Principles of Economics

About this Book
	Cover Page
	Brief Contents
	Title Page
	Copyright Page
	Dedication
	About the Authors
	A Fresh Perspective on Economics
	Broad. Useful. Intuitive.
		Broadly Applicable
		Extraordinarily Useful
		Refreshingly Intuitive
	Build a Solid Foundation
		Four Core Principles. Endless Applications.
		Economic Intuition Begins with the Basics
		From Fundamentals to "One Economics"
		Useful Economics for the Real World
	Teaching Modern Economics
		Every Decision Is an Economic Decision
		From Market Structure to Business Strategy
		Micro Foundations of Macroeconomics
		A Flexible Approach to Business Cycle Models
	Applications That Keep It Real
		Everyday Economics
		Interpreting the Data
		Do the Economics
	Tools That Prepare and Engage
		It Helps to Have a Navigation System
			The Big Picture
			The road ahead
			Every roadmap needs landmarks
			Marginal reminders
		Don’t Just Summarize … Synthesize
			Tying It Together
			Built-in study guide
			Chapter at a Glance
			Questions for discussion and assessment
		Practice the Process of Graphing
			Step-by-step breakdowns of key graphs
			Casual graphs model good economics habits
			Practice, practice, practice
	Technology That Supports Learning
		Everything You Need in a Single Learning Path
			Pre-class Tutorials
			Interactive Decision Points
			LearningCurve Adaptive Quizzing
			Step-by-Step Graphs
			End-of-Chapter Activities with Graphing Questions
			Work It Out Activities
	Powerful Support for Instructors
		Assessment
			Test Bank
			End-of-Chapter Questions
			Practice Quizzes
		Additional Resources
			Gradebook
			LMS Integration
			Instructor’s Resource Manual
			Solutions Manual
			Lecture Slides
			Active Learning Resources
	Acknowledgments
	Organization of This Book
	Contents
A Quick Review of Graphs
	Graphs That Break Down Numbers
		Pie Charts
		Analyzing Distributions
	Graphs That Show Comparisons
		Bar Chart and Dot Plot
		Time-Series Graphs
	Graphs That Show Relationships
		Scatterplot
		The stylized graphs of economics
	A Relationship Is Not the Same Thing as Cause and Effect
Part I: Foundations of Economics
	Chapter 1: The Core Principles of Economics
		1.1 A Principled Approach to Economics
			The Economic Approach
			A Systematic Framework for Making Decisions
		1.2 The Cost-Benefit Principle
			Quantifying Costs and Benefits
			Maximize Your Economic Surplus
			Focus on Costs and Benefits, Not How They’re Framed
			Applying the Cost-Benefit Principle
		1.3 The Opportunity Cost Principle
			Opportunity Costs Reflect Scarcity
			Calculating Your Opportunity Costs
			The “Or What?” Trick
			How Entrepreneurs Think About Opportunity Cost
			You Should Ignore Sunk Costs
			Applying the Opportunity Cost Principle
			The Production Possibility Frontier
			Recap: Evaluating Either/Or Decisions
		1.4 The Marginal Principle
			When Is the Marginal Principle Useful?
			Using the Rational Rule to Maximize Your Economic Surplus
			Applying the Rational Rule
		1.5 The Interdependence Principle
			Interdependency One: Dependencies Between Your Own Choices
			Interdependency Two: Dependencies Between People (or Businesses)
			Interdependency Three: Dependencies Between Markets
			Interdependency Four: Dependencies Over Time
			What Else?
		Tying It Together
			Using the Core Principles in Practice
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 2: Demand: Thinking Like a Buyer
		2.1 Individual Demand: What You Want, at Each Price
			An Individual Demand Curve
			The Law of Demand
		2.2 Your Decisions and Your Demand Curve
			Choosing the Best Quantity to Buy
			The Rational Rule for Buyers
			How Realistic Is This Theory of Demand?
