Principles of Economics

Contents
Preface
Chapter 1 Welcome to Economics!
	Introduction
	1.1 What Is Economics, and Why Is It Important?
	1.2 Microeconomics and Macroeconomics
	1.3 How Economists Use Theories and Models to Understand Economic Issues
	1.4 How To Organize Economies: An Overview of Economic Systems
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
Chapter 2 Choice in a World of Scarcity
	Introduction to Choice in a World of Scarcity
	2.1 How Individuals Make Choices Based on Their Budget Constraint
	2.2 The Production Possibilities Frontier and Social Choices
	2.3 Confronting Objections to the Economic Approach
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 3 Demand and Supply
	Introduction to Demand and Supply
	3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services
	3.2 Shifts in Demand and Supply for Goods and Services
	3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
	3.4 Price Ceilings and Price Floors
	3.5 Demand, Supply, and Efficiency
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 4 Labor and Financial Markets
	Introduction to Labor and Financial Markets
	4.1 Demand and Supply at Work in Labor Markets
	4.2 Demand and Supply in Financial Markets
	4.3 The Market System as an Efficient Mechanism for Information
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 5 Elasticity
	Introduction to Elasticity
	5.1 Price Elasticity of Demand and Price Elasticity of Supply
	5.2 Polar Cases of Elasticity and Constant Elasticity
	5.3 Elasticity and Pricing
	5.4 Elasticity in Areas Other Than Price
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 6 Consumer Choices
	Introduction to Consumer Choices
	6.1 Consumption Choices
	6.2 How Changes in Income and Prices Affect Consumption Choices
	6.3 Behavioral Economics: An Alternative Framework for Consumer Choice
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 7 Production, Costs, and Industry Structure
	Introduction to Production, Costs, and Industry Structure
	7.1 Explicit and Implicit Costs, and Accounting and Economic Profit
	7.2 Production in the Short Run
	7.3 Costs in the Short Run
	7.4 Production in the Long Run
	7.5 Costs in the Long Run
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 8 Perfect Competition
	Introduction to Perfect Competition
	8.1 Perfect Competition and Why It Matters
	8.2 How Perfectly Competitive Firms Make Output Decisions
	8.3 Entry and Exit Decisions in the Long Run
	8.4 Efficiency in Perfectly Competitive Markets
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 9 Monopoly
	Introduction to a Monopoly
	9.1 How Monopolies Form: Barriers to Entry
	9.2 How a Profit-Maximizing Monopoly Chooses Output and Price
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 10 Monopolistic Competition and Oligopoly
	Introduction to Monopolistic Competition and Oligopoly
	10.1 Monopolistic Competition
	10.2 Oligopoly
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 11 Monopoly and Antitrust Policy
	Introduction to Monopoly and Antitrust Policy
	11.1 Corporate Mergers
	11.2 Regulating Anticompetitive Behavior
	11.3 Regulating Natural Monopolies
	11.4 The Great Deregulation Experiment
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 12 Environmental Protection and Negative Externalities
	Introduction to Environmental Protection and Negative Externalities
	12.1 The Economics of Pollution
	12.2 Command-and-Control Regulation
	12.3 Market-Oriented Environmental Tools
	12.4 The Benefits and Costs of U.S. Environmental Laws
	12.5 International Environmental Issues
	12.6 The Tradeoff between Economic Output and Environmental Protection
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 13 Positive Externalities and Public Goods
	Introduction to Positive Externalities and Public Goods
	13.1 Investments in Innovation
	13.2 How Governments Can Encourage Innovation
	13.3 Public Goods
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 14 Labor Markets and Income
	Introduction to Labor Markets and Income
	14.1 The Theory of Labor Markets
	14.2 Wages and Employment in an Imperfectly Competitive Labor Market
	14.3 Market Power on the Supply Side of Labor Markets: Unions
	14.4 Bilateral Monopoly
	14.5 Employment Discrimination
	14.6 Immigration
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
Chapter 15 Poverty and Economic Inequality
	Introduction to Poverty and Economic Inequality
	15.1 Drawing the Poverty Line
	15.2 The Poverty Trap
	15.3 The Safety Net
	15.4 Income Inequality: Measurement and Causes
