16-1


130/259

16-2


131/259

16-3


132/259

16-4


133/259

16-5


134/259

16-6


135/259

P r i c e 1

C o s

t 1 R e v e n u e

QuantityQ

Demand

Averagetotal cost

Marginal cost

P

Marginal revenue

17-1


136/259

17-2


137/259

P r i c e 1

C o s

t 1 R e v e n u e

Quantity of Sparkle ToothpasteQM QC

Demand

Averagetotal cost

C

BA

Marginalcost

P M

Marginal revenue

17-3


138/259

17-4


139/259

P r i c e 1

C o s

t 1 R e v e n u e

QuantityQM

Demand

Marginal cost

P M

MCM

Marginal revenue

17-5


140/259

P r i c e 1

C o s

t 1 R e v e n u e

Quantity of TylenolQT

Demand

Marginal cost

P T

MCT

Marginal revenue

17-6


141/259

P r i c e 1

C o s

t 1 R e v e n u e

Quantity of AcetaminophenQg

Marginal cost

Demand =

Marginalrevenue

P g = MCg

17-7


142/259

P r i c e o f

A p p

l e s

Quantity of ApplesQ1 Q2

D2D1

Supply

P 2P 1

18-1


143/259


144/259

W a g e

Quantity of LaborL1 L2

D2

D1

Supply

w2

w1

W a g e

Quantity of LaborL2L1

S 1

Demand

S 2

w1

w2

18-3


145/259

W a g e


D1

Supply

w2

w1

D2

18-4


146/259

R e n

t a l P r i c e o f

C a p

i t a l

Quantity of CapitalK2K1

S 1

Demand

S 2

r1

r2

W a g e


D1

Supply

w2w1

D2

18-5


147/259

W a g e ,

V a l u e o f

M a r g i n a

l P r o

d u c t o f L a b o r

Quantity of Labor

Wage

VMPL10

1 2 3 4 5 6

20

30

40

50

60

70

18-6


148/259

W a g e


D2

Supply

w1

w2w1 $3 D1

18-7


149/259

W a g e


D2

S 2

S 1

w1

w2w1 $3

D1

18-8


150/259

18-9


151/259


152/259

19-2


153/259

W a g e

QuantityQuantity

Skilled LaborUnskilled Labor

Demand Demand

W a g e

S 1

S 1

S 2

S 2

19-3


154/259


155/259

19-5


156/259

20-1


157/259

20-2


158/259

20-3


159/259

20-4


160/259

W i n e

Cheese500

1,000

21-1


161/259

W i n e

Cheesec

1

MRSw

W i n e

Cheesec* 500

1,000

w*

21-2


162/259

W i n e

Cheesec1 c2

BC2BC1

w2w1

W i n e

Cheesec2 c1

BC2BC1

w2

w1

21-3


163/259

W i n e

CheeseC3 C1C2 500

1,000

w2w1

w3

BC2 BC3

B

A

C

BC1300

21-4


164/259

C r o i s s a n t s

Coffee

BC2 BC1

I2

I1

B

A

C r o

i s s a n

t s

Coffee

BC2 BC1

I2

I1

AB

21-5


165/259


166/259


167/259

C o n s u m

p t i o n

Leisure

BC1

BC2

C o n s u m p t

i o n

Leisure

BC1

BC2

21-8


168/259

C o n s u m

p t i o n

Leisure

BC3

BC2

$1,000

$800

$600

BC1

L8 L6 L10 100

C o n s u m p t

i o n

Leisure

21-9


169/259

C o n s u m p t

i o n

Leisure

BC2

BC1

L1 L2

C o n s u m p t

i o n

Leisure

BC2

BC1

L2 L1

21-10


170/259

C o n s u m p t i o n

W h e n

O l d

Consumption When Young

BC242

31.5

BC1

30 40

21-11


171/259

C o n s u m p t

i o n

W h e n

O l d


32.4

31.5

30

E d u c a

t i o n

S p e n d

i n g

Other Spending

15

5

10BC2 BC1

15

21-12


172/259

E d u c a

t i o n

S p e n d

i n g

Other Spending

15

5

10 15

E d u c a

t i o n

S p e n d

i n g

Other Spending

15

I2 I1

5

10 15

21-13


173/259

C o n s u m p t

i o n

Leisure

L1 L2

A

Lmax

21-14


174/259

C o n s u m p t

i o n

W h e n

O l d


BC2

BC1

21-15


175/259

22/10-1


176/259

22/10-2


177/259

22/10-3


178/259

23/11-1


179/259


