Professional Documents
Culture Documents
section 3
Macroeconomic
Measurement
1. How do economists in the United States determine when a recession begins and
when it ends? How do other countries determine whether or not a recession is
occurring?
S1o. lution
In th e U nite d States, economists assign the task of identifying recessions to
an independent panel of experts at the National Bureau of Economic Research
who determine when a recession begins and when it ends. It makes this deter-
mination by looking at a variety of economic indicators, with the main focus
on employment and production. In many other countries, economists adopt
the rule that a recession is a period of at least two consecutive quarters during
which the overall output of the economy shrinks.
S2o. lution
a. Answers will vary. In the December 2012 Employment Situation, the Bureau of
Labor Statistics states that the December 2012 unemployment rate was 7.8%.
b. During the recession of the early 1990s, the unemployment rate rose from
5.5% to 6.8%. During the recession of 2001, the unemployment rate rose from
4.3% to 5.5%. During the recession of 2007–2009, the unemployment rate rose
from 5% to 9.5%. The unemployment rate continued to rise for a time after the
official end of the recession, reaching a high of 10% in November of 2009. The
current numbers are not indicative of a recessionary trend. The current rate
of 7.8% is lower than the highest unemployment rates during the 2007–2009
recession and the unemployment rate has been falling.
S-39
3. The accompanying figure shows the annual rate of growth in employment for the
United Kingdom and Japan from 1991 to 2010. (The annual growth rate is the
percent change in each year’s employment over the previous year.) Comment on
the business cycles of these two economies. Are their business cycles similar or
dissimilar?
Annual
percent
change in
employment
Year
Sources: The Office for National Statistics; The Statistics Bureau of Japan.
S3o. lution
Ja pa n an d the United Kingdom do not appear to have similar business cycles
during the 1990s. While employment was falling in the United Kingdom in the
early 1990s, growth in employment was positive in Japan. The reverse occurred
in the late 1990s. However, their business cycles were very similar in the 2000s,
with a nearly identical dip in the 2007–2009 recession.
4. a. What three measures of the economy tend to move together during the busi-
ness cycle? Which way do they move during an upturn? During a downturn?
b. Who in the economy is hurt during a recession? How?
c. How did Milton Friedman alter the consensus that had developed in the after-
math of the Great Depression on how the economy should be managed? What
is the current goal of policy makers in managing the economy?
S4o. lution
a. The three measures that tend to move together are (1) industrial output, called
real gross domestic product, (2) employment, and (3) inflation. All three tend to
rise during an upturn and fall during a downturn.
b. Workers and their families experience a great deal of pain and hardship during
recessions because many people lose their jobs and many who retain their jobs
see their wages suffer. As a result, living standards decline and the number
of people living in poverty rises. Corporations also experience a fall in profits
during recessions.
c. According to the Keynesian view that developed after the Great Depression, it
was the government’s responsibility to manage the economy to reduce the
severity of downturns. According to Milton Friedman, booms in the economy
should also be managed in order to reduce their magnitude. So the current goal
of economic policy makers is to “smooth out” the business cycle—to reduce the
magnitude of both booms and busts.
S5o. lution
Long-run economic growth is the sustained upward trend in the economy’s out-
put over long periods of time. Long-run growth per capita is the key to rising
wages and sustained increases in the standard of living. A business-cycle expan-
sion results in a short-run (many months or a few years) increase in real GDP,
but long-run growth results in a long-run (many decades) increase in real GDP
per capita. We care about the relative size of the long-run growth rate of real
GDP and the population growth rate because living standards will fall unless
the long-run growth rate of real GDP is at least as high as the growth rate of the
population.
6. College tuition has risen significantly in the last few decades. From the 1979–
1980 academic year to the 2009–2010 academic year, total tuition, room, and
board paid by full-time undergraduate students went from $2,327 to $15,041 at
public institutions and from $5,013 to $35,061 at private institutions. This is an
average annual tuition increase of 6.4% at public institutions and 6.7% at pri-
vate institutions. Over the same time, average personal income after taxes rose
from $7,956 to $35,088 per year, which is an average annual rate of growth of
personal income of 5.1%. Have these tuition increases made it more difficult for
the average student to afford college tuition?
