Principles of Macroeconomics 8th Edition

Principles of Macroeconomics 8th Edition:

Preface: To the Student
Acknowledgments
Contents
Part I: Introduction
Chapter 1: Ten Principles of Economics
1-1 How People Make Decisions
1-1a Principle 1: People Face Trade-offs
1-1b Principle 2: The Cost of Something Is What You Give Up to Get It
1-1c Principle 3: Rational People Think At the Margin
1-1d Principle 4: People Respond to Incentives
1-2 How People Interact
1-2a Principle 5: Trade Can Make Everyone Better Off
1-2b Principle 6: Markets Are Usually a Good Way to Organize Economic Activity
FYI: Adam Smith and the Invisible Hand
Case Study: Adam Smith Would Have Loved Uber
1-2c Principle 7: Governments Can Sometimes Improve Market Outcomes
1-3 How the Economy As a Whole Works
1-3a Principle 8: A Country’s Standard of Living Depends on Its Ability to Produce Goods and Servi
1-3b Principle 9: Prices Rise When the Government Prints Too Much Money
1-3c Principle 10: Society Faces a Short-Run Trade-off Between Inflation and Unemployment
1-4 Conclusion
Summary
Key Concepts
Questions for Review
Problems and Applications
Chapter 2: Thinking Like An Economist
2-1 The Economist As Scientist
2-1a The Scientific Method: Observation, Theory, and More Observation
2-1b The Role of Assumptions
2-1c Economic Models
2-1d Our First Model: The Circular-Flow Diagram
2-1e Our Second Model: The Production Possibilities Frontier
2-1f Microeconomics and Macroeconomics
2-2 The Economist As Policy Adviser
2-2a Positive Versus Normative Analysis
2-2b Economists in Washington
2-2c Why Economists’ Advice Is Not Always Followed
2-3 Why Economists Disagree
2-3a Differences in Scientific Judgments
2-3b Differences in Values
2-3c Perception Versus Reality
Ask the Experts: Ticket Resale
2-4 Let’s Get Going
In The News: Why You Should Study Economics
Summary
Key Concepts
Questions For Review
Problems and Applications
Appendix: Graphing: A Brief Review
Chapter 3: Interdependence and the Gains From Trade
3-1 A Parable For the Modern Economy
3-1a Production Possibilities
3-1b Specialization and Trade
3-2 Comparative Advantage: The Driving Force of Specialization
3-2a Absolute Advantage
3-2b Opportunity Cost and Comparative Advantage
3-2c Comparative Advantage and Trade
3-2d The Price of the Trade
FYI: The Legacy of Adam Smith and David Ricardo
3-3 Applications of Comparative Advantage
3-3a Should Serena Williams Mow Her Own Lawn?
In the News: Economics Within a Marriage
3-3b Should the United States Trade With Other Countries?
Ask The Experts: Trade Between China and the United States
3-4 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Part II: How Markets Work
Chapter 4: The Market Forces of Supply and Demand
4-1 Markets and Competition
4-1a What Is a Market?
4-1b What Is Competition?
4-2 Demand
4-2a The Demand Curve: The Relationship Between Price and Quantity Demanded
4-2b Market Demand Versus Individual Demand
4-2c Shifts in the Demand Curve
Case Study: Two Ways to Reduce the Quantity of Smoking Demanded
4-3 Supply
4-3a The Supply Curve: The Relationship Between Price and Quantity Supplied
4-3b Market Supply Versus Individual Supply
4-3c Shifts in the Supply Curve
4-4 Supply and Demand Together
4-4a Equilibrium
4-4b Three Steps to Analyzing Changes in Equilibrium
4-5 Conclusion: How Prices Allocate Resources
Ask The Experts: Price Gouging
In The News: Price Increases After Disasters
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 5: Elasticity and Its Application
5-1 The Elasticity of Demand
5-1a The Price Elasticity of Demand and Its Determinants
5-1b Computing the Price Elasticity of Demand
5-1c the Midpoint Method: A Better Way to Calculate Percentage Changes and Elasticities
5-1d The Variety of Demand Curves
FYI: A Few Elasticities From the Real World
5-1e Total Revenue and the Price Elasticity of Demand
5-1f Elasticity and Total Revenue Along a Linear Demand Curve
5-1g Other Demand Elasticities
5-2 The Elasticity of Supply
5-2a The Price Elasticity of Supply and Its Determinants
5-2b Computing the Price Elasticity of Supply
5-2c The Variety of Supply Curves
5-3 Three Applications of Supply, Demand, and Elasticity
5-3a Can Good News For Farming Be Bad News For Farmers?
