Preface
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PART I
INTRODUCTION TO THE PRICE SYSTEM

Chapter 1: Economics: The World Around You

Preview.

  1. The Definition of Economics
    1. Scarcity.
    2. Choices.
    3. Rational Self-Interest.
  2. The Economic Approach
    1. Positive and Normative Analysis.
    2. Scientific Method.
    3. Common Mistakes.
    4. Microeconomics and Macroeconomics.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Free Air?"

Economically Speaking "Pumped Up Over Cheap Gas"

Appendix: Working With Graphs

  1. Reading Graphs
    1. Relationships Between Variables.
    2. Independent and Dependent Variables.
    3. Direct and Inverse Relationships.
  2. Constructing a Graph
    1. The Axes.
    2. Constructing a Graph from a Table.
    3. Interpreting Points on a Graph.
    4. Shifts of Curves.
  3. Slopes
    1. Positive and Negative Slopes.
    2. Equations.

Summary
Key Terms
Exercises

Chapter 2: Choice, Opportunity, Costs, and Specialization

Preview

  1. Opportunity Costs
    1. The Opportunity Cost of Going to College.
    2. Tradeoffs and Decisions at the Margin.
    3. The Production Possibilities Curve.
  2. Specialization and Trade
    1. Marginal Opportunity Cost.
    2. Specialize Where Opportunity Costs Are Lowest.
    3. Comparative Advantage.
    4. Specialization and Trade Occur Everywhere.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economically Speaking "Full Monty"

Chapter 3: Markets, Demand and Supply, and the Price System

Preview

  1. Markets
    1. Market and Definition.
    2. Barter and Money Exchanges.
    3. Relative Price.
  2. Demand
    1. The Law of Demand.
    2. The Demand Schedule.
    3. The Demand Curve.
    4. From Individual Demand Curves to a Market Curve.
    5. Changes in Demand and Changes in Quantity Demanded.
    6. International Effects.
  3. Supply
    1. The Law of Supply.
    2. The Supply Schedule and Supply Curve.
    3. From Individual Supply Curves to the Market Supply.
    4. Changes in Supply and Changes in Quantity Supplied.
    5. International Effects.
  4. Equilibrium: Putting Demand and Supply Together
    1. Determination of Equilibrium.
    2. Changes in the Equilibrium price: Demand Shifts.
    3. Changes in the Equilibrium Price: Supply Shifts.
    4. Equilibrium in Reality.

Summary Key Terms Exercises Internet Exercise

Active Learning Exercise

Economic Insight "The Foreign Exchange Market"

Economically Speaking "Feeling the Pain of San Francisco Landlords"

Chapter 4: The Market System and the Private Sector

Preview

  1. The Market System
    1. Customer Sovereignty.
    2. Profit and the Allocation of Resources.
    3. The Flow of Resources.
    4. The Determination of Income.
  2. Households
    1. Number of Households and Household Income.
    2. Household Spending.
  3. Business Firms
    1. Forms of Business Organization.
    2. Business and Statistics.
    3. Firms Around the World.
    4. Entrepreneurial Ability.
    5. Business Spending.
  4. The International Sector
    1. Types of Countries
    2. International Sector Spending.
  5. Linking the Sectors
    1. Household and Firms.
    2. Households, Firms, and the International Sector.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Adam Smith"

Economic Insight "The Successful Entrepreneur (Sometimes It’s Better to Be Lucky Than Good)"

Economically Speaking "Public Pressure on Tabloids Rises"

Chapter 5: The Public Sector

Preview

  1. The Circular Flow
  2. The Role of Government in the Market System
    1. Government as the Guardian of Efficiency.
    2. Information and the Price System.
    3. Externalities.
    4. Public Goods.
    5. Monopoly.
    6. Business Cycles.
    7. The Public Choice Theory of Government.
  3. Overview of the United States Government
    1. Microeconomic Policy.
    2. Macroeconomic Policy.
    3. Government Spending.
  4. Government in Other Economies
    1. Overview of Major Market Economies

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Government Creates a Market for Fishing Rights"