180/259

23/11-3


181/259

23/11-4


182/259

24/12-1


183/259


184/259

24/12-3


185/259

24/12-4


186/259

25/13-1


187/259

25/13-2


188/259


189/259

I n t e r e s

t R a t e

Loanable Funds

Demand

S 1

S 2

L1L1 20 L2

i1

i2

25/13-4


190/259

i

L

Inelastic Supply

L2

S 2 S 1

L1

D D

i2

i1

i

L

Elastic Supply

L2

S 2 S 1

L1

i2i1

i

L

Inelastic Demand

L2

S 2 S 1

L1D

D

i2

i1

i

L

Elastic Demand

L2

S 2S 1

L1

i2i1

25/13-5


191/259

I n t e r e s t

R a t e

Loanable Funds

Supply

D1D2

L1L2

i1

i2

I n t e r e s t

R a t e

Loanable Funds

Supply

D1D2

L1L2

i1

i2

25/13-6


192/259

25/13-7


193/259

26/14-1


194/259

26/14-2


195/259

W a g e

Quantity of Labor

Demand

Supply

L1S L2SL1DL2D

m1m2

26/14-3


196/259

w

QL

Unionized Market

U2D U2SU1

S

D D

w2Nw1N

ww2u

w1u

QL

Nonunionized Market

N2

S 2

S 1

N1

26/14-4


197/259

26/14-5


198/259

W a g e

Quantity of Labor

S 1

D2

D1

S 2

L1

w1

w1 $4

26/14-6


199/259

W a g e

Quantity of Labor

S 1

S 2

D2D1

L1DL2D L1S L2S

m

W a g e

Quantity of Labor

D2

D1

L2 L1

w1

w2

w1 $4

Supply

26/14-7


200/259

26/14-8


201/259

27/15-1


202/259

27/15-2


203/259


204/259

27/15-4


205/259

27/15-5


206/259

27/15-6


207/259

28/16-1


208/259

28/16-2


209/259


210/259

28/16-4


211/259


212/259

29/17-2


213/259

29/17-3


214/259

29/17-4


215/259

30/18-1


216/259

R e a

l I n t e r e s t

R a t e

Quantity of Loanable Funds

Supply

r1

Demand

Net Foreign Investment

R e a

l I n t e r e s t

R a t e

Quantity of Dollars

D2

E2

E1

D1

R e a

l E x c

h a n g e

R a t e


Supply

30/18-2


217/259


218/259

R e a

l E x c h a n g e

R a t e

Quantity of Dollars

Supply

E2

E1

D2D1

R e a

l I n t e r e s

t R a t e


S 1

S 2

r1

r2

Demand


R e a

l I n t e r e s

t R a t e

Quantity of Dollars

Demand

E1

E2 R e a l

E x c

h a n g e

R a t e


S 2S 1

30/18-4


219/259

R e a

l I n t e r e s

t R a t e


S 1

S 2

r1

r2

Demand


R e a

l I n t e r e s

t R a t e

Quantity of Dollars

Demand

E1

E2

R e a

l E x c

h a n g e

R a t e


S 2S 1

30/18-5


220/259

R e a

l I n t e r e s

t R a t e


Supply

r1

Demand


R e a

l I n t e r e s

t R a t e

Quantity of Dollars

D1

E1

E2

D2

R e a

l E x c

h a n g e

R a t e


Supply

30/18-6


221/259

R e a

l I n t e r e s t

R a t e


Supply

r1

Demand


R e a

l I n t e r e s t

R a t e

Quantity of Dollars

D2

E2

E1

D1

R e a

l E x c

h a n g e

R a t e


Supply

30/18-7


222/259

R e a

l I n t e r e s

t R a t e


Supply

r1

Demand


R e a

l I n t e r e s

t R a t e

Quantity of Dollars

D2

E2

E1

D1

R e a

l E x c

h a n g e

R a t e


Supply

30/18-8


223/259

R e a

l I n t e r e s

t R a t e


Supply

r2

r1

Demand

NFI1

NFI2

R e a

l I n t e r e s

t R a t e

Quantity of Dollars

D2

E1

E2

D1

R e a

l E x c

h a n g e R a t e


S 2S 1

30/18-9


224/259

R e a

l I n t e r e s

t R a t e


Supply

r1

r2

Demand

NFI2

NFI1

R e a

l I n t e r e s

t R a t e

Quantity of Canadian Dollars

D1

E2

E1

D2

R e a l

E x c

h a n g e

R a t e


S 1S 2

30/18-10


225/259

R e a

