Economics The Basics

Cover
Title Page
Copyright Page
Dedication
About the Author
Preface
Acknowledgments
Brief Content
Content
CH 01 INTRODUCTION
	THE BIG PICTURE
	KEY FORCES SHAPING TODAY'S ECONOMY
		Technological Change
		Globalization
		The Evolution of Financial Markets
	THE ROLE OF GOVERNMENT
		Economic Competition
		Government Intervention
		Finding a Balance
	THE DEFINITION OF ECONOMICS
		Indicators of Prosperity
		The Safety Net
	DISAGREEMENTS IN ECONOMICS
	APPENDIX THE BASICS OF GRAPHS
		READING DATA FROM GRAPHS
		PLOTTING GRAPHS FROM DATA
		CONCLUSION
CH 02 DEMAND AND SUPPLY: THE BASICS OF THE MARKET ECONOMY
	PRICES, BUYERS, AND SELLERS
		Local, National, and Global Markets
		The Market Price
	HOW PRICE AFFECTS THE QUANTITY DEMANDED
		The Law of Demand
		The Special Case of Zero Price
		Graphing the Demand Curve
	HOW PRICE AFFECTS THE QUANTITY SUPPLIED
		The Law of Supply
		Graphing the Supply Schedule
	NEW MARKETS
CH 03 MARKET EQUILIBRIUM AND SHIFTS
	MATCHING SUPPLY AND DEMAND
		The Case of Excess Demand
		The Case of Excess Supply
		The Invisible Hand
	MARKET EQUILIBRIUM
		The Basic Supply-Demand Diagram
		Equilibrium in Numbers
	MARKET SHIFTS
		Demand Shifts and Market Equilibrium
		Supply Shifts and Market Equilibrium
		An Example of an Increase in Demand
		An Example of a Decrease in Supply
		Shifts versus Movements
	SOME CAUSES OF MARKET SHIFTS
		Technological Change
		Globalization
		Changes in Financial Markets
		Government Action
		Changes in Raw Material Prices
		Shifts in Tastes
	THE EFFECT OF INCOME ON DEMAND
	A BRIEF LOOK AT ELASTICITY
	CONCLUSION
CH 04 HOW BUSINESSES WORK
	THE NATURE OF BUSINESS
		The Flow of Money
		Profit Maximization
	PRODUCTION
		Types of Inputs
		The Production Function
		The Marginal Product of Labor
		The Production Function with Capital
		Average Product
	COST
		Types of Cost
		Total Cost of Production
		The Cost Function
		Marginal Cost
		Variable versus Fixed Costs
	REVENUE
		A Simple Example
		Marginal Revenue
	PROFIT MAXIMIZATION
		An Example
		The Law of Supply Revisited
		Short-Term Profit Maximization and Long-Term Decisions
	CONCLUSION
CH 05 COMPETITION AND MARKET POWER
	PERFECT COMPETITION
		Examples of Perfect Competition
	PROFIT MAXIMIZATION IN PERFECT COMPETITION
		Market Equilibrium in Perfect Competition
	PERFECT COMPETITION IN THE LONG RUN
		Long-Term Survival
		The Shutdown Decision
		Escaping Perfect Competition
	MARKET STRUCTURE
		Monopolistic Competition
		Oligopoly
		Monopoly
	PERFECT COMPETITION VERSUS MARKET POWER
		The Benefits of Perfect Competition
		The Downsides of Market Power
	CONCLUSION
CH 06 GOVERNMENT AND THE ECONOMY
	HISTORICAL BACKGROUND
		The Great Depression and the New Deal
		The Era of Government Growth
		The Era of Deregulation
		International Comparisons
	THE BENEFITS OF GOVERNMENT ACTION
		The Benefits of the Command-and-Control Approach
	THE DOWNSIDES OF GOVERNMENT ACTION
		The Inefficiency of Taxation
	THE RIGHT ROLE FOR GOVERNMENT ECONOMIC POLICY
		Public Good Provision
		Market Regulation
		Externalities
		Income Redistribution
	CONCLUSION
	APPENDIX DELVING DEEPER INTO MICROECONOMICS
		CONSUMER CHOICE
			The Utility Function
			The Budget Constraint
			Utility Maximization
			Price Elasticity of Demand
		PRODUCER DECISIONS
			Choosing the Right Inputs
			Substitutes and Complements in Production
			A Cost Minimization Example
			Price Elasticity of Supply
		TAX INCIDENCE AND ELASTICITY
		CONCLUSION
CH 07 THE FIRST STEP INTO MACROECONOMICS
	MEASURING THE ECONOMY
		The Basics of Gross Domestic Product
		The Components of GDP
		No Double-Counting
	UNDERSTANDING GDP
