Economics (McConnell), 18th EditionChapter 23: An Introduction to MacroeconomicsKey Questions1. Consider a nation in which the volume of goods and services is growing by 5 percent per year. What is the likely impact of this high rate of growth on the power and influence of its government relative to other countries experiencing slower rates of growth? What about the effect of this 5 percent growth on the nation's living standards? Will these also necessarily grow by 5 percent per year, given population growth? Why or why not? 2. Catalogue companies are the classic example of perfectly inflexible prices because once they print and ship out their catalogues, they are committed to selling at the prices printed in their catalogues. If a catalogue company finds its inventory of sweaters rising, what does that tell you about the demand for sweaters? Was it unexpectedly high, unexpectedly low, or as expected? If the company could change the price of sweaters, would it raise the price, lower the price, or keep the price the same? Given that the company cannot change the price of sweaters, consider the number of sweaters it orders each month from the company that makes its sweaters. If inventories become very high, will the catalogue company increase, decrease, or keep orders the same? Given what the catalogue company does with its orders, what is likely to happen to employment and output at the sweater manufacturer?  Chapter 23 Key Question Solutions
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