Instructor Manual: Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like an Economist
Instructor Manual
Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like
an Economist
Prepared by David R. Hakes, University of Northern Iowa
TABLE OF CONTENTS
Purpose and Perspective of the Chapter..................................................................................................2
Chapter Objectives....................................................................................................................................2
Complete List of Chapter Activities and Assessments............................................................................3
Key Terms..................................................................................................................................................4
What's New in This Chapter....................................................................................................................4
Chapter Outline.........................................................................................................................................5
Solutions to Text Problems.....................................................................................................................15
Questions for Review............................................................................................................................15
Problems and Applications....................................................................................................................17
Additional Resources...............................................................................................................................20
Cengage Video Resources.....................................................................................................................20
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 1
accessible website, in whole or in part.
, Instructor Manual: Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like an Economist
PURPOSE AND PERSPECTIVE OF THE CHAPTER
Chapter 2 is the second chapter in a three-chapter section that serves as the introduction of the text.
Chapter 1 introduced ten principles of economics that will be revisited throughout the text. Chapter 2
develops how economists approach problems while Chapter 3 will explain how individuals and countries
gain from trade.
The purpose of Chapter 2 is to familiarize students with how economists approach economic problems.
With practice, they will learn how to approach similar problems in this dispassionate systematic way.
They will see how economists employ the scientific method, the role of assumptions in model building,
and the application of two specific economic models. Students will also learn the important distinction
between two roles economists can play: as scientists when we try to explain the economic world and as
policymakers when we try to improve it.
Key points addressed in this chapter:
Economists try to address their subject with a scientist’s objectivity. Like all scientists, they make
appropriate assumptions and build simplified models to understand the world around them. Two
simple economic models are the circular-flow diagram and the production possibilities frontier.
The field of economics is divided into two subfields: microeconomics and macroeconomics.
Microeconomists study decision making by households and firms and the interactions among
households and firms in the marketplace. Macroeconomists study the forces and trends that affect
the economy as a whole.
A positive statement is an assertion about how the world is. A normative statement is an assertion
about how the world ought to be. When economists make normative statements, they are acting
more as policy advisers than as scientists.
Economists who advise policymakers sometimes offer conflicting advice either because of
differences in scientific judgments or because of differences in values. At other times, economists
are united in the advice they offer, but policymakers may choose to ignore the advice because of
the many forces and constraints imposed by the political process.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
Explain how the circular flow diagram explains the economy.
Describe how the production possibilities frontier explains aggregate production.
Determine if an output level is exhibiting allocative or productive efficiency.
Describe opportunity cost in the context of the production possibilities frontier.
Describe the factors that cause the production possibilities frontier to shift.
Contrast macroeconomic concepts versus microeconomic concepts.
Contrast when an economist acts as a policy adviser and when an economist acts as a scientist.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 2
accessible website, in whole or in part.
, Instructor Manual: Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like an Economist
Explain the difference between positive and normative economics.
Given a scenario, identify the source of disagreement between two economists.
Classify the different functions an economist may serve.
COMPLETE LIST OF CHAPTER ACTIVITIES AND ASSESSMENTS
The following table organizes activities and assessments so that you can make decisions about which
content you would like to emphasize in your class. For additional guidance, refer to the Teaching Online
Guide.
Activity/Assessment Source (i.e., PPT slide, Duration
Workbook)
Active Learning 1 PPT Slide 18 5 mins.
Ask the Experts PPT Slide 35 10–15 mins.
Think-Pair-Share Activity PPT Slide 38 5–10 mins.
Self-Assessment PPT Slide 39 5 mins.
Section 02-1 QuickQuiz MindTap eBook 5 mins.
Section 02-2 QuickQuiz MindTap eBook 5 mins.
Section 02-3 QuickQuiz MindTap eBook 5 mins.
ConceptClip: Circular Flow Model MindTap Learn It Folder 5 mins.
ConceptClip: Production Possibilities Frontier MindTap Learn It Folder 5 mins.
ConceptClip: Micro vs. Macro MindTap Learn It Folder 5 mins.
ConceptClip: Positive and Normative MindTap Learn It Folder 5 mins.
Figure 2: The Production Possibilities Frontier MindTap Learn It Folder 5 mins.
Figure 3: A Shift in the Production Possibilities MindTap Learn It Folder 5 mins.
Frontier
Figure A-4: Shifting Demand Curves MindTap Learn It Folder 5 mins.
Figure A-5: Calculating the Slope of a Line MindTap Learn It Folder 5 mins.
Chapter 02 Problems & Applications MindTap Study It Folder 20–30 mins.
Chapter 02 A+ Test Prep MindTap Study It Folder N/A
Chapter 02 Homework MindTap Apply It Folder 25–35 mins.
