Economics: Principles and Policy, 11th Edition

Cover Page......Page 1
Title Page......Page 2
Copyright Page......Page 3
Dedication......Page 4
Preface......Page 26
About the Authors......Page 29
Brief Contents......Page 5
Table of Contents......Page 7
PART 1: GETTING ACQUAINTED WITH ECONOMICS\n......Page 31
CHAPTER 1 WHAT IS ECONOMICS?......Page 32
IDEAS FOR BEYOND THE FINAL EXAM......Page 33
INSIDE THE ECONOMIST’S TOOL KIT......Page 37
Summary......Page 42
APPENDIX: Using Graphs: A Review(1)......Page 43
CHAPTER 2 THE ECONOMY: MYTH AND REALITY......Page 50
THE AMERICAN ECONOMY: A THUMBNAIL SKETCH......Page 51
THE INPUTS: LABOR AND CAPITAL......Page 55
THE OUTPUTS: WHAT DOES AMERICA PRODUCE?......Page 59
THE CENTRAL ROLE OF BUSINESS FIRMS......Page 60
WHAT’S MISSING FROM THE PICTURE? GOVERNMENT......Page 61
Key Terms......Page 65
Discussion Questions......Page 66
CHAPTER 3 THE FUNDAMENTAL ECONOMIC PROBLEM: SCARCITY AND CHOICE......Page 67
SCARCITY, CHOICE, AND OPPORTUNITY COST......Page 68
SCARCITY AND CHOICE FOR A SINGLE FIRM......Page 70
SCARCITY AND CHOICE FOR THE ENTIRE SOCIETY......Page 73
THE CONCEPT OF EFFICIENCY......Page 74
THE THREE COORDINATION TASKS OF ANY ECONOMY\n......Page 75
TASK 1. HOW THE MARKET FOSTERS EFFICIENT RESOURCE ALLOCATION......Page 76
TASK 3. HOW TO DISTRIBUTE THE ECONOMY’S OUTPUTS AMONG CONSUMERS......Page 78
Summary......Page 80
Discussion Questions......Page 81
CHAPTER 4 SUPPLY AND DEMAND: AN INITIAL LOOK......Page 82
THE INVISIBLE HAND......Page 83
DEMAND AND QUANTITY DEMANDED......Page 84
SUPPLY AND QUANTITY SUPPLIED......Page 88
SUPPLY AND DEMAND EQUILIBRIUM......Page 91
EFFECTS OF DEMAND SHIFTS ON SUPPLY-DEMAND EQUILIBRIUM......Page 93
SUPPLY SHIFTS AND SUPPLY-DEMAND EQUILIBRIUM......Page 94
BATTLING THE INVISIBLE HAND: THE MARKET FIGHTS BACK......Page 97
Summary......Page 103
Test Yourself......Page 104
Discussion Questions......Page 105
PART 2: THE BUILDING BLOCKS OF DEMAND AND SUPPLY......Page 107
CHAPTER 5 CONSUMER CHOICE: INDIVIDUAL AND MARKET DEMAND......Page 108
SCARCITY AND DEMAND......Page 109
UTILITY: A TOOL TO ANALYZE PURCHASE DECISIONS......Page 110
CONSUMER CHOICE AS A TRADE-OFF: OPPORTUNITY COST......Page 117
FROM INDIVIDUAL DEMAND CURVES TO MARKET DEMAND CURVES......Page 121
Summary......Page 123
APPENDIX: Analyzing Consumer Choice Graphically: Indifference Curve Analysis......Page 124
CHAPTER 6 DEMAND AND ELASTICITY......Page 132
ELASTICITY: THE MEASURE OF RESPONSIVENESS......Page 133
PRICE ELASTICITY OF DEMAND: ITS EFFECT ON TOTAL REVENUE AND TOTAL EXPENDITURE......Page 138
WHAT DETERMINES DEMAND ELASTICITY?......Page 140
ELASTICITY AS A GENERAL CONCEPT......Page 141
THE TIME PERIOD OF THE DEMAND CURVE AND ECONOMIC DECISION MAKING......Page 143
REAL-WORLD APPLICATION: POLAROID VERSUS KODAK(5)......Page 145
Test Yourself......Page 146
