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• Title Page
• Copyright Page
• About the Authors
• Brief Contents
• Contents
• Preface
• Part I Introduction to Economics
• 1 The Scope and Method of Economics
• Why Study Economics?
• To Learn a Way of Thinking
• Economics in Practice Rainfall and Schooling in India
• Economics in Practice Majoring in Economics Makes You Less Vulnerable to a Recession!
• To Understand Society
• To Be an Informed Citizen
• The Scope of Economics
• Microeconomics and Macroeconomics
• Economics in Practice How Italian Is a Ferrari?
• The Diverse Fields of Economics
• The Method of Economics
• Theories and Models
• Economics in Practice Does Your Part-time Job Affect Your Academic Performance?
• Economic Policy
• An Invitation
• Economic Skills and Economics as a Career
• Summary
• Review Terms and Concepts
• Problems
• Appendix: How to Read and Understand Graphs
• 2 The Economic Problem: Scarcity and Choice
• Scarcity, Choice, and Opportunity Cost
• Scarcity and Choice in a One-person Economy
• Scarcity and Choice in an Economy of Two or More
• Economics in Practice Frozen Foods and Opportunity Costs
• The Production Possibility Frontier
• The Economic Problem
• Economics in Practice Changing Consumption Patterns in China
• Economic Systems and the Role of Government
• Command Economies
• Laissez-Faire Economies: The Free Market
• Mixed Systems, Markets, and Governments
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• 3 Demand, Supply, and Market Equilibrium
• Firms and Households: the Basic Decision-making Units
• Input Markets and Output Markets: the Circular Flow
• Demand in Product/output Markets
• Changes in Quantity Demanded Versus Changes in Demand
• Price and Quantity Demanded: the Law of Demand
• Other Determinants of Household Demand
• Economics in Practice Have You Bought This Textbook?
• Economics in Practice People Drink Tea on Rainy Days
• Shift of Demand Versus Movement Along a Demand Curve
• From Household Demand to Market Demand
• Supply in Product/output Markets
• Price and Quantity Supplied: the Law of Supply
• Other Determinants of Supply
• Shift of Supply Versus Movement Along a Supply Curve
• From Individual Supply to Market Supply
• Market Equilibrium
• Excess Demand
• Excess Supply
• Market Equilibrium with Equations
• Changes in Equilibrium
• Economics in Practice Quinoa
• Demand and Supply in Product Markets: A Review
• Economics in Practice “Shrinkflation” During Festive Seasons
• Looking Ahead: Markets and the Allocation of Resources
• Summary
• Review Terms and Concepts
• Problems
• 4 Demand and Supply Applications
• The Price System: Rationing and Allocating Resources
• Price Rationing
• Constraints on the Market and Alternative Rationing Mechanisms
• Economics in Practice Why Do I Have to Pay More for My Food? the Truth Behind the Flood Crises
• Prices and the Allocation of Resources
• Price Floor
• Supply and Demand Analysis: Tariffs (TAX)
• Economics in Practice The Price Mechanism at Work for Shakespeare
• Supply and Demand and Market Efficiency
• Consumer Surplus
• Producer Surplus
• Competitive Markets Maximize the Sum of Producer and Consumer Surplus
• Potential Causes of Deadweight Loss from Underand Overproduction
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• Part II Concepts and Problems in Macroeconomics
• 5 Introduction to Macroeconomics
• Macroeconomic Concerns
• Output Growth
• Unemployment
• Inflation and Deflation
• The Components of the Macroeconomy
• The Circular Flow Diagram
• The Three Market Arenas
• The Role of the Government in the Macroeconomy
• A Brief History of Macroeconomics
• Economics in Practice Macroeconomics in Literature
• The U.S. Economy Since 1970
• Summary
• Review Terms and Concepts
• Problems
• 6 Measuring Output and National Income
• Gross Domestic Product
• Final Goods and Services
• Exclusion of Used Goods and Paper Transactions
• Exclusion of Output Produced Abroad by Domestically Owned Factors of Production
• Calculating GDP
• The Expenditure Approach
• Economics in Practice Are Christie’s Brokerage Services Counted in Gdp?
