Economics

Cover......Page 1
Title Page......Page 5
Copyright......Page 6
Contents......Page 13
 Chapter 1: The Principles and Practice of Economics......Page 42
   Economic Agents and Economic Resources......Page 43
   Definition of Economics......Page 44
   Positive Economics and Normative Economics......Page 45
  1.2 Three Principles of Economics......Page 46
  1.3 The First Principle of Economics: Optimization......Page 47
   Opportunity Cost......Page 48
   Cost-Benefit Analysis......Page 49
    Evidence-Based Economics: Is Facebook free?......Page 50
  1.4 The Second Principle of Economics: Equilibrium......Page 53
  1.5 The Third Principle of Economics: Empiricism......Page 54
  1.6 Is Economics Good for You?......Page 55
  Key Terms......Page 56
  Problems......Page 57
 Chapter 2: Economic Methods and Economic Questions......Page 60
   Models and Data......Page 61
   An Economic Model......Page 63
    Evidence-Based Economics: How much more do workers with a college education earn?......Page 64
   Argument by Anecdote......Page 65
   The Red Ad Campaign Blues......Page 66
   Causation versus Correlation......Page 67
   Experimental Economics and Natural Experiments......Page 68
    Evidence-Based Economics: How much do wages increase when an individual is compelled by law to get an extra year of schooling?......Page 69
  2.3 Economic Questions and Answers......Page 70
  Questions......Page 72
  Problems......Page 73
   Experimental Design......Page 74
   Describing Variables......Page 75
   Cause and Effect......Page 77
   Appendix Key Terms......Page 80
   Appendix Problems......Page 81
 Chapter 3: Optimization: Doing the Best You Can......Page 82
  3.1 Two Kinds of Optimization: A Matter of Focus......Page 83
   Choice & Consequence: Do People Really Optimize?......Page 85
  3.2 Optimization in Levels......Page 86
   Comparative Statics......Page 88
   Marginal Cost......Page 90
    Evidence-Based Economics: How does location affect the rental cost of housing?......Page 93
  Key Terms......Page 96
  Problems......Page 97
 Chapter 4: Demand, Supply, and Equilibrium......Page 100
  4.1 Markets......Page 101
   Competitive Markets......Page 102
  4.2 How Do Buyers Behave?......Page 103
   Willingness to Pay......Page 104
   From Individual Demand Curves to Aggregated Demand Curves......Page 105
   Building the Market Demand Curve......Page 106
   Shifting the Demand Curve......Page 107
    Evidence-Based Economics: How much more gasoline would people buy if its price were lower?......Page 109
   Supply Curves......Page 111
   Shifting the Supply Curve......Page 112
  4.4 Supply and Demand in Equilibrium......Page 115
   Curve Shifting in Competitive Equilibrium......Page 117
  4.5 What Would Happen If the Government Tried to Dictate the Price of Gasoline?......Page 119
   Choice & Consequence: The Unintended Consequences of Fixing Market Prices......Page 121
  Summary......Page 122
  Questions......Page 123
  Problems......Page 124
 Chapter 5: Consumers and Incentives......Page 126
   What You Like......Page 127
    Choice & Consequence: Absolutes vs. Percentages......Page 128
   How Much Money You Have to Spend......Page 129
  5.2 Putting It All Together......Page 130
   Price Changes......Page 132
  5.3 From the Buyer’s Problem to the Demand Curve......Page 133
  5.4 Consumer Surplus......Page 135
   An Empty Feeling: Loss in Consumer Surplus When Price Increases......Page 136
    Evidence-Based Economics: Would a smoker quit the habit for $100 per month?......Page 137
   The Price Elasticity of Demand......Page 140
   Moving Up and Down the Demand Curve......Page 141
   Elasticity Measures......Page 142
   Determinants of the Price Elasticity of Demand......Page 143
   The Income Elasticity of Demand......Page 145
    Letting the Data Speak: Should McDonald’s Be Interested in Elasticities?......Page 146
