Principles of Economics (ISE HED IRWIN ECONOMICS)

Cover
Title Page
Copyright Page
Dedication
About the Authors
Preface
Acknowledgments
Brief Contents
Contents
PART I Introduction
	Chapter 1 Thinking Like an Economist
		Economics: Studying Choice in a World of Scarcity
		Applying the Cost-Benefit Principle
			Economic Surplus
			Opportunity Cost
			The Role of Economic Models
		Three Important Decision Pitfalls
			Pitfall 1: Measuring Costs and Benefits as Proportions rather than Absolute Dollar Amounts
			Pitfall 2: Ignoring Implicit Costs
			Pitfall 3: Failing to Think at the Margin
		Normative Economics versus Positive Economics
		Economics: Micro and Macro
		The Approach of This Text
		Economic Naturalism
		THE ECONOMIC NATURALIST 1.1
		THE ECONOMIC NATURALIST 1.2
		THE ECONOMIC NATURALIST 1.3
		Summary
		Core Principles
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
		Appendix: Working with Equations, Graphs, and Tables
	Chapter 2 Comparative Advantage
		Exchange and Opportunity Cost
			The Principle of Comparative Advantage
		THE ECONOMIC NATURALIST 2.1
			Sources of Comparative Advantage
		THE ECONOMIC NATURALIST 2.2
		Comparative Advantage and Production Possibilities
			The Production Possibilities Curve
			How Individual Productivity Affects the Slope and Position of the PPC
			The Gains from Specialization and Exchange
			A Production Possibilities Curve for a Many-Person Economy
			A Note on the Logic of the Fruit Picker’s Rule
		Factors That Shift the Economy’s Production Possibilities Curve
			Why Have Some Countries Been Slow to Specialize?
			Can We Have Too Much Specialization?
		Comparative Advantage and Outsourcing
		THE ECONOMIC NATURALIST 2.3
			Outsourcing
		THE ECONOMIC NATURALIST 2.4
		Summary
		Core Principles
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 3 Supply and Demand
		What, How, and for Whom? Central Planning versus the Market
		Buyers and Sellers in Markets
			The Demand Curve
			The Supply Curve
		Market Equilibrium
			Rent Controls Reconsidered
			Pizza Price Controls?
		Predicting and Explaining Changes in Prices and Quantities
			Shifts in Demand
		THE ECONOMIC NATURALIST 3.1
			Shifts in the Supply Curve
		THE ECONOMIC NATURALIST 3.2
			Four Simple Rules
		THE ECONOMIC NATURALIST 3.3
		Efficiency and Equilibrium
			Cash on the Table
			Smart for One, Dumb for All
		THE ECONOMIC NATURALIST 3.4
		Summary
		Core Principles
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
		Appendix: The Algebra of Supply and Demand
PART 2 Competition and the Invisible Hand
	Chapter 4 Elasticity
		Price Elasticity of Demand
			Price Elasticity Defined
			Determinants of Price Elasticity of Demand
				Substitution Possibilities
				Budget Share
				Time
			Some Representative Elasticity Estimates
			Using Price Elasticity of Demand
		THE ECONOMIC NATURALIST 4.1
		THE ECONOMIC NATURALIST 4.2
		A Graphical Interpretation of Price Elasticity
			Price Elasticity Changes along a Straight-Line Demand Curve
			Two Special Cases
		Elasticity and Total Expenditure
		Income Elasticity and Cross-Price Elasticity of Demand
		The Price Elasticity of Supply
			Determinants of Supply Elasticity
				Flexibility of Inputs
				Mobility of Inputs
				Ability to Produce Substitute Inputs
				Time
		THE ECONOMIC NATURALIST 4.3
			Unique and Essential Inputs: The Ultimat Supply Bottleneck
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
		Appendix: The Midpoint Formula
	Chapter 5 Demand
		The Law of Demand
