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| Preface | |
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| An Introduction to Economics | |
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| Economics: The Science of Scarcity | |
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| What Economics Is About | |
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| A Definition of Economics | |
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| Goods and Bads | |
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| Resources | |
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| Scarcity and a Definition of Economics | |
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| Key Concepts in Economics | |
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| Opportunity Cost | |
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| Benefits and Costs | |
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| Decisions Made at the Margin | |
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| Efficiency | |
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| Unintended Effects | |
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| Exchange | |
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| Economic Categories | |
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| Positive and Normative Economics | |
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| Microeconomics and Macroeconomics | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Diagrams | |
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| Two-Variable Diagrams | |
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| Slope of a Line | |
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| Slope of a Line Is Constant | |
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| Slope of a Curve | |
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| The 45[Degree] Line | |
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| Pie Charts | |
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| Bar Graphs | |
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| Line Graphs | |
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| Appendix Summary | |
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| Questions and Problems | |
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| Should You Major in Economics? | |
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| Five Myths about Economics and an Economics Major | |
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| What Awaits You as an Economics Major? | |
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| What Do Economists Do? | |
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| Places to Find More Information | |
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| Concluding Remarks | |
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| Economic Activities: Producing and Trading | |
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| The Production Possibilities Frontier | |
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| The Straight-Line PPF: Constant Opportunity Costs | |
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| The Bowed-Outward (Concave-Downward) PPF: Increasing Opportunity Costs | |
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| Law of Increasing Opportunity Costs | |
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| Economic Concepts within a PPF Framework | |
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| Exchange or Trade | |
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| Periods Relevant to Trade | |
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| Trade and the Terms of Trade | |
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| Costs of Trades | |
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| Trades and Third-Party Effects | |
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| Production, Trade, and Specialization | |
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| Producing and Trading | |
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| Profit and a Lower Cost of Living | |
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| A Benevolent and All-Knowing Dictator Versus the Invisible Hand | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Supply and Demand: Theory | |
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| A Note about Theories | |
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| What Is Demand? | |
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| The Law of Demand | |
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| What Does Ceteris Paribus Mean? | |
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| Four Ways to Represent the Law of Demand | |
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| Two Prices: Absolute and Relative | |
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| Why Does Quantity Demanded Go Down as Price Goes Up? | |
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| Individual Demand Curve and Market Demand Curve | |
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| A Change in Quantity Demanded Versus a Change in Demand | |
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| What Factors Cause the Demand Curve to Shift? | |
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| Movement Factors and Shift Factors | |
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| Supply | |
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| The Law of Supply | |
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| Why Most Supply Curves Are Upward Sloping | |
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| Changes in Supply Mean Shifts in Supply Curves | |
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| What Factors Cause the Supply Curve to Shift? | |
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| A Change in Supply Versus a Change in Quantity Supplied | |
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| The Market: Putting Supply and Demand Together | |
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| Supply and Demand at Work at an Auction | |
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| The Language of Supply and Demand: A Few Important Terms | |
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| Moving to Equilibrium: What Happens to Price When There Is a Surplus or a Shortage? | |
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| Speed of Moving to Equilibrium | |
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| Moving to Equilibrium: Maximum and Minimum Prices | |
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| Equilibrium in Terms of Consumers' and Producers' Surplus | |
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| What Can Change Equilibrium Price and Quantity? | |
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| Price Controls | |
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| Price Ceiling: Definition and Effects | |
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| Do Buyers Prefer Lower Prices to Higher Prices? | |
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| Price Floor: Definition and Effects | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Supply and Demand: Practice | |
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| Why Do Colleges Use GPAs, ACTs, and SATs for Purposes of Admission? | |
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| What Will Happen to the Price of Marijuana If the Purchase and Sale of Marijuana Are Legalized? | |
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| Where Did You Get That Music? | |
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| Television Shows During the Olympics | |
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| Who Feeds Cleveland? | |
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| The Minimum Wage Law | |
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| Loud Talking at a Restaurant | |
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| Price Ceiling in the Kidney Market | |
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| Healthcare and the Right to Sue Your HMO | |
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| Being Late to Class | |
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| If Gold Prices Are the Same Everywhere, Then Why Aren't House Prices? | |