  Key Terms......Page 147
  Questions......Page 148
  Problems......Page 149
  Appendix: Representing Preferences with Indifference Curves: Another Use of the Budget Constraint......Page 151
   Appendix Key Terms......Page 153
 Chapter 6: Sellers and Incentives......Page 154
  6.2 The Seller’s Problem......Page 155
   Making the Goods: How Inputs Are Turned into Outputs......Page 156
   The Cost of Doing Business: Introducing Cost Curves......Page 158
   The Rewards of Doing Business: Introducing Revenue Curves......Page 160
   Putting It All Together: Using the Three Components to Do the Best You Can......Page 162
  6.3 From the Seller’s Problem to the Supply Curve......Page 164
   Price Elasticity of Supply......Page 165
   Shutdown......Page 166
  6.4 Producer Surplus......Page 167
  6.5 From the Short Run to the Long Run......Page 169
    Choice & Consequence: Visiting a Car Manufacturing Plant......Page 170
   Firm Entry......Page 171
   Firm Exit......Page 172
   Zero Profits in the Long Run......Page 173
   Economic Profit versus Accounting Profit......Page 174
    Evidence-Based Economics: How would an ethanol subsidy affect ethanol producers?......Page 175
  Summary......Page 178
  Questions......Page 179
  Problems......Page 180
  Appendix: When Firms Have Different Cost Structures......Page 182
 Chapter 7: Perfect Competition and the Invisible Hand......Page 184
  7.1 Perfect Competition and Efficiency......Page 185
   Social Surplus......Page 186
  7.2 Extending the Reach of the Invisible Hand: From the Individual to the Firm......Page 188
  7.3 Extending the Reach of the Invisible Hand: Allocation of Resources Across Industries......Page 192
  7.4 Prices Guide the Invisible Hand......Page 195
   Deadweight Loss......Page 196
   The Command Economy......Page 197
    Choice & Consequence: FEMA and Walmart After Katrina......Page 198
   The Central Planner......Page 199
  7.5 Equity and Efficiency......Page 201
   Evidence-Based Economics: Can markets composed of only self-interested people maximize the overall well-being of society?......Page 202
  Questions......Page 206
  Problems......Page 207
 Chapter 8: Trade......Page 210
  8.1 The Production Possibilities Curve......Page 211
   Calculating Opportunity Cost......Page 213
  8.2 The Basis for Trade: Comparative Advantage......Page 214
   Absolute Advantage......Page 215
    Choice & Consequence: An Experiment on Comparative Advantage......Page 216
   The Price of the Trade......Page 217
  8.3 Trade Between States......Page 218
   Economy-Wide PPC......Page 219
   Comparative Advantage and Specialization Among States......Page 221
  8.4 Trade Between Countries......Page 222
   Determinants of Trade Between Countries......Page 224
   Exporting Nations: Winners and Losers......Page 225
   Importing Nations: Winners and Losers......Page 226
   Determinants of a Country’s Comparative Advantage......Page 227
   Environmental and Resource Concerns......Page 228
   The Effects of Tariffs......Page 229
    Evidence-Based Economics: Will free trade cause you to lose your job?......Page 231
  Key Terms......Page 233
  Problems......Page 234
 Chapter 9: Externalities and Public Goods......Page 238
  9.1 Externalities......Page 239
   A “Broken” Invisible Hand: Negative Externalities......Page 240
   A “Broken” Invisible Hand: Positive Externalities......Page 242
    Choice & Consequence: Positive Externalities in Spots You Never Imagined......Page 244
  9.2 Private Solutions to Externalities......Page 245
   The Coase Theorem......Page 246
   Private Solution: Doing the Right Thing......Page 247
   Government Regulation: Command-and-Control Policies......Page 248
   Corrective Taxes and Subsidies......Page 249
    Letting the Data Speak: How To Value Externalities......Page 250
    Letting the Data Speak: Pay As You Throw: Consumers Create Negative Externalities Too!......Page 251
