A
Abandoned boats, economic health indicator, 167a
Academic writers, 263a
Accounts, balancing, 498
ACH. See Automated Clearing House
Acquisition, definition, 295, 511
Actual reserves, definition, 234, 507
Adams, Walter, 407
Adaptive expectations, definition, 272, 507
AFL-CIO, 507
Aggregate demand (AD)
change, 264
classical economics, 264f
graph, 270f
increase, example, 265
new classical economics model, 270–271
chart, 270f
Aggregate spending (total spending), 146–150
definition, 515
Aggregate supply (AS)
classical economics, 264f
new classical economics model, 261
American Needle, Inc. v. National Football League et al., 411a
American Recovery and Reinvestment Act (ARRA), definition, 185
Antitrust case, accused (impact), 367
Antitrust enforcement, 406–415
examination, 414a
administration, 407
Antitrust penalties, 412–414–415
Assets
appreciation, 116
value, change, 114
Attempts to monopolize, definition, 407, 512
Automated Clearing House (ACH) network, definition, 218, 507
Automatic fiscal policy (automatic stabilization), 183, 184
Automotive Products Trade Act, 472
Availabilities, buyer expectations, 74
Average fixed cost, definition, 507
Averages, calculation, 349
Average total cost (ATC), 352t. See also Long-run average total cost
curve, 372
example, 344t
Average values, marginal values (relationship), 348
Average variable cost, definition, 507
B
Bagels
demand, examples, 65t, 66t, 67t, 68t
demand/supply, examples, 70t, 71f
Balanced budget, definition, 186, 507
Balance of trade. See U.S. balance of trade
Balances. See International financial transactions/balances
Bank holding company
definition, 507
example, 298f
Banking. See Branch banking; Correspondent banking; Interstate banking; Shadow banking
organization, size (determination), 220–221
system. See Dual banking system.
excess reserves, increase, 238
regulations, Congressional enactment (discussion), 224
Bankruptcy-prone position, 212
Banks. See Federal Reserve; National banks; State banks
excess reserve
increase, example, 237
loan-making capability, 236–237
increase, 213
regulation, 212
reserve
account, changes, 219
calculations, example, 235t
Bargaining. See Collective bargaining
power, inequality, 445
Barriers to entry, definition, 369, 507
definition, 204
Base year, definition, 119, 507
Basic economic decisions
economic systems, relationship, 37–38, 37f
scarcity, relationship, 37f
BEA. See Bureau of Economic Analysis
Behavior, maximization, 327
Benefits. See Marginal benefit; Total benefit
balancing (businesses), 315–320
balancing (individuals), 306–315
discussion questions, 332
answers, 522
utility points, example, 311t
chairmanship, 214
Board of directors. See Corporate board of directors
Board of Governors, 249
Bondholder, creditor (comparison), 294
Borrowing
household/business relationships, 154f
relationships, 149f
Brady Plan, definition, 500, 507
Branch banking, definition, 221, 507
Brazilian reals
price/quantity, inverse relationship, 488
supply/demand, 490f
U.S. dollar exchange rate, 490
U.S. dollars demand curve, 489f
U.S. dollars supply curve, 489f
Breaking even
example, graph, 373f
British Industrial Revolution, 52–53
Budgets. See Balanced budget; Deficit budget; Government; Surplus; Unified budget
fiscal policy, relationship, 190
Bureau of Economic Analysis (BEA), production data, 108
Bureau of Labor Statistics (BLS)
Current Population Survey, 111
employment/price level information, 108
graph, 144f
Businesses
benefits/costs, balancing, 315–320
business ownership, 295, 297–298
case study, 304
cost measures, usage, 342
discussion questions, 303
employee demand, determination, 438–439
goods/service selection, 338
government, relationship (understanding), 423
investment spending, saving/taxes (relationships), 154f
loss minimization, 298
numbers, 295
production methods, cost reduction, 440
profitability, community improvement role (discussion), 300
profit maximization, 298
answers, 521
risk, competition (impact), 406
sizes, 295
summary, 301
unfair competition, FTC perspective, 410
unit cost analysis, 345
Business firms
nonprice competition, attraction, 379
circular flow, relationship, 153
Business spending
profit expectations, 152
relationship, 232
Buyers
expectations, 74
incomes, 74
number, 75
C
Candidates, information seeking, 327
Capital account
Capital goods
analysis, 465
Capitalism. See Laissez-faire capitalism
Career decision making, examples, 292a
Carnegie, Andrew, 54
Cause-and-effect relationship, 13
support/denial, 14
Celler-Kefauver Act, 412
Cell phones
garden tractors, combinations, 20f, 20t
service market, 382
usage, ban (discussion), 326
Certificate of deposit (CD), nominal interest rate (example), 115–116
Change in demand, definition, 507
Change in labor demand/supply, definition, 442, 507
Change in supply, definition, 507
Change in the quantity of labor demanded/supplied, definition, 442, 507
Charter authority, 212
Checkable deposits
chronology, 208t
Federal Reserve system flowchart, 218f
Check 21, definition, 217–218, 507
Choice
difficulty, case study, 29
Circular flow
business sector, relationship, 153
foreign sector, relationship, 158, 160f
government sector, relationship, 156
household sector, relationship, 148–150
Civilian Conservation Corps (CCC), establishment, 55
Civilian labor force/subgroups, participation rates, 110t
Civil War, U.S. economy, 53–54
Clark, John Maurice, 406
aggregate supply/demand, chart, 264f
model, understanding, 274
Clayton Act (1914), 54, 410–411
cases, 413a
Closed economy, definition, 507
Coffee prices, coffee demand
equation, 19
relationship, 18f
Cola, demand schedule (example), 74t
Collective bargaining, 446–447
law, relationship, 447
Combinations/conspiracies in restraint of trade, definition, 407, 507
Command economies, 37
ranking, 221t
uniqueness, 211
Commodity monetary standards, 210
definition, 508
Common stock, definition, 294, 508
Community improvement, business role (discussion), 300
Comparative advantage
international trade, relationship, 468–471
understanding, 471
Competition. See Monopolistic competition; Nonprice competition; Pure competition
case study, 396
increase, 474
injury, price discrimination (impact), 411
answers, 523
Competitive labor market, graph, 433f
Competitive seller. See Monopolistically competitive seller
Conglomerate merger, definition, 297, 412, 508
Conspirators, economic impact, 146a
Constant GDP (real GDP), 127–128
Constant returns to scale, 351–354
Consumer, market structures (relationship), 390–391