	15.5 Government Policies to Reduce Income Inequality
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 16 Information, Risk, and Insurance
	Introduction to Information, Risk, and Insurance
	16.1 The Problem of Imperfect Information and Asymmetric Information
	16.2 Insurance and Imperfect Information
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 17 Financial Markets
	Introduction to Financial Markets
	17.1 How Businesses Raise Financial Capital
	17.2 How Households Supply Financial Capital
	17.3 How to Accumulate Personal Wealth
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 18 Public Economy
	Introduction to Public Economy
	18.1 Voter Participation and Costs of Elections
	18.2 Special Interest Politics
	18.3 Flaws in the Democratic System of Government
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 19 The Macroeconomic Perspective
	Introduction to the Macroeconomic Perspective
	19.1 Measuring the Size of the Economy: Gross Domestic Product
	19.2 Adjusting Nominal Values to Real Values
	19.3 Tracking Real GDP over Time
	19.4 Comparing GDP among Countries
	19.5 How Well GDP Measures the Well-Being of Society
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 20 Economic Growth
	Introduction to Economic Growth
	20.1 The Relatively Recent Arrival of Economic Growth
	20.2 Labor Productivity and Economic Growth
	20.3 Components of Economic Growth
	20.4 Economic Convergence
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 21 Unemployment
	Introduction to Unemployment
	21.1 How Economists Define and Compute Unemployment Rate
	21.2 Patterns of Unemployment
	21.3 What Causes Changes in Unemployment over the Short Run
	21.4 What Causes Changes in Unemployment over the Long Run
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 22 Inflation
	Introduction to Inflation
	22.1 Tracking Inflation
	22.2 How to Measure Changes in the Cost of Living
	22.3 How the U.S. and Other Countries Experience Inflation
	22.4 The Confusion Over Inflation
	22.5 Indexing and Its Limitations
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 23 The International Trade and Capital Flows
	Introduction to the International Trade and Capital Flows
	23.1 Measuring Trade Balances
	23.2 Trade Balances in Historical and International Context
	23.3 Trade Balances and Flows of Financial Capital
	23.4 The National Saving and Investment Identity
	23.5 The Pros and Cons of Trade Deficits and Surpluses
	23.6 The Difference between Level of Trade and the Trade Balance
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 24 The Aggregate Demand/Aggregate Supply Model
	Introduction to the Aggregate Supply–Aggregate Demand Model
	24.1 Macroeconomic Perspectives on Demand and Supply
	24.2 Building a Model of Aggregate Demand and Aggregate Supply
	24.3 Shifts in Aggregate Supply
	24.4 Shifts in Aggregate Demand
	24.5 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation
	24.6 Keynes’ Law and Say’s Law in the AD/AS Model
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 25 The Keynesian Perspective
	Introduction to the Keynesian Perspective
	25.1 Aggregate Demand in Keynesian Analysis
	25.2 The Building Blocks of Keynesian Analysis
	25.3 The Phillips Curve
	25.4 The Keynesian Perspective on Market Forces
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
Chapter 26 The Neoclassical Perspective
	Introduction to the Neoclassical Perspective
	26.1 The Building Blocks of Neoclassical Analysis
	26.2 The Policy Implications of the Neoclassical Perspective
	26.3 Balancing Keynesian and Neoclassical Models
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 27 Money and Banking
	Introduction to Money and Banking
	27.1 Defining Money by Its Functions
	27.2 Measuring Money: Currency, M1, and M2
	27.3 The Role of Banks
	27.4 How Banks Create Money
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 28 Monetary Policy and Bank Regulation
	Introduction to Monetary Policy and Bank Regulation
	28.1 The Federal Reserve Banking System and Central Banks
	28.2 Bank Regulation
	28.3 How a Central Bank Executes Monetary Policy
	28.4 Monetary Policy and Economic Outcomes
	28.5 Pitfalls for Monetary Policy
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 29 Exchange Rates and International Capital Flows
	Introduction to Exchange Rates and International Capital Flows
	29.1 How the Foreign Exchange Market Works
	29.2 Demand and Supply Shifts in Foreign Exchange Markets
	29.3 Macroeconomic Effects of Exchange Rates
	29.4 Exchange Rate Policies