  9.4 Public Goods......Page 252
   Government Provision of Public Goods......Page 253
    Choice & Consequence: The Free-Rider’s Dilemma......Page 254
   Private Provision of Public Goods......Page 256
  9.5 Common Pool Resource Goods......Page 258
   Choice & Consequence: The Race to Fish......Page 259
   Evidence-Based Economics: How can the Queen of England lower her commute time to Wembley Stadium?......Page 260
  Questions......Page 262
  Problems......Page 263
 Chapter 10: The Government in the Economy: Taxation and Regulation......Page 266
  10.1 Taxation and Government Spending in the United States......Page 267
   Where Does the Money Come From?......Page 268
   Why Does the Government Tax and Spend?......Page 270
    Letting the Data Speak: Understanding Federal Income Tax Brackets......Page 272
   Taxation: Tax Incidence and Deadweight Losses......Page 274
    Choice & Consequence: The Deadweight Loss Depends on the Tax......Page 277
   Direct Regulation......Page 279
   The Direct Costs of Bureaucracies......Page 282
   Corruption......Page 283
  10.4 Equity Versus Efficiency......Page 284
  10.5 Consumer Sovereignty and Paternalism......Page 285
    Evidence-Based Economics: What is the optimal size of government?......Page 286
    Letting the Data Speak: The Efficiency of Government Versus Privately Run Expeditions......Page 288
  Questions......Page 289
  Problems......Page 290
 Chapter 11: Markets for Factors of Production......Page 292
  11.1 The Competitive Labor Market......Page 293
   The Demand for Labor......Page 294
  11.2 The Supply of Labor: Your Labor-Leisure Trade-off......Page 296
    Letting the Data Speak: “Get Your Hot Dogs Here!”......Page 298
   Labor Supply Shifters......Page 299
  11.3 Wage Inequality......Page 301
   Differences in Human Capital......Page 302
    Choice & Consequence: Paying for Worker Training......Page 303
    Choice & Consequence: Compensating Wage Differentials......Page 304
   Changes in Wage Inequality Over Time......Page 306
  11.4 The Market for Other Factors of Production: Physical Capital and Land......Page 307
   Evidence-Based Economics: Is there discrimination in the labor market?......Page 308
  Questions......Page 310
  Problems......Page 311
 Chapter 12: Monopoly......Page 314
  12.1 Introducing a New Market Structure......Page 315
   Legal Market Power......Page 316
    Choice & Consequence: Cleaning Up While Cleaning Up......Page 317
   Economies of Scale......Page 318
  12.3 The Monopolist’s Problem......Page 319
   Revenue Curves......Page 320
   Price, Marginal Revenue, and Total Revenue......Page 322
   Setting the Optimal Price......Page 324
   Does a Monopoly Have a Supply Curve?......Page 326
  12.5 The “Broken” Invisible Hand: The Cost of Monopoly......Page 327
  12.6 Restoring Efficiency......Page 328
   Three Degrees of Price Discrimination......Page 329
    Letting the Data Speak: Third-Degree Price Discrimination in Action......Page 331
   The Microsoft Case......Page 332
   Price Regulation......Page 333
    Evidence-Based Economics: Can a monopoly ever be good for society?......Page 334
  Questions......Page 336
  Problems......Page 337
 Chapter 13: Game Theory and Strategic Play......Page 340
  13.1 Simultaneous Move Games......Page 341
   Best Responses and the Prisoners’ Dilemma......Page 342
   Games without Dominant Strategies......Page 343
  13.2 Nash Equilibrium......Page 345
   Finding a Nash Equilibrium......Page 346
    Choice & Consequence: Work or Surf?......Page 347
   Tragedy of the Commons Revisited......Page 348
   Zero-Sum Games......Page 349
   Game Theory in Penalty Kicks......Page 350
  13.5 Extensive-Form Games......Page 351
   Backward Induction......Page 352
   First-Mover Advantage, Commitment, and Vengeance......Page 353