APPENDIX: How Can We Find a Legitimate Demand Curve from Historical Statistics?......Page 147
CHAPTER 7 PRODUCTION, INPUTS, AND COST: BUILDING BLOCKS FOR SUPPLY ANALYSIS......Page 151
SHORT-RUN VERSUS LONG-RUN COSTS: WHAT MAKES AN INPUT VARIABLE?......Page 152
PRODUCTION, INPUT CHOICE, AND COST WITH ONE VARIABLE INPUT......Page 154
MULTIPLE INPUT DECISIONS: THE CHOICE OF OPTIMAL INPUT COMBINATIONS(5)......Page 157
COST AND ITS DEPENDENCE ON OUTPUT......Page 161
ECONOMIES OF SCALE......Page 166
Summary......Page 171
Test Yourself......Page 172
APPENDIX: Production Indifference Curves......Page 173
CHAPTER 8 OUTPUT, PRICE, AND PROFIT: THE IMPORTANCE OF MARGINAL ANALYSIS......Page 178
PRICE AND QUANTITY: ONE DECISION, NOT TWO......Page 180
ECONOMIC PROFIT AND OPTIMAL DECISION MAKING......Page 181
MARGINAL ANALYSIS AND MAXIMIZATION OF TOTAL PROFIT......Page 186
GENERALIZATION: THE LOGIC OF MARGINAL ANALYSIS AND MAXIMIZATION......Page 191
CONCLUSION: THE FUNDAMENTAL ROLE OF MARGINAL ANALYSIS......Page 193
Summary......Page 194
Discussion Question......Page 195
APPENDIX: The Relationships Among Total, Average, and Marginal Data......Page 196
CHAPTER 9 INVESTING IN BUSINESS: STOCKS AND BONDS......Page 199
CORPORATIONS AND THEIR UNIQUE CHARACTERISTICS......Page 201
BUYING STOCKS AND BONDS......Page 205
STOCK EXCHANGES AND THEIR FUNCTIONS......Page 207
SPECULATION......Page 211
Test Yourself......Page 215
Discussion Questions......Page 216
PART 3: MARKETS AND THE PRICE SYSTEM......Page 217
CHAPTER 10 THE FIRM AND THE INDUSTRY UNDER PERFECT COMPETITION......Page 218
PERFECT COMPETITION DEFINED......Page 219
THE PERFECTLY COMPETITIVE FIRM......Page 220
THE PERFECTLY COMPETITIVE INDUSTRY......Page 226
PERFECT COMPETITION AND ECONOMIC EFFICIENCY......Page 232
Test Yourself......Page 235
Discussion Questions......Page 236
CHAPTER 11 MONOPOLY......Page 237
MONOPOLY DEFINED......Page 238
THE MONOPOLIST’S SUPPLY DECISION......Page 241
CAN ANYTHING GOOD BE SAID ABOUT MONOPOLY?......Page 246
PRICE DISCRIMINATION UNDER MONOPOLY......Page 247
Summary......Page 251
Discussion Questions......Page 252
CHAPTER 12 BETWEEN COMPETITION AND MONOPOLY......Page 254
MONOPOLISTIC COMPETITION......Page 255
OLIGOPOLY......Page 260
MONOPOLISTIC COMPETITION, OLIGOPOLY, AND PUBLIC WELFARE......Page 276
A GLANCE BACKWARD: COMPARING THE FOUR MARKET FORMS......Page 277
Summary......Page 278
Discussion Questions......Page 279
CHAPTER 13 LIMITING MARKET POWER: REGULATION AND ANTITRUST......Page 281
THE PUBLIC INTEREST ISSUE: MONOPOLY POWER VERSUS MERE SIZE......Page 282
PART 1: ANTITRUST LAWS AND POLICIES......Page 283
MEASURING MARKET POWER: CONCENTRATION......Page 285
A CRUCIAL PROBLEM FOR ANTITRUST: THE RESEMBLANCE OF MONOPOLIZATION AND VIGOROUS COMPETITION......Page 287
ANTICOMPETITIVE PRACTICES AND ANTITRUST......Page 288
