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Macroeconomics Principles Applications and Tools 9th Edition OSullivan Solutions Manual 1
Macroeconomics Principles Applications and Tools 9th Edition OSullivan Solutions Manual 1
5
Measuring a Nation’s
Production and Income
Chapter Summary
Chapter 5 is the first chapter in macroeconomics and introduces many of the basic terms and concepts
required to study the economy as a whole. Here are the main points of the chapter:
• The circular flow diagram shows how the production of goods and services generates income for
households and how households purchase goods and services by firms. The expanded circular flow
diagram includes government and the foreign sector.
• Gross domestic product (GDP) is the market value of all final goods and services produced in a
given year.
• GDP consists of four components: consumption, investment, government purchases, and net
exports. The GDP deflator is an index that measures how the prices of goods and services included
in GDP change over time.
53
©2017 Pearson Education, Inc.
54 O'Sullivan/Sheffrin/Perez, Macroeconomics, 9e
• National income is obtained from GDP by adding the net income U.S. individuals and firms earn
from abroad, then subtracting depreciation.
• Real GDP is calculated by using constant prices. The Commerce Department now uses methods
that take an average using base years from neighboring years.
• A recession is commonly defined as a six-month consecutive period of negative growth. However, in
the United States, the National Bureau of Economic Research (NBER) uses a broader definition.
• GDP does not include nonmarket transactions, leisure time, the underground economy, or changes
to the environment.
Learning Objectives:
1. The “Flip” Sides of Macroeconomic Activity – Production and Income: Explain the circular flow.
2. The Production Approach – Measuring a Nation’s Macroeconomic Activity Using Gross Domestic
Product: Identify the components of GDP.
3. The Income Approach – Measuring a Nation’s Macroeconomic Activity Using National Income:
Describe the steps from GDP to income.
4. A Closer Examination of Nominal and Real GDP: Calculate real and nominal GDP.
5. Fluctuations in GDP: List the phases of the business cycle.
6. GDP as a Measure of Welfare: Discuss the relationship of GDP to welfare.
Chapter Outline
Macroeconomics is the study of the nation’s economy as a whole; it focuses on the issues of inflation,
unemployment, and economic growth. The sustained increase in the average prices of all goods and services
is called inflation.
Teaching Tip
If the semester does begin with this chapter, a brief re-introduction of what economics is
and the basics of economic analysis could be useful to get students thinking like economists
again. A graphical review of supply and demand, likewise, is always appropriate. There
are two resources to use from this Instructor’s Manual: The Appendix to Chapter 1, “Using
Graphs and Percentages,” and Chapter 4, “Demand, Supply, and Market Equilibrium.” One
way to open the semester here is to reinforce what they should know by pointedly asking
students to define the subject of economics and explain opportunity cost and marginal
analysis.
Teaching Tip
Point out that the divisive issue of us versus them where “them” refers to corporations, and
“us” refers to citizens, is patently false. This is evidenced by the circular flow model as we
are dually us and them. At times “we” are sellers in markets, and at other times “we” are
buyers. Lastly, as stock ownership in the United States hits 50% of households, ownership
of firms themselves broadens. Encourage students to look at the Circular Flow of
Production and Income and either use the PowerPoint figure or draw the figure on the
board.
Teaching Tip
Students should see the usefulness of the circular flow model by noting that GDP is
measured by three methods: (1) the expenditure method, (2) the production method, and
(3) the income method. All three methods should be equal, given the concept of the model;
what we buy is what we produce with the income we earn producing.
Question 1: How can we use economic analysis to compare the size of a major
corporation to the size of a country?
APPLICATION 1: USING VALUE ADDED TO MEASURE THE TRUE SIZE OF
WALMART
The application points out that the true measure of the size of a corporation is its value added. Using
Walmart to explain the concept, it shows that while Walmart’s gross sales were $473 billion, its cost of
sales was $358 billion, leaving a value added of $115 billion.
Teaching Tip
Students will need constant reminders in the beginning of the course to think of investment
as economists do and as distinct from financial investment of stocks or bonds. The same
goes for capital and financial capital.
3. Government purchases includes purchases of newly produced goods and services by local,
state, and federal governments.
a. Government purchases exclude transfer payments, defined as payments from
governments to individuals that do not correspond to the production of goods and
services (unemployment benefits are an example).
4. Net exports
a. Import: A good produced in a foreign country and purchased by residents of the home
country. For example, the United States buys televisions that are produced in Japan.
This is an import for the United States.
b. Export: A good produced in the home country and sold in another country
c. Net exports are defined as exports minus imports.
d. The United States has run a trade deficit for more than the past decade, as imports have
outpaced exports. A trade deficit is the excess of imports over exports. A trade surplus
is the excess of exports over imports.
e. Discuss how our trade accounts have occasionally been balanced; the United States has
had a negative balance of trade for much of the past half century.