		2.3 Market Demand: What the Market Wants
			From Individual Demand to Market Demand
			The Market Demand Curve Is Downward-Sloping
			Movements Along the Demand Curve
		2.4 What Shifts Demand Curves?
			The Interdependence Principle and Shifting Demand Curves
			Six Factors Shifting the Demand Curve
		2.5 Shifts versus Movements Along Demand Curves
			Movements Along the Demand Curve
			Shifts in Demand
		Tying It Together
			Individual Demand
			Market Demand
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 3: Supply: Thinking Like a Seller
		3.1 Individual Supply: What You Sell, at Each Price
			An Individual Supply Curve
			The Law of Supply
		3.2 Your Decisions and Your Individual Supply Curve
			Setting Prices in Competitive Markets
			Choosing the Best Quantity to Supply
			The Rational Rule for Sellers in Competitive Markets
			Rising Marginal Cost Explains Why Your Supply Curve Is Upward-Sloping
			How Realistic Is This Theory of Supply?
		3.3 Market Supply: What the Market Sells
			From Individual Supply to Market Supply
			The Market Supply Curve Is Upward-Sloping
			Movements Along the Supply Curve
		3.4 What Shifts Supply Curves?
			The Interdependence Principle and Shifting Supply Curves
			Five Factors Shifting the Supply Curve
		3.5 Shifts versus Movements Along Supply Curves
			Movements Along the Supply Curve
			Shifts in Supply
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 4: Equilibrium: Where Supply Meets Demand
		4.1 Understanding Markets
			What Is a Market?
			How Markets Are Organized
		4.2 Equilibrium
			Supply Equals Demand
			Getting to Equilibrium
			Figuring Out Whether Markets Are in Equilibrium
		4.3 Predicting Market Changes
			Shifts in Demand
			Shifts in Supply
			Predicting Market Outcomes
			When Both Supply and Demand Shift
			Interpreting Market Data
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part II: Analyzing Markets
	Chapter 5: Elasticity: Measuring Responsiveness
		5.1 Price Elasticity of Demand
			Measuring Responsiveness of Demand
			Determinants of the Price Elasticity of Demand
			Calculating the Price Elasticity of Demand
		5.2 How Businesses Use Demand Elasticity
			Elasticity and Revenue
			Elasticity and Business Strategy
		5.3 Other Demand Elasticities
			Cross-Price Elasticity of Demand
			Income Elasticity of Demand
		5.4 Price Elasticity of Supply
			Measuring Responsiveness of Supply
			Determinants of the Price Elasticity of Supply
			Calculating the Price Elasticity of Supply
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 6: When Governments Intervene in Markets
		6.1 How Taxes and Subsidies Change Market Outcomes
			A Tax on Sellers
			A Tax on Buyers
			The Statutory Burden and Tax Incidence
			The Economic Burden of Taxes
			A Three-Step Recipe for Evaluating Taxes
			Analyzing Subsidies
		6.2 Price Regulations
			Price Ceilings: When Regulation Forces Lower Prices
			Price Floors: When Regulation Forces Higher Prices
		6.3 Quantity Regulations
			Quotas
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 7: Welfare and Efficiency
		7.1 Evaluating Public Policies
			Positive and Normative Policy Analysis
			Efficiency and Equity
		7.2 Measuring Economic Surplus
			Consumer Surplus
			Producer Surplus
			Voluntary Exchange and Gains from Trade
		7.3 Market Efficiency
			Question One: Who Makes What?
			Question Two: Who Gets What?
			Question Three: How Much Gets Bought and Sold?
		7.4 Market Failure and Deadweight Loss
			Market Failure
			Deadweight Loss
			Market Failure versus Government Failure
		7.5 Beyond Economic Efficiency
			Critiques of Economic Efficiency
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 8: Gains from Trade
		8.1 Gains from Trade
		8.2 Comparative Advantage
			Introducing Comparative Advantage
			Comparative Advantage in Action
			Markets Facilitate Gains from Trade
			Comparative Advantage Drives International Trade
		8.3 Prices Are Signals, Incentives, and Information
			Role One: A Price Is a Signal
			Role Two: A Price Is an Incentive
			Role Three: A Price Aggregates Information
		8.4 How Managers Can Harness Market Forces
			Internal Markets Allocate Resources
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part III: Applications and Policy Issues
	Chapter 9: International Trade
		9.1 Comparative Advantage Is the Foundation of International Trade
			Comparative Advantage and International Trade
			What Gets Traded?