Chapter 02 Quiz: Thinking Like an Economist MindTap Apply It Folder 20–30 mins.
[return to top]
KEY TERMS
Circular-flow Diagram: a visual model of the economy that shows how dollars flow through markets
among households and firms.
Macroeconomics: the study of economy-wide phenomena, including inflation, unemployment, and
economic growth.
Microeconomics: the study of how households and firms make decisions and how they interact in
markets.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 3
accessible website, in whole or in part.
, Instructor Manual: Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like an Economist
Normative Statements: claims that attempt to prescribe how the world should be.
Positive Statements: claims that attempt to describe the world as it is.
Production Possibilities Frontier: a graph that shows the combinations of output that the economy can
possibly produce with the available factors of production and production technology.
[return to top]
WHAT'S NEW IN THIS CHAPTER
The following elements are improvements in this chapter from the previous edition:
Table 1 has been deleted, but the general discussion associated with Table 1 remains.
[return to top]
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in PowerPoints or
other supplements) and assessments by chapter (and therefore by topic), so that you can see how all the
content relates to the topics covered in the text.
I. The Economist as Scientist
A. Economists Follow the Scientific Method.
1. Observations help us to develop theory.
2. Data can be collected and analyzed to evaluate theories.
3. Using data to evaluate theories is more difficult in economics than in physical
science because economists are unable to generate their own data and must
make do with whatever data are available.
4. Thus, economists pay close attention to the natural experiments offered by
history.
B. Assumptions Make the World Easier to Understand.
1. Example: to understand international trade, it may be helpful to start out
assuming that there are only two countries in the world producing only two
goods. Once we understand how trade would work between these two
countries, we can extend our analysis to a greater number of countries and
goods.
2. One important role of a scientist is to understand which assumptions one
should make.
3. Economists often use assumptions that are somewhat unrealistic but will have
small effects on the actual outcome of the answer.
C. Economists Use Economic Models to Explain the World around Us.
1. Instruction Idea: To illustrate to the class how simple but unrealistic models
can be useful, bring a road map to class. Point out how unrealistic it is. For
example, it does not show where all of the stop signs, gas stations, or
restaurants are located. It assumes that the earth is flat and two-dimensional.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 4
accessible website, in whole or in part.
Instructor Manual
Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like
an Economist
Prepared by David R. Hakes, University of Northern Iowa
TABLE OF CONTENTS
Purpose and Perspective of the Chapter..................................................................................................2
Chapter Objectives....................................................................................................................................2
Complete List of Chapter Activities and Assessments............................................................................3
Key Terms..................................................................................................................................................4
What's New in This Chapter....................................................................................................................4
Chapter Outline.........................................................................................................................................5
Solutions to Text Problems.....................................................................................................................15
Questions for Review............................................................................................................................15
Problems and Applications....................................................................................................................17
Additional Resources...............................................................................................................................20
Cengage Video Resources.....................................................................................................................20
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 1
accessible website, in whole or in part.
, Instructor Manual: Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like an Economist
PURPOSE AND PERSPECTIVE OF THE CHAPTER
Chapter 2 is the second chapter in a three-chapter section that serves as the introduction of the text.
Chapter 1 introduced ten principles of economics that will be revisited throughout the text. Chapter 2
develops how economists approach problems while Chapter 3 will explain how individuals and countries
gain from trade.
The purpose of Chapter 2 is to familiarize students with how economists approach economic problems.
With practice, they will learn how to approach similar problems in this dispassionate systematic way.
They will see how economists employ the scientific method, the role of assumptions in model building,
and the application of two specific economic models. Students will also learn the important distinction
between two roles economists can play: as scientists when we try to explain the economic world and as
policymakers when we try to improve it.
Key points addressed in this chapter:
Economists try to address their subject with a scientist’s objectivity. Like all scientists, they make
appropriate assumptions and build simplified models to understand the world around them. Two
simple economic models are the circular-flow diagram and the production possibilities frontier.
The field of economics is divided into two subfields: microeconomics and macroeconomics.
Microeconomists study decision making by households and firms and the interactions among
households and firms in the marketplace. Macroeconomists study the forces and trends that affect
the economy as a whole.
A positive statement is an assertion about how the world is. A normative statement is an assertion
about how the world ought to be. When economists make normative statements, they are acting
more as policy advisers than as scientists.
Economists who advise policymakers sometimes offer conflicting advice either because of
differences in scientific judgments or because of differences in values. At other times, economists
are united in the advice they offer, but policymakers may choose to ignore the advice because of
the many forces and constraints imposed by the political process.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
Explain how the circular flow diagram explains the economy.
Describe how the production possibilities frontier explains aggregate production.
