Principles of Macroeconomics - 3e Contents

CONTENTS Preface CHAPTER Welcome to Economics ! Introduction What Is Economics , and Why Is It Important ?

10 and 15 How Economists Use Theories and Models to Understand Economic Issues 16 How To Organize Economies An Overview of Economic Systems 18 Key Terms 24 Key Concepts and Summary 24 Questions 25 Review Questions 25 Critical Thinking Questions 26 CHAPTER Choice in a World of Scarcity 27 Introduction to Choice in a World of Scarcity 27 How Individuals Make Choices Based on Their Budget Constraint 28 The Production Possibilities Frontier and Social Choices 34 Confronting Objections to the Economic Approach 39 Key Terms 43 Key Concepts and Summary 43 Questions 44 Review Questions 44 Critical Thinking Questions 45 Problems 45 CHAPTER Demand and Supply 47 Introduction to Demand and Supply 47 Demand , Supply , and Equilibrium in Markets for Goods and Services 48 Shifts in Demand and Supply for Goods and Services 54 Changes in Equilibrium Price and Quantity The Process 64 Price Ceilings and Price Floors 70 Demand , Supply , and 74 Key Terms 78 Key Concepts and Summary 79 Questions 80 Review Questions 81 Critical Thinking Questions 81 Problems 82 Labor and Financial Markets 37 Introduction to Labor and Financial Markets 87

Demand and Supply at Work in Labor Markets 88 Demand and Supply in Financial Markets 96 The Market System as an Mechanism for Information 102 Key Terms 106 Key Concepts and Summary 106 Questions 106 Review Questions 108 Critical Thinking Questions 108 Problems 109 CHAPTER Elasticity 111 Introduction to Elasticity 111 Price Elasticity of Demand and Price Elasticity of Supply 112 Polar Cases of Elasticity and Constant Elasticity 117 Elasticity and Pricing 120 Elasticity in Areas Other Than Price 128 Key Terms 13 Key Concepts and Summary 132 Questions 133 Review Questions 134 Critical Thinking Questions 135 Problems 135 CHAPTER The Perspective 137 Introduction to the Perspective 137 Measuring the Size of the Economy Gross Domestic Product 139 Adjusting Nominal Values to Real Values 148 Tracking Real over Time 153 Comparing among Countries 155 How Well Measures the of Society 158 Key Terms 161 Key Concepts and Summary 161 Questions 162 Review Questions 163 Critical Thinking Questions 163 Problems 164 CHAPTER Economic Growth 155 Introduction to Economic Growth 165 The Relatively Recent Arrival of Economic Growth 166 Labor Productivity and Economic Growth 169 Components of Economic Growth 176 Economic Convergence 181 Key Terms 186 Key Concepts and Summary 186 Questions 187 Review Questions 188 Critical Thinking Questions 188 Access for free at

Problems 189 CHAPTER Unemployment 191 Introduction to Unemployment 191 How Economists and Compute Unemployment Rate 192 Patterns 197 What Causes Changes in Unemployment over the Short Run 202 What Causes Changes in Unemployment over the Long Run 206 Key Terms 214 Key Concepts and Summary 214 Questions 215 Review Questions 215 Critical Thinking Questions 217 Problems 218 CHAPTER Inflation 219 Introduction to 219 Tracking 220 How to Measure Changes in the Cost of Living 224 How the and Other Countries Experience 229 The Confusion Over 233 Indexing and Its Limitations 238 Key Terms 241 Key Concepts and Summary 241 Questions 242 Review Questions 243 Critical Thinking Questions 244 Problems 244 CHAPTER 10 The International Trade and Capital Flows 247 Introduction to the International Trade and Capital Flows 247 Measuring Trade Balances 249 Trade Balances in Historical and International Context 252 Trade Balances and Flows of Financial Capital 254 The National Saving and Investment Identity 257 The Pros and Cons of Trade and Surpluses 262 The Difference between Level of Trade and the Trade Balance 264 Key Terms 266 Key Concepts and Summary 266 Questions 267 Review Questions 268 Critical Thinking Questions 269 Problems 269 CHAPTER 11 The Aggregate Su Model Introduction to the Aggregate Demand Model 271 Perspectives on Demand and Supply 273 271