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| Do You Pay for Good Weather? | |
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| Paying Ail Professors the Same Salary | |
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| Price Floors and Winners and Losers | |
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| College Superathletes | |
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| Supply and Demand on a Freeway | |
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| What Does Price Have to Do with Getting to Class on Time? | |
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| The Space Within Space | |
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| 10 A.M. Classes in College | |
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| Who Pays the Tax? | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Macroeconomics | |
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| Macroeconomic Fundamentals | |
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| Macroeconomic Measurements, Part I: Prices and Unemployment | |
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| How to Approach the Study of Macroeconomics | |
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| Macroeconomic Problems | |
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| Macroeconomic Theories | |
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| Macroeconomic Policies | |
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| Different Views of How the Economy Works | |
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| Three Macroeconomic Organizational Categories | |
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| Macroeconomic Measures | |
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| Measuring Prices Using the CPI | |
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| Inflation and the CPI | |
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| The Substitution Bias in Fixed-Weighted Measures | |
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| GDP Implicit Price Deflator | |
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| Converting Dollars from One Year to Another | |
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| Measuring Unemployment | |
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| Who Are the Unemployed? | |
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| The Unemployment and Employment Rates | |
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| Reasons for Unemployment | |
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| Discouraged Workers | |
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| Types of Unemployment | |
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| What Is Full Employment? | |
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| Cyclical Unemployment | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Macroeconomic Measurements, Part II: GDP and Real GDP | |
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| Gross Domestic Product | |
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| Three Ways to Compute GDP | |
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| What GDP Omits | |
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| GDP Is Not Adjusted for Bads Generated in the Production of Goods | |
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| Per Capita GDP | |
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| Is Either GDP or Per Capita GDP a Measure of Happiness or Well-Being? | |
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| The Expenditure Approach to Computing GDP for a Real-World Economy | |
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| Expenditures in a Real-World Economy | |
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| Computing GDP Using the Expenditure Approach | |
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| The Income Approach to Computing GDP for a Real-World Economy | |
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| Computing National Income | |
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| From National Income to GDP: Making Some Adjustments | |
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| Other National Income Accounting Measurements | |
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| Net Domestic Product | |
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| Personal Income | |
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| Disposable Income | |
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| Real GDP | |
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| Why We Need Real GDP | |
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| Computing Real GDP | |
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| The General Equation for Real GDP | |
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| What Does It Mean If Real GDP Is Higher in One Year Than in Another Year? | |
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| Real GDP, Economic Growth, and Business Cycles | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Macroeconomic Stability, Instability, and Fiscal Policy | |
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| Aggregate Demand and Aggregate Supply | |
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| The Two Sides to an Economy | |
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| Aggregate Demand | |
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| Why Does the Aggregate Demand Curve Slope Downward? | |
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| A Change in the Quantity Demanded of Real GDP Versus a Change in Aggregate Demand | |
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| Changes in Aggregate Demand: Shifts in the AD Curve | |
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| How Spending Components Affect Aggregate Demand | |
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| Factors That Can Change C, I, G, and NX (EX - IM) and Therefore Can Change AD | |
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| Can a Change in the Money Supply Change Aggregate Demand? | |
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| Short-Run Aggregate Supply | |
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| Short-Run Aggregate Supply Curve: What It Is and Why It Is Upward Sloping | |
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| What Puts the "Short Run" in SRAS? | |
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| Changes in Short-Run Aggregate Supply: Shifts in the SRAS Curve | |
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| Putting AD and SRAS Together: Short-Run Equilibrium | |
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| How Short-Run Equilibrium in the Economy Is Achieved | |
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| Thinking in Terms of Short-Run Equilibrium Changes in the Economy | |
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| An Important Exhibit | |
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| Long-Run Aggregate Supply | |
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| Going from the Short Run to the Long Run | |
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| Short-Run Equilibrium, Long-Run Equilibrium, and Disequilibrium | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| The Self-Regulating Economy | |
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| The Classical View | |
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| Classical Economists and Say's Law | |
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| Classical Economists and Interest Rate Flexibility | |
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| Classical Economists on Prices and Wages | |
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| Three States of the Economy | |
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| Real GDP and Natural Real GDP: Three Possibilities | |
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| The Labor Market and the Three States of the Economy | |
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| One Nagging Question: How Can the Unemployment Rate Be Less Than the Natural Unemployment Rate? | |
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| The Self-Regulating Economy | |