• Economics in Practice Estimating Depreciation in the National Income and Product Accounts
• The Income Approach
• Nominal Versus Real GDP
• Economics in Practice GDP: One of the Great Inventions of the 20th Century
• Calculating Real GDP
• Calculating the GDP Deflator
• The Problems of Fixed Weights
• Limitations of the GDP Concept
• GDP and Social Welfare
• The Informal Economy
• Economics in Practice An Alternative to GSP: the Human Development Index
• Gross National Income per Capita
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• 7 Unemployment, Inflation, and Long-run Growth
• Unemployment
• Measuring Unemployment
• Economics in Practice Time Use for the Unemployed in a Recession
• Components of the Unemployment Rate
• Economics in Practice Female Labor Force Participation and Economic Development
• The Costs of Unemployment
• Economics in Practice The Consequences of Unemployment Persist
• Inflation and Deflation
• The Consumer Price Index
• The Costs of Inflation
• What About Deflation?
• Economics in Practice Chain-linked Consumer Price Index in the News
• Long-Run Growth
• Output and Productivity Growth
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• Part III The Core of Macroeconomic Theory
• 8 Aggregate Expenditure and Equilibrium Output
• The Keynesian Theory of Consumption
• Economics in Practice Behavioral Biases in Saving Behavior
• Other Determinants of Consumption
• Planned Investment (I) Versus Actual Investment
• Planned Investment and the Interest Rate (r)
• Other Determinants of Planned Investment
• The Determination of Equilibrium Output (income)
• The Saving/investment Approach to Equilibrium
• Adjustment to Equilibrium
• The Multiplier
• Economics in Practice The Rise and Fall of Nokia
• The Multiplier Equation
• Economics in Practice The Paradox of Thrift
• The Size of the Multiplier in the Real World
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• Appendix: Deriving the Multiplier Algebraically
• 9 The Government and Fiscal Policy
• Government in the Economy
• Government Purchases (G), Net Taxes (T), and Disposable Income (Yd)
• The Determination of Equilibrium Output (Income)
• Fiscal Policy at Work: Multiplier Effects
• The Government Spending Multiplier
• The Tax Multiplier
• The Balanced-budget Multiplier
• Economics in Practice Regional Autonomy and Government Budgeting in Spain
• The Federal Government Debt
• The Federal Budget
• The Budget in 2017
• Fiscal Policy Since 1993: the Clinton, Bush, Obama, and Trump Administrations
• The Economy’s Influence on the Government Budget
• Automatic Stabilizers and Destabilizers
• Full-employment Budget
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• EOC Questions
• Appendix A
• Appendix B
• Appendix Summary
• Appendix Problems
• 10 Money, The Federal Reserve, and the Interest Rate
• An Overview of Money
• What Is Money?
• Economics in Practice Don’t Kill the Birds!
• Commodity and Fiat Monies
• Measuring the Supply of Money in the United States
• How Banks Create Money
• A Historical Perspective: Goldsmiths
• Economics in Practice A Run on the Bank: George Bailey, Mary Poppins, Wyatt Earp
• The Modern Banking System
• The Creation of Money
• The Money Multiplier
• The Federal Reserve System
• Functions of the Federal Reserve
• The Demand for Money
• Interest Rates and Security Prices
• Economics in Practice Professor Serebryakov Makes an Economic Error
• How the Federal Reserve Controls the Interest Rate
• Tools Prior to 2008
• Expanded Fed Activities Beginning in 2008
• The Federal Reserve Balance Sheet
• Tools After 2008
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• Appendix
• Appendix Problems
• 11 The Determination of Aggregate Output, the Price Level, and the Interest Rate
• The Aggregate Supply (AS)
• Aggregate Supply in the Short Run
• Shifts of the Short-run Aggregate Supply Curve
• The Aggregate Demand (AD) Curve
• Planned Aggregate Expenditure and the Interest Rate
• The Behavior of the Fed
• Economics in Practice Central Bankers: Does Personality Matter?