			Choosing Your Trading Partners: Sources of Comparative Advantage
		9.2 How International Trade Shapes the Economy
			The World Market
			The Effects of Imports
			Imports Raise Economic Surplus
			The Effects of Exports
			Exports Raise Economic Surplus
			Who Wins, and Who Loses? The Politics of International Trade
		9.3 The Debate About International Trade
			Five Arguments for Limiting International Trade
			An Intuitive Approach to the International Trade Debate
		9.4 International Trade Policy
			Tools of Trade Policy
			Current Trade Policy
		9.5 Effects of Globalization
			Globalization and the Labor Market
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 10: Externalities and Public Goods
		10.1 Identifying Externalities
			Types of Externalities
			The Conflict Between Private Interest and Society’s Interest
		10.2 The Externality Problem
			The Rational Rule for Society
			Consequences of Negative Externalities
			Consequences of Positive Externalities
		10.3 Solving Externality Problems
			Solution One: Private Bargaining and the Coase Theorem
			Solution Two: Corrective Taxes and Subsidies
			Solution Three: Cap and Trade
			Solution Four: Laws, Rules, and Regulations
		10.4 Public Goods and the Tragedy of the Commons
			Public Goods and the Free-Rider Problem
			Solution Five: Government Support for Public Goods
			Solution Six: Assign Ownership Rights for Common Resource Problems
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 11: The Labor Market
		11.1 The Labor Market: Supply and Demand at Work
		11.2 Labor Demand: Thinking Like an Employer
			How Many Workers Should You Hire at What Price?
			The Rational Rule for Employers
			Analyzing Labor Demand Shifts
			Will Robots Take Your Job?
		11.3 Labor Supply: How to Balance Work and Leisure
			Your Individual Labor Supply: Allocating Your Time Between Labor and Leisure
			The Rational Rule for Workers
			The Extensive Margin: Choose Whether or Not to Work
			Choosing Your Occupation
			The Market Labor Supply Curve
			Analyzing Labor Supply Shifts
		11.4 Changing Economic Conditions and Labor Market Equilibrium
			A Three-Step Recipe
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 12: Wages, Workers, and Management
		12.1 Labor Demand: What Employers Want
			Human Capital
			Efficiency Wages
			The Market for Superstars
		12.2 Labor Supply: What Workers Want
			Compensating Differentials
		12.3 Institutional Factors That Explain Why Wages Vary
			Government Regulations
			Unions and Workers’ Bargaining Power
			Monopsony and Employers’ Bargaining Power
		12.4 How Discrimination Affects Wages
			Measuring Discrimination
			Types of Discrimination
		12.5 Personnel Economics
			Ensure Your Workers Have the Right Skills for the Job
			Motivate Your Workers with Incentives
			Shape Your Corporate Culture
			Offer the Right Benefits
			Attract the Best Workers
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 13: Inequality, Social Insurance, and Redistribution
		13.1 Measuring Inequality
			Income Inequality
			Alternative Measures of Inequality
		13.2 Poverty
			Defining Poverty
			Absolute versus Relative Poverty
			The Incidence of Poverty in the United States
		13.3 Social Insurance, the Social Safety Net, and Redistributive Taxation
			The Social Safety Net
			Social Insurance Programs
			The Tax System
		13.4 The Debate About Income Redistribution
			The Economic Logic of Redistribution
			The Costs of Redistribution: The Leaky Bucket
			The Trade-Off Between Efficiency and Equality
			Fairness and Redistribution
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part IV: Market Structure and Business Strategy
	Chapter 14: Market Structure and Market Power
		14.1 Monopoly, Oligopoly, and Monopolistic Competition
			Perfect Competition
			Monopoly: No Direct Competitors
			Oligopoly: Only a Few Strategic Competitors
			Monopolistic Competition: Many Competitors Selling Differentiated Products
			Market Structure Determines Market Power
			Five Key Insights into Imperfect Competition
		14.2 Setting Prices When You Have Market Power
			Your Firm Demand Curve
			Your Marginal Revenue Curve
			The Rational Rule for Sellers
		14.3 The Problem with Market Power
			Market Power Leads to Worse Outcomes
			Increasing Competition Can Lead to Better Outcomes
		14.4 Public Policy to Restrain Market Power
			Laws to Ensure Competition Thrives
			Laws to Minimize the Harm from Exercising Market Power
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 15: Entry, Exit, and Long-Run Profitability
		15.1 Revenues, Costs, and Economic Profits
			Economic Profit versus Accounting Profit
			Average Revenue, Average Cost, and Your Profit Margin
		15.2 Free Entry and Exit in the Long Run
			Entry Decreases Demand and Your Profits
			Exit Increases Demand and Your Profits