    Evidence-Based Economics: Is there value in putting yourself into someone else’s shoes?......Page 354
  Key Terms......Page 357
  Problems......Page 358
 Chapter 14: Oligopoly and Monopolistic Competition......Page 362
  14.1 Two More Market Structures......Page 363
  14.2 Oligopoly......Page 364
   Oligopoly Model with Homogeneous Products......Page 365
   Doing the Best You Can: How Should You Price to Maximize Profits?......Page 366
   Oligopoly Model with Differentiated Products......Page 367
   Collusion: One Way to Keep Prices High......Page 369
    Letting the Data Speak: To Cheat or Not to Cheat: That Is the Question......Page 371
   The Monopolistic Competitor’s Problem......Page 372
   Doing the Best You Can: How a Monopolistic Competitor Maximizes Profits......Page 373
   How a Monopolistic Competitor Calculates Profits......Page 374
   Long-Run Equilibrium in a Monopolistically Competitive Industry......Page 375
  14.4 The “Broken” Invisible Hand......Page 377
   Regulating Market Power......Page 378
  14.5 Summing Up: Four Market Structures......Page 379
   Evidence-Based Economics: How many firms are necessary to make a market competitive?......Page 380
  Questions......Page 383
  Problems......Page 384
 Chapter 15: Trade-offs Involving Time and Risk......Page 388
  15.1 Modeling Time and Risk......Page 389
   Future Value and the Compounding of Interest......Page 390
   Borrowing Versus Lending......Page 392
   Present Value and Discounting......Page 393
   Time Discounting......Page 395
   Preference Reversals......Page 396
    Evidence-Based Economics: Do people exhibit a preference for immediate gratification?......Page 397
   Roulette Wheels and Probabilities......Page 398
   Independence and the Gambler’s Fallacy......Page 399
   Expected Value......Page 400
   Extended Warranties......Page 401
  15.5 Risk Preferences......Page 402
  Summary......Page 403
  Problems......Page 404
 Chapter 16: The Economics of Information......Page 406
  16.1 Asymmetric Information......Page 407
   Hidden Characteristics: Adverse Selection in the Used Car Market......Page 408
   Hidden Characteristics: Adverse Selection in the Health Insurance Market......Page 409
   Market Solutions to Adverse Selection: Signaling......Page 410
    Evidence-Based Economics: Why do new cars lose considerable value the minute they are driven off the lot?......Page 411
  16.2 Hidden Actions: Markets with Moral Hazard......Page 413
   Market Solutions to Moral Hazard in the Labor Market: Efficiency Wages......Page 414
   Market Solutions to Moral Hazard in the Insurance Market: “Putting Your Skin in the Game”......Page 415
    Letting the Data Speak: Designing Incentives for Teachers......Page 416
    Evidence-Based Economics: Why is private health insurance so expensive?......Page 417
  16.3 Government Policy in a World of Asymmetric Information......Page 418
   Crime and Punishment as a Principal–Agent Problem......Page 419
    Letting the Data Speak: Moral Hazard Among Job Seekers......Page 420
  Questions......Page 421
  Problems......Page 422
 Chapter 17: Auctions and Bargaining......Page 424
  17.1 Auctions......Page 425
   Open-Outcry English Auctions......Page 427
    Letting the Data Speak: To Snipe or Not to Snipe?......Page 428
   Open-Outcry Dutch Auctions......Page 429
   Sealed Bid: First-Price Auction......Page 430
   Sealed Bid: Second-Price Auction......Page 431
   The Revenue Equivalence Theorem......Page 433
    Evidence-Based Economics: How should you bid in an eBay auction?......Page 434
   What Determines Bargaining Outcomes?......Page 435
   Bargaining in Action: The Ultimatum Game......Page 436
   Bargaining and the Coase Theorem......Page 438
    Evidence-Based Economics: Who determines how the household spends its money?......Page 439
  Questions......Page 441
  Problems......Page 442
 Chapter 18: Social Economics......Page 444