5-3b Why Did OPEC Fail to Keep the Price of Oil High?
5-3c Does Drug Interdiction Increase or Decrease Drug-Related Crime?
5-4 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 6: Supply, Demand, and Government Policies
6-1 Controls on Prices
6-1a How Price Ceilings Affect Market Outcomes
Case Study: Lines At the Gas Pump
Case Study: Rent Control in the Short Run and the Long Run
6-1b How Price Floors Affect Market Outcomes
Ask The Experts: Rent Control
Case Study: The Minimum Wage
Ask the Experts: The Minimum Wage
6-1c Evaluating Price Controls
6-2 Taxes
6-2a How Taxes on Sellers Affect Market Outcomes
6-2b How Taxes on Buyers Affect Market Outcomes
Case Study: Can Congress Distribute the Burden of a Payroll Tax?
6-2c Elasticity and Tax Incidence
Case Study: Who Pays the Luxury Tax?
6-3 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Part III: Markets and Welfare
Chapter 7: Consumers, Producers, and the Efficiency of Markets
7-1 Consumer Surplus
7-1a Willingness to Pay
7-1b Using the Demand Curve to Measure Consumer Surplus
7-1c How a Lower Price Raises Consumer Surplus
7-1d What Does Consumer Surplus Measure?
7-2 Producer Surplus
7-2a Cost and the Willingness to Sell
7-2b Using the Supply Curve to Measure Producer Surplus
7-2c How a Higher Price Raises Producer Surplus
7-3 Market Efficiency
7-3a The Benevolent Social Planner
7-3b Evaluating the Market Equilibrium
In the News: The Invisible Hand Can Park Your Car
Case Study: Should There Be a Market For Organs?
Ask the Experts: Supplying Kidneys
7-4 Conclusion: Market Efficiency and Market Failure
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 8: Application: The Costs of Taxation
8-1 The Deadweight Loss of Taxation
8-1a How a Tax Affects Market Participants
8-1b Deadweight Losses and the Gains From Trade
8-2 The Determinants of the Deadweight Loss
Case Study: The Deadweight Loss Debate
8-3 Deadweight Loss and Tax Revenue As Taxes Vary
Case Study: The Laffer Curve and Supply-side Economics
Ask the Experts: The Laffer Curve
8-4 Conclusion
Summary
Key Concept
Questions For Review
Problems and Applications
Chapter 9: Application: International Trade
9-1 The Determinants of Trade
9-1a The Equilibrium Without Trade
9-1b The World Price and Comparative Advantage
9-2 The Winners and Losers From Trade
9-2a The Gains and Losses of An Exporting Country
9-2b The Gains and Losses of An Importing Country
9-2c Effects of a Tariff
FYI: Import Quotas: Another Way to Restrict Trade
9-2d The Lessons For Trade Policy
9-2e Other Benefits of International Trade
In the News: Trade As a Tool For Economic Development
9-3 The Arguments For Restricting Trade
9-3a The Jobs Argument
In the News: Should the Winners From Free Trade Compensate the Losers?
9-3b The National-Security Argument
9-3c The Infant-Industry Argument
9-3d The Unfair-Competition Argument
9-3e The Protection-as-a-Bargaining-Chip Argument
Case Study: Trade Agreements and the World Trade Organization
Ask the Experts: Trade Deals
9-4 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Part IV: The Data of Macroeconomics
Chapter 10: Measuring a Nation’s Income
10-1 The Economy’s Income and Expenditure
10-2 The Measurement of GDP
10-2a “GDP Is the Market Value . . .”
10-2b “. . . of All . . .”
10-2c “. . . Final . . .”
10-2d “. . . Goods and Services . . .”
10-2e “. . . Produced . . .”
10-2f “. . . Within a Country . . .”
10-2g “. . . In a Given Period of Time.”
FYI: Other Measures of Income
10-3 The Components of GDP
10-3a Consumption
10-3b Investment
In the News: Sex, Drugs, and GDP
10-3c Government Purchases
10-3d Net Exports
Case Study: The Components of U.S. GDP
10-4 Real Versus Nominal GDP
10-4a A Numerical Example
10-4b The GDP Deflator
Case Study: A Half Century of Real GDP
In the News: Gauging the High-Tech Economy
10-5 Is GDP a Good Measure of Economic Well-Being?
In the News: Measuring Macroeconomic Well-being
Case Study: International Differences in GDP and the Quality of Life
10-6 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 11: Measuring the Cost of Living
11-1 The Consumer Price Index
11-1a How the CPI Is Calculated
FYI: What’s in the CPI’s Basket?