S6o. lution
To determine whether it is more or less difficult for a typical person to afford
college, we would need to know how much tuition had increased relative to aver-
age income in the United States. Average personal income after taxes rose from
$7,956 to $35,088 from 1979 to 2009, or an average annual increase of 5.1%. So
it was more difficult for the average person to afford to attend either a public
institution, where tuition increased 6.4% annually, or a private institution, where
tuition increased 6.7% annually.
7. Each year, The Economist publishes data on the price of the Big Mac in different
countries and exchange rates. The accompanying table shows some data used
for the index from 2007 and 2011. Use this information to answer the following
questions.
a. Where was it cheapest to buy a Big Mac in U.S. dollars in 2007?
b. Where was it cheapest to buy a Big Mac in U.S. dollars in 2011?
c. Using the increase in the local currency price of the Big Mac in each country
to measure the percent change in the overall price level from 2007 to 2011,
which nation experienced the most inflation? Did any of the nations experi-
ence deflation?
2007 2011
Price of Price of Price of Price of
Big Mac Big Mac Big Mac Big Mac
(in local (in U.S. (in local (in U.S.
Country currency) dollars) currency) dollars)
Argentina peso8.25 $2.65 peso20.0 $4.84
Canada C$3.63 $3.08 C$4.73 $5.00
Euro area €2.94 $3.82 €3.44 $4.93
Japan ¥280 $2.31 ¥320 $4.08
United States $3.22 $3.22 $4.07 $4.07
S7o. lution
a. In U.S. d ollars, a Big Mac was cheapest in Japan in 2007.
b. In U.S. dollars, a Big Mac was cheapest in the United States in 2011.
c. First we must calculate the percent change of the local currency price of the
Big Mac during the period from 2007 to 2011.
Percent price change in Argentina = (peso20.0 − peso8.25)/peso8.25 = 142%
Percent price change in Canada = (C$4.73 − C$3.63)/C$3.63 = 30%
Percent price change in Euro area = (€3.44 − €2.94)/€2.94 = 17%
Percent price change in Japan = (¥320 − ¥280)/¥280 = 14%
Percent price change in the United States = (US$4.07 − US$3.22)/US$3.22 = 26%
Argentina experienced the highest inflation over the period, a price change
of 142%. Every country experienced a positive change in its price level, so no
country experienced deflation.
Not long after Clara left her mother and Miss Marston, she rapped
very softly on Susie’s door, not wishing to wake her if sleeping,
and thus oblivious for the time, to her misery. Thinking it was
Dinah, Susie bade the knocker come in. She was trying to dress
herself, and sat by her glass brushing her long light hair.
Perceiving the happy sister of Dan, resplendent in her youth and
beauty, Susie buried her face with her pretty round arms, and
wept softly. Clara approached her, and patted her white shoulder,
saying, “Poor Susie! I have come to comfort you in your trouble. I
know all about it, and I am so sorry, but I blame my brother far
more than I do you;” at the mention of Dan, Susie sobbed aloud.
“He is so cruel to you after all your loving him.”
“Don’t blame him too much,” sobbed Susie. “He could not help
it. If I were handsome and educated like Miss Marston, he would
love me always; but it is so hard. I wonder why I cannot die. Every
hour is harder and harder to bear.”
Clara’s tender heart was profoundly touched. This was the first
time she had ever been brought face to face with real anguish, and
she found it more terrible than any romance had ever pictured it.
She reproached herself for ever thinking even for one moment of
consequences, in view of so plain a question of duty as trying to
comfort this poor girl in every possible way. Yet she hardly knew
what to say or do in the presence of such agony. She felt the
necessity, however, of saying something, and inspiration and hope
came as soon as she saw her words had any effect. “Don’t give way
so, dear child, I beg you. Remember what papa says, ‘Grief cannot
last forever.’ Time will soften it all away, and if you live a noble life
after this, as I am confident you will, you will have good and true
friends. See how papa is going to stand by you; and I am also, if
you will let me.”
“If I will let you!” repeated Susie, raising her head. “What a good
angel you are! I am not good enough to deserve so much
kindness.”
