Solution Manual for Macroeconomics: Understanding the Global Economy, 3rd Edition

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C H A P T E R 1W h a t i s M a c r o e c o n o m i c s ?2INTRODUCTIONAs might be expected, this first chapter sets the scene for the whole textbook and attempts tomotivate the study of macroeconomics. Although there is probably only enough material herefor about fifteen minutes of lecture, it obviously needs to be well delivered.Teaching TipsALTERNATIVE ROUTES THROUGH THE CHAPTERThis chapter is likely to form only the first part of a lecture and should probably be combinedwith the material in Chapter 2. The chapter can be tailored to your audience. For example, ifthe students are mainly working in business, give examples of how macroeconomics influencesbusiness decisions. Think about touching on the key macroeconomic issues in the news at thetime e.g. tax policy, the business cycle etc.CHAPTER GUIDE1.1What is Macroeconomics About?It is a good idea to contrast a recent short-termmacroeconomic issue (like the latest change in monetary policy) with the longer-term issueof growth and inequality between regions.The Background Material below gives more information on comparative world growthsince 1500.1.2But What about that Definition?Milton Friedman’s favorite description of the wonders ofthepricemechanism(theinvisiblehand)is“IPencil”byLeonardReed(seewww.econlib.org/library/Essays/rdPncl1.html). However, business students may find it alittle patronizing.1.3The Difference between Macro and Microeconomics.Like most distinctions, this one issomewhatblurredaroundtheedges.Itmaybeworthunderliningthatgoodmacroeconomics tend to have strong microfoundations (i.e. based on microeconomicanalysis and built up to macroeconomic behavior).1.4Why Should People Interested in Business Study Macroeconomics?There are many goodexamples of how macro economic analysis can help solve real world problems. The casestudy below gives a lighter example; how macroeconomics can help to predict the next U.S.president.CHAPTER 1: WHAT IS MACROECONOMICS?

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