   The Economics of Charity......Page 445
    Letting the Data Speak: Do People Donate Less When It’s Costlier to Give?......Page 447
    Letting the Data Speak: Why Do People Give to Charity?......Page 448
   The Economics of Fairness......Page 449
    Evidence-Based Economics: Do people care about fairness?......Page 452
  18.2 The Economics of Trust and Revenge......Page 454
   The Economics of Trust......Page 455
   The Economics of Revenge......Page 456
   The Economics of Peer Effects......Page 458
    Letting the Data Speak: Is Economics Bad for You?......Page 459
   Following the Crowd: Herding......Page 460
    Letting the Data Speak: Your Peers Affect Your Waistline......Page 461
  Key Terms......Page 462
  Problems......Page 463
 Chapter 19: The Wealth of Nations: Defining and Measuring Macroeconomic Aggregates......Page 466
  19.1 Macroeconomic Questions......Page 467
   Production......Page 469
   Income......Page 470
   Circular Flows......Page 471
   National Income Accounts: Production......Page 472
   National Income Accounts: Expenditure......Page 474
    Evidence-Based Economics: In the United States, what is the total market value of annual economic production?......Page 476
    Letting the Data Speak: Saving vs. Investment......Page 478
  19.3 What Isn’t Measured by GDP?......Page 479
   Home Production......Page 480
   Negative Externalities......Page 481
   Gross Domestic Product vs. Gross National Product......Page 482
   Does GDP Buy Happiness?......Page 483
  19.4 Real vs. Nominal......Page 484
   The GDP Deflator......Page 486
   The Consumer Price Index......Page 488
   Adjusting Nominal Variables......Page 489
  Summary......Page 490
  Problems......Page 491
 Chapter 20: Aggregate Incomes......Page 494
   Measuring Differences in Income per Capita......Page 495
   Inequality in Income per Capita......Page 497
   Income per Worker......Page 498
   Productivity......Page 499
    Choice & Consequence: Dangers of Just Focusing on Income per Capita......Page 500
   Productivity Differences......Page 502
   Labor......Page 503
   Representing the Aggregate Production Function......Page 504
   Dimensions of Technology......Page 506
    Letting the Data Speak: Moore’s Law......Page 507
    Letting the Data Speak: Efficiency of Production and Productivity at the Company Level......Page 508
    Letting the Data Speak: Monopoly and GDP......Page 509
    Evidence-Based Economics: Why is the average American so much richer than the average Indian?......Page 510
  Key Terms......Page 512
  Problems......Page 513
  Appendix: The Mathematics of Aggregate Production Functions......Page 516
 Chapter 21: Economic Growth......Page 518
  21.1 The Power of Economic Growth......Page 519
   Exponential Growth......Page 520
    Choice & Consequence: The Power of Growth......Page 522
   Patterns of Growth......Page 523
    Letting the Data Speak: Levels versus Growth......Page 525
  21.2 How Does a Nation’s Economy Grow?......Page 527
   What Brings Sustained Growth?......Page 528
   Knowledge, Technological Change, and Growth......Page 529
    Evidence-Based Economics: Why are you so much more prosperous than your great-greatgrandparents were?......Page 531
   Growth Before Modern Times......Page 533
   Malthusian Limits to Growth......Page 534
   Growth and Inequality......Page 535
    Letting the Data Speak: Income Inequality in the United States......Page 536
   Growth and Poverty......Page 537
   How Can We Reduce Poverty?......Page 538
    Letting the Data Speak: Life Expectancy and Innovation......Page 539
  Questions......Page 540
  Problems......Page 541
  Appendix: The Solow Growth Model......Page 543
   Appendix Problems......Page 551
 Chapter 22: Why Isn’t the Whole World Developed?......Page 552
  22.1 Proximate Versus Fundamental Causes of Prosperity......Page 553
   Geography......Page 554
   Institutions......Page 555