Economically Speaking "The Cutting Edge; Breading the Speed Barrier; With the Regular Internet Congested, Research Scientists are Busy Building Special Routes for Their Own Private Data Flow"

PART II
MACROECONOMIC BASICS

Chapter 6: National Income Accounting

Preview

  1. Measures of Output and Income
    1. Gross Domestic Product.
    2. Other Measures of Output and Income.
  2. Nominal and Real Measures
    1. Nominal and Real GDP, 000
    2. Price Indexes.
  3. Flows of Income and Expenditures 000

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "The Value of Homemaker Services"

Economic Insight "The Consumer Price Index"

Economically Speaking "Brussels Sets Out on Road to Green GDP"

Chapter 7: An Introduction to the Foreign Exchange Market and the Balance of Payments

Preview

  1. The Foreign Exchange Market
    1. Exchange Rates.
    2. Exchange Rate Changes and International Trade.
  2. The Balance of Payments
    1. Accounting for International Transactions.
    2. Balance of Payments Accounts.
    3. The Current Account and the Capital Account.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Black Markets in Foreign Exchange"

Economically Speaking "Surge From the South; Mexican Shoppers Come Back to Texas"

Chapter 8: Unemployment and Inflation

Preview

  1. Business Cycles,
    1. Definitions.
    2. Historical Record.
    3. Indicators.
  2. Unemployment
    1. Definition and Measurement.
    2. Interpreting the Unemployment Rate.
    3. Types of Unemployment.
    4. Costs of Unemployment.
    5. The Record of Unemployment, 000
  3. Inflation
    1. Absolute Versus Relative Price Changes.
    2. Effects of Inflation.
    3. Types of Inflation.
    4. The Inflationary Record.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "The Underground Economy"

Economically Speaking "Though Layoffs make Headlines, Economy Quietly Creates Jobs"

Chapter 9: Macroeconomic Equilibrium: Aggregate

Demand and Supply

Preview

  1. Aggregate Demand, Aggregate Supply,and Business Cycles
    1. Aggregate Demand and Business Cycles.
    2. Aggregate Supply and Business Cycles.
    3. A Look Ahead.
  2. Factors That Influence Aggregate Demand
    1. Consumption.
    2. Investment.
    3. Government Spending.
    4. Net Exports
    5. Aggregate Expenditures.
  3. The Aggregate Demand Curve
    1. Changes in Aggregate Quantity Demanded: Price-Level Effects.
    2. Changes in Aggregate Demand: Nonprice Determinants.
  4. Aggregate Supply
    1. Changes in Aggregate Quantity Supplied: Price Level Effects.
    2. Short-Run Versus Long-Run Aggregate Supply.
    3. Changes in Aggregate Supply: Nonprice Determinants.
  5. Aggregate Demand and Supply Equilibrium
    1. Short-Run Equilibrium.
    2. Long-Run Equilibrium.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "How Lack of Information in the Short Run Affects Wages in the Long Run"

Economic Insight "OPEC and Aggregate Supply"

Economically Speaking "Confidence Down Now, Up for Future"

Chapter 10: Aggregate Expenditures

Preview

  1. Consumption and Saving
    1. Saving and Savings.
    2. The Consumption and Savings Functions.
    3. Marginal Propensity to Consume and Save.
    4. Average Propensity to Consume and Save.
    5. Determinants of Consumption.
  2. Investment
    1. Autonomous Investment.
    2. Determinants of Investment.
    3. Volatility.
  3. Government Spending
  4. Net Exports,
    1. Exports.
    2. Imports.
    3. The Net Export Function
  5. The Aggregate Expenditures Function
    1. Aggregate Expenditures Table and Function.
    2. The Next Step.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Permanent Income, Life Cycles, and Consumption"

Economically Speaking "U.S. Trade Deficit with China Widens; Record Gap Shows Up as Summit Nears"