Determine if an output level is exhibiting allocative or productive efficiency.
Describe opportunity cost in the context of the production possibilities frontier.
Describe the factors that cause the production possibilities frontier to shift.
Contrast macroeconomic concepts versus microeconomic concepts.
Contrast when an economist acts as a policy adviser and when an economist acts as a scientist.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 2
accessible website, in whole or in part.
, Instructor Manual: Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like an Economist
Explain the difference between positive and normative economics.
Given a scenario, identify the source of disagreement between two economists.
Classify the different functions an economist may serve.
COMPLETE LIST OF CHAPTER ACTIVITIES AND ASSESSMENTS
The following table organizes activities and assessments so that you can make decisions about which
content you would like to emphasize in your class. For additional guidance, refer to the Teaching Online
Guide.
Activity/Assessment Source (i.e., PPT slide, Duration
Workbook)
Active Learning 1 PPT Slide 18 5 mins.
Ask the Experts PPT Slide 35 10–15 mins.
Think-Pair-Share Activity PPT Slide 38 5–10 mins.
Self-Assessment PPT Slide 39 5 mins.
Section 02-1 QuickQuiz MindTap eBook 5 mins.
Section 02-2 QuickQuiz MindTap eBook 5 mins.
Section 02-3 QuickQuiz MindTap eBook 5 mins.
ConceptClip: Circular Flow Model MindTap Learn It Folder 5 mins.
ConceptClip: Production Possibilities Frontier MindTap Learn It Folder 5 mins.
ConceptClip: Micro vs. Macro MindTap Learn It Folder 5 mins.
ConceptClip: Positive and Normative MindTap Learn It Folder 5 mins.
Figure 2: The Production Possibilities Frontier MindTap Learn It Folder 5 mins.
Figure 3: A Shift in the Production Possibilities MindTap Learn It Folder 5 mins.
Frontier
Figure A-4: Shifting Demand Curves MindTap Learn It Folder 5 mins.
Figure A-5: Calculating the Slope of a Line MindTap Learn It Folder 5 mins.
Chapter 02 Problems & Applications MindTap Study It Folder 20–30 mins.
Chapter 02 A+ Test Prep MindTap Study It Folder N/A
Chapter 02 Homework MindTap Apply It Folder 25–35 mins.
Chapter 02 Quiz: Thinking Like an Economist MindTap Apply It Folder 20–30 mins.
[return to top]
KEY TERMS
Circular-flow Diagram: a visual model of the economy that shows how dollars flow through markets
among households and firms.
Macroeconomics: the study of economy-wide phenomena, including inflation, unemployment, and
economic growth.
Microeconomics: the study of how households and firms make decisions and how they interact in
markets.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 3
accessible website, in whole or in part.
, Instructor Manual: Mankiw, Brief Principles of Macroeconomics, 10e, 9780357722718; Chapter 2: Thinking Like an Economist
Normative Statements: claims that attempt to prescribe how the world should be.
Positive Statements: claims that attempt to describe the world as it is.
Production Possibilities Frontier: a graph that shows the combinations of output that the economy can
possibly produce with the available factors of production and production technology.
[return to top]
WHAT'S NEW IN THIS CHAPTER
The following elements are improvements in this chapter from the previous edition:
Table 1 has been deleted, but the general discussion associated with Table 1 remains.
[return to top]
CHAPTER OUTLINE
The following outline organizes activities (including any existing discussion questions in PowerPoints or
other supplements) and assessments by chapter (and therefore by topic), so that you can see how all the
content relates to the topics covered in the text.
I. The Economist as Scientist
A. Economists Follow the Scientific Method.
1. Observations help us to develop theory.
2. Data can be collected and analyzed to evaluate theories.
3. Using data to evaluate theories is more difficult in economics than in physical
science because economists are unable to generate their own data and must
make do with whatever data are available.
4. Thus, economists pay close attention to the natural experiments offered by
history.
B. Assumptions Make the World Easier to Understand.
1. Example: to understand international trade, it may be helpful to start out
assuming that there are only two countries in the world producing only two
goods. Once we understand how trade would work between these two
countries, we can extend our analysis to a greater number of countries and
goods.
2. One important role of a scientist is to understand which assumptions one
should make.
3. Economists often use assumptions that are somewhat unrealistic but will have
small effects on the actual outcome of the answer.
C. Economists Use Economic Models to Explain the World around Us.
1. Instruction Idea: To illustrate to the class how simple but unrealistic models
can be useful, bring a road map to class. Point out how unrealistic it is. For
example, it does not show where all of the stop signs, gas stations, or
restaurants are located. It assumes that the earth is flat and two-dimensional.
© 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 4
accessible website, in whole or in part.
