Principles of Macroeconomics 6th Edition Mankiw Solutions Manual
Principles of Macroeconomics 6th Edition Mankiw Solutions Manual
Principles of Macroeconomics 6th Edition Mankiw Solutions Manual
There are some updates to the FYI on Who Studies Economics? There is a new In the News on “The
Economics of President Obama.” Table 1 has been updated and expanded.
LEARNING OBJECTIVES:
two simple models—the circular flow and the production possibilities frontier.
15
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KEY POINTS:
Economists try to address their subject with a scientist’s objectivity. Like all scientists, they make
appropriate assumptions and build simplified models in order 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 decisionmaking by households and firms and the interaction 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 scientists.
Economists who advise policymakers 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 it.
CHAPTER OUTLINE:
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.
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.
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Chapter 2/Thinking Like an Economist ❖ 17
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. But, despite these simplifications, a map
usually helps travelers get from one place to another. Thus, it is a good model.
2. The goal of a model is to simplify reality in order to increase our understanding. This is
where the use of assumptions is helpful.
Figure 1
1. Definition of circular-flow diagram: a visual model of the economy that shows how
dollars flow through markets among households and firms.
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This discovery increased the mystery. Yet it was plain that he was
acting according to his promise, and was leaving no effort untried in
order to solve the problem. But why? What possible interest could he
have in discovering the truth regarding Reggie's assassination?
The look upon his countenance was the reverse of reassuring. Ugly
even when smiling, his face was distorted by rage, and absolutely
forbidding, as he walked hurriedly past within half-a-dozen feet of me,
and away towards the exit from the garden. The insult he had sustained
was one which angered him terribly, and if ever vengeance was written
upon a man's face it was written upon his.
The queer old fellow had puzzled me greatly ever since that eventful
evening at Leghorn. To me there was such an absence of motive that his
actions were doubly remarkable. And yet I could never get away from
the fact that he knew of old Keppel's intention to go to Ragusa before it
had been announced to us; and he was also well acquainted with all the
facts of poor Reggie's tragic end, and the subsequent action on the part of
both the police and myself. Besides, he had told me of Ernest's
whereabouts, of which I was in ignorance, and now it appeared that he
had been, until a moment ago, on friendly terms with the woman who
had robbed me of the one man who in all the world was dear to me.
I turned and glanced across at the woman. She had risen, shaken out
her skirts, and hastily drawn her light cape about her shoulders, as for a
moment she stood in hesitation, looking after her companion.
When I arrived, however, I found that the train had just departed for
the Gare du Nord, and that there was not another for nearly an hour. If
they had both left by the train I had so narrowly missed, then they had
successfully escaped me.
"My dear Laumont,—See Julie the instant she returns from Moscow,
and warn her. Someone has turned traitor. Tell her to be extremely
careful, and to lie low for the present. If she does not, she will place us
all in jeopardy. Advise her to go to London. She would be safe there. So
would you. Bury yourselves.—Hastily, your friend, "SIDONIE."
Was it possible that the woman referred to as Julie was actually the
person who had so fascinated Ernest? If so, the warning was a strange
one; and she had disregarded it by tearing up the letter and casting it into
Branca's face.
The person to whom the letter was addressed was, without doubt, an
accomplice of the woman Julie, while their correspondent, who was
named Sidonie, and who stayed at the "Grand Hotel" in Brussels, was
anxious that both should escape to London. The woman Julie had been in
Moscow. Was it possible that this woman who had attracted Ernest had
during my absence in the Mediterranean been in Russia? Perhaps she
had.
Yet I had no ground whatever for believing the woman whom I had
seen at Monte Carlo, and had so recently followed from Paris, to be
named Julie. My suspicions might, for aught I knew, be entirely
groundless.
From where I sat I could watch all persons entering the station, but
my heart sank within me when at length it was time for me to cross to
take the train for Paris, for my search along the platform was a fruitless
one.
