Solution Manual For Macroeconomics, 11th Edition

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1CHAPTER1:ECONOMICS AND ECONOMICREASONINGQuestions and Exercises1.Coordination refers to how the three central problems facing any economy aresolved. Those three problems are what and how much to produce, how toproduce, and for whom to produce. Inevitably,individuals desire more than isavailablein light ofhow much they’re willing to work, causing a problem ofscarcity.The concept of scarcity has two elements:our wants and our means of fulfillingthose wants. Those two elements are interrelated since wants are changeable andarepartially determined by society and the means of fulfilling those wants. Inaddition, the degree of scarcity is constantly changing,depending on the availablemeans of production and the development of new wants.Therefore, the author of the textbook focused on coordination instead of scarcityto emphasize the subsidiary nature of scarcity to the overall concept ofcoordination. Economics is not merely about our wants or the means of fulfillingthose wants; it is also about reconciling our wants with reality, where realityconsists of decision-making mechanisms, social customs, and political realities.2.a.Macroeconomicb.Microeconomicc.Macroeconomicd.Microeconomice.Microeconomicf.MicroeconomicMicroeconomics studies how economic forces influence individual choices suchas the pricing policies of firms, households’ decisions on what tobuy, and howmarkets allocate resources among alternative ends. Macroeconomics studiesaggregate relationships such as how household consumption is related to incomeand how government policies can affect growth.3.Answers will differ.Two microeconomic problems are the pricing policies offirms (price-fixing in particular) andthe waywages are determined in labormarkets. (Why do athletes and celebrities make so much money,anyway?) Twomacroeconomic problems are unemployment and inflation (business cycles andgrowth are also macroeconomic problems).

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