			The Origins of Demand
			Needs versus Wants
		THE ECONOMIC NATURALIST 5.1
		Translating Wants into Demand
			Measuring Wants: The Concept of Utility
			Allocating a Fixed Income between Two Goods
		The Rational Spending Rule
			Income and Substitution Effects Revisited
			Applying the Rational Spending Rule
				Substitution at Work
		THE ECONOMIC NATURALIST 5.2
		THE ECONOMIC NATURALIST 5.3
		THE ECONOMIC NATURALIST 5.4
			The Importance of Income Differences
		THE ECONOMIC NATURALIST 5.5
		Individual and Market Demand Curves
			Horizontal Addition
		Demand and Consumer Surplus
			Calculating Consumer Surplus
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
		Appendix: Indifference Curves
	Chapter 6 Perfectly Competitive Supply
		Thinking about Supply: The Importance of Opportunity Cost
		Individual and Market Supply Curves
		Profit-Maximizing Firms in Perfectly Competitive Markets
			Profit Maximization
			The Demand Curve Facing a Perfectly Competitive Firm
			Production in the Short Run
			Some Important Cost Concepts
			Choosing Output to Maximize Profit
			A Note on the Firm’s Shutdown Condition
			Average Variable Cost and Average Total Cost
			A Graphical Approach to Profit Maximization
			Price = Marginal Cost: The Maximum-Profit Condition
			The “Law” of Supply
		Determinants of Supply Revisited
			Technology
			Input Prices
			The Number of Suppliers
			Expectations
			Changes in Prices of Other Products
			Applying the Theory of Supply
		THE ECONOMIC NATURALIST 6.1
		Supply and Producer Surplus
			Calculating Producer Surplus
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 7 Efficiency, Exchange, and the Invisible Hand in Action
		The Central Role of Economic Profit
			Three Types of Profit
		The Invisible Hand Theory
			Two Functions of Price
			Responses to Profits and Losses
			The Importance of Free Entry and Exit
		Economic Rent versus Economic Profit
			The Invisible Hand in Action
				The Invisible Hand at the Supermarket and on the Freeway
		THE ECONOMIC NATURALIST 7.1
			The Invisible Hand and Cost-Saving Innovations
		The Distinction between an Equilibrium and a Social Optimum
			Smart for One, Dumb for All
		THE ECONOMIC NATURALIST 7.2
			Market Equilibrium and Efficiency
				Efficiency Is Not the Only Goal
				Why Efficiency Should Be the First Goal
		The Cost of Preventing Price Adjustments
			Price Ceilings
			Price Subsidies
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
PART 3 Market Imperfections
	Chapter 8 Monopoly, Oligopoly, and Monopolistic Competition
		Perfect and Imperfect Competition
			Different Forms of Imperfect Competition
			Monopolistic Competition
			Oligopoly
			The Essential Difference between Perfectly and Imperfectly Competitive Firms
		Five Sources of Market Power
			Exclusive Control over Important Inputs
			Patents and Copyrights
			Government Licenses or Franchises
			Economies of Scale and Natural Monopolies
			Network Economies
		Economies of Scale and the Importance of Start-Up Costs
		THE ECONOMIC NATURALIST 8.1
		Profit Maximization for the Monopolist
			Marginal Revenue for the Monopolist
			The Monopolist’s Profit-Maximizing Decision Rule
			Being a Monopolist Doesn’t Guarantee an Economic Profit
		Why the Invisible Hand Breaks Down under Monopoly
		Using Discounts to Expand the Market
			Price Discrimination Defined
		THE ECONOMIC NATURALIST 8.2
			How Price Discrimination Affects Output
			The Hurdle Method of Price Discrimination
			Is Price Discrimination a Bad Thing?