Consumer choice, 43
Consumer goods, definition, 21, 508
Consumer Price Index (CPI), 119, 120–121
annual percentage changes, 122f
statistics, 120t
Consumer Product Safety Commission, 56
differences, 422
Consumer units, annual expenditures (data), 287–288
Core values, exercise, 6t
Corporate board of directors, definition, 295, 508
Corporate stock, ownership, 295
acquisition, 297
establishment, 294
number/receipts, 297t
owners, profit (receiving), 294
profit maximization, manager motivation, 300
structure, 295f
Correspondent banking, definition, 218, 508
Cost-benefit analysis, definition, 306, 508
Cost-benefit principles, application, 313
Cost-of-living adjustment (COLA)
receiving, 122
Cost per unit
decrease, 348
increase, 353
Cost-plus pricing, definition, 421, 508
demand-pull inflation, simultaneity, 118
example, 118a
Costs. See Explicit costs; Implicit costs; Total cost, Marginal cost
balancing (businesses), 315–320
balancing (individuals), 306–315
calculation, understanding, 349
categorization, 315
discussion questions, 332
measurement, 308–310, 316, 318–319
pattern, impact, 350
answers, 522
utility points, example, 311t
Country, comparative advantage, 469
Craft union, definition, 445, 508
Creative destruction
impact, 341a
occurrence, 340
Crops, markets, 369
Currency
chronology, 208t
price quotes, 491
Current GDP (money GDP/nominal GDP), definition, 127, 512
Current Population Survey (BLS), 111
Cyclical unemployment, 105
D
Data collection/analysis, 14
Dealer, Fed securities purchase, 247
Debt. See National debt
monetization
impact, 251f
Decision makers, scarcity/choice/influences, 7f
Deficit budget, definition, 186, 508
Degree-granting institution fees, graphs, 33f
Demand, 64–68, 397. See also Derived demand
case study, 96
definition, 73
effect, 82
factors, 492
understanding, 83
classical economics. See Aggregate demand.
decrease, 80
effect, graph, 81f
graph, 76f
chronology, 208t
discussion questions, 95
example, 65t
graph, 401f
graphing, 65
increase, 80
effect, graph, 81f
graph, 76f
definition, 511
nonprice factors, 74
definition, 512
total revenue, relationship, 90t
quantity demanded/supplied, changes, 78–80
graph, 79f
answers, 518
taste/fashion/popularity, impact, 74
Demand curve
graph, 437f
movement, 73
surpluses/shortages, measurement, 72f
Demand curve for labor, definition, 436, 508
Demand-pull inflation
cost-push inflation, simultaneity, 118
Department of Justice, responsibility, 407
Depository institutions
excess reserves, change, 241
loans, variation, 240
money transfer, 235
reserve
loss, 235
requirement, 234
Depository Institutions Deregulation and Monetary Control Act (1980), definition, 219, 508
Deregulation, definition, 423, 508
Derived demand, definition, 433, 508
Devaluation, definition, 488, 508
Developing countries, external debt (ranking), 499t
Diesel fuel sales, economic health indicator, 167a
Differentiated products, definition, 377, 508
Diminishing marginal utility, law (definition), 309
Diminishing returns, law, 348, 350
definition, 348
example, 32f
graph, 32f
Discount rate, 244–245. See also Federal Reserve
Discouraged workers, definition, 112, 508
Discretionary fiscal policy, 183–184
Discrimination. See also Income
Diseconomies of scale, 351–354, 373
existence, 353
Distribution of income. See Income
Dodd-Frank Wall Street Reform and Consumer Protection Act (2010)
passage, 225
Do-it-yourself projects, application, 313a
Dollars. See U.S. dollars
spending, comparison, 289
Domestic employment, 474
Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), 477
Dr. Miles Medical Co. v. John D. Parks & Sons, Co., 410a
Dual banking system, definition, 212, 508
Durable goods, definition, 288, 508
E
Earning groups, classification, 10
Easy money policy, definition, 244, 508
Econometrics, definition, 14, 509
Economic activity
changes, 161t
understanding, 165
circular flow, 40f
globalization, 464
government influence, role (discussion), 275
injections, 161t
leakages, 161t
level, relationship, 242f
long-term view, graph, 144f
Economic activity level
graph, 145f
money supply, relationship, 232–234
relationships, 239t
total spending, relationship, 147f
Economic change, realities, 50
Economic cost of production, 315
definition, 509
Economic decision making
circular flow, understanding, 48
continuum, 47f
Economic decisions, 26–28. See also Basic economic decisions
case study, 61
impact, 288
Economic growth
deceleration, environmental protection (impact), 126
full production, relationship, 123–126
illustration, 124f
real output per capita. See U.S. economic growth.
Economic health, indicators, 167a
Economic individualism, rise, 51–52
Economic loss
example, graph, 373f
monopolistically competitive seller, operation, 380f
illustration, 16f
making, 16
media attention, 12
earning, ability, 385
example, graph, 373f
excess profit, definition, 316
monopolistically competitive seller, operation, 380f
seller earnings, 380
Economic Report of the President economic indicators, 108
Economics. See Classical economics; Keynesian economics; New classical economics; New Keynesian economics
case study, 29
discussion questions, 28
information, 4
institutional information/skills, 4–5
answers, 517
scarcity, relationship, 5
study, reason, 4
Economic stabilization, 184–185
Economic systems, 36–38. See also U.S. economic system
basic economic decisions, relationship, 37–38, 37f
case study, 61
scarcity, relationship, 37f
illustration, 16f
support, arguments (usage), 15a
Economic well–being, maximization
balance, 289
Economies, judgment, 61
Economies of scale, 351–354, 373
existence, 353
graph, 420f
impact, 419
Economists
requirement, 317a
scenario, 476a
Economy. See Market economy; Open economy
change, causes, 146a
global playing field, 276
impacts, 164a
producing sectors, 337t
variables (explanation), economic theories (usage), 17
Edsel (Ford), mistake, 41a
Education
impact. See Income.
levels, 449t
Efficiency, 43
market structures, relationship, 390–391
monopolistic competition, 380–381
oligopolistic market, 385
Efficient method of production, definition, 339, 509
Efficient production, definition, 374, 509
Elasticity coefficient, definition, 509
Elastic price change, definition, 89, 509
Electronic payment clearing, 217–218
Embargo
imposition, 475
Emergency Economic Stabilization Act (2008), definition, 220, 509
Employee demand, business determination, 438–439
Employer, bargaining power, 445
Employment. See Underemployment; Unemployment
answers, 518
goal. See Full employment.