11-1b Problems in Measuring the Cost of Living
In the News: Monitoring Inflation in the Internet Age
11-1c the GDP Deflator Versus the Consumer Price Index
11-2 Correcting Economic Variables For the Effects of Inflation
11-2a Dollar Figures From Different Times
FYI: Mr. Index Goes to Hollywood
Case Study: Regional Differences in the Cost of Living
11-2b Indexation
11-2c Real and Nominal Interest Rates
Case Study: Interest Rates in the U.S. Economy
11-3 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Part V: The Real Economy in the Long Run
Chapter 12: Production and Growth
12-1 Economic Growth Around the World
12-2 Productivity: Its Role and Determinants
12-2a Why Productivity Is So Important
FYI: Are You Richer Than the Richest American?
12-2b How Productivity Is Determined
FYI: A Picture Is Worth a Thousand Statistics
FYI: The Production Function
Case Study: Are Natural Resources a Limit to Growth?
12-3 Economic Growth and Public Policy
12-3a Saving and Investment
12-3b Diminishing Returns and the Catch-up Effect
12-3c Investment From Abroad
12-3d Education
12-3e Health and Nutrition
12-3f Property Rights and Political Stability
12-3g Free Trade
12-3h Research and Development
Ask the Experts: Innovation and Growth
In the News: Curmudgeon Versus Optimist
12-3i Population Growth
In the News: Using Experiments to Evaluate Aid
12-4 Conclusion: The Importance of Long-Run Growth
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 13: Saving, Investment, and the Financial System
13-1 Financial Institutions in the U.S. Economy
13-1a Financial Markets
13-1b Financial Intermediaries
FYI: Key Numbers For Stock Watchers
13-1c Summing Up
13-2 Saving and Investment in the National Income Accounts
13-2a Some Important Identities
13-2b the Meaning of Saving and Investment
13-3 The Market For Loanable Funds
13-3a Supply and Demand For Loanable Funds
13-3b Policy 1: Saving Incentives
13-3c Policy 2: Investment Incentives
13-3d Policy 3: Government Budget Deficits and Surpluses
Ask the Experts: Fiscal Policy and Saving
Case Study: The History of U.S. Government Debt
FYI: Financial Crises
13-4 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 14: The Basic Tools of Finance
14-1 Present Value: Measuring the Time Value of Money
FYI: The Magic of Compounding and the Rule of 70
14-2 Managing Risk
14-2a Risk Aversion
14-2b The Markets For Insurance
14-2c Diversification of Firm-Specific Risk
14-2d The Trade-Off Between Risk and Return
14-3 Asset Valuation
14-3a Fundamental Analysis
14-3b The Efficient Markets Hypothesis
Case Study: Random Walks and Index Funds
Ask the Experts: Diversification
14-3c Market Irrationality
14-4 Conclusion
Summary
Key Concepts
Questions for Review
Problems and Applications
Chapter 15: Unemployment
15-1 Identifying Unemployment
15-1a How Is Unemployment Measured?
Case Study: Labor-Force Participation of Men and Women in the U.S. Economy
15-1b Does the Unemployment Rate Measure What We Want It To?
15-1c How Long Are the Unemployed Without Work?
15-1d Why Are There Always Some People Unemployed?
FYI: The Jobs Number
15-2 Job Search
15-2a Why Some Frictional Unemployment Is Inevitable
15-2b Public Policy and Job Search
15-2c Unemployment Insurance
15-3 Minimum-Wage Laws
Case Study: Who Earns the Minimum Wage?
In the News: Should the Minimum Wage Be Raised to $15 An Hour?
15-4 Unions and Collective Bargaining
15-4a The Economics of Unions
15-4b Are Unions Good or Bad For the Economy?
15-5 The Theory of Efficiency Wages
15-5a Worker Health
15-5b Worker Turnover
15-5c Worker Quality
15-5d Worker Effort
Case Study: Henry Ford and the Very Generous $5-a-day Wage
15-6 Conclusion
Summary
Key Concepts
Questions for Review
Questions and Applications
Part VI: Money and Prices in the Long Run
Chapter 16: The Monetary System
16-1 The Meaning of Money
16-1a The Functions of Money
16-1b The Kinds of Money
In the News: Why Gold?
16-1c Money in the U.S. Economy
Case Study: Where Is All the Currency?