			Examples of Price Discrimination
		THE ECONOMIC NATURALIST 8.3
		Public Policy toward Natural Monopoly
			State Ownership and Management
			State Regulation of Private Monopolies
			Exclusive Contracting for Natural Monopoly
			Vigorous Enforcement of Antitrust Laws
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
		Appendix: The Algebra of Monopoly Profit Maximization
	Chapter 9 Games and Strategic Behavior
		Using Game Theory to Analyze Strategic Decisions
			The Three Elements of a Game
			Nash Equilibrium
		The Prisoner’s Dilemma
			The Original Prisoner’s Dilemma
			The Economics of Cartels
		THE ECONOMIC NATURALIST 9.1
			Tit-for-Tat and the Repeated Prisoner’s Dilemma
		THE ECONOMIC NATURALIST 9.2
		THE ECONOMIC NATURALIST 9.3
		Games in Which Timing Matters
			Credible Threats and Promises
			Monopolistic Competition When Location Matters
		THE ECONOMIC NATURALIST 9.4
		Commitment Problems
			Solving Commitment Problems with Psychological Incentives
			Are People Fundamentally Selfish?
			Preferences as Solutions to Commitment Problems
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 10 An Introduction to Behavioral Economics
		Judgmental Heuristics or Rules of Thumb
			Availability
			Representativeness
			Regression to the Mean
		THE ECONOMIC NATURALIST 10.1
			Anchoring and Adjustment
		Misinterpretation of Contextual Clues
			The Psychophysics of Perception
			The Difficulty of Actually Deciding
		Impulse-Control Problems
		THE ECONOMIC NATURALIST 10.2
		Loss Aversion and Status Quo Bias
		THE ECONOMIC NATURALIST 10.3
		Beyond Narrow Self-Interest
			The Present-Aim Standard of Rationality
			The Adaptive Rationality Standard
			Concerns about Fairness
		Concerns about Relative Position
		THE ECONOMIC NATURALIST 10.4
		THE ECONOMIC NATURALIST 10.5
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 11 Externalities, Property Rights, and the Environment
		External Costs and Benefits
			How Externalities Affect Resource Allocation
			How Do Externalities Affect Supply and Demand?
		The Coase Theorem
		Remedies for Externalities
			Laws and Regulations
		THE ECONOMIC NATURALIST 11.1
		THE ECONOMIC NATURALIST 11.2
			The Optimal Amount of Negative Externalities Is Not Zero
			Compensatory Taxes and Subsidies
		THE ECONOMIC NATURALIST 11.3
		Property Rights and the Tragedy of the Commons
			The Problem of Unpriced Resources
			The Effect of Private Ownership
			When Private Ownership Is Impractical
		THE ECONOMIC NATURALIST 11.4
		THE ECONOMIC NATURALIST 11.5
			Harvesting Timber on Remote Public Land
			Harvesting Whales in International Waters
			Controlling Multinational Environmental Pollution
		Positional Externalities
			Payoffs That Depend on Relative Performance
		THE ECONOMIC NATURALIST 11.6
			Positional Arms Races and Positional Arms Control Agreements
				Contents
				Campaign Spending Limits
				Roster Limits
				Arbitration Agreements
				Mandatory Starting Dates for Kindergarten
			Social Norms as Positional Arms Control Agreements
				Nerd Norms
				Fashion Norms
				Norms of Taste
				Norms against Vanity
		Using Price Incentives in Environmental Regulation
			Taxing Pollution
			Auctioning Pollution Permits
			Climate Change and Carbon Taxes
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
PART 4 Economics of Public Policy
	Chapter 12 The Economics of Information
		How the Middleman Adds Value
		The Optimal Amount of Information
			The Cost-Benefit Test
			The Free-Rider Problem
		THE ECONOMIC NATURALIST 12.1
		THE ECONOMIC NATURALIST 12.2
			Two Guidelines for Rational Search
			The Gamble Inherent in Search
			The Commitment Problem When Search Is Costly
		Asymmetric Information
			The Lemons Model
			The Credibility Problem in Trading
				The Costly-to-Fake Principle
		THE ECONOMIC NATURALIST 12.3
		THE ECONOMIC NATURALIST 12.4
			Conspicuous Consumption as a Signal of Ability
		THE ECONOMIC NATURALIST 12.5
		Statistical Discrimination
		THE ECONOMIC NATURALIST 12.6
			Disappearing Political Discourse
		THE ECONOMIC NATURALIST 12.7
		THE ECONOMIC NATURALIST 12.8
		Insurance
			Adverse Selection
			Moral Hazard
			The Problem with Health Care Provision through Private Insurance
			The Affordable Care Act of 2010
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 13 Labor Markets, Poverty, and Income Distribution
		The Economic Value of Work
		The Equilibrium Wage and Employment Levels
			The Demand Curve for Labor
			The Supply Curve of Labor
			Market Shifts
		Explaining Differences in Earnings
			Human Capital Theory
			Labor Unions
		THE ECONOMIC NATURALIST 13.1
			Compensating Wage Differentials
		THE ECONOMIC NATURALIST 13.2
			Discrimination in the Labor Market
				Discrimination by Employers
				Discrimination by Others
				Other Sources of the Wage Gap
			Winner-Take-All Markets
		THE ECONOMIC NATURALIST 13.3
		Recent Trends in Inequality
			Is Income Inequality a Moral Problem?