USE OF ANTITRUST LAWS TO PREVENT COMPETITION......Page 289
WHAT IS REGULATION?......Page 291
SOME OBJECTIVES OF REGULATION......Page 292
TWO KEY ISSUES THAT FACE REGULATORS......Page 293
THE PROS AND CONS OF “BIGNESS”......Page 296
DEREGULATION......Page 297
CONCLUDING OBSERVATIONS......Page 300
Discussion Questions......Page 301
PART 4: THE VIRTUES AND LIMITATIONS OF MARKETS......Page 303
CHAPTER 14 THE CASE FOR FREE MARKETS I: THE PRICE SYSTEM......Page 304
EFFICIENT RESOURCE ALLOCATION AND PRICING......Page 305
SCARCITY AND THE NEED TO COORDINATE ECONOMIC DECISIONS......Page 309
HOW PERFECT COMPETITION ACHIEVES EFFICIENCY: A GRAPHIC ANALYSIS......Page 316
HOW PERFECT COMPETITION ACHIEVES OPTIMAL OUTPUT: MARGINAL ANALYSIS......Page 318
TOWARD ASSESSMENT OF THE PRICE MECHANISM......Page 323
Discussion Questions......Page 324
CHAPTER 15 THE SHORTCOMINGS OF FREE MARKETS......Page 326
WHAT DOES THE MARKET DO POORLY?......Page 327
EFFICIENT RESOURCE ALLOCATION: A REVIEW......Page 328
EXTERNALITIES: GETTING THE PRICES WRONG......Page 329
PROVISION OF PUBLIC GOODS......Page 333
ALLOCATION OF RESOURCES BETWEEN PRESENT AND FUTURE......Page 335
SOME OTHER SOURCES OF MARKET FAILURE......Page 337
MARKET FAILURE AND GOVERNMENT FAILURE......Page 340
THE COST DISEASE OF SOME VITAL SERVICES: INVITATION TO GOVERNMENT FAILURE......Page 341
EPILOGUE: THE UNFORGIVING MARKET, ITS GIFT OF ABUNDANCE, AND ITS DANGEROUS FRIENDS......Page 347
Summary......Page 348
Discussion Questions......Page 349
CHAPTER 16 THE MARKET’S PRIME ACHIEVEMENT: INNOVATION AND GROWTH......Page 350
THE MARKET ECONOMY’S INCREDIBLE GROWTH RECORD......Page 351
INNOVATION, NOT INVENTION, IS THE UNIQUE FREE-MARKET ACCOMPLISHMENT......Page 355
SOURCES OF FREE-MARKET INNOVATION: THE ROLE OF THE ENTREPRENEUR......Page 356
MICROECONOMIC ANALYSIS OF THE INNOVATIVE OLIGOPOLY FIRM......Page 357
DO FREE MARKETS SPEND ENOUGH ON R&D ACTIVITIES?......Page 366
THE MARKET ECONOMY AND THE SPEEDY DISSEMINATION OF NEW TECHNOLOGY......Page 368
Summary......Page 370
Discussion Questions......Page 371
CHAPTER 17 EXTERNALITIES, THE ENVIRONMENT, AND NATURAL RESOURCES......Page 372
REVIEW—EXTERNALITIES: A CRITICAL SHORTCOMING OF THE MARKET MECHANISM......Page 373
BASIC APPROACHES TO ENVIRONMENTAL POLICY......Page 380
TWO CHEERS FOR THE MARKET......Page 384
PART 2: THE ECONOMICS OF NATURAL RESOURCES......Page 385
ECONOMIC ANALYSIS: THE FREE MARKET AND PRICING OF DEPLETABLE RESOURCES......Page 386
ACTUAL RESOURCE PRICES IN THE TWENTIETH CENTURY......Page 388
Key Terms......Page 392
Discussion Questions......Page 393
CHAPTER 18 TAXATION AND RESOURCE ALLOCATION......Page 394
THE LEVEL AND TYPES OF TAXATION......Page 395
THE FEDERAL TAX SYSTEM......Page 396
THE STATE AND LOCAL TAX SYSTEM......Page 400
THE CONCEPT OF EQUITY IN TAXATION......Page 401
