Part One Introduction to Economics
CHAPTER 1 Introduction to Economics
Application 1.1: To Work or Not to Work
Application 1.2: Does Money Buy Happiness?
Application 1.3: OK, What Are They?
Up for Debate: Should St. Louis County, Missouri, Impose Mandatory Trash Pickup and Recycling?
Words, Graphs, and Mathematical Equations
Scarcity, Model Building, and Graphs
Test Your Understanding: Production Possibilities
Macroeconomics and Microeconomics
Critical Thinking Case 1: Difficult Choices in the Extreme
Direct and Inverse Relationships
CHAPTER 2 Economic Decision Making and Economic Systems
Scarcity, the Basic Economic Decisions, and Economic Systems
Economic Systems and the Basic Economic Decisions
Traditional or Agrarian Economies
Economic Decisions in a Traditional Economy
The Operation of a Market Economy
Economic Decisions in a Market Economy
Government Intervention in a Market Economy: A Mixed Economy
Economic Decisions in a Planned Economy
Test Your Understanding: Economic Decision Making and the Circular Flow
Up for Debate: Is Western-Style Development Appropriate for Other Cultures?
The Realities of Economic Change
Application 2.2: The People's Republic of China
The British Foundations of the U.S. Economy
Application 2.3: The Factory Girl's Last Day
Historical Highlights in the Development of the U.S. Economy
Critical Thinking Case 2: Judging Economies
CHAPTER 3 Demand, Supply, and Price Determination
Market Demand, Market Supply, and Price Setting
Market Demand and Market Supply
Application 3.1: The Laws of Demand and Supply
Equilibrium Price and Equilibrium Quantity
Changes in Quantity Demanded and Quantity Supplied
Application 3.2: The Rise and Fall of Low Carbs
Changes in Quantity Demanded or Supplied and Changes in Demand or Supply: A Crucial Distinction
Changes in Equilibrium Price and Equilibrium Quantity
Effect of Increases and Decreases in Demand
Effect of Increases and Decreases in Supply
Effect of Changes in Both Demand and Supply
Test Your Understanding: Changes in Demand and Supply
Price Elasticity of Demand and Supply
Application 3.3: Is Rent Control a Good Thing or a Bad Thing?
Up for Debate: Is It a Mistake to Raise the Minimum Wage?
Application 3.4: Peanut Butter: A Yummy Staple
Critical Thinking Case 3: How Do Supply and Demand Work in Health Care?
Determining Percentage Changes
CHAPTER 4 Goals and Problems of the Macroeconomy: Employment, Prices, and Production
Unemployment and Full Employment
Application 4.1: What's at Stake When a Job Is Lost?
Employment and Unemployment: Measures and Statistics
Labor Force, Participation Rates, and Unemployment
Calculating Unemployment Statistics
Interpreting Unemployment Statistics
Causes of Inflationary Pressure
Application 4.2: The $4 Summer of 2008
Full Production and Economic Growth
Up for Debate: Will Policies to Protect the Environment Slow Economic Growth?
Does GDP Tell the Whole Story?
Test Your Understanding: Calculating Price Indexes and GDP
Application 4.3: A Tale of Two Families
Critical Thinking Case 4: Statistics and Decision Making
CHAPTER 5 Foundations of the Macroeconomy
Changes in Macroeconomic Activity
Causes of Economic Fluctuations
Application 5.1: What's Causing the Economy to Change?
Total Spending and Macroeconomic Activity
Up for Debate: Is Saving a Healthy Habit?
Application 5.2: Interest Rates and Investment Spending
Summary of Aggregate Spending, Leakages, and Injections
Application 5.3: Ripples through the Economy
Test Your Understanding: Changes in Economic Activity
Macroeconomic Predictors and Policies
Application 5.4: Unconventional Indicators of Economic Health
Critical Thinking Case 5: Getting Smarter
CHAPTER 6 The Role of Government in the Macroeconomy
Government Expenditures and Revenues
Progressive, Proportional, and Regressive Taxes
Up for Debate: Should the Federal Income Tax Be Changed to a Flat Tax?
Application 6.1: A Chronology of Federal Income Tax Policies
The Mechanics of Fiscal Policy
Discretionary and Automatic Fiscal Policy
Economic Stimulus: 2008 and 2009
Application 6.2: How Much Do We Love Granny?
The Budget and Fiscal Policy: Tying Them Together
The Realities of Fiscal Policy and the Federal Budget
Test Your Understanding: Government's Impact on the Macroeconomy
Application 6.3: U.S. Treasury Securities
Critical Thinking Case 6: Nimby (Not in My Backyard)
CHAPTER 7 Money, Financial Institutions, and the Federal Reserve
The Definition and Functions of Money
Application 7.1: Fixed Assets, or: Why a Loan in Yap Is Hard to Roll Over
Financial Depository Institutions
Application 7.2: Am I Covered?
Other Financial Depository Institutions
Organization of the Federal Reserve System
Functions of the Federal Reserve Banks
Test Your Understanding: Changes in a Bank's Reserve Account
Recent Trends In Financial Institutions
The Financial Crisis of 2007–2009
Application 7.3: Ben Bernanke's Reflections on the Financial Crisis
Up for Debate: Should Congress Enact More Stringent Regulations over the Banking System?
Critical Thinking Case 7: Cigarette Money
CHAPTER 8 Money Creation, Monetary Theory, and Monetary Policy
The Money Supply and the Level of Economic Activity
Application 8.1: Questions and Answers about Reserves and Loans
The Multiple Expansion of Money
Excess Reserves, Interest Rates, and the Level of Spending
Determining Interest Rates on Loans
Application 8.2: An Interest Rate Primer
The Federal Reserve and Monetary Policy
Test Your Understanding: Financial Depository Institution Calculations
Application 8.3: Who Is the Most Powerful Person in the United States?