B. Putting It All Together: The GDP Equation
1. If we set GDP equal to Y, then we can algebraically represent the four components of GDP
according to the expenditure approach as Y = C + I + G + NX.
2. This identity is the simplest configuration for remembering the four components of GDP
according to the expenditure approach.
Teaching Tip
The sheer size of the GDP numbers can sometimes trouble students as if they were
somewhat surreal. Students also, unfortunately, have trouble understanding the terms
“trillions” versus “billion” or “million.” Consider the average income level of roughly
$45,000 and the size of the labor force of approximately 140 million. While these “wages”
are only part of the size of the U.S. economy, it does get us over halfway to the total of
over $10 trillion.
Question 2: How has the recovery from the most recent recession compared to
recoveries from earlier recessions?
APPLICATION 2: COMPARING RECOVERIES FROM RECESSIONS
The most recent recession in the U.S. was deep and severe, and the growth of the economy after the
recession ended has been slower than for previous recessions. Some economists believe that recessions
that are caused by financial crises usually have slower recoveries. This was the cause of our last
recession.
Language: English
CAPTAINS OF SOULS
THE MISSING MILLION
ROOM 13
THE FACE IN THE NIGHT
A KING BY NIGHT
THE MAN FROM MOROCCO
THE AVENGER
THE AVENGER
By
EDGAR WALLACE
TENTH EDITION
London
John Long, Limited
12, 13 & 14 Norris Street, Haymarket
[All Rights Reserved]
I. THE HEAD-HUNTER
II. MR. SAMPSON LONGVALE CALLS
III. THE NIECE
IV. THE LEADING LADY
V. MR. LAWLEY FOSS
VI. THE MASTER OF GRIFF
VII. THE SWORDS AND BHAG
VIII. BHAG
IX. THE ANCESTOR
X. THE OPEN WINDOW
XI. THE MARK ON THE WINDOW
XII. A CRY FROM A TOWER
XIII. THE TRAP THAT FAILED
XIV. MENDOZA MAKES A FIGHT
XV. TWO FROM THE YARD
XVI. THE BROWN MAN FROM NOWHERE
XVII. MR. FOSS MAKES A SUGGESTION
XVIII. THE FACE IN THE PICTURE
XIX. THE MIDNIGHT VISIT
XX. A NARROW ESCAPE
XXI. THE ERASURE
XXII. THE HEAD
XXIII. CLUES AT THE TOWER
XXIV. THE MARKS OF THE BEAST
XXV. THE MAN IN THE CAR
XXVI. THE HAND
XXVII. THE CAVES
XXVIII. THE TOWER
XXIX. BHAG’S RETURN
XXX. THE ADVERTISEMENT
XXXI. JOHN PERCIVAL LIGGITT
XXXII. GREGORY’S WAY
XXXIII. THE TRAP THAT FAILED
XXXIV. THE SEARCH
XXXV. WHAT HAPPENED TO ADELE
XXXVI. THE ESCAPE
XXXVII. AT THE TOWER AGAIN
XXXVIII. THE CAVERN OF BONES
XXXIX. MICHAEL KNOWS FOR SURE
XL. “THE WIDOW”
XLI. THE DEATH
XLII. CAMERA!
The Avenger
CHAPTER I
THE HEAD-HUNTER
A did not speak to him for a long time. Resentment that he should
force his company upon her, and nervousness at the coming ordeal—a
nervousness which became sheer panic as they grew nearer and nearer to
their destination—made conversation impossible.
“I see your Mr. Lawley Foss is with us,” said Michael, glancing over
his shoulder, and by way of making conversation.
“He always goes on location,” she said shortly. “A story has
sometimes to be amended while it’s being shot.”
“Where are we going now?” he asked.
“Griff Towers first,” she replied. She found it difficult to be uncivil
to anybody. “It is a big place owned by Sir Gregory Penne.”
“But I thought we were going to the Dower House?”
She looked at him with a little frown.
“Why did you ask if you knew?” she demanded, almost in a tone of
asperity.
“Because I like to hear you speak,” said the young man calmly. “Sir
Gregory Penne? I seem to know the name.”
She did not answer.
“He was in Borneo for many years, wasn’t he?”
“He’s hateful,” she said vehemently. “I detest him!”
She did not explain the cause of her detestation, and Michael thought
it discreet not to press the question, but presently she relieved him of
responsibility.
“I’ve been to his house twice. He has a very fine garden, which Mr.