		Methods of Income Redistribution
			Welfare Payments and In-Kind Transfers
			Means-Tested Benefit Programs
			The Negative Income Tax
			Minimum Wages
			The Earned-Income Tax Credit
			Public Employment for the Poor
			A Combination of Methods
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 14 Public Goods and Tax Policy
		Government Provision of Public Goods
			Public Goods versus Private Goods
			Paying for Public Goods
		THE ECONOMIC NATURALIST 14.1
		The Optimal Quantity of a Public Good
			The Demand Curve for a Public Good
			Private Provision of Public Goods
				Funding by Donation
				Development of New Means to Exclude Nonpayers
				Private Contracting
				Sale of By-Products
		THE ECONOMIC NATURALIST 14.2
		Laws, Regulations, and the Question of Centralization
			Externalities and Property Rights
			Local, State, or Federal?
			Sources of Inefficiency in the Political Process
				Pork Barrel Legislation
		THE ECONOMIC NATURALIST 14.3
		THE ECONOMIC NATURALIST 14.4
			Rent-Seeking
			Starve the Government?
		What Should We Tax?
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
PART 5 International Trad
	Chapter 15 International Trade and Trade Policy
		Comparative Advantage as a Basis for Trade
		Production and Consumption Possibilities and the Benefits of Trade
			The Two-Worker Production Possibilities Curve
			The Many-Worker Production Possibilities Curve
			Consumption Possibilities with and without International Trade
		A Supply and Demand Perspective on Trade
			Winners and Losers from Trade
		THE ECONOMIC NATURALIST 15.1
		Protectionist Policies: Tariffs and Quotas
			Tariffs
			Quotas
		THE ECONOMIC NATURALIST 15.2
			The Inefficiency of Protectionism
		THE ECONOMIC NATURALIST 15.3
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
PART 6 Macroeconomic: Issues and Data
	Chapter 16 Macroeconomics: The Bird’s-Eye View of the Economy
		The Major Macroeconomic Issues
			Economic Growth and Living Standards
			Productivity
			Recessions and Expansions
			Unemployment
			Inflation
			Economic Interdependence among Nations
		Macroeconomic Policy
			Types of Macroeconomic Policy
			Positive versus Normative Analyses of Macroeconomic Policy
		Aggregation
		Studying Macroeconomics: A Preview
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 17 Measuring Economic Activity: GDP and Unemployment
		Gross Domestic Product: Measuring the Nation’s Output
			Market Value
			Final Goods and Services
			Produced in a Country during a Given Period
		Methods for Measuring GDP
			The Expenditure Method for Measuring GDP
			GDP and the Incomes of Capital and Labor
		Nominal GDP versus Real GDP
		THE ECONOMIC NATURALIST 17.1
		Real GDP and Economic Well-Being
			Why Real GDP Isn’t the Same as Economic Well-Being
				Leisure Time
		THE ECONOMIC NATURALIST 17.2
			Nonmarket Economic Activities
			Environmental Quality and Resource Depletion
			Quality of Life
			Poverty and Economic Inequality
		But GDP Is Related to Economic Well-Being
			Availability of Goods and Services
			Health and Education
		THE ECONOMIC NATURALIST 17.3
		Unemployment and the Unemployment Rate
			Measuring Unemployment
			The Costs of Unemployment
			The Duration of Unemployment
			The Unemployment Rate versus “True” Unemployment
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 18 Measuring the Price Level and Inflation
		The Consumer Price Index and Inflation
			Inflation
			Adjusting for Inflation
				Deflating a Nominal Quantity
				Indexing to Maintain Buying Power
			THE ECONOMIC NATURALIST 18.1
			Does the CPI Measure “True” Inflation?