THE CONCEPT OF EFFICIENCY IN TAXATION......Page 402
SHIFTING THE TAX BURDEN: TAX INCIDENCE......Page 404
EQUITY, EFFICIENCY, AND THE OPTIMAL TAX......Page 408
Key Terms......Page 410
Discussion Questions......Page 411
PART 5: THE DISTRIBUTION OF INCOME......Page 412
CHAPTER 19 PRICING THE FACTORS OF PRODUCTION......Page 413
THE PRINCIPLE OF MARGINAL PRODUCTIVITY......Page 414
INPUTS AND THEIR DERIVED DEMAND CURVES......Page 415
INVESTMENT, CAPITAL, AND INTEREST......Page 417
THE DETERMINATION OF RENT......Page 421
PAYMENTS TO BUSINESS OWNERS: ARE PROFITS TOO HIGH OR TOO LOW?......Page 427
CRITICISMS OF MARGINAL PRODUCTIVITY THEORY......Page 430
Summary......Page 431
Discussion Questions......Page 432
APPENDIX: Discounting and Present Value......Page 433
CHAPTER 20 LABOR AND ENTREPRENEURSHIP: THE HUMAN INPUTS......Page 435
PART 1: THE MARKETS FOR LABOR......Page 436
WAGE DETERMINATION IN COMPETITIVE MARKETS......Page 437
THE SUPPLY OF LABOR......Page 440
WHY DO WAGES DIFFER?......Page 444
UNIONS AND COLLECTIVE BARGAINING......Page 446
ENTREPRENEURSHIP AND GROWTH......Page 451
INSTITUTIONS AND THE SUPPLY OF INNOVATIVE ENTREPRENEURSHIP......Page 456
Summary......Page 457
Test Yourself......Page 458
Discussion Questions......Page 459
CHAPTER 21 POVERTY, INEQUALITY, AND DISCRIMINATION......Page 460
THE FACTS: POVERTY......Page 461
THE FACTS: INEQUALITY......Page 464
SOME REASONS FOR UNEQUAL INCOMES......Page 465
THE FACTS: DISCRIMINATION......Page 467
THE TRADE-OFF BETWEEN EQUALITY AND EFFICIENCY......Page 468
POLICIES TO COMBAT POVERTY......Page 469
OTHER POLICIES TO COMBAT INEQUALITY......Page 472
POLICIES TO COMBAT DISCRIMINATION......Page 473
A LOOK BACK......Page 474
Test Yourself......Page 475
APPENDIX: The Economic Theory of Discrimination......Page 476
PART 6: THE MACROECONOMY: AGGREGATE SUPPLY AND DEMAND......Page 479
CHAPTER 22 AN INTRODUCTION TO MACROECONOMICS......Page 480
DRAWING A LINE BETWEEN MACROECONOMICS AND MICROECONOMICS......Page 481
SUPPLY AND DEMAND IN MACROECONOMICS......Page 482
GROSS DOMESTIC PRODUCT......Page 484
THE ECONOMY ON A ROLLER COASTER......Page 488
THE PROBLEM OF MACROECONOMIC STABILIZATION: A SNEAK PREVIEW......Page 496
Summary......Page 498
Test Yourself......Page 499
Discussion Questions......Page 500
CHAPTER 23 THE GOALS OF MACROECONOMIC POLICY......Page 501
PRODUCTIVITY GROWTH: FROM LITTLE ACORNS . . .......Page 502
THE CAPACITY TO PRODUCE: POTENTIAL GDP AND THE PRODUCTION FUNCTION......Page 504
THE GROWTH RATE OF POTENTIAL GDP......Page 505
PART 2: THE GOAL OF LOW UNEMPLOYMENT......Page 507
THE HUMAN COSTS OF HIGH UNEMPLOYMENT......Page 508
COUNTING THE UNEMPLOYED: THE OFFICIAL STATISTICS......Page 509
TYPES OF UNEMPLOYMENT......Page 510
UNEMPLOYMENT INSURANCE: THE INVALUABLE CUSHION......Page 511
PART 3: THE GOAL OF LOW INFLATION......Page 512