Employment Act (1946), 55
Entitlements, definition, 188, 509
Entrepreneurship, definition, 9, 509
Entry, 369
barriers, 385
restriction, 385
Environment, protection (impact), 126
Environmental damage, trade restriction (discussion), 478
Environmental Protection Agency (EPA), 56
pollution standards, 415
Equal Employment Opportunity Commission (EEOC), 56
authority, 415
Equilibrium
changes, charts, 269f
chart, 268f
increases/decreases, effect, 80
demand, increases/decreases (effect), 80
Equity, 43
Euro, creation, 501
Europe, monetary integration, 500–502
European Monetary System (EMS), definition, 500, 509
European Union (EU), 500
discussion, 501
exchange rate, 487
Events, cause-and-effect interpretation, 12–13
Excess profit (economic profit)
seller earnings, 380
impact, 242f
determination, 234
increase, 241
loan making, relationship, 235–236
loan-making capability, 236–237
relationship, 242f
Exchange
market. See Foreign exchange markets.
Exchange rates, 486–487. See Fixed exchange rates; Flexible exchange rates
impact, 494
understanding, 494
Exclusive dealing arrangement
case, 411a
Exit, 369
role, 118
Explicit costs, definition, 315, 509
Exports
foreign students, 497a
trading partners, ranking, 467t
External debt
coverage, 500
problem, 499
ranking. See Developing countries.
Externality. See Negative externality; Positive externality
impact, 324
F
F. Hoffmann-La Roche Ltd et al. v. Empagran S. A. et al., 410a
Factors, income (relationship), 10
Factors of production (resources), 9–11
Factory Girl's Last Day, poem, 53a
Fairness, 9
Families
contribution, example, 131a
gossip, satisfaction, 291a
poverty level, 451t
Farmers' Almanac, necessity, 374a
Farm work, lessons, 354a
Federal budget
receipts/outlays/surpluses, 187t
Federal Communications Commission (FCC), actions, 415
Federal debt, increase, 56
Federal Deposit Insurance Corporation (FDIC), 55
coverage, example, 213a
establishment, 212
Federal Funds market, 245
definition, 509
Federal Funds rate
Open Market Operations, relationship, 247–248
Federal government expenditures, 175t
categories, 176t
function, 178f
Federal government revenue, sources, 179t
Federal government unified balance, 188t
Federal income tax (flat tax discussion), 180
policies, chronology, 181a
Federal minimum wage, change, 444f
Federal on-budget/off-budget balances, 188t
Federal regulatory agencies, chronology, 416t–417t
Federal Reserve
accounts, maintenance, 216
banks
definition, 215
Board of Governors, 249
definition, 214
case study, 230
congressional control, question, 252
discount rates, 246t
discussion, 212
districts, 216f
member banks, supervision/examination, 215–216
answers, 520
check clearing, flowchart, 218f
functional structure, 215f
Federal Trade Commission (FTC), 407
establishment, 54
Federal Trade Commission Act, 409–410
Financial crisis (2007–2009), 222–225
Bernanke perspective, 223a
mortgage market, impact, 222
Financial depository institutions (FDIs), 211–214
calculations, understanding, 248
loans, 211
Financial holding company, definition, 220, 509
Financial institutions
case study, 230
loan making, 235
answers, 520
Finished goods, value (measure), 126–127
Firm behavior, 390t
monopolistic competition, 378–381
Firms
characteristics, 390t
demand curve, graph, 437f
loss minimization
downward-sloping demand curve, 402f
nonprice decisions, influence, 366
output, determination, 397–400
price, influence, 366
products, sale, 377
profit maximization
downward-sloping demand curve, 402f
profit-maximizing output, downward-sloping demand curve, 402f
profit-maximizing price, determination, 397–400
wage, payment willingness, 433
budget, relationship, 190
mechanics, 183
summary, 185t
Fixed assets, 206a
Fixed costs, definition, 341, 509
Fixed factors, definition, 341, 509
Flat tax (proportional tax), 179–180
Flexible exchange rates (floating exchange rates), 488, 490
Floating exchange rates, 488, 490
Food, law of diminishing marginal utility, 309
Food and Drug Act (1906), 55
Food and Drug Administration (FDA), actions, 415
Food products, problem, 41a
Foreign currencies
demand/supply, changes, 493f
U.S. dollar, exchange rates, 487t
Foreign exchange markets (forex markets)
definition, 490
demand/supply, factors, 492–494
explanation, 491a
money, supply/demand (factors), 494
circular flow, relationship, 158, 160f
Foreign trade effect, definition, 261, 510
Free enterprise, definition, 39, 510
Free market approach, 50
Free trade
merits, debate, 472
protectionism, impact, 472–478
Frictional unemployment, 105
attainment, 268
definition, 510
meaning, 113
Full production
economic growth, relationship, 123–126
Future income, buyer expectation, 74
Future market conditions, expectations, 77
G
Garden tractors, cell phones (combination), 20f, 20t
Gasoline, law of demand, 69a
GDP. See Gross Domestic Product
General Agreement on Tariffs and Trade (GATT), definition, 477, 510
Generalized System of Preferences, 472
General partner, definition, 293, 510
General Theory of Employment, Interest, and Money (Keynes), 265
Geographic boundary of a market, definition, 367, 510
Goods. See Durable goods; Nondurable goods
availability, 474
consumption, satisfaction (maximization), 289
government purchases, definition, 510
labor, total product/marginal product, 434t
movement, 464
price per unit, 435t
prices, substitutes/complements (relationship), 75
production, 468a
tariffs, 473t
examples, 472
total product, example, 435t
U.S. exports/imports, 465t
Goods/services
government purchases, definition, 155, 176, 510
production, 468a
business decisions, 42
real government purchases, 156f
real U.S. exports/imports, 159f
real U.S. net exports, 159f
receiving, identification, 42
U.S. exports/imports, 465t
Government
benefit programs, average monthly payments, 454t
borrowing, impact, 251f
business, relationship (understanding), 423
cost measures, usage, 342
deficits, monetary policy, 250–251
discussion questions, 427
fiscal agents. See U.S. government.