			The Costs of Inflation: Not What You Think
				The True Costs of Inflation
					“Noise” in the Price System
					Distortions of the Tax System
					“Shoe-Leather” Costs
					Unexpected Redistributions of Wealth
					Interference with Long-Term Planning
				Hyperinflation
			Inflation and Interest Rates
				Inflation and the Real Interest Rate
				The Fisher Effect
			Summary
			Key Terms
			Review Questions
			Problems
			Answers to Self-Tests
PART 7 The Economy in the Long Run
	Chapter 19 Economic Growth, Productivity, and Living Standards
		The Remarkable Rise in Living Standards: The Record
			Why “Small” Differences in Growth Rates Matter
		Why Nations Become Rich: The Crucial Role of Average Labor Productivity
		The Determinants of Average Labor Productivity
			Human Capital
		THE ECONOMIC NATURALIST 19.1
			Physical Capital
			Land and Other Natural Resources
			Technology
		THE ECONOMIC NATURALIST 19.2
			Entrepreneurship and Management
		THE ECONOMIC NATURALIST 19.3
			The Political and Legal Environment
		The Costs of Economic Growth
		Promoting Economic Growth
			Policies to Increase Human Capital
		THE ECONOMIC NATURALIST 19.4
			Policies That Promote Saving and Investment
			Policies That Support Research and Development
			The Legal and Political Framework
			The Poorest Countries: A Special Case?
		Are There Limits to Growth?
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 20 The Labor Market: Workers, Wages, and Unemployment
		Five Important Labor Market Trends
			Trends in Real Wages
			Trends in Employment and Unemployment
		Supply and Demand in the Labor Market
			Wages and the Demand for Labor
			Shifts in the Demand for Labor
		THE ECONOMIC NATURALIST 20.1
			The Supply of Labor
			Shifts in the Supply of Labor
		Explaining the Trends in Real Wages and Employment
			Large Increases in Real Wages in Industrialized Countries
			Real Wage Growth in the United States Has Stagnated since the Early 1970s, while Employment Growth Has Been Rapid
			Increasing Wage Inequality: The Effects of Globalization and Technological Change
				Globalization
				Technological Change
		THE ECONOMIC NATURALIST 20.2
		Unemployment
			Types of Unemployment and Their Costs
				Frictional Unemployment
				Structural Unemployment
				Cyclical Unemployment
			Impediments to Full Employment
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 21 Saving and Capital Formation
		Saving and Wealth
			Stocks and Flows
			Capital Gains and Losses
		THE ECONOMIC NATURALIST 21.1
		Why Do People Save?
		THE ECONOMIC NATURALIST 21.2
			Saving and the Real Interest Rate
			Saving, Self-Control, and Demonstration Effects
		THE ECONOMIC NATURALIST 21.3
		National Saving and Its Components
			The Measurement of National Saving
			Private and Public Components oNational Saving
			Public Saving and the Government Budget
			Is Low Household Saving a Problem?