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| What Happens If the Economy Is in a Recessionary Gap? | |
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| What Happens If the Economy Is in an Inflationary Gap? | |
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| The Self-Regulating Economy: A Recap | |
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| Policy Implication of Believing the Economy Is Self-Regulating | |
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| Changes in a Self-Regulating Economy: Short Run and Long Run | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Economic Instability: A Critique of the Self-Regulating Economy | |
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| Questioning the Classical Position | |
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| Keynes's Criticism of Say's Law in a Money Economy | |
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| Keynes on Wage Rates | |
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| New Keynesians and Wage Rates | |
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| Keynes on Prices | |
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| Is It a Question of the Time It Takes for Wages and Prices to Adjust? | |
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| The Simple Keynesian Model | |
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| Assumptions | |
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| The Consumption Function | |
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| Consumption and Saving | |
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| The Multiplier | |
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| The Multiplier and Reality | |
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| The Simple Keynesian Model in the AD-AS Framework | |
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| Shifts in the Aggregate Demand Curve | |
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| The Keynesian Aggregate Supply Curve | |
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| The Economy in a Recessionary Gap | |
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| Government's Role in the Economy | |
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| The Theme of the Simple Keynesian Model | |
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| The Simple Keynesian Model in the TE-TP Framework | |
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| Deriving a Total Expenditures (TE) Curve | |
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| What Will Shift the TE Curve? | |
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| Comparing Total Expenditures (TE) and Total Production (TP) | |
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| Moving from Disequilibrium to Equilibrium | |
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| The Graphical Representation of the Three States of the Economy in the TE-TP Framework | |
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| The Economy in a Recessionary Gap and the Role of Government | |
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| The Theme of the Simple Keynesian Model | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| The Federal Budget and Fiscal Policy | |
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| The Federal Budget | |
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| Government Expenditures | |
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| Government Tax Revenues | |
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| Budget Deficit, Surplus, or Balance | |
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| Structural and Cyclical Deficits | |
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| The Public Debt | |
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| Fiscal Policy | |
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| Some Relevant Fiscal Policy Terms | |
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| Two Important Notes | |
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| Demand-Side Fiscal Policy | |
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| Shifting the Aggregate Demand Curve | |
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| Fiscal Policy: A Keynesian Perspective | |
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| Crowding Out: Questioning Expansionary Fiscal Policy | |
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| Lags and Fiscal Policy | |
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| Crowding Out, Lags, and the Effectiveness of Fiscal Policy | |
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| Supply-Side Fiscal Policy | |
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| Marginal Tax Rates and Aggregate Supply | |
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| The Laffer Curve: Tax Rates and Tax Revenues | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Money, the Economy, and Monetary Policy | |
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| Money and Banking | |
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| Money: What Is It and How Did It Come to Be? | |
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| Money: A Definition | |
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| Three Functions of Money | |
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| From a Barter to a Money Economy: The Origins of Money | |
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| Money in a Prisoner of War Camp | |
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| Money, Leisure, and Output | |
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| What Gives Money Its Value? | |
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| Defining the Money Supply | |
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| M1 | |
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| M2 | |
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| Where Do Credit Cards Fit In? | |
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| How Banking Developed | |
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| The Early Bankers | |
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| The Federal Reserve System | |
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| The Money Creation Process | |
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| The Bank's Reserves and More | |
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| The Banking System and the Money Expansion Process | |
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| Why Maximum? Answer: No Cash Leakages and Zero Excess Reserves | |
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| Who Created What? | |
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| It Works in Reverse: The "Money Destruction" Process | |
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| We Change Our Example | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| The Federal Reserve System | |
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| The Structure and Functions of the Fed | |
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| The Structure of the Fed | |
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| The Functions of the Fed | |
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| Fed Tools for Controlling the Money Supply | |
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| Open Market Operations | |
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| The Required Reserve Ratio | |
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| The Discount Rate | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Money and the Economy | |
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| Money and the Price Level | |
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| The Equation of Exchange | |
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| From the Equation of Exchange to the Simple Quantity Theory of Money | |
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| The Simple Quantity Theory of Money in an AD-AS Framework | |
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| Dropping the Assumptions That V and Q Are Constant | |
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| Monetarism | |
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| Monetarist Views | |