programs, poverty (relationship), 453–455
purchases of goods/services, definition, 155, 176, 510
representatives, 174t
circular flow, relationship, 156, 157f
taxing-spending relationship, 156–157
demand/supply, graph, 370f
Gramm-Leach-Bliley Act (1999)
passage, 221
reasons, 18
Great Depression, 55
joblessness, 260
persistence, 265
regulation, growth, 415
unemployment
presence, 104
Greenspan, Alan, 249
Gross Domestic Product (GDP), 108, 126–127
calculation, 130
information, completeness, 129–131
national debt, percentage, 196f
Price Index, 119
statistics, 128t
total government expenditures, percentage, 175t
Gross National Happiness (GNH) Index, 61
Guitar production methods, costs, 42t
H
Happiness, money (influence), 12a
Health care, supply/demand (impact), 96
Heavily Indebted Poor Countries (HIPC) initiative, definition, 500, 510
Hemline index, economic health indicator, 167a
Holding company. See Financial holding company
example, 298f
Homeless families, children (inclusion), 453a
Horizontal merger
case, 413a
Hourly wage rates
example, 30t
graph, 31f
Household-business relationship, 40
Households
average money income, 288t
case study, 304
discussion questions, 303
average, size, 287
distribution, 448t
usage, 287
individuals, goals/decisions, 288–291
answers, 521
circular flow, relationship, 148–150
summary, 301
Household spending, relationships, 232
flowchart, 149f
Human capital investments, definition, 125f, 450, 510
Hyperinflation, definition, 113, 510
I
Illinois Tool Works, Inc. et al. v. Independent Ink, Inc., 410a–411a
Implicit costs, definition, 315, 510
Imports
trading partners, ranking, 467t
Incentive regulation, definition, 421, 510
Income. See Money; Psychic income; Real income
discrimination, 451
earning, satisfaction (maximization), 290–291
education/experience, impact, 449–450
factors, relationship, 10
inflation, relationship, 114–115
levels, 449t
proportion, 89
purchasing power, 114f
resource ownership, 449
usage, 287
Income-determined spending, definition, 148, 510
Income distribution, 448–455. See also Households
case study, 460
answers, 524
Indexes. See Price index
importance, 122
Individual firm
demand curve, definition, 370–371, 510
market demand, increase (impact), 372f
definition, 371f
Individual hardships, 105
Individuals
benefits/costs, balancing, 306–315
poverty levels, 451t
Industrialization, problem, 52
Industrial Revolution. See British Industrial Revolution
Industrial union, definition, 446, 510
sample, 338t
Inelastic price change, definition, 89, 510
Infant industry
protection, 474
Inferior goods/services, definition, 74, 510
Inflation, 113–123. See also Cost-push inflation; Demand-pull inflation; Hyperinflation
definition, 510
impact, 115
interest rate, relationship, 115–116
social/political consequences, 116
wealth, relationship, 116
winners/losers, 116t
Inflationary pressure, causes, 117–118
Information, 43
Injections
economic activity, 161t
spending stream, 149
Injections into the spending stream, definition, 510
Injured party, triple damages, 414
Input markets (resource markets), definition, 40, 510
Intellectual capital, usage, 450a
Interest
real rate, definition, 115–116, 514
excess reserves, changes (impact), 242f
government borrowing, effect, 251f
inflation, relationship, 115
information, 243
investment spending, relationship, 153a
monetizing the debt, impact, 251f
relationship, 242f
role, 240
variation, 243
Interlocking directorates, definition, 410, 510
International Business Machines Corp. v. United States, 413a
International finance
case study, 506
answers, 524
International financial system
International financial transactions/balances, 495–498
International Monetary Fund (IMF), definition, 477, 510
International trade. See U.S. international trade
comparative advantage, relationship, 468–471
discussion questions, 481
answers, 524
summary, 479
Interstate banking, definition, 219, 510
Interstate Commerce Commission (ICC), establishment, 418
Inventories, definition, 266, 510
example, 32f
graph, 32f
Investment
goods, spending (postponement), 500
household/business relationships, 154f
spending, definition, 151, 510
Invisible hand doctrine, definition, 52, 511
J
Job applicants
absence, nonwage factors (impact), 437–438
example, 30t
graph, 31f
Job discrimination, authority, 415
Joblessness, Great Depression, 260
Job loss, problem, 106a
Joint venture, definition, 409, 511
Jungle, The (Sinclair), 54
Justice, 9
K
Keynes, John Maynard, 116, 263, 265
Keynesian economics, 265–269. See also New Keynesian economics
model, understanding, 274
popularity, peak, 269
Keynesian policy prescriptions, 267–269
Kinked demand curve
flat portion, 384
graph, 384f
Knowledge, impact, 450a
Kraft Foods
company profile, 299a
holding company arrangement, 298
L
Labor
productivity, decline, 433
supply curve, definition, 514
total product/marginal product, 434t
value, determination, 435
definition, 442
quantity demand/supply, 442
productivity, relationship, 434
product price, relationship, 434–435
quantity, change (definition), 442
technological change, impact, 440
statistics, 109t
subgroups. See Civilian labor force/subgroups.