l I n t e r e s t

R a t e


Supply

r2

r1

Demand

NFI1

NFI2

R e a

l I n t e r e s t

R a t e

Quantity of Dollars

D2

E1

E2

D1

R e a

l E x c

h a n g e

R a t e


S 2S 1

30/18-11


226/259

P r i c e

L e v e

l

Quantity of Output

Long-runaggregatesupply

Short-runaggregatesupply

Aggregatedemand

31/19-1


227/259

P r i c e

L e v e

l

Quantity of Output

Long-run

aggregatesupplySRAS 2

AD1

A

C

B

AD2

SRAS 1

31/19-2


228/259

P r i c e

L e v e

l

Quantity of Output


SRAS 1

Aggregatedemand

A

B

SRAS 2

31/19-3


229/259

P r i c e

L e v e

l

Quantity of Output

Long-runaggregatesupply Short-run

aggregatesupply

Aggregatedemand

31/19-4


230/259

31/19-5


231/259

P r i c e

L e v e

l

Quantity of Output


SRAS 2

Aggregatedemand

A

B

SRAS 1

31/19-6


232/259

P r i c e

L e v e

l

Quantity of Output


Aggregatedemand

B

A

SRAS 2

SRAS 1

P r i c e

L e v e

l

Quantity of Output



AD1

B

A

AD2

31/19-7


233/259

P r i c e

L e v e

l

Quantity of Output


Aggregatedemand

B

A

SRAS 2

SRAS 1

P r i c e

L e v e

l

Quantity of Output



AD2

B

A

AD1

31/19-8


234/259

P r i c e

L e v e

l

Quantity of Output


SRAS 1C

A

BP2

P 3

P 1

Y1 Y2

AD1

AD2

SRAS 2

31/19-9


235/259

31/19-10


236/259

32/20-1


237/259

I n t e r e s t

R a t e

Quantity of Money

Money supply

MD1

MD2

r1

r2

I n t e r e s t

R a t e

Quantity of Money

MS1 MS2

Money demand

r1

r2

32/20-2


238/259

I n t e r e s t

R a t e

Quantity of Money

Money supply

MD1

MD2r1

r2

I n t e r e s t R a t e

Quantity of Money

Money supply

MD1

MD2r1

r2

32/20-3


239/259

I n t e r e s t R a t e

Quantity of Money

MD1

MS1MS2

MD2

r1

r2

I n t e r e s t

R a t e

Quantity of Money

Money supply

MD1MD2

r1

r2

32/20-4


240/259

I n t e r e s t

R a t e

Quantity of Money

MD1

MS1 MS2

MD2

r1

r2

32/20-5


241/259

32/20-6


242/259

32/20-7


243/259


244/259

I n f l a t i o n

R a t e

Unemployment Rate

Phillips curve

33/21-1


245/259

I n f l a t i o n

R a t e

Unemployment Rate

SRPC 2

Long-runPhillips curve

SRPC 1

I n f l a t i o n

R a t e

Unemployment Rate

SRPC 1

A

BC


SRPC 2

33/21-2


246/259


247/259


248/259

I n f l a t i o n

R a t e

Unemployment Rate

SRPC 1


SRPC 2

33/21-5


249/259


250/259

I n f l a t i o n

R a t e

Unemployment Rate

SRPC 2e

a

d


SRPC 1

c

33/21-7


251/259

I n f l a t i o n

R a t e

Unemployment Rate

SRPC 3

Long-run

Phillips curve

SRPC 2

SRPC 1

5.5% 6%

33/21-8


252/259

33/21-9


253/259

34/22-1


254/259

34/22-2


255/259

P r i c e L e v e

l

Quantity of Output

Long-runaggregate supply

AD1

SRAS 1SRAS 2

AD2

Y1Y2

A

B

C

I n t e r e s t

R a t e

Quantity of Money

r2

MD1

MD2r1

P r i c e

L e v e

l

Quantity of Output

P 1P 2

Y2

AD2AD1

Y1

Moneysupply


Short-runaggregate supply

34/22-3


256/259

I n t e r e s t

R a t e

Quantity of Money

r2r3

MD1

MS1 MS2

MD2r1

P r i c e

L e v e

l

Quantity of OutputY3Y2

AD2AD3

AD1

Y1


Short-runaggregate supply

34/22-4


257/259

34/22-5


258/259

I n f l a t i o n

R a t e

Unemployment Rate


SRPC 1

SRPC 3

SRPC 2

A

B

C

34/22-6


259/259