			Economic Profits Tend to Zero
			Price Equals Average Cost
		15.3 Barriers to Entry
			Demand-Side Strategies: Create Customer Lock-In
			Supply-Side Strategies: Develop Unique Cost Advantages
			Regulatory Strategy: Government Policy
			Entry Deterrence Strategies: Convince Your Rivals You’ll Crush Them
			Overcoming Barriers to Entry
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 16: Business Strategy
		16.1 The Five Forces That Determine Business Profitability
			Five Forces Framework
			Force One—Existing Competitors: Intensity and Type of Existing Competition
			Force Two—Potential Competitors: Threat of Entry
			Force Three—Competitors in Other Markets: Threat of Potential Substitutes
			Force Four—Bargaining Power of Suppliers
			Force Five—Bargaining Power of Buyers
			Recap: The Five Forces and the Path Ahead
		16.2 Non-Price Competition: Product Positioning
			The Importance of Product Differentiation
			Positioning Your Product
			The Role of Advertising
		16.3 Bargaining Power of Buyers and Sellers
			Bargaining Power
			The Hold-Up Problem
			Contract Theory
			What Should You Make, and What Should You Buy?
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 17: Sophisticated Pricing Strategies
		17.1 Price Discrimination
			Price Discrimination
			The Efficiency of Price Discrimination
			Conditions for Price Discrimination
		17.2 Group Pricing
			Setting Group Prices
			How to Segment Your Market
		17.3 The Hurdle Method
			Alternative Versions and Timing
			Shopping Around
			Extra Hassle, Bad Service, and Imperfect Goods
			Quantity Discounts
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 18: Game Theory and Strategic Choices
		18.1 How to Think Strategically
			Introducing Game Theory
			The Four Steps for Making Good Strategic Decisions
		18.2 The Prisoner’s Dilemma and the Challenge of Cooperation
			Understanding the Prisoner’s Dilemma
			Nash Equilibrium
			The Prisoner’s Dilemma and the Failure of Cooperation
			Examples of the Prisoner’s Dilemma
		18.3 Multiple Equilibria and the Problem of Coordination
			Coordination Games
			Examples of Coordination Games
			Anti-Coordination Games
			Good and Bad Equilibria
			Solving Coordination Problems
		18.4 Advanced Strategy: First and Second Mover Advantages
			Games That Play Out over Time
			Using Tree Logic
			First-Mover Advantage versus Second-Mover Advantage
		18.5 Advanced Strategy: Repeated Games and Punishments
			Collusion and the Prisoner’s Dilemma
			Finitely Repeated Games
			Indefinitely Repeated Games
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part V: Advanced Decisions
	Chapter 19: Decisions Involving Uncertainty
		19.1 Risk Aversion
			Understanding Risk
			Diminishing Marginal Utility
			The Risk-Reward Trade-off
			Expected Utility
		19.2 Reducing Risk
			Strategy One: Risk Spreading—Transforming Big Risks into Small Risks
			Strategy Two: Diversification
			Strategy Three: Insurance
			Strategy Four: Hedging—Offsetting Risks
			Strategy Five: Gathering Information to Reduce Risk
		19.3 Behavioral Economics: How People Make Mistakes Around Uncertainty
			Overconfidence
			Problems Assessing Probability
			Problems Evaluating Payoffs
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 20: Decisions Involving Private Information
		20.1 Adverse Selection When Sellers Know More Than Buyers
			Hidden Quality and the Risk of Getting a Lemon
			Adverse Selection and Your Ability to Buy High-Quality Products
			Solutions to Adverse Selection of Sellers
		20.2 Adverse Selection When Buyers Know More Than Sellers
			Hidden Quality and the Risk of Getting High-Cost Customers
			Solutions to Adverse Selection of Buyers
		20.3 Moral Hazard: The Problem of Hidden Actions
			Hidden Actions and Your Decisions
			Moral Hazard in Relationships: The Principal-Agent Problem
			Solving Moral Hazard Problems
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part VI: Macroeconomic Foundations and the Long Run
	Chapter 21: Sizing Up the Economy Using GDP
		21.1 GDP and the Macroeconomy
			From Microeconomics to Macroeconomics
			The Circular Flow
			Digging into the Definition of GDP
		21.2 GDP Measures Total Spending, Output, and Income
			Perspective One: GDP Measures Total Spending
			Perspective Two: GDP Is Total Output
			Perspective Three: GDP Measures Total Income
			Recap: Three Perspectives on GDP
		21.3 What GDP Captures and What It Misses
			Limitations of GDP
			GDP as a Measure of Living Standards
		21.4 Real and Nominal GDP
			Real and Nominal GDP
			How to Calculate Real GDP
		21.5 Millions, Billions, and Trillions
			The Problem of Big Numbers
			Four Strategies for Scaling Big Numbers
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 22: Economic Growth
		22.1 Economic Growth Facts
			Economic Growth Since 1 Million B.C.