participation rates, 110t
unemployment rates, 111t
case study, 460
demand, increase (impact), 440f
economy, impact, 442
legal considerations, 443, 445
minimum wage, impact, 444f
answers, 524
supply restriction, 446f
definition, 442
quantity demand/supply, 442
curve
definition, 436
graph, 437f
demographic trends, impact, 442
long-term gain, impact, 439
quantity, change (definition), 442
categories, 445
Laissez-faire capitalism, definition, 52, 511
Lands' End, Sears purchase, 411
Law, collective bargaining (relationship), 447
example, 69a
gasoline example, 69a
Law of diminishing marginal utility, definition, 309
Law of diminishing returns, 348, 350
Law of supply
example, 69a
organic milk example, 69a
Leadership pricing, definition, 383, 511
Leakages
definition, 511
economic activity, 161t
spending stream, 149
Least-cost (efficient) method of production, definition, 42, 511
Leegin Creative Leather Products, Inc. v. PSKS, Inc. DBA Kay's Kloset…Kay's Shoes, 410a
Legal considerations (labor markets), 443
Liability. See Unlimited liability
Limited liability company (LLC), 294–295
Limited resources, problem, 5
Lipstick index, economic health indicator, 167a
Liquidity, definition, 210, 511
Loan making
decrease, 239
depository institution, money transfer, 235
excess reserves, relationship, 235–236
government borrowing, impact, 251f
increase, 239
monetizing the debt, impact, 251f
Loans
interest rates, determination, 240–243
chart, 241f
quality, excess reserves (changes, impact), 242f
questions/answers, 236a
rollover difficulty, 206a
Local government expenditures, 175t
function, 178f
Long run, definition, 341, 511
Long-run average total cost (LRATC)
calculation, long-run total cost (usage), 351
curve, phases, 354f
Long-run condition, occurrence (reason), 375
oligopolistic market, 385
Long-run marginal cost, definition, 351, 511
Long-run position
graph, 375f
monopolistically competitive seller, 382f
Long-run total cost, 352t
usage, 351
Loss. See Profit or loss
Loss minimization, 298
downward-sloping demand curve, 402f
graph, 399f
Low carbs, rise/fall (impact), 78a
Lower price limit, definition, 513
Luddites, impact, 341a
Luxury goods, necessities (contrast), 88–89
M
M1 (money supply)
M2 (U.S. money supply), 209t
definition, 511
Maastricht Treaty, definition, 501, 511
Macroeconomic equilibrium
changes, charts, 269f
attention, 262a
case study, 282
case study, 172
discussion questions, 171
policy instruments, update/refinement, 276–277
theories, update/refinement, 276–277
Macroeconomic viewpoints, 261–275
case study, 282
Macroeconomy
chart, 268f
government, role
answers, 519
case study, 201
government impact, understanding, 191
Major League baseball fan cost index, team marketing report, 388t
Management, union negotiations, 447
Manufacturing sector, industries/sectors (sample), 338t
Marginal benefit (marginal utility)
graph, 314f
Marginal cost (MC), 345t, 347–348. See also Long-run marginal cost
list, 352t
marginal revenue, relationship, 319, 320
Marginal cost-marginal benefit approach, usage, 312
Marginal product
definition, 511
example, 434t
Marginal productivity, decline, 434–436
example, graph, 401f
graph, 321f
marginal cost, relationship, 319, 320
example, 436t4
total revenue, change, 397
Marginal values, average values (relationship), 348
Market
basket, dollar outlays (conversion), 119
buyers, number, 75
clearing price, definition, 71, 511
decision making, government influence, 45
discussion questions, 427
entry/exit, 369
existence, 39
failure, 43
definition, 511
geographic boundary, definition, 367, 510
independently acting sellers, 370
power, 43
price ceiling, effect (graph), 85f
price floor, effect (graph), 86f
product boundary, definition, 367, 513
product type, 368
systems, choices, 43
Market boundaries, 367
controversy, 367
defining, 368a
determination, 367
identification, attempt, 367
curve, definition, 370–371, 511
example, graph, 370f
evaluation, 43
government intervention, 44f
strengths, 43
list, 44t
weaknesses, 43
list, 44t
Market structures, 368–369, 390–391
case study, 396
firms, characteristics/behavior, 390t
answers, 523
example, graph, 370f
Marshall, Alfred, 262
Mathematical equations, usage, 17–19
Maximization
discussion questions, 332
answers, 522
Maximizing economic well-being, definition, 288–289, 511
Maximum employment, promotion, 104
Maximum profit (yield), price-quantity combination (impact), 386
Measure of value, definition, 205, 511
Meat Inspection Act (1907), 54
Medium of exchange, definition, 204, 511
Men's underwear/neckties, economic health indicator, 167a
Mercantilism, definition, 52, 511
Merger. See Conglomerate merger; Horizontal merger; Vertical merger
Method for storing wealth and delaying, definition, 511
Milk, price jump, 118a
Mine Safety and Health Administration, 418
Minimum wage
change. See Federal minimum wage.
impact, 444f
law, definition, 443, 445, 511
raising, problem, 88
assumptions/conditions, 261
attention, 262a
interpretation, 21
Monetarism, definition, 273, 512
Monetarists, definition, 273, 512
Monetary Control Act (1980), 211, 219
Monetary policy
case study, 258
discussion questions, 257
government deficits, relationship, 250–251
answers, 520
Monetary standards, 210. See Commodity monetary standards; Paper monetary standards
Monetary theory
case study, 258
discussion questions, 257
answers, 520
Monetizing the debt
impact, 251f
case study, 230
forms, 205t
income
households, averages, 288t
nominal income, definition, 114, 512
influence, 12a
reserve requirement example, 237t
multiplier effect, definition, 512
policy. See Easy money policy; Tight money policy.