Knebworth has used before—of course, I only went as an extra and was
very much in the background. I wish I had been more so. He has queer
ideas about women, and especially actresses—not that I’m an actress,”
she added hastily, “but I mean people who play for a living. Thank
heaven there’s only one scene to be shot at Griff, and perhaps he will not
be at home, but that’s unlikely. He’s always there when I go.”
Michael glanced at her out of the corner of his eye. His first
impression of her beauty was more than confirmed. There was a certain
wistfulness in her face which was very appealing; an honesty in the dark
eyes that told him all he wanted to know about her attitude toward the
admiration of the unknown Sir Gregory.
“It’s queer how all baronets are villains in stories,” he said, “and
queerer still that most of the baronets I’ve known have been men of
singular morals. I’m bothering you, being here, aren’t I?” he asked,
dropping his tone of banter.
She looked round at him.
“You are a little,” she said frankly. “You see, Mr. Brixan, this is my
big chance. It’s a chance that really never comes to an extra except in
stories, and I’m frightened to death of what is going to happen. You
make me nervous, but what makes me more panic-stricken is that the
first scene is to be shot at Griff. I hate it, I hate it!” she said almost
savagely. “That big, hard-looking house, with its hideous stuffed tigers
and its awful looking swords——”
“Swords?” he asked quickly. “What do you mean?”
“The walls are covered with them—Eastern swords. They make me
shiver to see them. But Sir Gregory takes a delight in them: he told Mr.
Knebworth, the last time we were there, that the swords were as sharp
now as they were when they came from the hands of their makers, and
some of them were three hundred years old. He’s an extraordinary man:
he can cut an apple in half on your hand and never so much as scratch
you. That is one of his favourite stunts—do you know what ‘stunt’
means?”
“I seem to have heard the expression,” said Michael absently.
“There is the house,” she pointed. “Ugh! It makes me shiver.”
Griff Towers was one of those bleak looking buildings that it had
been the delight of the early Victorian architects to erect. Its one grey
tower, placed on the left wing, gave it a lopsided appearance, but even
this distortion did not distract attention from its rectangular unloveliness.
The place seemed all the more bare, since the walls were innocent of
greenery, and it stood starkly in the midst of a yellow expanse of gravel.
“Looks almost like a barracks,” said Michael, “with a parade ground
in front!”
They passed through the lodge gates, and the char-à-banc stopped
half-way up the drive. The gardens apparently were in the rear of the
building, and certainly there was nothing that would attract the most
careless of directors in its uninteresting façade.
Michael got down from his seat and found Jack Knebworth already
superintending the unloading of a camera and reflectors. Behind the
char-à-banc came the big dynamo lorry, with three sun arcs that were to
enhance the value of daylight.
“Oh, you’re here, are you?” growled Jack. “Now you’ll oblige me,
Mr. Brixan, by not getting in the way? I’ve got a hard morning’s work
ahead of me.”
“I want you to take me on as a—what is the word?—extra,” said
Michael.
The old man frowned at him.
“Say, what’s the great idea?” he asked suspiciously.
“I have an excellent reason, and I promise you that nothing I do will
in any way embarrass you. The truth is, Mr. Knebworth, I want to be
around for the remainder of the day, and I need an excuse.”
Jack Knebworth bit his lip, scratched his long chin, scowled, and
then:
“All right,” he said gruffly. “Maybe you’ll come in handy, though I’ll
have quite enough bother directing one amateur, and if you get into the
pictures on this trip you’re going to be lucky!”
There was a man of the party, a tall young man whose hair was
brushed back from his forehead, and was so tidy and well arranged that it
seemed as if it had originally been stuck by glue and varnished over. A
tall, somewhat good-looking boy, who had sat on Adele’s left throughout
the journey and had not spoken once, he raised his eyebrows at the
appearance of Michael, and, strolling across to the harassed Knebworth,
his hands in his pockets, he asked with a hurt air:
“I say, Mr. Knebworth, who is this johnny?”
“Which johnny?” growled old Jack. “You mean Brixan? He’s an
extra.”
“Oh, an extra, is he?” said the young man. “I say, it’s pretty
desperately awful when extras hobnob with principals! And this
Leamington girl—she’s simply going to mess up the pictures, she is, by
Jove!”
“Is she, by Jove?” snarled Knebworth. “Now see here, Mr. Connolly,
I ain’t so much in love with your work that I’m willing to admit in
advance that even an extra is going to mess up this picture.”
“I’ve never played opposite to an extra in my life, dash it all!”
“Then you must have felt lonely,” grunted Jack, busy with his
unpacking.
“Now, Mendoza is an artiste——” began the youthful leading man,
and Jack Knebworth straightened his back.
“Get over there till you’re wanted, you!” he roared. “When I need
advice from pretty boys, I’ll come to you—see? For the moment you’re