FYI: Why Credit Cards Aren’t Money
16-2 The Federal Reserve System
16-2a The Fed’s Organization
16-2b The Federal Open Market Committee
16-3 Banks and the Money Supply
16-3a The Simple Case of 100-Percent-Reserve Banking
16-3b Money Creation With Fractional-Reserve Banking
16-3c The Money Multiplier
16-3d Bank Capital, Leverage, and the Financial Crisis of 2008–2009
16-4 The Fed’s Tools of Monetary Control
16-4a How the Fed Influences the Quantity of Reserves
16-4b How the Fed Influences the Reserve Ratio
16-4c Problems in Controlling the Money Supply
Case Study: Bank Runs and the Money Supply
In the News: A Trip to Jekyll Island
16-4d The Federal Funds Rate
16-5 Conclusion
Summary
Key Concepts
Questions for Review
Problems and Applications
Chapter 17: Money Growth and Inflation
17-1 The Classical Theory of Inflation
17-1a The Level of Prices and the Value of Money
17-1b Money Supply, Money Demand, and Monetary Equilibrium
17-1c The Effects of a Monetary Injection
17-1d A Brief Look At the Adjustment Process
17-1e The Classical Dichotomy and Monetary Neutrality
17-1f Velocity and the Quantity Equation
Case Study: Money and Prices During Four Hyperinflations
17-1g The Inflation Tax
FYI: Hyperinflation in Zimbabwe
17-1h The Fisher Effect
17-2 The Costs of Inflation
17-2a A Fall in Purchasing Power? the Inflation Fallacy
17-2b Shoeleather Costs
17-2c Menu Costs
17-2d Relative-Price Variability and the Misallocation of Resources
17-2e Inflation-induced Tax Distortions
17-2f Confusion and Inconvenience
17-2g A Special Cost of Unexpected Inflation: Arbitrary Redistributions of Wealth
17-2h Inflation Is Bad, But Deflation May Be Worse
Case Study: The Qizard of Oz and the Free-Silver Debate
17-3 Conclusion
Summary
Key Concepts
Questions for Review
Problems and Applications
Part VII: The Macroeconomics of Open Economies
Chapter 18: Open-Economy Macroeconomics: Basic Concepts
18-1 The International Flows of Goods and Capital
18-1a The Flow of Goods: Exports, Imports, and Net Exports
Case Study: The Increasing Openness of the U.S. Economy
In the News: The Complicated Politics of Trade Agreements
18-1b The Flow of Financial Resources: Net Capital Outflow
18-1c The Equality of Net Exports and Net Capital Outflow
18-1d Saving, Investment, and Their Relationship to the International Flows
18-1e Summing Up
Case Study: Is the U.S. Trade Deficit a National Problem?
Ask the Experts: Trade Balances and Trade Negotiations
18-2 The Prices For International Transactions: Real and Nominal Exchange Rates
18-2a Nominal Exchange Rates
18-2b Real Exchange Rates
FYI: The Euro
18-3 A First Theory of Exchange-Rate Determination: Purchasing-Power Parity
18-3a The Basic Logic of Purchasing-Power Parity
18-3b Implications of Purchasing-Power Parity
Case Study: The Nominal Exchange Rate During a Hyperinflation
18-3c Limitations of Purchasing-Power Parity
Case Study: The Hamburger Standard
18-4 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 19: A Macroeconomic Theory of the Open Economy
19-1 Supply and Demand For Loanable Funds and For Foreign-Currency Exchange
19-1a The Market For Loanable Funds
19-1b The Market For Foreign-Currency Exchange
FYI: Purchasing-Power Parity As a Special Case
19-2 Equilibrium in the Open Economy
19-2a Net Capital Outflow: The Link Between the Two Markets
19-2b Simultaneous Equilibrium in Two Markets
FYI: Disentangling Supply and Demand
19-3 How Policies and Events Affect An Open Economy
19-3a Government Budget Deficits
19-3b Trade Policy
19-3c Political Instability and Capital Flight
In the News: Is a Strong Currency Always in a Nation’s Interest?
Case Study: Capital Flows From China
Ask the Experts: Currency Manipulation
19-4 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Part VIII: Short-Run Economic Fluctuations
Chapter 20: Aggregate Demand and Aggregate Supply
20-1 Three Key Facts about Economic Fluctuations
20-1a Fact 1: Economic Fluctuations Are Irregular and Unpredictable
20-1b Fact 2: Most Macroeconomic Quantities Fluctuate Together
20-1c Fact 3: As Output Falls, Unemployment Rises
20-2 Explaining Short-Run Economic Fluctuations
20-2a The Assumptions of Classical Economics
20-2b The Reality of Short-Run Fluctuations
20-2c The Model of Aggregate Demand and Aggregate Supply
20-3 The Aggregate-Demand Curve
20-3a Why the Aggregate-demand Curve Slopes Downward
20-3b Why the Aggregate-demand Curve Might Shift
20-4 The Aggregate-Supply Curve
20-4a Why the Aggregate-supply Curve Is Vertical in the Long Run
20-4b Why the Long-Run Aggregate-supply Curve Might Shift
20-4c Using Aggregate Demand and Aggregate Supply to Depict Long-Run Growth and Inflation
20-4d Why the Aggregate-supply Curve Slopes Upward in the Short Run
20-4e Why the Short-Run Aggregate-supply Curve Might Shift
20-5 Two Causes of Economic Fluctuations
20-5a The Effects of a Shift in Aggregate Demand
FYI: Monetary Neutrality Revisited
Case Study: Two Big Shifts in Aggregate Demand: The Great Depression and World War Ii
Case Study: The Great Recession of 2008–2009
In the News: What Have We Learned?