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 30 Government Budgets and Fiscal Policy
	Introduction to Government Budgets and Fiscal Policy
	30.1 Government Spending
	30.2 Taxation
	30.3 Federal Deficits and the National Debt
	30.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation
	30.5 Automatic Stabilizers
	30.6 Practical Problems with Discretionary Fiscal Policy
	30.7 The Question of a Balanced Budget
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 31 The Impacts of Government Borrowing
	Introduction to the Impacts of Government Borrowing
	31.1 How Government Borrowing Affects Investment and the Trade Balance
	31.2 Fiscal Policy and the Trade Balance
	31.3 How Government Borrowing Affects Private Saving
	31.4 Fiscal Policy, Investment, and Economic Growth
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 32 Macroeconomic Policy Around the World
	Introduction to Macroeconomic Policy around the World
	32.1 The Diversity of Countries and Economies across the World
	32.2 Improving Countries’ Standards of Living
	32.3 Causes of Unemployment around the World
	32.4 Causes of Inflation in Various Countries and Regions
	32.5 Balance of Trade Concerns
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 33 International Trade
	Introduction to International Trade
	33.1 Absolute and Comparative Advantage
	33.2 What Happens When a Country Has an Absolute Advantage in All Goods
	33.3 Intra-industry Trade between Similar Economies
	33.4 The Benefits of Reducing Barriers to International Trade
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Chapter 34 Globalization and Protectionism
	Introduction to Globalization and Protectionism
	34.1 Protectionism: An Indirect Subsidy from Consumers to Producers
	34.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions
	34.3 Arguments in Support of Restricting Imports
	34.4 How Governments Enact Trade Policy: Globally, Regionally, and Nationally
	34.5 The Tradeoffs of Trade Policy
	Key Terms
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	Problems
Appendix A The Use of Mathematics in Principles of Economics
	Algebraic Models
	Growth Rates
	Displaying Data Graphically and Interpreting the Graph
	Key Concepts and Summary
	Review Questions
Appendix B Indifference Curves
	What Is an Indifference Curve?
	Utility-Maximizing with Indifference Curves
	Changes in Income
	Responses to Price Changes: Substitution and Income Effects
	Indifference Curves with Labor-Leisure and Intertemporal Choices
	Sketching Substitution and Income Effects
	Key Concepts and Summary
	Review Questions
Appendix C Present Discounted Value
	Applying Present Discounted Value to a Stock
	Applying Present Discounted Value to a Bond
	Other Applications
Appendix D The Expenditure-Output Model
	The Axes of the Expenditure-Output Diagram
	Building the Aggregate Expenditure Schedule
	Equilibrium in the Keynesian Cross Model
	The Multiplier Effect
	Key Concepts and Summary
	Self-Check Questions
	Review Questions
	Critical Thinking Questions
	References
Answer Key
	Chapter 1
	Chapter 2
	Chapter 3
	Chapter 4
	Chapter 5
	Chapter 6
	Chapter 7
	Chapter 8
	Chapter 9
	Chapter 10
	Chapter 11
	Chapter 12
	Chapter 13
	Chapter 14
	Chapter 15
	Chapter 16
	Chapter 17
	Chapter 18
	Chapter 19
	Chapter 20
	Chapter 21
	Chapter 22
	Chapter 23
	Chapter 24
	Chapter 25
	Chapter 26
	Chapter 27
	Chapter 28
	Chapter 29
	Chapter 30
	Chapter 31
	Chapter 32
	Chapter 33
	Chapter 34
References
	Welcome to Economics!
	Choice in a World of Scarcity
	Demand and Supply
	Labor and Financial Markets
	Elasticity
	Consumer Choices
	Production, Costs, and Industry Structure
	Perfect Competition
	Monopoly
	Monopolistic Competition and Oligopoly
	Monopoly and Antitrust Policy
	Environmental Protection and Negative Externalities
	Positive Externalities and Public Goods
	Labor Markets and Income
	Poverty and Economic Inequality
	Information, Risk, and Insurance
	Financial Markets
	Public Economy
	The Macroeconomic Perspective
	Economic Growth
	Unemployment
	Inflation
	The International Trade and Capital Flows
	The Aggregate Demand/Aggregate Supply Model
	The Keynesian Perspective
	The Neoclassical Perspective
	Money and Banking
	Monetary Policy and Bank Regulation
	Exchange Rates and International Capital Flows
	Government Budgets and Fiscal Policy
	The Impacts of Government Borrowing
	Macroeconomic Policy Around the World
	International Trade
	Globalization and Protectionism
Index
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