• Deriving the AD Curve
• Economics in Practice Central Banks and Price Stability: Which Prices to Look At?
• The Final Equilibrium
• Other Reasons for a Downward-Sloping AD Curve
• The Long Run AS Curve
• Potential GDP
• Economics in Practice The Simple “Keynesian” Aggregate Supply Curve
• Summary
• Review Terms and Concepts
• Problems
• 12 Policy Effects and Cost Shocks in the As/ad Model
• Fiscal Policy Effects
• Fiscal Policy Effects in the Long Run
• Monetary Policy Effects
• The Fed’s Response to the
• Shape of the AD Curve When the Fed Cares More About the Price Level than Output
• What Happens When There Is a Zero Interest Rate Bound?
• Shocks to the System
• Cost Shocks
• Economics in Practice South African Prices Surge as Cape Town Goes Dry
• Demand-Side Shocks
• Expectations
• Monetary Policy Since 1970
• Inflation Targeting
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• 13 The Labor Market in the Macroeconomy
• The Labor Market: Basic Concepts
• The Classical View of the Labor Market
• The Classical Labor Market and the Aggregate Supply Curve
• The Unemployment Rate and the Classical View
• Explaining the Existence of Unemployment
• Efficiency Wage Theory
• Imperfect Information
• Minimum Wage Laws
• Explaining the Existence of Cyclical Unemployment
• Sticky Wages
• Economics in Practice Evidence on Sticky Wages
• Economics in Practice How the Sharing Economy Is Transforming the Job Market
• An Open Question
• The Short-Run Relationship Between the Unemployment Rate and Inflation
• The Phillips Curve: A Historical Perspective
• Aggregate Supply and Aggregate Demand Analysis and the Phillips Curve
• Expectations and the Phillips Curve
• Inflation and Aggregate Demand
• The Long-Run Aggregate Supply Curve, Potential Output, and the Natural Rate of Unemployment
• The Nonaccelerating Inflation Rate of Unemployment (NAIRU)
• Looking Ahead
• Summary
• Review Terms and Concepts
• Problems
• Part IV Further Macroeconomics Issues
• 14 Financial Crises, Stabilization, and Deficits
• The Stock Market, the Housing Market, and Financial Crises
• Stocks and Bonds
• Determining the Price of a Stock
• The Stock Market Since 1948
• Housing Prices Since 1952
• Household Wealth Effects on the Economy
• Financial Crises and the 2008 Bailout
• Economics in Practice Predicting an Economy’s Future
• Time Lags Regarding Monetary and Fiscal Policy
• Recognition Lags
• Implementation Lags
• Response Lags
• Summary
• Government Deficit Issues
• Deficit Targeting
• Summary
• Review Terms and Concepts
• Problems
• 15 Household and Firm Behavior in the Macroeconomy: A Further Look
• Households: Consumption and Labor Supply Decisions
• The Life-Cycle Theory of Consumption
• The Labor Supply Decision
• Interest Rate Effects on Consumption
• Government Effects on Consumption and Labor Supply: Taxes and Transfers
• A Possible Employment Constraint on Households
• A Summary of Household Behavior
• The Household Sector Since 1970
• Economics in Practice Measuring Housing Price Changes
• Firms: Investment and Employment Decisions
• Expectations and Animal Spirits
• Excess Labor and Excess Capital Effects
• Inventory Investment
• A Summary of Firm Behavior
• The Firm Sector Since 1970
• Productivity and the Business Cycle
• The Short-Run Relationship Between Output and Unemployment
• The Size of the Multiplier
• Economics in Practice Estimating Multipliers: the Mafia Link
• Summary
• Review Terms and Concepts
• Problems
• 16 Long-Run Growth
• The Growth Process: from Agriculture to Industry
• Sources of Economic Growth
• Increase in Labor Supply
• Economics in Practice Government Strategy for Growth
• Increase in Physical Capital
• Increase in the Quality of the Labor Supply (Human Capital)