“Why, do you know, I think you are. I don’t think any of the
family but papa appreciate your sweetness and goodness. Now I
want to tell you that Miss Marston will never marry Dan. She
would never dream of such a thing. There is an idol in her heart
enshrined, which no common man could displace; but that is a
little secret, and I only tell it to reassure you. You are not going to
sink down under this misfortune like a common-spirited girl. Do
you know I admire you so much for refusing to be saved by Dan as
a charity on his part? I’ve been thinking of it all day. You can win
him back if you will; I’m sure of it, and the way to do it is to show
him that he is not important enough for a woman to die for—not
important enough to destroy your happiness for all time either. I
tell you there is nothing so sure to win the love of men as to force
them to admire our strength and independence. The clinging vines
become very disagreeable and burdensome to the oaks after a
time.” Clara said all this smiling cheerfully, and not in a
patronizing “I am holier than thou” way at all. This won Susie’s
heart, and gave her a first impulse of hope.
“Oh, how good you are, Miss Forest. You come like warm
sunlight into a cold dungeon, and I bless you with all my soul. And
how selfish I am to let you stand all this time.” And Susie rose and
begged Clara to be seated, and excuse her while she finished
dressing. Clara was struck with the delicacy of feeling in this poor
girl, and especially by her good manners; and every minute in her
presence increased her faith in her natural worth. “If I had only
been here,” she said to herself, “I would have helped her to study
and be interested in something in the universe besides Dan, and
this would never have happened.” Then a new thought struck her
suddenly, and she said, “What you want now is distraction from
the one subject that worries you. What do you say to commencing
to study seriously, and making me your teacher?”
“Oh, I will do anything in the world, and you shall never regret
—” she said, but broke down before she could finish, after a
moment adding, “never regret helping poor Susie. No one ever
cared for me but Dan, and it was natural that I should love him too
well——”
“Don’t think of him just now any more,” said Clara. “Of course it
was natural. It is too bad that you have had so little chance for
education, but we will make up for lost time.” Clara remembered
the delight she had often experienced when, finding a pot-flower
drooping, she had given it water, and waited to see it slowly lift up
its limp foliage, as if in gratitude to the beneficent hand that came
to its relief. How much grander the pleasure in raising up a
sorrow-burdened human soul, she thought; and life seemed to
have more scope and meaning to her from that hour. She entered
enthusiastically into her plan of teaching Susie, and was delighted
at the quick response it met.
“I have so longed to learn. I have tried to study grammar alone,
but it is very difficult to get on. I fear you will find me so ignorant
that you will give up in despair. I know so little of books; but I can
read, and write too, but I am a dreadful poor speller though. Dan
used to laugh at me so.”
“Did he? Why he was a perfect blockhead himself in school, and
forever at the foot of the spelling class.”
“Why, Miss Forest! I thought he was a beautiful writer and
speller,” said Susie, wondering if this could be so.
“Have you any of his letters?” asked Clara, laughing and
thinking it would be a good stroke of policy to show Susie that her
tyrant was not quite omnipotent in wisdom.
Susie produced from the bottom of a well-worn paper box,
whose corners, both of box and cover, had been carefully sewed
together, a package of letters, and handed it confidently to Clara,
who took out one at random, which was written while Dan was in
the peddling business. It ran thus:
The twins, who were now about thirteen years of age, had great
difficulty in fathoming the secret regarding Susie, for, being the
youngest of the children, they were still babies in the eyes of the
family. They were not long in “nosing out,” as Leila called it, the
real difficulty, and they discussed the subject together in a naive
way that would have been amusing but for the heartlessness they
displayed; still it was the heartlessness of the kitten over the
agonies of a captive mouse, and perhaps implied no real cruelty of
purpose beyond a certain spitefulness that they were not
considered of sufficient importance to be taken into anybody’s
confidence. Even Dinah snubbed them in a supercilious way when
they attempted to obtain information from her, and they revenged
themselves in a thousand nameless ways. Susie meanwhile had
recovered from her illness occasioned by the shock she had
received, and made superhuman efforts to win some little show of
sympathy from Mrs. Forest. Clara had talked Miss Marston over to
her side in a measure, so that she manifested a good deal of
kindness to poor Susie, whose position was very difficult to
endure. The twins, taking their cue from their mother, ignored
Susie’s existence completely, more especially Leila, who, though in
the habit of shirking every duty upon the willing hands of Susie,
informed “Miss Dykes,” as she called her one day for the first time,
that she need not come into her room any more to do the
chamber-work. Susie looked at her with mild, sorrowful eyes, set
down the water she had brought, and left the room without a
word. Linnie, being softer in her feelings, said, “I think you are too
bad, Leila. Did you see how she looked at you?”