INFLATION: THE MYTH AND THE REALITY......Page 513
REAL VERSUS NOMINAL INTEREST RATES......Page 516
INFLATION DISTORTS MEASUREMENTS......Page 517
OTHER COSTS OF INFLATION......Page 518
THE COSTS OF LOW VERSUS HIGH INFLATION......Page 519
Summary......Page 521
Test Yourself......Page 522
APPENDIX: How Statisticians Measure Inflation......Page 523
CHAPTER 24 ECONOMIC GROWTH: THEORY AND POLICY......Page 528
THE THREE PILLARS OF PRODUCTIVITY GROWTH......Page 529
LEVELS, GROWTH RATES, AND THE CONVERGENCE HYPOTHESIS......Page 531
GROWTH POLICY: ENCOURAGING CAPITAL FORMATION......Page 533
GROWTH POLICY: IMPROVING EDUCATION AND TRAINING......Page 535
GROWTH POLICY: SPURRING TECHNOLOGICAL CHANGE......Page 537
THE PRODUCTIVITY SLOWDOWN AND SPEED-UP IN THE UNITED STATES......Page 538
GROWTH IN THE DEVELOPING COUNTRIES(6)......Page 542
Summary......Page 544
Test Yourself......Page 545
Discussion Questions......Page 546
CHAPTER 25 AGGREGATE DEMAND AND THE POWERFUL CONSUMER......Page 547
AGGREGATE DEMAND, DOMESTIC PRODUCT, AND NATIONAL INCOME......Page 548
THE CIRCULAR FLOW OF SPENDING, PRODUCTION, AND INCOME......Page 549
CONSUMER SPENDING AND INCOME: THE IMPORTANT RELATIONSHIP......Page 551
THE CONSUMPTION FUNCTION AND THE MARGINAL PROPENSITY TO CONSUME......Page 554
FACTORS THAT SHIFT THE CONSUMPTION FUNCTION......Page 555
THE EXTREME VARIABILITY OF INVESTMENT......Page 558
THE DETERMINANTS OF NET EXPORTS......Page 559
Summary......Page 560
Test Yourself......Page 561
APPENDIX: National Income Accounting......Page 562
CHAPTER 26 DEMAND-SIDE EQUILIBRIUM: UNEMPLOYMENT OR INFLATION?......Page 569
THE MEANING OF EQUILIBRIUM GDP......Page 570
THE MECHANICS OF INCOME DETERMINATION......Page 572
THE AGGREGATE DEMAND CURVE......Page 574
DEMAND-SIDE EQUILIBRIUM AND FULL EMPLOYMENT......Page 576
THE COORDINATION OF SAVING AND INVESTMENT......Page 577
CHANGES ON THE DEMAND SIDE: MULTIPLIER ANALYSIS......Page 579
THE MULTIPLIER IS A GENERAL CONCEPT......Page 583
THE MULTIPLIER AND THE AGGREGATE DEMAND CURVE......Page 584
Summary......Page 585
Test Yourself......Page 586
APPENDIX A: The Simple Algebra of Income Determination and the Multiplier......Page 587
APPENDIX B: The Multiplier with Variable Imports......Page 588
CHAPTER 27 BRINGING IN THE SUPPLY SIDE: UNEMPLOYMENT AND INFLATION?......Page 592
THE AGGREGATE SUPPLY CURVE......Page 593
EQUILIBRIUM OF AGGREGATE DEMAND AND SUPPLY......Page 596
INFLATION AND THE MULTIPLIER......Page 597
RECESSIONARY AND INFLATIONARY GAPS REVISITED......Page 598
ADJUSTING TO A RECESSIONARY GAP: DEFLATION OR UNEMPLOYMENT?......Page 600
ADJUSTING TO AN INFLATIONARY GAP: INFLATION......Page 602
STAGFLATION FROM A SUPPLY SHOCK......Page 604
APPLYING THE MODEL TO A GROWING ECONOMY......Page 605
Summary......Page 609
Test Yourself......Page 610
Discussion Questions......Page 611