			Economic Growth Over the Past Two Centuries
		22.2 The Ingredients of Economic Growth
			The Production Function
			Ingredient One: Labor and Total Hours Worked
			Ingredient Two: Human Capital
			Ingredient Three: Capital Accumulation
			New Recipes for Combining Ingredients: Technological Progress
		22.3 The Analytics of Economic Growth
			Analyzing the Production Function
			Capital Accumulation and the Solow Model
			Technological Progress
		22.4 Public Policy: Why Institutions Matter for Growth
			Property Rights
			Government Stability
			Efficiency of Regulation
			Government Policy to Encourage Innovation
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 23: Unemployment
		23.1 Employment and Unemployment
			The Employed and the Unemployed
			Labor Force Participation
			The Unemployment Rate
		23.2 The Dynamics of the Labor Market
			Labor Market Flows
			Alternative Measures of Unemployment
		23.3 Understanding Unemployment
			Types of Unemployment
			Frictional Unemployment: It Takes Time to Find a Job
			Structural Unemployment: When Wages Are Stuck Above the Equilibrium Wage
			Institutions: Additional Causes of Structural Unemployment
			Recap: Frictional and Structural Unemployment
		23.4 The Costs of Unemployment
			The Economic Costs of Unemployment
			The Social Costs of Unemployment
			Protecting Yourself from the Harmful Effects of Unemployment
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 24: Inflation and Money
		24.1 Measuring Inflation
			The Price of a Basket of Goods and Services
			Constructing the Consumer Price Index and Measuring Inflation
			The Challenges of Measuring the True Cost of Living
		24.2 Different Measures of Inflation
			Consumer Prices
			Business Prices
		24.3 Adjusting for the Effects of Inflation
			Comparing Dollars over Time
			Real and Nominal Variables
			Real and Nominal Interest Rates
			Overcoming Money Illusion
		24.4 The Role of Money and the Costs of Inflation
			The Functions of Money
			The Costs of Hyperinflation
			The Costs of Expected Inflation
			The Costs of Unexpected Inflation
			The Inflation Fallacy
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part VII: Micro Foundations of Macroeconomics