“No, nor I don’t care. She’s a nasty thing.”
“I don’t see much difference between her now and a week ago,
when you used to kiss her when you wanted her to do anything for
you.” Leila flared up, and a very sisterly fight ensued. Linnie was
no match for the hardheaded Leila in a contest of words, but in
revenge, later in the day, she told Clara how Susie had been
treated. This happened to be a good policy, though not intended as
such. Clara drew her arm about Linnie, saying, “I am glad, sister
dear, that you show some feeling. I knew you would, and I have
wanted to take you into my confidence, for you are more mature
for your age than Leila is; but mamma thought it not best. I think
she is wrong, and I am going to tell you the truth. You have
guessed it already. Susie, you know, has loved Dan since she was
your age, and she has been foolish of course; but I want you to
remember that she was a poor, ignorant, neglected child, and Dan
was engaged to marry her. I blame him infinitely more than I do
her. He was very selfish and unprincipled.”
“So I think, sissy. I thought it must be Dan—the mean thing. I’m
real sorry for Susie; but what a goose she must be to care so for
him.” And so another friend was won over to Susie. Linnie grew
immensely important in her own eyes after this confidence of
Clara, who told her, among other pretty compliments, that she was
“right womanly” in her sentiments.
On one of those weary days, when Susie felt like destroying her
life despite the kindness and sympathy of Clara and her father, she
received a note from Dan. It was written in a cold, heartless style
that she could scarcely believe him capable of after all she knew of
him, and ended: “I don’t want you to be disgraced through me,
and I am willing to marry you. Name the time and place, and I will
be on hand. It is no use to palaver and swear I shall be supremely
happy, and all that; but you are ‘ruined,’ of course, if I don’t, and
I’m willing to do it, and ought to for the prospective brat’s sake, at
least.” The letter enclosed a cheque for fifty dollars. Susie regarded
the money greedily. She had never had half as much in her whole
life, and this would buy so many things she needed, and then she
read Dan’s heartless letter again, crying bitterly. Not one word of
tenderness; nothing of the old love was left, only pity and an offer
to sacrifice himself to save her. Disgust with her weakness, self-
reproach, indignation, possessed her by turns, and the result was
sending back the letter and the cheque, with only these words: “I
can beg in the streets for myself or for your child much easier than
I can accept charity from you. O my God! that I should come to
this—to have money thrown at me like a bone to a dog, from one,
too, whom I have so loved and trusted. Believe me, the only favor I
ask, is that you may forget that I ever cared for you, for—
‘I am shamed through all my being
To have loved so weak a thing.’”
When Dan received this, he was surprised, to say the least, and
chewed his moustache viciously. Beyond all his pique at the way
his offer was received, there was a dawning respect for the girl he
had ruined, as he thought; but Susie was not quite ruined yet,
thanks to the generous sympathy of Dr. Forest and his daughter;
and losing her respect for Dan, through finding out how soulless
and unworthy he was, her heart-aches on account of his
faithlessness gradually began to subside. Pretty soon another
letter came, containing one hundred dollars in greenbacks. This
time he confessed admiration for her “pluck,” as he called it, but
swore that if she sent back this money he would burn it, leaving
enough of the notes to show her he had kept his word. This was
why he had sent greenbacks, which, if destroyed, could not be
made good like a bank cheque.
Susie resolved to show this letter to Clara, and ask her advice,
apologizing for not doing so with the first one. In fact Susie had
enjoyed, in a bitter way, her answer, knowing it would wound
Dan’s vanity, and she had feared that Clara’s advice would
interfere with this satisfaction. The letter was written in a moment
of exaltation, and was the wisest thing Susie could have done; but
yet after it was in the post-office and beyond recall, the poor girl
suffered new tortures lest her words should alienate him still
further from her; for she had to own that, after all, she had not
utterly given up the hope that he was only temporarily under some
new influence, that made him act so dishonorably toward her.