PART 7: FISCAL AND MONETARY POLICY......Page 612
CHAPTER 28 MANAGING AGGREGATE DEMAND: FISCAL POLICY......Page 613
INCOME TAXES AND THE CONSUMPTION SCHEDULE......Page 614
THE MULTIPLIER REVISITED......Page 615
PLANNING EXPANSIONARY FISCAL POLICY......Page 618
THE CHOICE BETWEEN SPENDING POLICY AND TAX POLICY......Page 619
SOME HARSH REALITIES......Page 620
THE IDEA BEHIND SUPPLY-SIDE TAX CUTS......Page 621
Test Yourself......Page 625
APPENDIX A: Graphical Treatment of Taxes and Fiscal Policy......Page 626
APPENDIX B: Algebraic Treatment of Taxes and Fiscal Policy......Page 630
CHAPTER 29 MONEY AND THE BANKING SYSTEM......Page 633
THE NATURE OF MONEY......Page 634
HOW THE QUANTITY OF MONEY IS MEASURED......Page 638
THE BANKING SYSTEM......Page 640
THE ORIGINS OF THE MONEY SUPPLY......Page 643
BANKS AND MONEY CREATION......Page 644
WHY THE MONEY-CREATION FORMULA IS OVERSIMPLIFIED......Page 650
Summary......Page 651
Discussion Questions......Page 652
CHAPTER 30 MANAGING AGGREGATE DEMAND: MONETARY POLICY......Page 653
MONEY AND INCOME: THE IMPORTANT DIFFERENCE......Page 654
AMERICA’S CENTRAL BANK: THE FEDERAL RESERVE SYSTEM......Page 655
IMPLEMENTING MONETARY POLICY: OPEN-MARKET OPERATIONS......Page 657
OTHER METHODS OF MONETARY CONTROL......Page 660
HOW MONETARY POLICY WORKS......Page 662
MONEY AND THE PRICE LEVEL IN THE KEYNESIAN MODEL......Page 664
FROM MODELS TO POLICY DEBATES......Page 666
Test Yourself......Page 667
Discussion Questions......Page 668
CHAPTER 31 THE DEBATE OVER MONETARY AND FISCAL POLICY......Page 669
VELOCITY AND THE QUANTITY THEORY OF MONEY......Page 670
FISCAL POLICY, INTEREST RATES, AND VELOCITY......Page 673
DEBATE: SHOULD WE RELY ON FISCAL OR MONETARY POLICY?......Page 675
DEBATE: SHOULD THE FED CONTROL THE MONEY SUPPLY OR INTEREST RATES?......Page 676
DEBATE: THE SHAPE OF THE AGGREGATE SUPPLY CURVE......Page 679
DEBATE: SHOULD THE GOVERNMENT INTERVENE?......Page 681
DIMENSIONS OF THE RULES-VERSUS-DISCRETION DEBATE......Page 683
Summary......Page 687
Test Yourself......Page 688
Discussion Questions......Page 689
CHAPTER 32 BUDGET DEFICITS IN THE SHORT AND LONG RUN......Page 690
SHOULD THE BUDGET ALWAYS BE BALANCED? THE SHORT RUN......Page 691
SURPLUSES AND DEFICITS: THE LONG RUN......Page 692
DEFICITS AND DEBT: TERMINOLOGY AND FACTS......Page 694
INTERPRETING THE BUDGET DEFICIT OR SURPLUS......Page 696
WHY IS THE NATIONAL DEBT CONSIDERED A BURDEN?......Page 698
BUDGET DEFICITS AND INFLATION......Page 699
DEBT, INTEREST RATES, AND CROWDING OUT......Page 701
THE MAIN BURDEN OF THE NATIONAL DEBT: SLOWER GROWTH......Page 702
THE ECONOMICS AND POLITICS OF THE U.S. BUDGET DEFICIT......Page 705
Test Yourself......Page 706
Discussion Questions......Page 707
CHAPTER 33 THE TRADE-OFF BETWEEN INFLATION AND UNEMPLOYMENT......Page 708