		Investment and Capital Formation
		Saving, Investment, and Financial Markets
		THE ECONOMIC NATURALIST 21.4
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 22 Money, Prices, and the Federal Reserve
		Money and Its Uses
		THE ECONOMIC NATURALIST 22.1
			Measuring Money
		Commercial Banks and the Creation of Money
			The Money Supply with Both Currency and Deposits
		The Federal Reserve System
			The History and Structure of the Federal Reserve System
			Controlling the Money Supply: Open-Market Operations
			The Fed’s Role in Stabilizing Financial Markets: Banking Panics
		THE ECONOMIC NATURALIST 22.2
		Money and Prices
			Velocity
			Money and Inflation in the Long Run
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 23 Financial Markets and International Capital Flows
		The Financial System and the Allocation of Saving to Productive Uses
			The Banking System
		THE ECONOMIC NATURALIST 23.1
			Bonds and Stocks
			Bonds
			Stocks
		Bond Markets, Stock Markets, and the Allocation of Savings
			The Informational Role of Bond and Stock Markets
			Risk Sharing and Diversification
		THE ECONOMIC NATURALIST 23.2
		International Capital Flows
			Capital Flows and the Balance of Trade
			The Determinants of International Capital Flows
			Saving, Investment, and Capital Inflows
			The Saving Rate and the Trade Deficit
		THE ECONOMIC NATURALIST 23.3
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
PART 8 The Economy in the Short Run
	Chapter 24 Short-Term Economic Fluctuations: An Introduction
		THE ECONOMIC NATURALIST 24.1
		Recessions and Expansions
		THE ECONOMIC NATURALIST 24.2
			Some Facts about Short-Term Economic Fluctuations
		Output Gaps and Cyclical Unemployment
			Potential Output
			The Output Gap
			The Natural Rate of Unemployment and Cyclical Unemployment
		THE ECONOMIC NATURALIST 24.3
		Okun’s Law
		THE ECONOMIC NATURALIST 24.4
		Why Do Short-Term Fluctuations Occur? A Preview and a Tale
			Alice’s Ice Cream Store: A Tale about Short-Run Fluctuations
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
	Chapter 25 Spending and Output in the Short Run
		The Keynesian Model’s Crucial Assumption: Firms Meet Demand at Preset Prices
		THE ECONOMIC NATURALIST 25.1
		Planned Aggregate Expenditure
			Planned Spending versus Actual Spending
			Consumer Spending and the Economy
		THE ECONOMIC NATURALIST 25.2
			Planned Aggregate Expenditure and Output
		Short-Run Equilibrium Output
			Finding Short-Run Equilibrium Output: Numerical Approach
			Finding Short-Run Equilibrium Output: Graphical Approach
		Planned Spending and the Output Gap
		THE ECONOMIC NATURALIST 25.3
			The Multiplier
		Stabilizing Planned Spending: The Role of Fiscal Policy
			Government Purchases and Planned Spending
		THE ECONOMIC NATURALIST 25.4
			Taxes, Transfers, and Aggregate Spending
		THE ECONOMIC NATURALIST 25.5
		Fiscal Policy as a Stabilization Tool: Three Qualifications
			Fiscal Policy and the Supply Side
			The Problem of Deficits
			The Relative Inflexibility of Fiscal Policy
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
		Appendix A: An Algebraic Solution of the Basic Keynesian Model
		Appendix B: The Multiplier in the Basic Keynesian Model
	Chapter 26 Stabilizing the Economy: The Role of the Fed
		The Federal Reserve and Interest Rates: The Basic Model
			The Demand for Money
			Macroeconomic Factors That Affect the Demand for Money
			The Money Demand Curve
		THE ECONOMIC NATURALIST 26.1
			The Supply of Money and Money Market Equilibrium
			How the Fed Controls the Nominal Interest Rate
			The Role of the Federal Funds Rate in Monetary Policy
			Can the Fed Control the Real Interest Rate?
		The Federal Reserve and Interest Rates: A Closer Look
			Can the Fed Fully Control the Money Supply?
