Chapter 21: Problem 1

Which of the following questions are relevant for the study of macroeconomics and which for microeconomics? a. How will Ms. Martin's tips change when a large manufacturing plant near the restaurant where she works closes? b. What will happen to spending by consumers when the economy enters a downturn? c. How will the price of oranges change when a late frost damages Florida's orange groves? d. How will wages at a manufacturing plant change when its workforce is unionized? e. What will happen to U.S. exports as the dollar becomes less expensive in terms of other currencies? f. What is the relationship between a nation's unemployment rate and its inflation rate?

Short Answer

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b) What will happen to spending by consumers when the economy enters a downturn? c) How will the price of oranges change when a late frost damages Florida's orange groves? d) How will wages at a manufacturing plant change when its workforce is unionized? e) What will happen to U.S. exports as the dollar becomes less expensive in terms of other currencies? f) What is the relationship between a nation's unemployment rate and its inflation rate? Answer: a) Microeconomics b) Macroeconomics c) Microeconomics d) Microeconomics e) Macroeconomics f) Macroeconomics

Step by step solution

Question a

How will Ms. Martin's tips change when a large manufacturing plant near the restaurant where she works closes? This question is studying the effect of an external event (closing of the plant) on the financial situation of an individual (Ms. Martin). Since it is focused on an individual's economic decision, it is a study of microeconomics.

Question b

What will happen to spending by consumers when the economy enters a downturn? This question is focused on the overall spending behavior of consumers during an economic downturn, which affects the entire economy. Since this question is about the behavior of the entire economy, it is a study of macroeconomics.

Question c

How will the price of oranges change when a late frost damages Florida's orange groves? This question is focused on the supply and price changes of a specific good (oranges) due to an external event (late frost). It is concerned with the individual market for oranges, making it a study of microeconomics.

Question d

How will wages at a manufacturing plant change when its workforce is unionized? This question is studying the effect of unionization on wages at a specific manufacturing plant. Since it is concerned with the decision-making process within a particular firm, it is a study of microeconomics.

Question e

What will happen to U.S. exports as the dollar becomes less expensive in terms of other currencies? This question is focused on the overall export behavior of the United States as its currency becomes cheaper, which is a factor that affects the entire economy. Since this question is about the behavior of the entire economy, it is a study of macroeconomics.

Question f

What is the relationship between a nation's unemployment rate and its inflation rate? This question seeks to establish a relationship between two key macroeconomic indicators, namely unemployment rate and inflation rate. Since it involves the entire economy and its indicators, it is a study of macroeconomics.