曼昆經(jīng)濟學原理微觀經(jīng)濟學英文版習題答案(考試章節(jié)篩選)

曼昆經(jīng)濟學原理微觀經(jīng)濟學英文版習題答案(考試章節(jié)篩選)------------------------------------曼昆經(jīng)濟學原理微觀經(jīng)濟學英文版習題答案(考試章節(jié)篩選)------------------------------------曼昆經(jīng)濟學原理微觀經(jīng)濟學英文版習題答案(考試章節(jié)篩選)曼昆經(jīng)濟學原理微觀經(jīng)濟學英文版習題答案(考試章節(jié)篩選)曼昆經(jīng)濟學原理微觀經(jīng)濟學英文版課后習題答案（考試章節(jié)篩選）UNIT1SOLUTIONSTOTEXTPROBLEMS:QuickQuizzes1. Thefourprinciplesofeconomicdecisionmakingare:(1)peoplefacetradeoffs;(2)thecostofsomethingiswhatyougiveuptogetit;(3)rationalpeoplethinkatthemargin;and(4)peoplerespondtoincentives.Peoplefacetradeoffsbecausetogetonethingthattheylike,theyusuallyhavetogiveupanotherthingthattheylike.Thecostofsomethingiswhatyougiveuptogetit,notjustintermsofmonetarycostsbutallopportunitycosts.Rationalpeoplethinkatthemarginbytakinganactionifandonlyifthemarginalbenefitsexceedthemarginalcosts.Peoplerespondtoincentivesbecauseastheycomparebenefitstocosts,achangeinincentivesmaycausetheirbehaviortochange.2. Thethreeprinciplesconcerningeconomicinteractionsare:(1)tradecanmakeeveryonebetteroff;(2)marketsareusuallyagoodwaytoorganizeeconomicactivity;and(3)governmentscansometimesimprovemarketoutcomes.Tradecanmakeeveryonebetteroffbecauseitallowscountriestospecializeinwhattheydobestandtoenjoyawidervarietyofgoodsandservices.Marketsareusuallyagoodwaytoorganizeeconomicactivitybecausetheinvisiblehandleadsmarketstodesirableoutcomes.Governmentscansometimesimprovemarketoutcomesbecausesometimesmarketsfailtoallocateresourcesefficientlybecauseofanexternalityormarketpower.3. Thethreeprinciplesthatdescribehowtheeconomyasawholeworksare:(1)acountry’sstandardoflivingdependsonitsabilitytoproducegoodsandservices;(2)pricesrisewhenthegovernmentprintstoomuchmoney;and(3)societyfacesashort-runtradeoffbetweeninflationandunemployment.Acountry’sstandardoflivingdependsonitsabilitytoproducegoodsandservices,whichinturndependsonitsproductivity,whichisafunctionoftheeducationofworkersandtheaccessworkershavetothenecessarytoolsandtechnology.Pricesrisewhenthegovernmentprintstoomuchmoneybecausemoremoneyincirculationreducesthevalueofmoney,causinginflation.Societyfacesashort-runtradeoffbetweeninflationandunemploymentthatisonlytemporaryandpolicymakershavesomeabilitytoexploitthisrelationshipusingvariouspolicyinstruments.QuestionsforReview1. Examplesoftradeoffsincludetimetradeoffs(suchasstudyingonesubjectoveranother,orstudyingatallcomparedtoengaginginsocialactivities)andspendingtradeoffs(suchaswhethertouseyourlasttendollarsonpizzaoronastudyguideforthattougheconomicscourse).2. Theopportunitycostofseeingamovieincludesthemonetarycostofadmissionplusthetimecostofgoingtothetheaterandattendingtheshow.Thetimecostdependsonwhatelseyoumightdowiththattime;ifit'sstayinghomeandwatchingTV,thetimecostmaybesmall,butifit'sworkinganextrathreehoursatyourjob,thetimecostisthemoneyyoucouldhaveearned.3. Themarginalbenefitofaglassofwaterdependsonyourcircumstances.Ifyou'vejustrunamarathon,oryou'vebeenwalkinginthedesertsunforthreehours,themarginalbenefitisveryhigh.Butifyou'vebeendrinkingalotofliquidsrecently,themarginalbenefitisquitelow.Thepointisthateventhenecessitiesoflife,likewater,don'talwayshavelargemarginalbenefits.4. Policymakersneedtothinkaboutincentivessotheycanunderstandhowpeoplewillrespondtothepoliciestheyputinplace.Thetext'sexampleofseatbeltsshowsthatpolicyactionscanhavequiteunintendedconsequences.Ifincentivesmatteralot,theymayleadtoaverydifferenttypeofpolicy;forexample,someeconomistshavesuggestedputtingknivesinsteeringcolumnssothatpeoplewilldrivemuchmorecarefully!Whilethissuggestionissilly,ithighlightstheimportanceofincentives.5. Tradeamongcountriesisn'tagamewithsomelosersandsomewinnersbecausetradecanmakeeveryonebetteroff.Byallowingspecialization,tradebetweenpeopleandtradebetweencountriescanimproveeveryone'swelfare.6. The"invisiblehand"ofthemarketplacerepresentstheideathateventhoughindividualsandfirmsareallactingintheirownself-interest,pricesandthemarketplaceguidethemtodowhatisgoodforsocietyasawhole.7. Thetwomaincausesofmarketfailureareexternalitiesandmarketpower.Anexternalityistheimpactofoneperson’sactionsonthewell-beingofabystander,suchasfrompollutionorthecreationofknowledge.Marketpowerreferstotheabilityofasingleperson(orsmallgroupofpeople)toundulyinfluencemarketprices,suchasinatownwithonlyonewelloronlyonecabletelevisioncompany.Inaddition,amarketeconomyalsoleadstoanunequaldistributionofincome.8. Productivityisimportantbecauseacountry'sstandardoflivingdependsonitsabilitytoproducegoodsandservices.Thegreateracountry'sproductivity(theamountofgoodsandservicesproducedfromeachhourofaworker'stime),thegreaterwillbeitsstandardofliving.9. Inflationisanincreaseintheoveralllevelofpricesintheeconomy.Inflationiscausedbyincreasesinthequantityofanation'smoney.10. Inflationandunemploymentarenegativelyrelatedintheshortrun.Reducinginflationentailscoststosocietyintheformofhigherunemploymentintheshortrun.ProblemsandApplications1. a. Afamilydecidingwhethertobuyanewcarfacesatradeoffbetweenthecostofthecarandotherthingstheymightwanttobuy.Forexample,buyingthecarmightmeantheymustgiveupgoingonvacationforthenexttwoyears.Sotherealcostofthecaristhefamily'sopportunitycostintermsofwhattheymustgiveup.b. ForamemberofCongressdecidingwhethertoincreasespendingonnationalparks,thetradeoffisbetweenparksandotherspendingitemsortaxcuts.Ifmoremoneygoesintotheparksystem,thatmaymeanlessspendingonnationaldefenseoronthepoliceforce.Or,insteadofspendingmoremoneyontheparksystem,taxescouldbereduced.c. Whenacompanypresidentdecideswhethertoopenanewfactory,thedecisionisbasedonwhetherthenewfactorywillincreasethefirm'sprofitscomparedtootheralternatives.Forexample,thecompanycouldupgradeexistingequipmentorexpandexistingfactories.Thebottomlineis:Whichmethodofexpandingproductionwillincreaseprofitthemost?d. Indecidinghowmuchtoprepareforclass,aprofessorfacesatradeoffbetweenthevalueofimprovingthequalityofthelecturecomparedtootherthingsshecoulddowithhertime,suchasworkingonadditionalresearch.2. Whenthebenefitsofsomethingarepsychological,suchasgoingonavacation,itisn'teasytocomparebenefitstocoststodetermineifit'sworthdoing.Buttherearetwowaystothinkaboutthebenefits.Oneistocomparethevacationwithwhatyouwoulddoinitsplace.Ifyoudidn'tgoonvacation,wouldyoubuysomethinglikeanewsetofgolfclubs?Thenyoucandecideifyou'dratherhavethenewclubsorthevacation.Asecondwayistothinkabouthowmuchworkyouhadtodotoearnthemoneytopayforthevacation;thenyoucandecideifthepsychologicalbenefitsofthevacationwereworththepsychologicalcostofworking.3. Ifyouarethinkingofgoingskiinginsteadofworkingatyourpart-timejob,thecostofskiingincludesitsmonetaryandtimecosts,whichincludestheopportunitycostofthewagesyouaregivingupbynotworking.Ifthechoiceisbetweenskiingandgoingtothelibrarytostudy,thenthecostofskiingisitsmonetaryandtimecostsincludingthecosttoyouofgettingalowergradeinyourcourse.4. Ifyouspend$100nowinsteadofsavingitforayearandearning5percentinterest,youaregivinguptheopportunitytospend$105ayearfromnow.Theideathatmoneyhasatimevalueisthebasisforthefieldoffinance,thesubfieldofeconomicsthathastodowithpricesoffinancialinstrumentslikestocksandbonds.5. Thefactthatyou'vealreadysunk$5millionisn'trelevanttoyourdecisionanymore,sincethatmoneyisgone.Whatmattersnowisthechancetoearnprofitsatthemargin.Ifyouspendanother$1millionandcangeneratesalesof$3million,you'llearn$2millioninmarginalprofit,soyoushoulddoso.Youarerighttothinkthattheprojecthaslostatotalof$3million($6millionincostsandonly$3millioninrevenue)andyoushouldn'thavestartedit.That'strue,butifyoudon'tspendtheadditional$1million,youwon'thaveanysalesandyourlosseswillbe$5million.Sowhatmattersisnotthetotalprofit,buttheprofityoucanearnatthemargin.Infact,you'dpayupto$3milliontocompletedevelopment;anymorethanthat,andyouwon'tbeincreasingprofitatthemargin.6. Harrysuggestslookingatwhetherproductivitywouldriseorfall.Productivityiscertainlyimportant,sincethemoreproductiveworkersare,thelowerthecostpergallonofpotion.Ronwantstolookataveragecost.ButbothHarryandRonaremissingtheothersideoftheequationrevenue.Afirmwantstomaximizeitsprofits,soitneedstoexaminebothcostsandrevenues.Thus,Hermioneisrightit’sbesttoexaminewhethertheextrarevenuewouldexceedtheextracosts.Hermioneistheonlyonewhoisthinkingatthemargin.7. a. TheprovisionofSocialSecuritybenefitslowersanindividual’sincentivetosaveforretirement.Thebenefitsprovidesomelevelofincometotheindividualwhenheorsheretires.Thismeansthattheindividualisnotentirelydependentonsavingstosupportconsumptionthroughtheyearsinretirement.b. Sinceapersongetsfewerafter-taxSocialSecuritybenefitsthegreaterishisorherearnings,thereisanincentivenottowork(ornotworkasmuch)afterage65.Themoreyouwork,theloweryourafter-taxSocialSecuritybenefitswillbe.ThusthetaxationofSocialSecuritybenefitsdiscouragesworkeffortafterage65.8. a. Whenwelfarerecipientswhoareabletoworkhavetheirbenefitscutoffaftertwoyears,theyhavegreaterincentivetofindjobsthaniftheirbenefitsweretolastforever.b. Thelossofbenefitsmeansthatsomeonewhocan'tfindajobwillgetnoincomeatall,sothedistributionofincomewillbecomelessequal.Buttheeconomywillbemoreefficient,sincewelfarerecipientshaveagreaterincentivetofindjobs.Thusthechangeinthelawisonethatincreasesefficiencybutreducesequity.9. Byspecializingineachtask,youandyourroommatecanfinishthechoresmorequickly.Ifyoudividedeachtaskequally,itwouldtakeyoumoretimetocookthanitwouldtakeyourroommate,anditwouldtakehimmoretimetocleanthanitwouldtakeyou.Byspecializing,youreducethetotaltimespentonchores.Similarly,countriescanspecializeandtrade,makingbothbetteroff.Forexample,supposeittakesSpanishworkerslesstimetomakeclothesthanFrenchworkers,andFrenchworkerscanmakewinemoreefficientlythanSpanishworkers.ThenSpainandFrancecanbothbenefitifSpanishworkersproducealltheclothesandFrenchworkersproduceallthewine,andtheyexchangesomewineforsomeclothes.10. a. Beingacentralplanneristough!ToproducetherightnumberofCDsbytherightartistsanddeliverthemtotherightpeoplerequiresanenormousamountofinformation.YouneedtoknowaboutproductiontechniquesandcostsintheCDindustry.Youneedtoknoweachperson'smusicaltastesandwhichartiststheywanttohear.Ifyoumakethewrongdecisions,you'llbeproducingtoomanyCDsbyartiststhatpeopledon'twanttohear,andnotenoughbyothers.b. YourdecisionsabouthowmanyCDstoproducecarryovertootherdecisions.YouhavetomaketherightnumberofCDplayersforpeopletouse.IfyoumaketoomanyCDsandnotenoughcassettetapes,peoplewithcassetteplayerswillbestuckwithCDstheycan'tplay.Theprobabilityofmakingmistakesisveryhigh.Youwillalsobefacedwithtoughchoicesaboutthemusicindustrycomparedtootherpartsoftheeconomy.Ifyouproducemoresportsequipment,you'llhavefewerresourcesformakingCDs.SoalldecisionsabouttheeconomyinfluenceyourdecisionsaboutCDproduction.11. a. Efficiency:ThemarketfailurecomesfromthemonopolybythecableTVfirm. b. Equityc. Efficiency:Anexternalityarisesbecausesecondhandsmokeharmsnonsmokers.d. Efficiency:ThemarketfailureoccursbecauseofStandardOil'smonopolypower.e. Equityf. Efficiency:Thereisanexternalitybecauseofaccidentscausedbydrunkdrivers.12. a. Ifeveryonewereguaranteedthebesthealthcarepossible,muchmoreofournation'soutputwouldbedevotedtomedicalcarethanisnowthecase.Wouldthatbeefficient?Ifyouthinkthatcurrentlydoctorsformamonopolyandrestricthealthcaretokeeptheirincomeshigh,youmightthinkefficiencywouldincreasebyprovidingmorehealthcare.Butmorelikely,ifthegovernmentmandatedincreasedspendingonhealthcare,theeconomywouldbelessefficientbecauseitwouldgivepeoplemorehealthcarethantheywouldchoosetopayfor.Fromthepointofviewofequity,ifpoorpeoplearelesslikelytohaveadequatehealthcare,providingmorehealthcarewouldrepresentanimprovement.Eachpersonwouldhaveamoreevensliceoftheeconomicpie,thoughthepiewouldconsistofmorehealthcareandlessofothergoods.b. Whenworkersarelaidoff,equityconsiderationsarguefortheunemploymentbenefitssystemtoprovidethemwithsomeincomeuntiltheycanfindnewjobs.Afterall,nooneplanstobelaidoff,sounemploymentbenefitsareaformofinsurance.Butthere’sanefficiencyproblemwhyworkifyoucangetincomefordoingnothing?Theeconomyisn’toperatingefficientlyifpeopleremainunemployedforalongtime,andunemploymentbenefitsencourageunemployment.Thus,there’satradeoffbetweenequityandefficiency.Themoregenerousareunemploymentbenefits,thelessincomeislostbyanunemployedperson,butthemorethatpersonisencouragedtoremainunemployed.Sogreaterequityreducesefficiency.13. SinceaverageincomeintheUnitedStateshasroughlydoubledevery35years,wearelikelytohaveabetterstandardoflivingthanourparents,andamuchbetterstandardoflivingthanourgrandparents.Thisismainlytheresultofincreasedproductivity,sothatanhourofworkproducesmoregoodsandservicesthanitusedto.Thusincomeshavecontinuouslyrisenovertime,ashasthestandardofliving.14. IfAmericanssavemoreanditleadstomorespendingonfactories,therewillbeanincreaseinproductionandproductivity,sincethesamenumberofworkerswillhavemoreequipmenttoworkwith.Thebenefitsfromhigherproductivitywillgotoboththeworkers,whowillgetpaidmoresincethey'reproducingmore,andthefactoryowners,whowillgetareturnontheirinvestments.Thereisnosuchthingasafreelunch,however,becausewhenpeoplesavemore,theyaregivingupspending.Theygethigherincomesatthecostofbuyingfewergoods.15. a. Ifpeoplehavemoremoney,theyareprobablygoingtospendmoreongoodsandservices.b. Ifpricesaresticky,andpeoplespendmoreongoodsandservices,thenoutputmayincrease,asproducersincreaseoutputtomeetthehigherdemandratherthanraisingprices.c. Ifpricescanadjust,thenthehigherspendingofconsumerswillbematchedwithincreasedpricesandoutputwon'trise.16. Tomakeanintelligentdecisionaboutwhethertoreduceinflation,apolicymakerwouldneedtoknowwhatcausesinflationandunemployment,aswellaswhatdeterminesthetradeoffbetweenthem.Anyattempttoreduceinflationwilllikelyleadtohigherunemploymentintheshortrun.Apolicymakerthusfacesatradeoffbetweenthebenefitsoflowerinflationcomparedtothecostofhigherunemployment.UNIT2SOLUTIONSTOTEXTPROBLEMS:QuickQuizzes1. Economicsislikeasciencebecauseeconomistsdevisetheories,collectdata,andanalyzethedatainanattempttoverifyorrefutetheirtheories.Inotherwords,economicsisbasedonthescientificmethod. Figure1showstheproductionpossibilitiesfrontierforasocietythatproducesfoodandclothing.PointAisanefficientpoint(onthefrontier),pointBisaninefficientpoint(insidethefrontier),andpointCisaninfeasiblepoint(outsidethefrontier).Figure1 TheeffectsofadroughtareshowninFigure2.Thedroughtreducestheamountoffoodthatcanbeproduced,shiftingtheproductionpossibilitiesfrontierinward.Figure2 Microeconomicsisthestudyofhowhouseholdsandfirmsmakedecisionsandhowtheyinteractinmarkets.Macroeconomicsisthestudyofeconomy-widephenomena,includinginflation,unemployment,andeconomicgrowth.2. Anexampleofapositivestatementis“highertaxesdiscourageworkeffort”(manyotheranswersarepossible).That’sapositivestatementbecauseitdescribestheeffectsofhighertaxes,describingtheworldasitis.Anexampleofanormativestatementis“thegovernmentshouldreducetaxrates.”Thatisanormativestatementbecauseit’saclaimabouthowtheworldshouldbe. PartsofthegovernmentthatregularlyrelyonadvicefromeconomistsaretheTreasuryDepartmentindesigningtaxpolicy,theDepartmentofLaborinanalyzingdataontheemploymentsituation,theJusticeDepartmentinenforcingthenation’santitrustlaws,theCongressionalBudgetOfficeinevaluatingpolicyproposals,andtheFederalReserveinanalyzingeconomicdevelopments(manyotheranswersarepossible).3. Economicadviserstothepresidentmightdisagreeaboutaquestionofpolicybecauseofdifferingscientificjudgmentsordifferencesinvalues.QuestionsforReview1. Economicsislikeasciencebecauseeconomistsusethescientificmethod.Theydevisetheories,collectdata,andthenanalyzethesedatainanattempttoverifyorrefutetheirtheoriesabouthowtheworldworks.Economistsusetheoryandobservationlikeotherscientists,buttheyarelimitedintheirabilitytoruncontrolledexperiments.Instead,theymustrelyonnaturalexperiments.2. Economistsmakeassumptionstosimplifyproblemswithoutsubstantiallyaffectingtheanswer.Assumptionscanmaketheworldeasiertounderstand.3. Aneconomicmodelcannotdescriberealityexactlybecauseitwouldbetoocomplicatedtounderstand.Amodelisasimplificationthatallowstheeconomisttoseewhatistrulyimportant.4. Figure3showsaproductionpossibilitiesfrontierbetweenmilkandcookies(PPF1).Ifadiseasekillshalfoftheeconomy'scowpopulation,lessmilkproductionispossible,sothePPFshiftsinward(PPF2).Notethatiftheeconomyproducesallcookies,soitdoesn'tneedanycows,thenproductionisunaffected.Butiftheeconomyproducesanymilkatall,thentherewillbelessproductionpossibleafterthediseasehits.Figure35. Theideaofefficiencyisthatanoutcomeisefficientiftheeconomyisgettingallitcanfromthescarceresourcesithasavailable.Intermsoftheproductionpossibilitiesfrontier,anefficientpointisapointonthefrontier,suchaspointAinFigure4.Apointinsidethefrontier,suchaspointB,isinefficientsincemoreofonegoodcouldbeproducedwithoutreducingtheproductionofanothergood.Figure46. Thetwosubfieldsineconomicsaremicroeconomicsandmacroeconomics.Microeconomicsisthestudyofhowhouseholdsandfirmsmakedecisionsandhowtheyinteractinspecificmarkets.Macroeconomicsisthestudyofeconomy-widephenomena.7. Positivestatementsaredescriptiveandmakeaclaimabouthowtheworldis,whilenormativestatementsareprescriptiveandmakeaclaimabouthowtheworldoughttobe.Hereisanexample.Positive:Arapidgrowthrateofmoneyisthecauseofinflation.Normative:Thegovernmentshouldkeepthegrowthrateofmoneylow.8. TheCouncilofEconomicAdvisersisagroupofeconomistswhoconsultwiththepresidentoftheUnitedStatesabouteconomicmatters.TheCouncilconsistsofthreemembersandastaffofseveraldozeneconomists.ItwritestheannualEconomicReportofthePresident.9. Economistssometimesofferconflictingadvicetopolicymakersfortworeasons: (1)economistsmaydisagreeaboutthevalidityofalternativepositivetheoriesabouthowtheworldworks;and(2)economistsmayhavedifferentvaluesand,therefore,differentnormativeviewsaboutwhatpublicpolicyshouldtrytoaccomplish.ProblemsandApplications1. Manyanswersarepossible.2. a. Steelisafairlyuniformcommodity,thoughsomefirmsproducesteelofinferiorquality.b. Novelsareeachunique,sotheyarequitedistinguishable.c. Wheatproducedbyonefarmeriscompletelyindistinguishablefromwheatproducedbyanother.d. Fastfoodismoredistinguishablethansteelorwheat,butcertainlynotasmuchasnovels.3. SeeFigure5;thefourtransactionsareshown.Figure54. a. Figure6showsaproductionpossibilitiesfrontierbetweengunsandbutter.Itisbowedoutbecausewhenmostoftheeconomy’sresourcesarebeingusedtoproducebutter,thefrontierissteepandwhenmostoftheeconomy’sresourcesarebeingusedtoproduceguns,thefrontierisveryflat.Whentheeconomyisproducingalotofguns,workersandmachinesbestsuitedtomakingbutterarebeingusedtomakeguns,soeachunitofgunsgivenupyieldsalargeincreaseintheproductionofbutter.Thus,theproductionpossibilitiesfrontierisflat.Whentheeconomyisproducingalotofbutter,workersandmachinesbestsuitedtomakinggunsarebeingusedtomakebutter,soeachunitofgunsgivenupyieldsasmallincreaseintheproductionofbutter.Thus,theproductionpossibilitiesfrontierissteep. b. PointAisimpossiblefortheeconomytoachieve;itisoutsidetheproductionpossibilitiesfrontier.PointBisfeasiblebutinefficientbecauseit’sinsidetheproductionpossibilitiesfrontier.Figure6 c. TheHawksmightchooseapointlikeH,withmanygunsandnotmuchbutter.TheDovesmightchooseapointlikeD,withalotofbutterandfewguns. d. IfbothHawksandDovesreducedtheirdesiredquantityofgunsbythesameamount,theHawkswouldgetabiggerpeacedividendbecausetheproductionpossibilitiesfrontierismuchsteeperatpointHthanatpointD.Asaresult,thereductionofagivennumberofguns,startingatpointH,leadstoamuchlargerincreaseinthequantityofbutterproducedthanwhenstartingatpointD.5. SeeFigure7.Theshapeandpositionofthefrontierdependonhowcostlyitistomaintainacleanenvironmenttheproductivityoftheenvironmentalindustry.Gainsinenvironmentalproductivity,suchasthedevelopmentofano-emissionautoengine,leadtoshiftsoftheproduction-possibilitiesfrontier,liketheshiftfromPPF1toPPF2showninthefigure.Figure76. a. Afamily'sdecisionabouthowmuchincometosaveismicroeconomics.b. Theeffectofgovernmentregulationsonautoemissionsismicroeconomics.c. Theimpactofhighersavingoneconomicgrowthismacroeconomics.d. Afirm'sdecisionabouthowmanyworkerstohireismicroeconomics.e. Therelationshipbetweentheinflationrateandchangesinthequantityofmoneyismacroeconomics.7. a. Thestatementthatsocietyfacesashort-runtradeoffbetweeninflationandunemploymentisapositivestatement.Itdealswithhowtheeconomyis,nothowitshouldbe.Sinceeconomistshaveexamineddataandfoundthatthereisashort-runnegativerelationshipbetweeninflationandunemployment,thestatementisafact,thusitisapositivestatement.b. Thestatementthatareductionintherateofgrowthofmoneywillreducetherateofinflationisapositivestatement.Economistshavefoundthatmoneygrowthandinflationareverycloselyrelated.Thestatementthustellshowtheworldis,andsoitisapositivestatement.c. ThestatementthattheFederalReserveshouldreducetherateofgrowthofmoneyisanormativestatement.Itstatesanopinionaboutsomethingthatshouldbedone,nothowtheworldis.d. Thestatementthatsocietyoughttorequirewelfarerecipientstolookforjobsisanormativestatement.Itdoesn'tstateafactabouthowtheworldis.Instead,itisastatementofhowtheworldshouldbeandisthusanormativestatement.e. Thestatementthatlowertaxratesencouragemoreworkandmoresavingisapositivestatement.Economistshavestudiedtherelationshipbetweentaxratesandwork,aswellastherelationshipbetweentaxratesandsaving.Theyhavefoundanegativerelationshipinbothcases.Sothestatementreflectshowtheworldis,andisthusapositivestatement.8. TwoofthestatementsinTable2areclearlynormative.Theyare:"5.Ifthefederalbudgetistobebalanced,itshouldbedoneoverthebusinesscycleratherthanyearly"and"9.Thegovernmentshouldrestructurethewelfaresystemalongthelinesofa'negativeincometax.'"Botharesuggestionsofchangesthatshouldbemade,ratherthanstatementsoffact,sotheyareclearlynormativestatements.Theotherstatementsinthetablearepositive.Allthestatementsconcernhowtheworldis,nothowtheworldshouldbe.Notethatinallcases,eventhoughtheyarestatementsoffact,fewerthan100percentofeconomistsagreewiththem.Youcouldsaythatpositivestatementsarestatementsoffactabouthowtheworldis,butnoteveryoneagreesaboutwhatthefactsare.9. Asthepresident,you'dbeinterestedinboththepositiveandnormativeviewsofeconomists,butyou'dprobablybemostinterestedintheirpositiveviews.Economistsareonyourstafftoprovidetheirexpertiseabouthowtheeconomyworks.Theyknowmanyfactsabouttheeconomyandtheinteractionofdifferentsectors.Soyouwouldbemostlikelytocallonthemaboutquestionsoffactpositiveanalysis.Sinceyouarethepresident,youaretheonewhohastomakethenormativestatementsastowhatshouldbedone,withaneyetothepoliticalconsequences.Thenormativestatementsmadebyeconomistsrepresenttheirownviews,notnecessarilyyourviewsortheelectorate’sviews.10. Therearemanypossibleanswers.11. Asofthiswriting,thechairmanoftheFederalReserveisAlanGreenspan,thechairoftheCouncilofEconomicAdvisersisR.GlenHubbard,andthesecretaryofthetreasuryisPaulH.O’Neill.12. Astimegoes