answers, 520
velocity, definition, 209, 515
wealth, storage method, 205–206
case study, 258
discussion questions, 257
answers, 520
Money GDP (current GDP/nominal GDP)
determination, 127t
statistics, 128t
Money multiplier
effect, definition, 236
Money supply (M), 206–210. See also U.S. money supply
decrease, 233
economic activity level, relationship, 232–234
equation, 233
M1, 207t
M2, 209t
M2, definition, 511
relationships, 239t
turnover, 209
Monopolist
direct competitors, absence, 387
nonprice competition, 387
output, demand curve, 387f
price, control, 386
profit-making ability, 389
Monopolistically competitive markets, 377
Monopolistically competitive seller
long-run position, 382f
operation, economic profit/loss, 380f
output, demand curve, 379f
Monopolistic competition, 377–381
individual firm product, demand, 378
control, 378
Monopolization
attempts, definition, 407, 512
Monopoly, 385–389. See also Natural monopoly
definition, 385
market
definition, 512
structure, pricing, 387
public utility, 385
Mortgages. See Subprime mortgages
bundling, definition, 224, 512
Movies, economic health indicator, 167a
Muckrakers, definition, 54, 512
equation, 163
Mutual funds
growth, 221
Mutual interdependence, definition, 383, 512
N
National banks, definition, 212, 512
National Collegiate Athletic Association (NCAA), boundaries (defining), 368a
chronology, 194t
financing, 193
size, 193
National Highway Traffic Safety Administration, ruling (impact), 422
National Labor Relations Act (1935), 55
Wagner Act, definition, 447, 512
National Labor Relations Board (NLRB)
National security, 475
Nations
currency, demand/supply (change), 493
Natural monopoly
result, 419
Natural rate hypothesis, definition, 272, 512
Natural rate of unemployment, definition, 113, 270, 512
Nebbia v. New York, 421
Necessities
price, impact (example), 118a
Negative externality, 323
definition, 512
usage, graph, 325f
Net benefits
graph, example, 314f
Net exports, definition, 158, 512
Net income, 497
Net services, 497
Net worth, definition, 212
New classical economics
aggregate demand/supply, manipulation, 271–272
New classical economics model, 269–273
chart, 270f
aggregate supply, 271
chart, 272f
understanding, 274
New Coke (Coca-Cola), problem, 41a
New Deal
regulation, growth, 415
New Keynesian economics, definition, 273, 512
New York Stock Exchange (NYSE), 296
Nominal GDP (current GDP/money GDP), definition, 127, 512
Nominal (money) income, definition, 114, 512
Nondurable goods, definition, 288, 512
Nonincome-determined spending
injection, impact, 162t
Nonmarket productive activities, 129
Nonmember state insured bank, definition, 512
business firm attraction, 379–380
controversy, 380
forms, 379
resources, waste (discussion), 381
Nonprice competition, definition, 373, 512
Nonprice decisions, influence, 366
Nonprice factors, definition, 74, 75, 512
Nonprofits, cost measures (usage), 342
Normal goods/services, definition, 74f, 512
Normal profit, definition, 315, 512
North American Free Trade Agreement (NAFTA), 472
O
Obama, Barack (election), 56
Occupational Safety and Health Administration (OSHA)
authority, 415
establishment, 418
Off-budget, definition, 188, 512
Oil-based energy problem, 118a
Oligopolistic market
definition, 512
efficiency, 385
individual firm product, price, 383–384
long-run costs, 385
price, control, 383
profit, 385
structure, 383
Oligopolist output, kinked demand curve (graph), 384f
characteristics, 382
definition, 382
On-budget, definition, 188, 512
Open economy, definition, 512
Open Market, securities (Fed purchase), 246–247
Open Market Committee, 214–215
Open Market Operations, 246–247
Opportunity cost, 7–8. See also External debt
concept (emphasis), production possibilities model (usage), 21
production example, 470
Organic milk, law of supply, 69a
Organization of Petroleum Exporting Countries (OPEC), 386
Other checkable deposits, definition, 513
Outlays. See Federal budget receipts/outlays/surpluses
Output, 474
loss-maximizing level, 373
markets (product markets), definition, 39, 513
profit-maximizing level, 373
Overtime, work decision, 290–291
P
Paper monetary standards, 210
definition, 513
Paper money, share, 207
calculation, 110
civilian labor force/subgroups, 110t
statistics, 109t
Partnership
general partners, comparison, 293
number/receipts, 297t
Patents
function, 389a
ownership, 386
Payments
delay method, definition, 206, 511
Peanut butter, price increase, 90a
People's Republic of China, economic system, 51a
Per se violations, definition, 407, 513
Personal consumption expenditures, 1470148
Personal income
sources, percentage distribution, 287t
economic decisions, 46
evaluation, 46
market economies, movement, 49–50
operation, 45
strengths/weaknesses, list, 47t
Planning failure, definition, 46, 513
Positive externality
usage, graph, 325f
government programs, relationship, 453–455
levels. See Families; Individuals.
group ranking, 452t
Preferred stock, definition, 294, 513
Price
answers, 518
buyer expectation, 74
ceilings, 84
definition, 513
effect, graph, 85f
upper price limit, definition, 84, 513
discrimination
case, 413a
Robinson-Patman Act, impact, 411–412
elasticity
example, 436t
fixing
case, 410a
lower price limit, definition, 84, 513
general level, increase, 113
influence, 366
leadership, 383
purely competitive firm, control (absence), 372
reduction, 474
regulation, 421
searcher, definition, 386, 513
setting, markets (relationship), 68–70
Price determination
case study, 96
discussion questions, 95
answers, 518
Price elastic, definition, 87–88, 513
Price indexes, 121–122. See also Consumer Price Index; Producer Price Index: Gross Domestic Product
calculation, 130
example, 119t
price changes, comparison, 121
Price inelastic, definition, 88, 513
Price per unit, example, 435t
Pricing, 378–379. See also Cost-plus pricing
Private benefits, social net benefits (relationship), 324–325
Private property rights, definition, 39, 513
Private school fees, graphs, 33f
Producer Price Index (PPI), 119
Producing sectors
sample, 337t
Product
differentiation, 378
downward-sloping demand curves, 434–435
patent ownership, 386
rejection, 41a
sample, 338t
type, 368
U.S. merchandise exports/imports, percentage distribution, 466t
Product boundary of a market, definition, 367, 513
assessment. See U.S. production.
complexity, 46
economic cost, definition, 315, 509
efficient method, definition, 339, 509
factors, 341
definition, 514
example, 347
least-cost (efficient) method, definition, 42, 511
cost, reduction, 440
range, technology definition, 340
positive externalities, 324–325
promotion, 104
Production costs, 75, 77, 340–354
case study, 359
summary, 355
evaluation, example, 342
example, 339t
technology, impact, 340
Production possibilities
curve, formation, 20
model, 21
economic growth, 22f
example, 22f
understanding, 23
Productive activities, 336
labor demand, relationship, 434
Product markets (output markets), definition, 39, 513
Product price
labor demand, relationship, 434–435
Profit. See Excess profit; Normal profit
example, 319t
expectations, business spending (relationship), 152
graph, example, 321f
graphing, 320
oligopolistic market, 385
determination, mechanics, 316
downward-sloping demand curve, 402f
graph, 399f
manager motivation. See Corporation.