		Personal Consumption
		Nonresidential Investment
		Residential Investment
		Government Consumption and Investment
		Change in Private Inventories
		Net Exports
	WHAT GDP DOES NOT INCLUDE
	INTERNATIONAL COMPARISONS OF GDP
		GDP per Capita
	CONCLUSION
CH 08 INFLATION
	THE BASICS OF INFLATION
		The Average Price Level
		The Inflation Rate
	RELATIVE PRICE SHIFTS
		Globalization and Inflation
		Quality Improvements and Inflation
	ADJUSTING FOR INFLATION
		Avoiding Money Illusion
		Real versus Nominal Dollars
	EXPECTATIONS AND INFLATION
		Hyperinflation
		The Harm from Unexpected Inflation
		The Harm from Expected Inflation
		Deflation
	CONCLUSION
CH 09 GROWTH
	THE SIGNIFICANCE OF GROWTH
		Improved Living Standards
		Production Possibility Frontier
		Growth versus the Zero-Sum Economy
		What Growth Doesn't Buy
	MEASURING GROWTH
		GDP versus Real GDP
		A Word of Warning
	THE INCREASE IN LIVING STANDARDS
		Short-Term versus Long-Term Growth
	WHAT DRIVES GROWTH
		Increase in Labor
		Increase in Education and Skills
		Investment in Physical Capital
		Increase in Raw Materials
		Increase in Knowledge
	GOVERNMENT AND GROWTH
	PRODUCTIVITY
		The History of U.S. Productivity Growth
	CONCLUSION
CH 10 BUSINESS CYCLES, UNEMPLOYMENT, AND INFLATION
	POTENTIAL VERSUS REAL GDP
		Potential Growth
		The Output Gap
	UNEMPLOYMENT
		Types of Unemployment
		The Unemployment Puzzle
	THE TRADE-OFF BETWEEN UNEMPLOYMENT AND INFLATION
		Inflation and Potential GDP
		The Natural Rate of Unemployment
	RECESSIONS
		The Business Cycle
		The Impact of Recession on Workers
		The Impact of Recession on Businesses
	WHY DO RECESSIONS HAPPEN?
		Problems in Financial Markets
		Negative Supply Shifts
		Negative Demand Shifts
		Inflation Fighting
	CONCLUSION
CH 11 FISCAL POLICY
	THE GOVERNMENT AND THE ECONOMY
	THE SHORT-TERM IMPACT OF GOVERNMENT SPENDING
		The Multiplier Effect
		The Marginal Propensity to Consume
		Overseas Leakage
		The Size of the Multiplier
	THE LIMITATIONS OF SPENDING STIMULUS
		The Perils of Inflation
		Lags in Policy
	TAXATION
		The Basics
		Changes in the Tax System
		The Direct Impact of Taxes
		Using Tax Cuts to Fight Recession
		Incentives and Taxes
	BORROWING
		Budget Deficits and Surpluses
		The Stimulative Effect of Bigger Deficits
		Crowding Out
		The Impact of Budget Deficits in the Long Run
		Putting It All Together
	CONCLUSION
CH 12 MONETARY POLICY
	THE USES OF MONEY
	THE HISTORY OF THE FEDERAL RESERVE
		The Structure of the Fed
	THE GOALS AND TOOLS OF MONETARY POLICY
		Controlling Inflation
		Smoothing Out the Business Cycle
		Ensuring Financial Stability
		Monetary Policy Tools
	CONTROL OVER SHORT-TERM INTEREST RATES
		Open Market Operations
		Which Interest Rates Can the Fed Affect?
		Effect of Rate Changes on the Economy
		Effect of Rate Changes on Inflation
		Example: Volcker's Fight against Inflation
		Example: Greenspan's Response to the 2001 Recession
		Example: Bernanke's Response to the Financial Crisis
	QUANTITATIVE EASING, DIRECT LENDING, AND OTHER TOOLS
		Quantitative Easing
		Example: The Fed's Response to the 2007-2009 Financial Crisis
		The Reserve Requirement and Other Regulations
	THE PRACTICE OF MONETARY POLICY
		How Soon Should Rates Be Increased?
		Monetary versus Fiscal Policy
		Discretion versus Rules
		Long-Term Effects of Monetary Policy
	CONCLUSION
	APPENDIX DELVING DEEPER INTO MACROECONOMICS
		AGGREGATE DEMAND AND AGGREGATE SUPPLY
			Aggregate Demand
			Aggregate Supply
			Long-Term Aggregate Equilibrium
		REACTING TO EVENTS
			Shifts in Aggregate Supply
			Shifts in Aggregate Demand
CH 13 THE FINANCIAL MARKETS
	THE MARKET FOR LOANS
		Why Borrow?