• Increase in the Quality of Capital (Embodied Technical Change)
• Economics in Practice Germany’s Open Border Policy
• Disembodied Technical Change
• More on Technical Change
• U.S. Labor Productivity: 1952 I–2017 IV
• Growth and the Environment and Issues of Sustainability
• Summary
• Review Terms and Concepts
• Problems
• 17 Alternative Views In Macroeconomics
• Keynesian Economics
• Monetarism
• The Velocity of Money
• The Quantity Theory of Money
• The Keynesian/monetarist Debate
• Supply-Side Economics
• The Laffer Curve
• Evaluating Supply-side Economics
• New Classical Macroeconomics
• The Development of New Classical Macroeconomics
• Rational Expectations
• Economics in Practice Brexit and Consumer Expectations
• Real Business Cycle Theory and New Keynesian Economics
• Evaluating the Rational Expectations Assumption
• Behavioral Macroeconomics
• Testing Alternative Macroeconomic Models
• Summary
• Review Terms and Concepts
• Problems
• Part V The World Economy
• 18 International Trade, Comparative Advantage, and Protectionism
• Trade Surpluses and Deficits
• The Economic Basis for Trade: Comparative Advantage
• Absolute Advantage Versus Comparative Advantage
• Terms of Trade
• Exchange Rates
• The Sources of Comparative Advantage
• The Heckscher-Ohlin Theorem
• Other Explanations for Observed Trade Flows
• Trade Barriers: Tariffs, Export Subsidies, and Quotas
• Economics in Practice Globalization Improves Firm Productivity
• U.S. Trade Policies, GATT, and the WTO
• Economics in Practice What Happens When We Lift a Quota?
• Free Trade or Protection?
• The Case for Free Trade
• The Case for Protection
• Economics in Practice Reshaping the Global Trade Order
• An Economic Consensus
• Summary
• Review Terms and Concepts
• Problems
• 19 Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates
• The Balance of Payments
• The Current Account
• The Financial Account
• Economics in Practice Debtor and Creditor Nations
• Equilibrium Output (Income) in an Open Economy
• The International Sector and Planned Aggregate Expenditure
• Imports, Exports, and the Trade Feedback Effect
• Import and Export Prices and the Price Feedback Effect
• The Open Economy with Flexible Exchange Rates
• The Market for Foreign Exchange
• Factors That Affect Exchange Rates
• The Effects of Exchange Rates on the Economy
• An Interdependent World Economy
• Summary
• Review Terms and Concepts
• Problems
• Appendix: World Monetary Systems since 1900
• Appendix Summary
• Appendix Problems
• 20 Economic Growth In Developing Economies
• Life in the Developing Nations: Population and Poverty
• Economics in Practice What Can We Learn from the Height of Children?
• Economic Development: Sources and Strategies
• The Sources of Economic Development
• Economics in Practice Corruption
• Strategies for Economic Development
• Economics in Practice Who You Marry May Depend on the Rain
• Two Examples of Development: China and India
• Economics in Practice Boosting Agricultural Income Through Digital Finance
• Development Interventions
• Random and Natural Experiments: Some New Techniques in Economic Development
• Education Ideas
• Health Improvements
• Summary
• Review Terms and Concepts
• Problems
• Part VI Methodology
• 21 Critical Thinking About Research
• Selection Bias
• Causality
• Correlation Versus Causation
• Random Experiments
• Regression Discontinuity
• Economics in Practice Moving to Opportunity
• Economics in Practice Control Groups and Experimental Economics
• Difference-in-differences
• Economics in Practice Using Difference-in-differences to Study the Efficacy of Medical Insurance in
• Statistical Significance
• Regression Analysis
• Summary
• Review Terms and Concepts
• Problems
• Glossary
• Index
• Photo Credits