Both had evidently left by the earlier train, and the absence of a
fiacre at the door of the Casino had caused me to lose sight of them.
On every side I saw plot and counterplot, the most dastardly of them
all being the determination of Keppel to destroy his yacht. And Ulrica?
What of her? That she was on board was almost certain; she might even
then be sailing southward to her doom.
Yet I had warned her, and I hoped that she had come ashore as we
had arranged. The only possibility I feared was a disinclination upon her
part to offend the old millionaire. If she found the course altered to
Genoa, a change which I had endeavoured to effect by my telegram, she
might possibly have gone on there. All that I prayed for was that my wire
had reached Davis's hand before the package supposed to contain the
statuette.
For what reason, I wondered, had he met that tow-haired woman who
had been Ernest Cameron's good genius at Monte Carlo? Why, too, had
she taken the trouble to go out to Enghien for the purpose of seeing him?
One theory alone took possession of my mind, namely, that there was
a secret between them. Possibly he had been acquainted with her; they
might even have been friends. But it was quite evident that they had
quarrelled, and he had been gravely offended by the insult offered him.
Fearing lest any of the trio might be lounging at the café in front of
the hotel, where arriving cabs file slowly past, I dismissed the vehicle at
the corner of the Rue du Havre, and approached the hotel on the opposite
side of the way.
One of my chief difficulties was the entering and leaving the hotel,
for I never knew whom I might meet. I had had several narrow escapes
from recognition, notwithstanding every possible precaution.
CHAPTER XXVI
Even though tired out, I slept but little that night. I tried, times
without number, but in vain, to solve the secret of that cipher message—
or warning, was it?—written upon the table before the "Grand Café." But
neither the initial nor the word "tabac" conveyed to me any meaning
whatever. One fact seemed particularly strange, namely, the reason why
the ragged collector of cigar-ends should have searched for it; and,
further, why the word written there should have been "tabac." Again,
who was the shabby, wizen-faced individual who had watched that table
with such eagerness and expectancy?
Had the man whom I had so fondly loved actually allied himself with
some criminal band, that he knew their means of communication, and
was in possession of their cipher? It certainly seemed as though he had.
But that was one of the points I intended to clear up before denouncing
him to the police.
Next morning I rose early, eager for activity, but there seemed no
movement in the room adjoining mine. All three took their coffee in their
bedrooms, and it was not till nearly eleven o'clock that I heard Keppel in
conversation with the mysterious woman who had been my travelling
companion.
"But surely you don't anticipate such a thing?" she asked, in genuine
alarm.
"Well, he goes about quite openly, well knowing that his description
has been circulated through every town and village in France."
"It's certainly ridiculous for him to run his head into a noose. I must
speak to him at once."
"He's out. He went out before six this morning, the chambermaid
tells me."
"Exactly. The whole scheme must be carried out firmly and without a
hitch, otherwise we shall find ourselves in very hot water."
What new plot had been hatched I could not guess. What was this
fresh conspiracy that was intended? His carefully-guarded words awoke
in me an intense curiosity. I had already overheard many things, and still
resolved to possess myself in patience, and to continue my ever-watchful
vigil. There was, according to the old man's own words, a desperate plot
in progress, which the conspirators were determined to carry out at all
hazards, even up to the point of taking another human life.
About seven o'clock I myself dressed and went forth, strolling idly
along until I stood on the pavement at the corner of the Boulevard des
Italiens, in front of the Opera. There are always many idlers there,
mostly sharks on the watch for the unsuspecting foreigner. The English
and American tourist offices are just opposite, and from the corner these
polyglot swindlers can easily fix upon persons who change cheques as
likely victims, and track them down. Suddenly it occurred to me to stroll
along and glance at the table before the "Grand Café." This I did, but
found only the remains of some cipher which had been hastily
obliterated, possibly earlier in the day, for the surface of the marble was
quite dry, and only one or two faint pencil-marks remained.