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| Monetarism and AD-AS | |
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| The Monetarist View of the Economy | |
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| Inflation | |
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| One-Shot Inflation | |
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| Continued Inflation | |
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| Money and Interest Rates | |
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| What Economic Variables Are Affected by a Change in the Money Supply? | |
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| The Money Supply, the Loanable Funds Market, and Interest Rates | |
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| So What Happens to the Interest Rate as the Money Supply Changes? | |
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| The Nominal and Real Interest Rates | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Monetary Policy | |
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| The Money Market | |
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| The Demand for Money | |
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| The Supply of Money | |
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| Equilibrium in the Money Market | |
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| Transmission Mechanisms | |
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| The Keynesian Transmission Mechanism: Indirect | |
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| The Keynesian Mechanism May Get Blocked | |
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| The Monetarist Transmission Mechanism: Direct | |
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| Monetary Policy and the Problem of Inflationary and Recessionary Gaps | |
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| Monetary Policy and the Activist-Nonactivist Debate | |
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| The Case for Activist (or Discretionary) Monetary Policy | |
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| The Case for Nonactivist (or Rules-Based) Monetary Policy | |
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| Nonactivist Monetary Proposals | |
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| A Constant-Money-Growth-Rate Rule | |
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| A Predetermined-Money-Growth-Rate Rule | |
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| The Fed and the Taylor Rule | |
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| Inflation Targeting | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Expectations and Growth | |
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| Expectations Theory and the Economy | |
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| Phillips Curve Analysis | |
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| The Phillips Curve | |
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| Samuelson and Solow: The Phillips Curve Is Americanized | |
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| The Controversy Begins: Are There Really Two Phillips Curves? | |
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| Things Aren't Always as We Thought | |
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| Friedman and the Natural Rate Theory | |
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| How Do People Form Their Expectations? | |
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| Rational Expectations and New Classical Theory | |
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| Rational Expectations | |
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| Do People Anticipate Policy? | |
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| New Classical Theory: The Effects of Unanticipated and Anticipated Policy | |
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| Policy Ineffectiveness Proposition (PIP) | |
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| Rational Expectations and Incorrectly Anticipated Policy | |
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| How to Fall into a Recession Without Really Trying | |
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| New Keynesians and Rational Expectations | |
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| Looking at Things from the Supply Side: Real Business Cycle Theorists | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Economic Growth | |
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| A Few Basics About Economic Growth | |
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| Do Economic Growth Rates Matter? | |
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| Growth Rates in Selected Countries | |
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| Two Types of Economic Growth | |
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| Economic Growth and the Price Level | |
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| What Causes Economic Growth? | |
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| Natural Resources | |
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| Labor | |
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| Capital | |
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| Technological Advances | |
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| Free Trade as Technology | |
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| Property Rights Structure | |
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| Economic Freedom | |
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| Policies to Promote Economic Growth | |
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| Economic Growth and Special Interest Groups | |
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| New Growth Theory | |
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| What Was Wrong with the Old Theory? Or What's New with New Growth Theory? | |
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| Discovery, Ideas, and Institutions | |
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| Expanding Our Horizons | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| The Global Economy | |
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| International Economics and Globalization | |
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| International Trade | |
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| International Trade Theory | |
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| How Do Countries Know What to Trade? | |
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| How Do Countries Know When They Have a Comparative Advantage? | |
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| Trade Restrictions | |
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| The Distributional Effects of International Trade | |
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| Consumers' and Producers' Surplus | |
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| The Benefits and Costs of Trade Restrictions | |
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| If Free Trade Results in Net Gain, Why Do Nations Sometimes Restrict Trade? | |
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| The World Trade Organization (WTO) | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| International Finance | |
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| The Balance of Payments | |
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| Current Account | |
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| Capital Account | |
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| Official Reserve Account | |
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| Statistical Discrepancy | |
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| What the Balance of Payments Equals | |
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| The Foreign Exchange Market | |
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| The Demand for Goods | |
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| The Demand for and Supply of Currencies | |
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| Flexible Exchange Rates | |
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| The Equilibrium Exchange Rate | |