   A Natural Experiment of History......Page 556
   Inclusive and Extractive Economic Institutions......Page 558
   How Economic Institutions Affect Economic Outcomes......Page 559
    Letting the Data Speak: Divergence and Convergence in Eastern Europe......Page 560
   The Logic of Extractive Economic Institutions......Page 563
    Letting the Data Speak: Blocking the Railways......Page 564
    Evidence-Based Economics: Are tropical and semitropical areas condemned to poverty by their geographies?......Page 565
  22.3 Is Foreign Aid the Solution to World Poverty?......Page 570
   Choice & Consequence: Foreign Aid and Corruption......Page 571
  Summary......Page 572
  Problems......Page 573
 Chapter 23: Employment and Unemployment......Page 576
   Classifying Potential Workers......Page 577
   Calculating the Unemployment Rate......Page 578
   Trends in the Unemployment Rate......Page 579
   Who Is Unemployed?......Page 580
   The Demand for Labor......Page 581
   Shifts in the Labor Demand Curve......Page 582
   Shifts in the Labor Supply Curve......Page 584
   Equilibrium in a Competitive Labor Market......Page 585
  23.4 Job Search and Frictional Unemployment......Page 586
   Minimum Wage Laws......Page 587
    Choice & Consequence: The Luddites......Page 588
   Labor Unions and Collective Bargaining......Page 589
   Downward Wage Rigidity and Unemployment Fluctuations......Page 590
   The Natural Rate of Unemployment and Cyclical Unemployment......Page 591
    Evidence-Based Economics: What happens to employment and unemployment if local employers go out of business?......Page 593
  Summary......Page 594
  Key Terms......Page 595
  Problems......Page 596
 Chapter 24: Credit Markets......Page 600
   Borrowers and the Demand for Loans......Page 601
   Real and Nominal Interest Rates......Page 602
   The Credit Demand Curve......Page 603
   Saving Decisions......Page 604
   The Credit Supply Curve......Page 605
    Choice & Consequence: Why Do People Save?......Page 606
   Equilibrium in the Credit Market......Page 607
  24.2 Banks and Financial Intermediation: Putting Supply and Demand Together......Page 609
   Assets and Liabilities on the Balance Sheet of a Bank......Page 610
   Maturity Transformation......Page 612
   Management of Risk......Page 613
   Bank Runs......Page 614
   Bank Regulation and Bank Solvency......Page 615
    Evidence-Based Economics: How often do banks fail?......Page 616
    Choice & Consequence: Too Big to Fail......Page 617
  Summary......Page 618
  Questions......Page 619
  Problems......Page 620
 Chapter 25: The Monetary System......Page 622
   The Functions of Money......Page 623
   The Money Supply......Page 624
    Choice & Consequence: Non-Convertible Currencies in U.S. History......Page 625
   Nominal GDP, Real GDP, and Inflation......Page 626
   The Quantity Theory of Money......Page 627
   The Consequences of Inflation......Page 628
   The Social Costs of Inflation......Page 629
   The Social Benefits of Inflation......Page 630
    Evidence-Based Economics: What caused the German hyperinflation of 1922-1923?......Page 631
   The Central Bank and the Objectives of Monetary Policy......Page 633
   Bank Reserves......Page 634
   The Demand Side of the Federal Funds Market......Page 636
   The Supply Side of the Federal Funds Market and Equilibrium in the Federal Funds Market......Page 637
   The Fed’s Influence on the Money Supply and the Inflation Rate......Page 640
    Choice & Consequence: Obtaining Reserves Outside the Federal Funds Market......Page 641
   The Relationship Between the Federal Funds Rate and the Long-Term Real Interest Rate......Page 642
    Choice & Consequence: Two Models of Inflation Expectations......Page 643
  Key Terms......Page 645
  Problems......Page 646
 Chapter 26: Short-Run Fluctuations......Page 648