The house was, I discovered, like many in Paris, far more handsome
within than without. The stairs leading to the flats were thickly carpeted
and were illuminated by electricity, though, judging by the exterior, I had
believed it to be a house of quite a fourth-rate class. When I rang at the
door on the left a neat Parisian bonne in a muslin cap answered my
summons.
I saw in an instant that I was mistaken for a guest, and quickly made
up my mind to use this mistake to the best possible advantage.
In the room I had entered was a roulette table, smaller than those at
Monte Carlo, and around it were some twenty well-dressed men and
women, all intent upon the game. Notes and gold were lying everywhere
upon the numbers and the single chances, and the fact that no silver was
there was sufficient testimony that high stakes were usual. The air was
close and oppressive, for the windows were closed and heavily curtained,
and above the sound of excited voices rose that well-known cry of the
unhealthy-looking, pimply-faced croupier in crimped shirt front and
greasy black:
Boldly I went forward into that room, and in an instant saw that I was
not mistaken, for there, chatting to a circle of men and women at the
opposite end of the salon, was the small, fair-haired woman whom I had
seen in Ernest's company at Monte Carlo, and whom I had followed to
Enghien. The man who had given me the stolen notes was standing near
her, listening to her account of a pleasure trip from which she had
apparently only just returned.
"Ah!" she said. "With such a maximum, how can one hope to gain? It
is impossible."
I stood watching the play. As far as I could see, it was perfectly fair;
but some of the players, keen-faced men, were evidently practised card-
sharpers, swindlers, or men who lived by their wits. The amount of
money constantly changing hands surprised me. As I stood there, one
young man, scarcely more than a lad, lost five thousand francs with
perfect sang-froid. The women present were none of them young, but
were mostly elderly and ugly, of that stamp so eternally prominent in the
Principality of Monaco. The woman, when she turns gambler, always
loses her personal beauty. It may be the vitiated atmosphere in which she
exists; it may be the constant tension of the nerves; or it may, perchance,
be the unceasing, all-consuming avarice—which, I know not. All I am
certain of is that no woman can play and at the same time remain fresh,
youthful, and interesting.
CHAPTER XXVII
I stepped back quickly, while he, with eyes fixed upon that fair-
haired woman, who seemed the centre of a miniature court, failed to
notice me. Upon his face was a dark, anxious look, an expression such as
I had never before seen upon his countenance. Perhaps he was jealous of
the attention shown by that dozen or so of men who were chatting and
laughing with her.
Ernest appeared to take in the situation at a glance, and with his back
turned to her stood watching the baccarat, just as I had feigned to watch
it. Through the great mirror before him, however, he could note all her
actions. She was laughing immoderately at some remark made by one of
her companions, and I noticed how Ernest's face went pale with
suppressed anger. How haggard, how thin, how blanched, nervous, and
ill he looked! Usually so smart in attire, his dress clothes seemed to hang
upon him, his cravat was carelessly tied, and in place of the diamond
solitaire I had bought at Tiffany's for him in the early days of our
acquaintance—which he had worn when we met at Monte Carlo—there
was only a plain pearl stud, worth perhaps ten centimes. Alas! he had
sadly changed. His was, indeed, the figure of a man haunted by the ever-
present shadow of his crime.
It was curious, I thought, that he did not approach her; but the reason
for this became plain ere long. I had returned to the adjoining room, and
was again watching the roulette, when suddenly she brushed past me on
her way out into the corridor, into which several other rooms opened.
Suddenly I heard his well-known voice utter her name in a hoarse
whisper.
"Julie!"
Julie! The person mentioned in the letter of warning which she had
torn up at Enghien!
She stopped, and recognising him for the first time, gasped:
"Yes," he responded. "I told you that we should meet, and I have
found you, you see. I must speak to you alone."
"You hoped so, you mean," he answered hardly. "Come into one of
these rooms, where we may be alone. Someone may overhear if we
remain standing in this passage."
"Yes," he answered, "it is." Then, with every sign of reluctance and
impatience, she opened a door behind them, and they passed into what
appeared to be her own petit salon.