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| Changes in the Equilibrium Exchange Rate | |
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| Factors That Affect the Equilibrium Exchange Rate | |
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| Fixed Exchange Rates | |
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| Fixed Exchange Rates and Overvalued/Undervalued Currency | |
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| What Is So Bad About an Overvalued Dollar? | |
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| Government Involvement in a Fixed Exchange Rate System | |
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| Options Under a Fixed Exchange Rate System | |
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| The Gold Standard | |
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| Fixed Exchange Rates Versus Flexible Exchange Rates | |
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| Promoting International Trade | |
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| Optimal Currency Areas | |
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| The Current International Monetary System | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Globalization | |
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| What Is Globalization? | |
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| A Smaller World | |
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| A World Economy | |
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| Two Ways to "See" Globalization | |
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| No Barriers | |
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| A Union of States | |
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| Globalization Facts | |
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| International Trade | |
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| Foreign Exchange Trading | |
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| Foreign Direct Investment | |
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| Personal Investments | |
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| The World Trade Organization | |
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| Business Practices | |
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| Movement Toward Globalization | |
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| The End of the Cold War | |
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| Advancing Technology | |
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| Policy Changes | |
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| Benefits and Costs of Globalization | |
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| The Benefits | |
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| The Costs | |
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| The Continuing Globalization Debate | |
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| More or Less Globalization: A Tug of War? | |
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| Less Globalization | |
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| More Globalization | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Practical Economics | |
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| Financial Matters | |
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| Stocks, Bonds, Futures, and Options | |
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| Financial Markets | |
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| Stocks | |
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| Where Are Stocks Bought and Sold? | |
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| The Dow Jones Industrial Average (DJIA) | |
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| How the Stock Market Works | |
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| Why Do People Buy Stock? | |
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| How to Buy and Sell Stock | |
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| Buying Stocks or Buying the Market | |
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| How to Read the Stock Market Page | |
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| Bonds | |
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| The Components of a Bond | |
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| Bond Ratings | |
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| Bond Prices and Yields (or Interest Rates) | |
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| Types of Bonds | |
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| How to Read the Bond Market Page | |
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| Risk and Return | |
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| Futures and Options | |
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| Futures | |
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| Options | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Web Chapters | |
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| Web Chapters | |
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| Agriculture: Farmers' Problems, Government Policies, and Unintended Effects | |
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| Agriculture: The Issues | |
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| A Few Facts | |
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| Agriculture and Income Inelasticity | |
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| Agriculture and Price Inelasticity | |
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| Price Variability and Futures Contracts | |
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| Can Bad Weather Be Good for Farmers? | |
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| Agricultural Policies | |
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| Price Supports | |
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| Restricting Supply | |
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| Target Prices and Deficiency Payments | |
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| Production Flexibility Contract Payments, (Fixed) Direct Payments, and Countercyclical Payments | |
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| Nonrecourse Commodity Loans | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| International Impacts on the Economy | |
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| International Factors and Aggregate Demand | |
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| Net Exports | |
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| The J-Curve | |
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| International Factors and Aggregate Supply | |
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| Foreign Input Prices | |
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| Why Do Foreign Input Prices Change? | |
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| Factors That Affect Both Aggregate Demand and Aggregate Supply | |
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| The Exchange Rate | |
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| What Role Do Interest Rates Play? | |
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| Deficits: International Effects and Domestic Feedback | |
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| The Budget Deficit and Expansionary Fiscal Policy | |
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| The Budget Deficit and Contractionary Fiscal Policy | |
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| The Effects of Monetary Policy | |
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| A Reader Asks | |
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| Analyzing the Scene | |
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| Chapter Summary | |
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| Key Terms and Concepts | |
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| Questions and Problems | |
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| Working with Numbers and Graphs | |
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| Self-Test Appendix | |
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| Glossary | |
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| Index | |