Appendix to Chapter 10: An Algebraic Model of Aggregate Expenditures

Chapter 11: Income and Expenditures Equilibrium

Preview

  1. Equilibrium Income and Expenditures
    1. Expenditures and Income.
    2. Leakages and Injections.
  2. Changes in Equilibrium Income and Expenditures
    1. The Spending Multiplier.
    2. The Spending Multiplier and Equilibrium.
    3. Real-World Complications.
  3. Aggregate Expenditures and Aggregate Demand
    1. Aggregate Expenditures and Changing Price Levels.
    2. Deriving the Aggregate Demand Curve.
    3. A Fixed-Price AD-AS Model.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "John Maynard Keynes"

Economic Insight "The Paradox of Thrift"

Economically Speaking "Economy May Catch Chill"

Appendix to Chapter 11: An Algebraic Model of Income and Expenditures Equilibrium

PART III
MACROECONOMIC POLICY

Chapter 12: Fiscal Policy

Preview

  1. Fiscal Policy and Aggregate Demand,
    1. Shifting the Aggregate Demand Curve.
    2. Multiplier Effects.
    3. Government Spending Financed by Tax Increases.
    4. Government Spending Financed by Borrowing.
    5. Crowding Out.
  2. Fiscal Policy in the United States,
    1. The Budget Process.
    2. The Historical Record.
    3. Deficits and the National Debt.
    4. Automatic Stabilizers.
  3. Fiscal Policy in Different Countries
    1. Government Spending.
    2. Taxation.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Supply-Side Economics and the Laffer Curve"

Economic Insight "The Taxpayer’s Federal Government Credit Card Statement"

Economically Speaking "Think of the Federal Budget as a Little Like Air"

Appendix to Chapter 12: An Algebraic Examination of the Balanced-Budget Change in Fiscal Policy

Chapter 13: Money and Banking

Preview

  1. What is Money?,
    1. Functions of Money.
    2. The U.S. Money Supply.
    3. Global Money.
  2. Banking
    1. Financial Intermediaries.
    2. U.S. Banking.
    3. International Banking.
  3. Banks and the Money Supply
    1. Deposits and Loans.
    2. Deposit Expansion Multiplier.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Islamic Banking"

Economically Speaking "The World Still Loves the Dollar"

Chapter 14: Monetary Policy

Preview

  1. The Federal Reserve System,
    1. Structure of the Fed.
    2. Functions of the Fed.
  2. Implementing Monetary Policy
    1. Policy Goals.
    2. Operating Procedures.
    3. Foreign Exchange Market Interventions.
  3. Monetary Policy and Equilibrium Income,
    1. Monetary Demand.
    2. Money and Equilibrium Income.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "What’s on a Dollar Bill?"

Economic Insight "An FOMC Directive" 000

Economically Speaking "Greenspan and Fed Act Prudently in Raising Rates to Guard Against Inflation"

Chapter 15: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Preview

  1. The Business Curve,
    1. An Inflation-Unemployment Tradeoff?.
    2. Short-Run Versus Long-Run Tradeoffs.
  2. The Role of Expectations
    1. Expected Versus Unexpected Inflation.
    2. Forming Expectations.
  3. Credibility and Time Inconsistency
    1. The Policymaker’s Problem.
    2. Credibility.
  4. Sources of Business Cycles
    1. The Political Business Cycle.
    2. Real Business Cycles.
  5. The Link Between Monetary and Fiscal Policies
    1. The Government Budget Constraint.
    2. Monetary Reforms.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "The Natural Rate of Unemployment"

Economically Speaking "Greenspan Grilled; Congress Questions Inflation, Rates, Dollar"

Chapter 16: Maroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Preview

  1. Keynesian Economics
    1. The Keynesian Model.
    2. The Policymaker’s Role.
  2. Monetarist Economics
    1. The Monetarist Model.
    2. The Policymaker’s Role.
  3. New Classical Economics
    1. The New Classical Model.
    2. The Policymaker’s Role.
  4. Comparison and Influence

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Milton Friedman"

Economically Speaking "A Harvard Economist Asks, What’s Wrong With Keynes?"