Again the fire of jealousy consumed me, and without thought of the
consequences of my act, I went straightway to the door, and entering,
faced them.
"The person who murdered him was none other than yourself—Julie
Fournereau."
I stood there, utterly astounded. If his words were true, why had he
been concealed on board the Vispera in order to avoid arrest?
"Bah!" she said. "You bring me here into this room to make this
absurd and unfounded charge! You dare not say it before my friends.
They would thrash you as if you were a mongrel of the streets!"
His cheeks were pale, but there was a fierce and resolute expression
upon his countenance. The woman whom I had believed he loved was, it
seemed, his bitterest enemy.
"I have not the slightest wish to bring upon you any greater exposure
or disgrace than that which must inevitably come," he said coolly. "For
months I have been waiting for this opportunity, and by means of the
cipher fortunately discovered your return. I was then enabled to give the
police some highly interesting information."
"The police!" she gasped, her face instantly blanched to the lips.
"You have told them?"
"Yes," he responded, gazing steadily upon her, "I have told them."
"Then let me pass," she said hoarsely, making towards the door.
"So this is your revenge! I was warned of this from Brussels!" she
cried, turning upon him with a murderous light in her eyes. But almost
before the words had left her mouth there were sounds of scuffling and
shouting, a smashing of glass, and loud imprecations. The whistle had
raised the alarm, and the police had entered the place, and were
preventing the egress of the players.
Outside, in the corridor, there were several fierce scrimmages, but
next instant the door opened, and there entered three detectives—of
whom one was the wizen-faced little man who had betrayed such an
interest in myself when at the Grand Café—accompanied by old Mr.
Keppel, and the woman who had been my travelling companion in the
wagon-lit. Certainly the arrangements perfected by the police in order
that their raid upon the private gaming establishment might be successful
in all respects had been elaborately prepared, for at the signal given by
Ernest the coup was instantaneously effected, and the players, nearly all
of whom were persons known as criminals, fell back entrapped and
dismayed.
The old millionaire and his companion were just as astounded to find
me present as Ernest had been. But there was no time at that exciting
moment for explanations. The plan had apparently been arranged for the
arrest of the white-faced woman, who now stood trembling before us.
"I tell you it's a lie!" she cried hoarsely. "I did not kill him."
"I demand the arrest of that woman, Julie Fournereau, for the murder
of Reginald Thorne at the 'Grand Hotel,' in Nice."
"I have evidence that she committed the murder—that the sixty
thousand francs stolen from the dead man's pockets were in her
possession on the following morning; and, further, that on the night on
which the murder was committed she was staying under another name at
the very hotel in which Mr. Thorne was found dead."
"Listen," said Ernest, in a firm tone, although there was a slight catch
in his voice, which showed how greatly excited he was. "The reasons
which have led me to this step are briefly these. Last December, while
living here in Paris, I went south to spend the winter at Monte Carlo. I
stayed at the 'Metropole,' and amid the cosmopolitan crowd there met the
woman before you. One day there arrived at the same hotel, from Paris,
my friend Reginald Thorne, whom I knew well in London, but who had
lived in Paris for the past year. We were about together during the day,
and in the Rooms that evening he encountered me walking beside this
woman Fournereau. That same night he came to my room, and in
confidence related to me a story which at the moment I regarded as
somewhat exaggerated, namely, that he had been induced to frequent a
certain gaming-house in Paris, where he had lost almost everything he
possessed, and how he had ultimately discovered that an elaborate
system of sharping had been practised upon him by the woman and her
male accomplices. That woman, he told me, had left Paris suddenly just
at the moment when he discovered the truth, and he had encountered her
in the Rooms with me. Her name was Julie Fournereau."
I glanced at the wretched woman before us. Her wild eyes were fixed
upon the carpet; her fingers were twitching with intense agitation; her
breath came and went in short quick gasps. Ernest, in his exposure, was
merciless.
"Of what?"