		The Demand Curve for Loans
		The Supply Curve for Loans
		Some Factors Affecting Interest Rates
	FINANCIAL INTERMEDIARIES
		Banks as Intermediaries
		Another Example: Venture Capital
	RISK AND RETURN
		The Stock Market and the Risk-Return Principle
	THE DIVERSITY OF FINANCIAL INTERMEDIARIES
		The Bond Market
		Government Borrowing
	THE CAUSES OF THE FINANCIAL CRISIS
	CONCLUSION
CH 14 INTERNATIONAL TRADE
	THE NATURE OF INTERNATIONAL TRADE
		Falling Natural Barriers to Trade
		The Lowering of Legal Barriers
	THE GAINS FROM TRADE
		Lower Prices of Goods and Services
		Access to Natural Resources
		Access to Global Markets
		Access to New Ideas
	ABSOLUTE ADVANTAGE VERSUS COMPARATIVE ADVANTAGE
		Absolute Advantage
		The Theory of Comparative Advantage
	WINNERS AND LOSERS
		Winners: Consumers
		Winners: Worker's Who Don't Compete with Imports
		Winners: Innovative Companies and Their Employees
		Losers: Unemployed Workers
		The Adjustment Process
		Arguments for Protectionism
	EXCHANGE RATES
		Effects of Appreciation and Depreciation
	THE TRADE BALANCE
		Some Explanations for the Trade Deficit
		Paying for Trade
	CONCLUSION
CH 15 TECHNOLOGICAL CHANGE
	THE NATURE OF TECHNOLOGICAL CHANGE
		The Information Revolution
	THREE TYPES OF INNOVATION
		Productivity Enhancements
		New Goods and Services
		Quality of Life
	INNOVATIVE ACTIVITIES
		The Market for Innovative Activities
	INNOVATION: THE SUPPLY SIDE
		Availability of Scientists and Engineers
		Availability of Venture Capital
		Location in an Innovation Cluster
	INNOVATION: THE DEMAND SIDE
		Return and Risk from Innovative Activities
		Patents and Other Intellectual Property Protection
		Intensity of Competition
		The Diffusion of New Technologies
	CONCLUSION
CH 16 ECONOMICS OF THE LABOR MARKET
	THE BASICS OF THE LABOR MARKET
		The Labor Supply Curve
		The Labor Demand Curve
		An Example of Labor Demand
	LABOR MARKET EQUILIBRIUM AND WAGES
		The Impact of Technological Change
		The Impact of Globalization
	WHY NOT ALL WORKERS ARE THE SAME
		Education
		Age and Experience
	REGULATION OF THE LABOR MARKET
		The Minimum Wage
		The Working Day
		Licensing
		Unions
	LONG-TERM LABOR SUPPLY
		Working-Age Population
		The Impact of Immigration
		Location
	CONCLUSION
CH 17 THE DISTRIBUTION OF INCOME
	THE BASICS OF INCOME DISTRIBUTION
		Quintiles
		One Way to Measure Inequality
	CHANGING INCOME INEQUALITY
		The 80/20 Ratio
		An Alternative View
		Reasons for Rising Inequality
		Poverty
	THE DEBATE OVER INEQUALITY
		Two Competing Notions of Fairness
		Inequality, Growth, and Politics
		Misleading Statistics
	TAXES AND REDISTRIBUTION
		Adding It All Up
	EARNINGS AND LABOR MARKET DISCRIMINATION
	CONCLUSION
CH 18 ECONOMICS OF RETIREMENT AND HEALTH CARE
	THE BASICS OF RETIREMENT
		The Life Cycle Theory of Retirement
		Problems with the Life Cycle Theory
		Sources of Retirement Income
	EMPLOYER RETIREMENT PLANS
		Defined Benefit versus Defined Contribution
		The Limitations of Employer Retirement Plans
	SOCIAL SECURITY
		How Social Security Works Today
		The Demographic Challenge Facing Social Security
		Will Social Security Run Out of Money?
		Fixing the Retirement Shortfall
	THE BASICS OF HEALTH CARE SPENDING
		The Health Care Life Cycle
		Problems with the Health Care Life Cycle
	THE RISING COST OF HEALTH CARE
		Demographic Change
		Rising Incomes
		Third-Party Payments
		Tax Deductions for Employer Health Care
		Rapid Technological Change
		Bad Medicine
	HEALTH CARE REFORM
		Affordable Care Act of 2010
		The Role of Government in Health Care
	CONCLUSION
CH 19 ECONOMICS OF ENERGY, THE ENVIRONMENT, AND GLOBAL CLIMATE CHANGE
	THE BASICS OF ENERGY CONSUMPTION AND SUPPLY
		Energy Consumption
		Energy Supply: Fossil Fuels
		Energy Supply: Renewable and Nuclear
		Distribution of Supply
		The Price of Energy
	ENERGY SUSTAINABILITY
		The Economics of Conservation
		Alternatives to Fossil Fuels
	ECONOMICS OF THE ENVIRONMENT
		Sources of Pollution Externalities
		The Impact of Pollution Externalities
		Measuring the Damage Done by Pollution Externalities
		Costs in a Market with Externalities
	CONTROLLING POLLUTION
		Command-and-Control Approaches
		Market-Based Approaches
	GLOBAL CLIMATE CHANGE
		The Potential Costs of Global Climate Change
		Policy Response: Adaptation
		Policy Response: Mitigation
		An International Problem
	CONCLUSION
GLOSSARY
INDEX