	Chapter 25: Consumption and Saving
		25.1 Consumption, Saving, and Income
			Consumption and Income
			Saving and Income
		25.2 The Micro Foundations of Consumption
			Choosing How Much to Spend and How Much to Save
			The Rational Rule for Consumers
			Consumption Smoothing
			Permanent Income Hypothesis
		25.3 The Macroeconomics of Consumption
			The Relationship Between Consumption and Income
			Adding Behavioral Economics and Credit Constraints to Our Analysis
		25.4 What Shifts Consumption?
			Consumption Shifter One: Real Interest Rates
			Consumption Shifter Two: Expectations
			Consumption Shifter Three: Taxes
			Consumption Shifter Four: Wealth
		25.5 Saving
			Saving Motive One: Changing Income over the Life Cycle
			Saving Motive Two: Changing Needs over the Life Cycle
			Saving Motive Three: Bequests
			Saving Motive Four: Precautionary Saving
			Smart Saving Strategies
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 26: Investment
		26.1 Macroeconomic Investment
			Defining Investment
			Types of Investment
			Investment Is a Key Economic Variable
		26.2 Tools to Analyze Investments
			Investment Tool One: Compounding
			Investment Tool Two: Discounting
			Real versus Nominal Interest Rates
		26.3 Making Investment Decisions
			How to Evaluate an Investment Opportunity
			The Rational Rule for Investors
			An Alternative Perspective: The User Cost of Capital
		26.4 The Macroeconomics of Investment
			The Real Interest Rate and Investment
			Factors That Shift the Investment Line
		26.5 The Market for Loanable Funds
			Supply and Demand of Loanable Funds
			Shifts in the Supply of Loanable Funds
			Shifts in the Demand for Loanable Funds
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 27: The Financial Sector
		27.1 Banks
			What Do Banks Do?
			Bank Runs
			Shadow Banks and the Financial Crisis
		27.2 The Bond Market
			What Does the Bond Market Do?
			Evaluating Risks
		27.3 The Stock Market
			What Do Stocks Do?
			Comparing Stocks and Bonds
			Understanding Stock Market Data
		27.4 What Drives Financial Prices?
			Valuing Stocks
			The Efficient Markets Hypothesis
			The Value of Expert Advice
			Financial Bubbles
		27.5 Personal Finance
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 28: International Finance and the Exchange Rate
		28.1 International Trade and Global Financial Flows
			International Trade
			Global Financial Flows
		28.2 Exchange Rates
			Exchanging U.S. Dollars for Foreign Currencies
			Exchange Rates and the Price of Foreign Goods
		28.3 Supply and Demand of Currencies
			The Market for U.S. Dollars
			Shifts in Currency Demand
			Shifts in Currency Supply
			Forecasting Exchange Rate Movements
			Government Intervention in Foreign Exchange Markets
		28.4 The Real Exchange Rate and Net Exports
			Real Exchange Rate and Competitiveness
			The Real Exchange Rate Determines Net Exports
		28.5 The Balance of Payments
			The Current Account and The Financial Account
			Saving, Investment, and the Current Account
			Current Account Controversies
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part VIII: The Business Cycle
	Chapter 29: Business Cycles
		29.1 Macroeconomic Trends and Cycles
			Trend Growth and the Output Gap
			Business Cycles Are Not Cycles
		29.2 Common Characteristics of Business Cycles
			Recessions Are Short and Sharp; Expansions Are Long and Gradual
			The Business Cycle Is Persistent
			The Business Cycle Impacts Many Parts of the Economy
			Okun’s Rule of Thumb Links the Output Gap and the Unemployment Rate
		29.3 Analyzing Macroeconomic Data
			The Basics of Macroeconomic Data
			Top 10 Economic Indicators
			Tracking the Economy: An Economy Watcher’s Guide
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 30: IS-MP Analysis: Interest Rates and Output
		30.1 Aggregate Expenditure
			Aggregate Expenditure and Short Run Fluctuations
			The Demand-Driven Short Run and the Supply-Driven Long Run
		30.2 The IS Curve: Output and the Real Interest Rate
			Aggregate Expenditure and Interest Rates
			The IS Curve Describes the Link Between the Real Interest Rate and the Output Gap
			How to Use the IS Curve
		30.3 The MP Curve: What Determines the Interest Rate
			The Federal Reserve
			The Risk Premium
			The MP Curve
		30.4 The IS-MP Framework
			IS-MP Equilibrium
			Fluctuating Demand and Business Cycles
			Analyzing Monetary Policy
			Analyzing Fiscal Policy and the Multiplier