Government Deficits and Monetary Policy
Advantages and Disadvantages of Monetary Policy
Up for Debate: Should the Federal Reserve Be Placed under the Direct Control of Congress?
Critical Thinking Case 8: The Fed and the Great Depression
CHAPTER 9 Macroeconomic Viewpoints and Models
Application 9.1: Paying Close Attention to Models: It's Worth the Effort
Application 9.2: The Academic Scribblers
Test Your Understanding: Classical, Keynesian, and New Classical Models
Up for Debate: Should Government's Role in Influencing Economic Activity Be Reduced?
A Final Word on Macroeconomic Viewpoints
Application 9.3: The World According To …
Critical Thinking Case 9: Does Anyone Care What Economists Think?
CHAPTER 10 Households and Businesses: An Overview
Household Income and Expenditures
Goals and Decisions of Individuals in Households
Application 10.1: Family Gossip
Numbers and Sizes of Businesses
Business Ownership of Business
Test Your Understanding: The Price of Stock Shares
Goals and Decisions of Business Firms
Application 10.3: Two Profiles: Starbucks and Kraft Foods
Critical Thinking Case 10: Time to Maximize
CHAPTER 11 Benefits, Costs, and Maximization
Balancing Benefits And Costs: The Individual
Application 11.1: Do It Yourself
Graphing Costs, Benefits, and Net Benefit
Balancing Benefits and Costs: The Business
Application 11.2: You Need An Economist
Graphing Costs, Revenues, and Profit
Test Your Understanding: Maximizing Profit
Maximizing Society's Net Benefit
Application 11.3: The Real Cost of Smoking
Up for Debate: Should Drivers Be Banned from Using Cell Phones while Operating a Vehicle?
Maximizing Behavior and the Voting Process
Critical Thinking Case 11: A Spoonful of Sugar
CHAPTER 12 Production and the Costs of Production
Economic Time, Production, and the Costs of Production
Application 12.1: Do You Know a Modern-Day Luddite?
Up for Debate: Should the Same Cost Measures Used by Businesses Apply to Government and Nonprofits?
The Pattern of Short-Run Costs
The Law of Diminishing Returns
Test Your Understanding: Calculating Costs and Averages
Application 12.2: Are Wellness Programs Cost Effective?
Application 12.3: A Distance-Ed Student Puts His Lessons To Work on a Farm
Critical Thinking Case 12: The Human Factor
A Further Look at Short-Run Average and Marginal Costs
Calculating Average Fixed and Average Variable Costs
Graphing Average and Marginal Cost Curves
CHAPTER 13 Competition and Market Structures
Application 13.1: Defining the Boundaries of a Market: The NCAA Case
Characteristics of Pure Competition
Behavior of a Firm in Pure Competition
Application 13.2: The Farmers' Almanac: It's a Necessity
Characteristics of Monopolistic Competition
Behavior of a Firm in Monopolistic Competition
Up for Debate: Does Nonprice Competition Waste Resources?
Behavior of a Firm in an Oligopolistic Market
Application 13.3: Patents Work—for a While
Market Structures, the Consumer, and Efficiency
Critical Thinking Case 13: The $800 Haircut
Determining the Profit-Maximizing Price and Output for the Firm In Pure Competition
Determining the Profit-Maximizing Price and Output for the Firm with a Downward-Sloping Demand Curve
Test Your Understanding: Maximizing Profit and Minimizing Loss
CHAPTER 14 Government and the Markets
Application 14.1: Cases Involving the Sherman Act
Application 14.2: Cases Involving the Clayton Act and its Amendments
Application 14.3: Antitrust Enforcement up Close and Personal
Test Your Understanding: Government and Business
Up for Debate: Has Our Enthusiasm for Regulation Gone Too Far?
Critical Thinking Case 14: Eminent Domain: In the Public Interest or Not?
CHAPTER 15 Labor Markets, Unions, and the Distribution of Income
Test Your Understanding: A Small Business Determines Its Demand for Employees
Changes in Labor Demand and Supply
Modifications of the Labor Demand and Supply Model
Types of Unions and Union Membership
Collective Bargaining and the Law
Application 15.2: Making the Most of Intellectual Capital
Application 15.3: Homeless Families with Children
Up for Debate: Should There Be a Work Requirement for Those Seeking Public Assistance?
Critical Thinking Case 15: Income Distribution: Are the Shares of the Pie Fair?
Part Four The International Economy
CHAPTER 16 International Trade
An Overview of U.S. International Trade
The Size and Composition of U.S. Trade
Comparative Advantage and International Trade
The Principle of Comparative Advantage
Test Your Understanding: Comparative Advantage
The Real World of International Trade
Application 16.2: Gloria Flunks the Professor
Up for Debate: Should Trade Be Restricted if It Results in Environmental Damage?
Critical Thinking Case 16: A Petition (by Frederic Bastiat, 1801–1850)
CHAPTER 17 International Finance
The Determination of Exchange Rates
Understanding Foreign Exchange Markets
Application 17.1: Foreign Exchange Markets
Application 17.2: Does a Lower-Valued Dollar Help the Economy?
Test Your Understanding: Changes in Exchange Rates
International Financial Transactions and Balances
Application 17.3: A Prized Export?
Challenges To The International Financial System
Monetary Integration in Europe
Critical Thinking Case 17: Helping Poor Countries