socially responsible behavior, relationship, 299
Profit-maximizing behavior, 397–400
Profit-maximizing output, determination, 397–403
Profit-maximizing price/output, determination, 397, 400–403
Profit-maximizing rules
application, 386
Profit or loss, definition, 298, 319, 513
Proportional taxes (flat taxes), 179–180
limitation, 293
number/receipts, 297t
unlimited liability, impact, 293
Protectionism
free trade, relationship, 472–478
Psychic income, 438
Psychology, economic impact, 146a
Public assistance, work requirement (discussion), 455
Public good, definition, 176, 513
Public interest justification for regulation, definition, 420, 513
Public school fees, graphs, 33f
Purchasing power. See Income
promotion, 104
characteristics, 369
costs, 397
demand, 397
existence, discussion, 377
firm
profit-maximizing price, determination, 397–400
long-run condition, occurrence (reason), 375
long run effects, 374
price, 371
revenues, 397
study, value, 377
Purely competitive market
sellers
entry, effect (graph), 376f
exit, effect (graph), 376f
Purely competitive seller
long-run position, 373
graph, 375f
loss, minimization, 399f
operation, example (graph), 373f
output, demand curve, 371f
price/quantity/revenue information, 398t
maximization, graph, 399f
profit-maximizing seller, 399f
Pure market systems, 39
Q
Quantity demanded/supplied, changes, 73, 78–80
graph, 79f
Quasi-public good, definition, 176, 513
Quota
imposition, 475
R
Rational expectations, definition, 272, 513
Rational ignorance, definition, 327, 513
Real GDP (constant GDP), 127–128
determination, 127t
equation, 128
graph, 143f
statistics, 128t
Real government purchases, goods/services, 156f
Real gross investment, graph, 151f
Real income, definition, 114, 514
Real output per capita. See U.S. economic growth
Real personal consumption expenditures, 148f
Real rate of interest, definition, 115–116, 514
Real U.S. exports/imports/net exports, 159f
Reason violations, rule (definition), 408
Recession, definition, 142, 514
Recovery, definition, 142, 514
Regulation. See Deregulation; Incentive regulation
enthusiasm, discussion, 424
explanation, natural monopoly (impact), 420
public interest justification, definition, 420, 513
structure, 418
Regulatory/deregulatory waves, U.S. economy, 55–56
Rent
control, discussion, 87
Required reserves, definition, 234, 514
Reserve account
changes, 219
Reserve requirement, 244
definition, 514
example, 245t
Reserves. See Actual reserves; Excess reserves; Required reserves
calculations, example, 235t
questions/answers, 236a
requirement
definition, 234
example, 237t
Resolution Trust Corporation (RTC), definition, 514
Resource markets (input markets), definition, 40, 510
Resource ownership, 449
Resources
availability, 11t
definition, 514
government allocation, 46
problem. See Limited resources.
production per country without specialization, 470t
production per country with specialization, 470t
production possibilities, 469t
wants/needs, relationship, 10f
waste, discussion, 381
Retained earnings, definition, 153, 514
Revenues, 397. See also Government; Marginal revenue; Total revenue
graphing, 320
Riegle-Neal Interstate Banking and Branching Efficiency Act (1994), definition, 219, 514
Right to work laws, definition, 447, 514
Rockefeller, John D., 54
Rule of reason violations, definition, 408, 514
S
Satisfaction
measurement, subjectivity, 307
ranking, 307t
Satisfaction, maximization, 311–313
actions, 308
family, gossip, 291a
goods/services, consumption, 289
Saving
business investment spending, relationship, 154f
habit, quality, 150
household/business relationships, 154f
relationships, 149f
Saving-borrowing relationship, 153–155
basic economic decisions, relationship, 37f
economics, relationship, 5
economic systems, relationship, 37f
impact, 6
intensification, 114
problem
intensification, unemployment (impact), 105
root, 5
solution, 11
Scarcity-related tradeoff problem, 6
Schumpeter, Joseph, 341a
importance, changes, 336
industries/products, sample. See Manufacturing sector.
definition, 513
Securities and Exchange Commission (SEC)
actions, 415
creation, 55
Sellers
marginal cost curve, 401
Services. See Goods/services
consumption, satisfaction (maximization), 289
government purchases, definition, 155, 176, 510
movement, 464
production, 468a
business decisions, 42
real government purchases, 156f
real U.S. exports/imports, 159f
real U.S. net exports, 159f
receiving, identification, 42
U.S. exports/imports, 465t
Shadow banking, definition, 222, 514
Sherman Antitrust Act, 407–409
definition, 514
passage, 54
Section 2, cases, 409
Shortage
measurement, 72f
Short run, definition, 340–341, 514
summary, 345t
Sinclair, Upton, 54
Smoking, cost, 323a
Snowball effect, 164a
Social benefits/costs, 320–325
Social insurance program, definition, 177, 514
Socialism, definition, 45, 514
Social net benefits
maximization, negative/positive externalities (usage), 325f
private benefits, relationship, 324–325
Social regulatory agencies, list, 422t
Social Security system, 189
Society
costs, 324
economic loss, 105
limited resources, impact, 8–9
net benefit, maximization, 323–325
Special-interest group, definition, 327, 514
Specialization
absence, 470t
inclusion, 470t
international level, 469
occurrence, 468
Spending
increase, 183
relationships, 239t
Spending stream
injections, definition, 149, 510
leakage, 267
definition, 149
St. Louis County, trash pickup/recycling (imposition), 17
Stagflation, definition, 270, 514
Starbucks
company profile, 299a
growth, holding company arrangement, 298
State banks, definition, 212, 514
State government expenditures, 175t
function, 178f
State utility commissions, 415
Statistical Abstract of the United States (publication), 14
Stock. See Common stock; Preferred stock
shares, price (understanding), 296
Structural remedies, 414
Structural unemployment, 105
factors, 107
issue, 223a
Substitutes, 89
Success, opportunity, 43
Sunspots, economic impact, 146a
case study, 96
classical economics. See Aggregate supply.
effect, 81
effect, graph, 82f
graph, 77f
impact, 81
discussion questions, 95
effect, 81
effect, graph, 82f
graph, 77f
nonprice factors, definition, 75
factors, 91
quantity demanded/supplied, changes, 78–80
graph, 79f
restriction. See Labor markets.
answers, 518
definition, 75
effect, 82
factors, 492
understanding, 83
Supply curve
movement, 73
shift, 241
surpluses/shortages, measurement, 72f
Supply curve for labor, definition, 436, 514
Supply-side economics, 273, 275
Surplus. See Federal budget receipts/outlays/surpluses
definition, 514
example, 70
measurement, 72f
Sustainability, concern, 441a
Swapped services, 129
T
Taft-Hartley Act, definition, 447, 514
Tariff
absence, 474
imposition, 475
increase, 475
ranking, 473t
Tax bracket indexation, 182
definition, 514
Taxes
abatement, 182
definition, 514
base, 182
definition, 514
business investment spending, relationship, 154f
household spending, relationships, 149f
rates, 182
definition, 514
Tax Reform Act (1986), 182
definition, 514
TC. See Total cost
Technology
changes, impact, 107
impact, 340
Teen employment, impact (understanding), 8a
Temporary Assistance to Needy Families (TANF), 454
Territorial division, definition, 408, 515
TFC. See Total fixed cost
Theology, economic impact, 146a
Theories. See Economic theory development, 13
Theory of Moral Sentiments, The (Smith), 263
30-60-90 rule, 409
Tight money policy, definition, 244, 515
Token money, definition, 207, 515
Total benefit (total utility)
change, 308
graphs, 314f
Total cost (TC), 343–344. See also Average total cost
definition, 309–310, 345t, 515
examples, 310t, 343t, 344t, 346t, 347t
increase, 347
Total fixed cost (TFC), 345t
Total income, nonincome-determined spending injection (impact), 162t
Total output, 266t
measurement, 267
nonincome-determined spending injection, impact, 267
Total planned spending, 266t
Total product, example, 434t, 436t
demand, price elasticity (relationship), 90t
example, 436t
graph, 321f
Total spending (aggregate spending), 146–150
economic activity level, relationship, 147f
Total utility
total benefit, definition, 308
Total variable cost (TVC), 345t
Trade. See Free trade; U.S. trade
association, definition, 408, 515
balance, definition, 496
efficiency, relationship, 474
globalization, expansion, 467
restraint, combinations/conspiracies, definition, 407, 507
restriction, discussion, 478
specialization, 474
U.S. balance, 496f
Tradeoffs
concept (emphasis), production possibilities model (usage), 21
national level, 7
Trade-restricting policies, 472–473
barter, reliance, 38
economic decisions, 38
strengths/weaknesses, 38t
Transfer payment, definition, 149, 176, 286, 515
Trash pickup/recycling, imposition (debate), 17
Traveler's checks, 207
chronology, 208t
Treasury Inflation Protected Securities (TIPS), definition, 193, 515
Trough, definition, 142–143, 514
Trust fund, definition, 188, 515
Tying arrangement
U
Underemployment, definition, 112, 515
Undergraduate tuition, graph, 33f
Underground economy, definition, 131, 515
consequences, 105
labor force, relationship, 108–111
natural rate, definition, 113, 270, 512
participation rates, relationship, 108–111
product possibilities model, usage, 22f
statistics
calculation, 111
interpretation, 112
Unemployment rates
acceptability, problem, 244
calculation, 110
full employment, relationship, 112
graph, 143f
statistics, 109t
workers/labor force subgroups, 111t
Unidentified flying objects (UFOs), 15a
Unilateral transfers, 497
Unions. See Craft union; Industrial union; Labor unions
case study, 460
management negotiations, 447
answers, 524
Unitary price elastic, definition, 515
analysis, 345
United States
export/import trading partners, ranking, 467t
people, power ranking, 249a
United States Football League (USFL), introduction (problem), 41a
United States v. Aluminum Company of America, 409
United States v. Philadelphia National Bank et al., 413a
Unlimited liability, definition, 293, 515
Unreported work, 129
Upper price limit, definition, 513
Urban farming, economic health indicator, 167a
Urban forecasts, economic health indicator, 167a
Uruguay Round, trade rules, 477
U.S. balance of trade, 496f
U.S. corporate employers, ranking, 293t
U.S. Department of Agriculture (USDA), assistance programs, 377
U.S. dollars
Brazilian real, exchange rate, 490
demand curve, 489f
foreign currencies, exchange rates, 487t
value, decrease (impact), 492a
U.S. economic growth, real output per capita, 125f
U.S. economy
British foundations, 51
commodity standard, 210
development (highlights), 53–56
New Deal, 55
policy problem, 132
recent developments, 56
regulatory/deregulatory waves, 55–56
resources, availability, 11t
World War II era, 55
U.S. exports/imports, ranking, 465t
U.S. government, fiscal agents, 218
U.S. international financial transactions, 495t
U.S. international trade, overview, 464–468
U.S. merchandise exports/imports, percentage distribution, 466t
U.S. money supply, 207t
M2, 209t
U.S. production, assessment, 128–129
U.S. trade
geographic distribution, 466–467
U.S. Treasury bills, definition, 193, 515
U.S. Treasury bonds, definition, 193, 515
U.S. Treasury notes, definition, 193, 515
U.S. Treasury securities, 192a
Usury laws, 84
definition, 515
Utility. See Total utility
maximization, 290
points, example, 309t
Utility-maximizing rule, statement, 290
real world example, presence, 290
Util-O-Meter
points, example, 310
usage, 307
V
Value
exercise, 6t
Value of money, definition, 204, 515
Variable costs, definition, 341, 515
Variable factors, definition, 341, 515
Variables, 13
Velocity of money, definition, 209, 515
Vertical merger, definition, 297, 412, 515
Vertical price fixing, 410a
Volvo Trucks North America, Inc. v. Reeder-Simco GMC, Inc., 413a
Voting process, behavior maximization, 327
W
Wages
decline, 436
rigidities, 443
Wagner Act, definition, 447
Wants/needs, resources (relationship), 10f
Wealth
effect, definition, 261
inflation, relationship, 116
storing, method (definition), 205, 511
Wealth of Nations, The (Smith), 51–52
Wellness programs, cost effectiveness, 351a
Western Pennsylvania, economy (changes), 164a
Western-style development, appropriateness, 49
Work
accomplishment, 350
decision, 8a
right, laws (definition), 447, 514
Works Progress Administration (WPA), establishment, 55
World Trade Organization (WTO), definition, 477, 515
World War II, U.S. economy, 55
Y
Yen, supply (increase), 493