				Affecting Bank Reserves through Open-Market Operations
				Affecting Bank Reserves through Discount Window Lending
				Setting and Changing Reserve Requirements
				Excess Reserves: The Norm since 2008
			Do Interest Rates Always Move Together?
				The Zero Lower Bound and the Need for “Unconventional” Monetary Policy
				Quantitative Easing
				Forward Guidance
				Interest on Reserves and the New Tools of Monetary Policy
		The Effects of Federal Reserve Actions on the Economy
			Planned Aggregate Expenditure and the Real Interest Rate
			The Fed Fights a Recession
		THE ECONOMIC NATURALIST 26.2
			The Fed Fights Inflation
		THE ECONOMIC NATURALIST 26.3
		THE ECONOMIC NATURALIST 26.4
		THE ECONOMIC NATURALIST 26.5
			The Feds Policy Reaction Function
		THE ECONOMIC NATURALIST 26.6
		Monetary Policymaking: Art or Science?
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
		Appendix: Monetary Policy in the Basic Keynesian Model
	Chapter 27 Aggregate Demand, Aggregate Supply, and Inflation
		Inflation, Spending, and Output: The Aggregate Demand Curve
			Inflation, the Fed, and Why the AD Curve Slopes Downward
			Other Reasons for the Downward Slope of the AD Curve
			Factors That Shift the Aggregate Demand Curve
				Changes in Spending
				Changes in the Fed’s Policy Reaction Function
			Shifts of the AD Curve versus Movements along the AD Curve
		Inflation and Aggregate Supply
			Inflation Inertia
				Inflation Expectations
				Long-Term Wage and Price Contracts
			The Output Gap and Inflation
				No Output Gap: Y = Y*
				Expansionary Gap: Y > Y*
				Recessionary Gap: Y < Y*
			The Aggregate Demand–Aggregate Supply Diagram
			The Self-Correcting Economy
		Sources of Inflation
			Excessive Aggregate Spending
		THE ECONOMIC NATURALIST 27.1
			Inflation Shocks
		THE ECONOMIC NATURALIST 27.2
			Shocks to Potential Output
		THE ECONOMIC NATURALIST 27.3
		Controlling Inflation
		THE ECONOMIC NATURALIST 27.4
		THE ECONOMIC NATURALIST 27.5
		Summary
		Key Terms
		Review Questions
		Problems
		Answer to Self-Test
		Appendix: The Algebra of Aggregate Demand and Aggregate Supply
PART 9 The International Economy
	Chapter 28 Exchange Rates and the Open Economy
		Exchange Rates
			Nominal Exchange Rates
			Flexible versus Fixed Exchange Rates
			The Real Exchange Rate
		THE ECONOMIC NATURALIST 28.1
		The Determination of the Exchange Rate in the Long Run
			A Simple Theory of Exchange Rates: Purchasing Power Parity (PPP)
			Shortcomings of the PPP Theory
		The Determination of the Exchange Rate in the Short Run
			The Foreign Exchange Market: A Supply and Demand Analysis
				The Supply of Dollars
				The Demand for Dollars
				The Equilibrium Value of the Dollar
			Changes in the Supply of Dollars
			Changes in the Demand for Dollars
		THE ECONOMIC NATURALIST 28.2
		Monetary Policy and the Exchange Rate
		THE ECONOMIC NATURALIST 28.3
			The Exchange Rate as a Tool of Monetary Policy
		Fixed Exchange Rates
			How to Fix an Exchange Rate
			Speculative Attacks
			Monetary Policy and the Fixed Exchange Rate
		THE ECONOMIC NATURALIST 28.4
		THE ECONOMIC NATURALIST 28.5
		THE ECONOMIC NATURALIST 28.6
		Should Exchange Rates Be Fixed or Flexible?
		THE ECONOMIC NATURALIST 28.7
		Summary
		Key Terms
		Review Questions
		Problems
		Answers to Self-Tests
Glossary
Index