Chapter 17: Macroeconomic Links Between Countries

Preview

  1. Prices and Exchange Rates
    1. Appreciation and Deprecation.
    2. Purchasing Power Parity.
    3. Inflation and Exchange Rate Changes.
  2. Interest Rates and Exchange Rates
    1. The Domestic Currency Return from
    2. Foreign Bonds.
    3. Interest Rate Parity.
    4. Deviations from Interest Rate Parity.
  3. Policy Effects
    1. Government Borrowing.
    2. Monetary Policy.
    3. Linking IRP and PPP.
  4. International Policy Coordination
    1. Potential Gains.
    2. Obstacles.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economically Speaking "Expats’ Currency Conundrum/American Investors Try to Predict Future of Dollar"

PART IV
ECONOMIC GROWTH AND DEVELOPMENT

Chapter 18: Economic Growth

Preview

  1. Defining Economic Growth,
    1. Read GDP.
    2. Per Capita Real GDP.
    3. The Problems with Definitions of Growth.
  2. The Determinants of Growth
    1. Labor.
    2. Capital.
    3. Land.
    4. Technology.
  3. Productivity
    1. Productivity and Economic Growth.
    2. The U.S. Productivity Slowdown.
    3. Growth and Development.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economically Speaking "Services: A Future of Low Productivity Growth?"

Chapter 19: Development Economics

Preview

  1. The Developing World
    1. 1.a Measuring Poverty.
    2. Basic Human Needs.
  2. Obstacles to Growth
    1. Political Obstacles.
    2. Social Obstacles.
  3. Development Strategies
    1. Inward-Oriented Strategies.
    2. Outward-Oriented Strategies.
    3. Comparing Strategies.
  4. Foreign Investment and Aid
    1. Foreign Savings Flows.
    2. Benefits of Foreign Investment.
    3. Foreign Aid.
  5. Economies in Transition from Socialism
    1. Microeconomic Issues.
    2. Macroeconomic Issues.
    3. The Sequencing of Reforms.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Development and Cultural Values in Sub-Saharan Africa"

Economically Speaking "We Need the Will to Feed the Hungry"

PART V
ISSUES IN INTERNATIONAL TRADE AND FINANCE

Chapter 20 : World Trade Equilibrium

Preview.

  1. An Overview of World Trade
    1. The Direction of Trade.
    2. What Goods Are Traded.
  2. An Example of International Trade Equilibrium
    1. Comparative Advantage.
    2. Terms of Trade.
    3. Export Supply and Import Demand.
    4. The World Equilibrium Price and Quantity Traded.
  3. Sources of Comparative Advantage
    1. Productivity Differences.
    2. Factor Abundance.
    3. Other Theories of Comparative Advantage.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "The Dutch Disease"

Economically Speaking "Stop U.S.–Japan Squabbling Over Trade"

Chapter 21 : International Trade Restrictions

Preview

  1. Arguments for Protection
    1. Creation of Domestic Jobs.
    2. Creation of a "Level Playing Field,"
    3. Government Revenue Creation.
    4. National Defense.
    5. Infant Industries.
    6. Strategic Trade Policy.
  2. Tools of Policy
    1. Tariffs.
    2. Quotas.
    3. Other Barriers to Trade.
  3. Preferential Trade Agreements
    1. Free Trade Areas and Customs Unions.
    2. Trade Creation and Diversion.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "Smoot-Hawley Tariff"

Economically Speaking "Imports and Competition in Domestic Markets"

Chapter 22 : Exchange-Rate Systems and Practices

Preview

  1. Past and Current Exchange-Rate Arrangements
    1. The Gold Standard.
    2. The Bretton Woods System.
    3. The International Monetary Fund and the World Bank.
    4. The Transition Years.
    5. Floating Exchange Rates.
  2. Fixed or Floating Exchange Rates
    1. Equilibrium in the Foreign Exchange Market.
    2. Adjustment Mechanisms Under Fixed and Flexible Exchange Rates.
    3. Constraints on Economic Policy.
  3. The Choice of an Exchange-Rate System
    1. Country Characteristics.
    2. Multiple Exchange Rates.
    3. Overvalued Exchange Rates.

Summary
Key Terms
Exercises
Internet Exercise
Active Learning Exercise

Economic Insight "The IMF and the World Bank"

Economically Speaking "Germans Urge Delay of Euro Adoption"

Glossary G-I

Credits C-I

Index I-I

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