  26.1 Economic Fluctuations and Business Cycles......Page 649
   Patterns of Economic Fluctuations......Page 651
   The Great Depression......Page 653
   Labor Demand and Fluctuations......Page 655
   Sources of Fluctuations......Page 657
    Letting the Data Speak: Unemployment and the Growth Rate of Real GDP: Okun’s Law......Page 658
   Multipliers and Economic Fluctuations......Page 661
   Equilibrium in the Short Run, with Multipliers and Downward Wage Rigidity......Page 663
   Equilibrium in the Medium Run: Partial Recovery and Full Recovery......Page 664
  26.3 Modeling Expansions......Page 668
   Evidence-Based Economics: What caused the recession of 2007–2009?......Page 669
  Summary......Page 674
  Questions......Page 675
  Problems......Page 676
 Chapter 27: Countercyclical Macroeconomic Policy......Page 678
  27.1 The Role of Countercyclical Policies in Economic Fluctuations......Page 679
  27.2 Countercyclical Monetary Policy......Page 681
   Controlling the Federal Funds Rate......Page 682
   Other Tools of the Fed......Page 684
   Expectations, Inflation, and Monetary Policy......Page 685
   Contractionary Monetary Policy: Control of Inflation......Page 686
    Choice & Consequence: Policy Mistakes......Page 688
   Policy Trade-offs......Page 689
   Fiscal Policy Over the Business Cycle: Automatic and Discretionary Components......Page 690
   Analysis of Expenditure-Based Fiscal Policy......Page 692
   Analysis of Taxation-Based Fiscal Policy......Page 694
   Fiscal Policies that Directly Target the Labor Market......Page 695
   Policy Waste and Policy Lags......Page 696
    Evidence-Based Economics: How much does government expenditure stimulate GDP?......Page 697
  27.4 Policies That Blur the Line Between Fiscal and Monetary Policy......Page 699
  Key Terms......Page 700
  Problems......Page 701
 Chapter 28: Macroeconomics and International Trade......Page 704
   Absolute Advantage and Comparative Advantage......Page 705
   Comparative Advantage and International Trade......Page 708
   Efficiency and Winners and Losers from Trade......Page 709
   How We Trade......Page 710
   Trade Barriers: Tariffs......Page 711
    Letting the Data Speak: Living in an Interconnected World......Page 712
   Trade Surpluses and Trade Deficits......Page 713
   International Financial Flows......Page 714
   The Workings of the Current Account and the Financial Account......Page 715
  28.3 International Trade, Technology Transfer, and Economic Growth......Page 717
   Letting the Data Speak: From IBM to Lenovo......Page 719
   Evidence-Based Economics: Are companies like Nike harming workers in Vietnam?......Page 720
  Summary......Page 722
  Problems......Page 723
 Chapter 29: Open Economy Macroeconomics......Page 726
   Nominal Exchange Rates......Page 727
   Flexible, Managed, and Fixed Exchange Rates......Page 728
  29.2 The Foreign Exchange Market......Page 729
   How Do Governments Intervene in the Foreign Exchange Market?......Page 732
   Defending an Overvalued Exchange Rate......Page 733
    Evidence-Based Economics: How did George Soros make $1 billion?......Page 735
   From the Nominal to the Real Exchange Rate......Page 737
   Co-Movement Between the Nominal and the Real Exchange Rates......Page 738
   The Real Exchange Rate and Net Exports......Page 739
  29.4 GDP in the Open Economy......Page 740
   Letting the Data Speak: Why Have Chinese Authorities Kept the Yuan Undervalued?......Page 741
   Interest Rates, Exchange Rates, and Net Exports......Page 742
   Revisiting Black Wednesday......Page 743
  Summary......Page 744
  Questions......Page 745
  Problems......Page 746
Endnotes......Page 749
Glossary......Page 755
Credits......Page 767
 B......Page 771
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 I......Page 779
 L......Page 780
 M......Page 781
 N......Page 782
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