Love is not only blind, but absolutely idiotic, in its faith. When
once we are even partially free from his gilded toils, how wide our
eyes are opened! How microscopic their power to detect and
measure infinitesimal quantities of meanness in the lover.
Clara was away when the second letter came, and Mrs. Forest
and her visitor were out riding. Just as she had folded and put
away Dan’s second letter, the doctor came in. He greeted her
pleasantly, and threw himself wearily on the lounge in the dining-
room. Upon his inquiring for Clara, Susie told him she was out.
“But cannot I take her place, just for once?” she asked. “You want
your bath, I know, for you always say that nothing rests you so
much;” and not waiting for any verbal assent, Susie ran and
pumped the water from the rain-cistern into the bath-tub, and
added a pail of hot water from Dinah’s range. The bath refreshed
him, as it always did, and when he came back Susie had his pipe
filled for him, and a cup of fresh coffee beside it.
“What a grand sachem I am, to be so coddled by nice women.
Now come and talk to me, Susie,” he said, stretching himself on
the lounge. Susie sat down beside him on a low stool, and showed
him Dan’s first letter and a copy of her answer.
“Good for your answer, Susie. I rather like it, though it is a little
romantic. Yes, I like it; but your sending back the money—ah! that
was too romantic by far. He’s a spendthrift, and the best possible
use he can make of his money is to give it to you. Don’t you do it
again—hear?—if he sends you any more.”
Susie listened to the doctor, but could not tell him just then that
Dan had sent more, having stubbornly determined to refuse it, as
she had the first; but she would consult Clara first. Seeing her
silent, the doctor said:
“‘Is there confusion in the little isle?
Let what is broken so remain.’
As Mrs. Buzzell was watering her house plants, a few days after the
visit of the doctor’s wife, a letter arrived for her, and her eyes
brightened, seeing the doctor’s handwriting in the superscription.
She was very familiar with this handwriting, not from letters,
indeed—nothing so romantic, but from his manifold medical
prescriptions for her dyspepsia. There was no person in the world
she esteemed so highly as she did Dr. Forest, and receiving a letter
from him was a rare delight; yet she did not open it at once, but
kept on tending her plants, which occupied a large table before the
south window of her sitting-room. She did not open it hastily,
probably for the same reason that has led many of us on receiving
several letters, to leave the specially coveted one until the last, or
perhaps until we were quite at ease and alone. At all events, Mrs.
Buzzell waited until the flowers were all watered, and the stray
drops of water fallen on the square of oiled cloth beneath the table
carefully wiped up. Then she sat down, put on her gold-bowed
spectacles, opened her letter, and read:
This verse she sang entire. “Why this special verse?” asked
Dan’s heart, for it was in the state when clinging to straws is
perfectly natural. At this juncture he made bold to enter by the
French window, which was open, and stood beside her. She
attempted to rise, but he prevented it, begging her to keep on
playing—he had something to say to her, which could be fittest
said to music.
“So it is coming,” thought Miss Marston. “How shall I stave it
off?”
If Dan had only read her thoughts as easily as she read his, he
would not have made the headlong plunge into a declaration of
love, as he did, without a moment’s pause. Miss Marston quickly
interrupted him.
“You do me honor, Mr. Forest,” she said, rising and looking him
calmly in the face; “but——”
Dan was half mad. He thought he detected contempt in the way
she pronounced the word “honor.” He thought some one had been
“poisoning her mind” against him—by the truth in his case—and
scarcely knowing what he was saying, he blurted out this fear—
thus, by a stroke of poetic justice, revealing what the prudent Mrs.
Forest had taken such infinite pains to conceal.
“Indeed!” exclaimed Miss Marston, coldly. “I never dreamed
that, young as you are, you could be so old in iniquity. I should
much like to be able to respect you for the sake of your estimable
family; but if this is so, and I see the truth of it in your face, let me
give you a word of advice: I am some years older than you are, and
I think I know human nature well enough to assure you that you
will never win the love of any true woman while basely deserting
another, whose happiness”—and she added in a low, withering
tone, as she turned to leave the room—“and whose honor you have
placed in your hands.” The door closed behind her, and Dan, in
speaking of his sensations years after, remarked that you could
have “knocked him down with a feather.”
CHAPTER XVI.
THE VISIT OF THE DELANOS.