DEMAND-SIDE INFLATION VERSUS SUPPLY-SIDE INFLATION: A REVIEW......Page 709
ORIGINS OF THE PHILLIPS CURVE......Page 710
SUPPLY-SIDE INFLATION AND THE COLLAPSE OF THE PHILLIPS CURVE......Page 712
WHAT THE PHILLIPS CURVE IS NOT......Page 713
FIGHTING UNEMPLOYMENT WITH FISCAL AND MONETARY POLICY......Page 715
WHAT SHOULD BE DONE?......Page 716
INFLATIONARY EXPECTATIONS AND THE PHILLIPS CURVE......Page 717
THE THEORY OF RATIONAL EXPECTATIONS......Page 719
WHY ECONOMISTS (AND POLITICIANS) DISAGREE......Page 721
ATTEMPTS TO REDUCE THE NATURAL RATE OF UNEMPLOYMENT......Page 722
INDEXING......Page 723
Summary......Page 724
Discussion Questions......Page 725
PART 8: THE UNITED STATES IN THE WORLD ECONOMY......Page 727
CHAPTER 34 INTERNATIONAL TRADE AND COMPARATIVE ADVANTAGE......Page 728
WHY TRADE?......Page 730
INTERNATIONAL VERSUS INTRANATIONAL TRADE......Page 731
THE LAW OF COMPARATIVE ADVANTAGE......Page 732
TARIFFS, QUOTAS, AND OTHER INTERFERENCES WITH TRADE......Page 737
WHY INHIBIT TRADE?......Page 739
CAN CHEAP IMPORTS HURT A COUNTRY?......Page 742
Key Terms......Page 745
Discussion Questions......Page 746
APPENDIX: Supply, Demand, and Pricing in World Trade......Page 747
CHAPTER 35 THE INTERNATIONAL MONETARY SYSTEM: ORDER OR DISORDER?......Page 750
WHAT ARE EXCHANGE RATES?......Page 751
EXCHANGE RATE DETERMINATION IN A FREE MARKET......Page 752
WHEN GOVERNMENTS FIX EXCHANGE RATES: THE BALANCE OF PAYMENTS......Page 758
A BIT OF HISTORY: THE GOLD STANDARD AND THE BRETTON WOODS SYSTEM......Page 759
WHY TRY TO FIX EXCHANGE RATES?......Page 761
THE CURRENT “NONSYSTEM”......Page 762
Key Terms......Page 766
Discussion Questions......Page 767
CHAPTER 36 EXCHANGE RATES AND THE MACROECONOMY......Page 768
INTERNATIONAL TRADE, EXCHANGE RATES, AND AGGREGATE DEMAND......Page 769
AGGREGATE SUPPLY IN AN OPEN ECONOMY......Page 771
THE MACROECONOMIC EFFECTS OF EXCHANGE RATES......Page 772
FISCAL AND MONETARY POLICIES IN AN OPEN ECONOMY......Page 773
INTERNATIONAL ASPECTS OF DEFICIT REDUCTION......Page 775
ON CURING THE TRADE DEFICIT......Page 777
CONCLUSION: NO NATION IS AN ISLAND......Page 779
Summary......Page 780
Discussion Questions......Page 781
PART 9: POSTSCRIPT: THE FINANCIAL CRISIS OF 2007–2009......Page 782
CHAPTER 37 THE FINANCIAL CRISIS AND THE GREAT RECESSION......Page 783
ROOTS OF THE CRISIS......Page 784
LEVERAGE, PROFITS, AND RISK......Page 786
THE HOUSING PRICE BUBBLE AND THE SUBPRIME MORTGAGE CRISIS......Page 788
FROM THE HOUSING BUBBLE TO THE FINANCIAL CRISIS......Page 790
FROM THE FINANCIAL CRISIS TO THE GREAT RECESSION......Page 792
HITTING BOTTOM AND RECOVERING......Page 795
LESSONS FROM THE FINANCIAL CRISIS......Page 796
Key Terms......Page 797
Discussion Questions......Page 798
APPENDIX: Answers to Odd-Numbered Test Yourself Questions......Page 799
GLOSSARY......Page 817
INDEX......Page 829