Building a Model Demand and Aggregate Supply 274 Shifts in Aggregate Supply 280 Shifts in Aggregate Demand 282 How the Model Incorporates Growth , Unemployment , and 286 Keynes Law and Say Law in the Model 289 Key Terms 291 Key Concepts and Summary 291 Questions 293 Review Questions 293 Critical Thinking Questions 294 Problems 296 CHAPTER 12 The Perspective 299 Introduction to the Perspective 299 Aggregate Demand in Analysis 301 The Building Blocks of Analysis 304 The Phillips Curve 308 The Perspective on Market Forces 312 Key Terms 314 Key Concepts and Summary 314 Questions 315 Review Questions 315 Critical Thinking Questions 316 CHAPTER 13 The Neoclassical Perspective 317 Introduction to the Neoclassical Perspective 317 The Building Blocks of Neoclassical Analysis 319 The Policy Implications of the Neoclassical Perspective 324 Balancing and Neoclassical Models 331 Key Terms 333 Key Concepts and Summary 333 Questions 334 Review Questions 334 Critical Thinking Questions 334 Problems 335 CHAPTER 14 Money and Banking 337 Introduction to Money and Banking 337 Money by Its Functions 338 Measuring Money Currency , and 340 The Role 344 How Banks Create Money 349 Key Terms 53 Key Concepts and Summary 354 Questions 355 Review Questions 355 Critical Thinking Questions 356 Problems 356 Access for free at

CHAPTER 15 Monetary Policy and Bank Regulation 357 Introduction to Monetary Policy and Bank Regulation 357 The Federal Reserve Banking System and Central Banks 358 Bank Regulation 361 How a Central Bank Executes Monetary Policy 363 Monetary Policy and Economic Outcomes 367 Pitfalls for Monetary Policy 373 Key Terms 380 Key Concepts and Summary 380 Questions 381 Review Questions 382 Critical Thinking Questions 382 Problems 383 CHAPTER 16 Exchange Rates and International Capital Flows 385 Introduction to Exchange Rates and International Capital Flows 385 How the Foreign Exchange Market Works 386 Demand and Supply Shifts in Foreign Exchange Markets 394 Effects of Exchange Rates 398 Exchange Rate Policies 401 Key Terms 408 Key Concepts and Summary 408 Questions 409 Review Questions 410 Critical Thinking Questions 410 Problems 411 CHAPTER 17 Government Budgets and Fiscal Policy 413 Introduction to Government Budgets and Fiscal Policy 413 Government Spending 414 Taxation 417 Federal and the National Debt 420 Using Fiscal Policy to Fight Recession , Unemployment , and 423 Automatic Stabilizers 427 Practical Problems with Discretionary Fiscal Policy 429 The Question ofa Balanced Budget 432 Key Terms 434 Key Concepts and Summary 434 Questions 436 Review Questions 437 Critical Thinking Questions 437 Problems 438 CHAPTER 18 The Impacts of Government Borrowing 439 Introduction to the Impacts of Government Borrowing 439 How Government Borrowing Affects Investment and the Trade Balance 440 Fiscal Policy and the Trade Balance 443

How Government Borrowing Affects Private Saving 446 Fiscal Policy , Investment , and Economic Growth 448 Key Terms 454 Key Concepts and Summary 454 Questions 454 Review Questions 455 Critical Thinking Questions 455 Problems 456 CHAPTER 19 Policy Around the World 457 Introduction to Policy around the World 457 The Diversity of Countries and Economies across the World 458 Improving Countries Standards of Living 462 Causes around the World 467 Causes of in Various Countries and Regions 469 Balance of Trade Concerns 470 Key Terms 475 Key Concepts and Summary 475 Questions 476 Review Questions 477 Critical Thinking Questions 477 Problems 478 CHAPTER 20 International Trade 479 Introduction to International Trade 479 Absolute and Comparative Advantage 480 What Happens When a Country Has an Absolute Advantage in All Goods 486 Trade between Similar Economies 491 The of Reducing Barriers to International Trade 494 Key Terms 496 Key Concepts and Summary 496 Questions 496 Review Questions 497 Critical Thinking Questions 498 Problems 499 CHAPTER 21 Globalization and Protectionism 501 Introduction to Globalization and Protectionism 501 Protectionism An Indirect Subsidy from Consumers to Producers 502 International Trade and Its Effects on Jobs , Wages , and Working Conditions 509 Arguments in Support of Restricting Imports 512 How Governments Enact Trade Policy Globally , Regionally , and Nationally 518 The of Trade Policy 522 Key Terms 525 Key Concepts and Summary 525 Questions 526 Review Questions 527 Critical Thinking Questions 528 Access for free at

Problems 529 Use of Mathematics in Principles of Economics 531 Appendix The Model 549 Answer Key 573 References 601 Index 613