		30.5 Macroeconomic Shocks
			Spending Shocks Shift the IS Curve
			Financial Shocks Shift the MP Curve
			Predicting Economic Changes
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 31: The Phillips Curve and Inflation
		31.1 Three Inflationary Forces
			Inflationary Force One: Inflation Expectations
			Inflationary Force Two: Demand-Pull Inflation
			Inflationary Force Three: Supply Shocks and Cost-Push Inflation
			Understanding Inflation
		31.2 Inflation Expectations
			Why Inflation Expectations Matter
			Measuring Inflation Expectations
		31.3 The Phillips Curve
			Demand-Pull Inflation
			The Phillips Curve Framework
			The Phillips Curve in the United States
			An Alternative Illustration: The Labor Market Phillips Curve
		31.4 Supply Shocks Shift the Phillips Curve
			How Supply Shocks Shift the Phillips Curve
			Phillips Curve Shifter One: Input Prices
			Phillips Curve Shifter Two: Productivity
			Phillips Curve Shifter Three: Exchange Rates
			Shifts versus Movements Along the Phillips Curve
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 32: The Fed Model: Linking Interest Rates, Output, and Inflation
		32.1 The Fed Model
			The Fed Model Combines the IS, MP, and Phillips Curves
			Forecasting Economic Outcomes
			Three Types of Macroeconomic Shocks
		32.2 Analyzing Macroeconomic Shocks
			A Recipe for Analyzing Macroeconomic Shocks
			Analyzing Financial Shocks
			Analyzing Spending Shocks
			Analyzing Supply Shocks
		32.3 Diagnosing the Causes of Macroeconomic Changes
			A Brief Recap
			A Diagnosis Tool
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 33: Aggregate Demand and Aggregate Supply
		33.1 The AD-AS Framework
			Introducing Aggregate Demand and Aggregate Supply
			Macroeconomic versus Microeconomic Forces
		33.2 Aggregate Demand
			Aggregate Expenditure
			Why Aggregate Demand Is Downward-Sloping
			Analyzing Aggregate Demand
			Aggregate Demand Shifters
		33.3 Aggregate Supply
			Why Aggregate Supply Is Upward-Sloping
			Analyzing Aggregate Supply
			Shifts in Aggregate Supply
		33.4 Macroeconomic Shocks and Countercyclical Policy
			Monetary Policy
			Fiscal Policy and the Multiplier
			Forecasting Macroeconomic Outcomes
		33.5 Aggregate Supply in the Short Run and the Long Run
			Aggregate Supply in the Long Run with Flexible Prices
			Aggregate Supply in the Very Short Run with Fixed Prices
			Aggregate Supply in the Short Run and Medium Run with Sticky Prices
			Getting from the Very Short Run to the Long Run
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Part IX: Macroeconomic Policy
	Chapter 34: Monetary Policy
		34.1 The Federal Reserve
			The Federal Reserve System
			The Federal Open Market Committee
		34.2 The Fed’s Policy Goals and Decision-Making Framework
			The Fed’s Dual Mandate: Stable Prices and Maximum Sustainable Employment
			How the Fed Chooses the Interest Rate
		34.3 How the Fed Sets Interest Rates
			The Overnight Market for Interbank Loans
			The Impact of Changing the Federal Funds Rate on the Rest of the Economy
		34.4 Unconventional Monetary Policy
			Monetary Policy Choices When Nominal Interest Rates Are Zero
			Lender of Last Resort
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
	Chapter 35: Government Spending, Taxes, and Fiscal Policy
		35.1 The Government Sector
			Government Spending
			Government Revenue
			Hidden Government Spending: Tax Expenditures
			Regulation
		35.2 Fiscal Policy
			A Countercyclical Force
			Automatic Stabilizers
			Fiscal Policy and Monetary Policy Interactions
		35.3 Government Deficits and Debt
			Government Budget Deficits
			Government Debt
			Reasons Not to Worry About the Debt
			Reasons to Worry About Government Debt
		Tying It Together
		Chapter at a Glance
		End of Chapter
			Key Concepts
			Discussion and Review Questions
			Study Problems
Appendix A: A Closer Look at Aggregate Expenditure and the Multiplier
	A.1 Aggregate Expenditure and Income
		Aggregate Expenditure
		Aggregate Expenditure Rises with Income
		How to Use the Aggregate Expenditure Line
	A.2 Macroeconomic Equilibrium and the Keynesian Cross
		Aggregate Expenditure in Macroeconomic Equilibrium
		Shifts in Aggregate Expenditure
		Predicting the State of the Economy
	A.3 The Multiplier
		The Multiplier Effect
		The Size of the Multiplier
	Tying It Together
	Chapter at a Glance
	End of Chapter
		Key Concepts
		Discussion and Review Questions
		Study Problems
Glossary
Index
Back Cover