20-5b The Effects of a Shift in Aggregate Supply
Case Study: Oil and the Economy
FYI: The Origins of the Model of Aggregate Demand and Aggregate Supply
20-6 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 21: The Influence of Monetary and Fiscal Policy on Aggregate Demand
21-1 How Monetary Policy Influences Aggregate Demand
21-1a The Theory of Liquidity Preference
21-1b The Downward Slope of the Aggregate-Demand Curve
FYI: Interest Rates in the Long Run and the Short Run
21-1c Changes in the Money Supply
21-1d The Role of Interest-Rate Targets in Fed Policy
Case Study: Why the Fed Watches the Stock Market (and Vice Versa)
21-1e The Zero Lower Bound
21-2 How Fiscal Policy Influences Aggregate Demand
21-2a Changes in Government Purchases
21-2b The Multiplier Effect
21-2c a Formula For the Spending Multiplier
21-2d Other Applications of the Multiplier Effect
21-2e The Crowding-Out Effect
21-2f Changes in Taxes
FYI: How Fiscal Policy Might Affect Aggregate Supply
21-3 Using Policy to Stabilize the Economy
21-3a the Case For Active Stabilization Policy
In the News: How Large Is the Fiscal Policy Multiplier?
Case Study: Keynesians in the White House
Ask the Experts: Economic Stimulus
21-3b The Case Against Active Stabilization Policy
21-3c Automatic Stabilizers
21-4 Conclusion
Summary
Key Concepts
Questions For Review
Problems and Applications
Chapter 22: The Short-Run Trade-off Between Inflation and Unemployment
22-1 The Phillips Curve
22-1a Origins of the Phillips Curve
22-1b Aggregate Demand, Aggregate Supply, and the Phillips Curve
22-2 Shifts in the Phillips Curve: The Role of Expectations
22-2a The Long-Run Phillips Curve
22-2b The Meaning of “Natural”
22-2c Reconciling Theory and Evidence
22-2d The Short-Run Phillips Curve
22-2e The Natural Experiment For the Natural-Rate Hypothesis
22-3 Shifts in the Phillips Curve: The Role of Supply Shocks
22-4 The Cost of Reducing Inflation
22-4a The Sacrifice Ratio
22-4b Rational Expectations and the Possibility of Costless Disinflation
22-4c The Volcker Disinflation
22-4d The Greenspan Era
22-4e a Financial Crisis Takes Us For a Ride Along the Phillips Curve
22-5 Conclusion
Summary
Key Concepts
Questions for Review
Problems and Applications
Part IX: Final Thoughts
Chapter 23: Six Debates Over Macroeconomic Policy
23-1 Should Monetary and Fiscal Policymakers Try to Stabilize the Economy?
23-1a Pro: Policymakers Should Try to Stabilize the Economy
23-1b Con: Policymakers Should Not Try to Stabilize the Economy
23-2 Should the Government Fight Recessions With Spending Hikes Rather Than Tax Cuts?
23-2a Pro: The Government Should Fight Recessions With Spending Hikes
23-2b Con: The Government Should Fight Recessions With Tax Cuts
23-3 Should Monetary Policy Be Made By Rule Rather Than By Discretion?
23-3a Pro: Monetary Policy Should Be Made By Rule
23-3b Con: Monetary Policy Should Not Be Made By Rule
FYI: Inflation Targeting
23-4 Should the Central Bank Aim For Zero Inflation?
23-4a Pro: The Central Bank Should Aim For Zero Inflation
23-4b Con: The Central Bank Should Not Aim For Zero Inflation
In the News: On Kiwis and Currencies
23-5 Should the Government Balance Its Budget?
23-5a Pro: The Government Should Balance Its Budget
23-5b Con: The Government Should Not Balance Its Budget
23-6 Should the Tax Laws Be Reformed to Encourage Saving?
23-6a Pro: The Tax Laws Should Be Reformed to Encourage Saving
Ask the Experts: Taxing Capital and Labor
23-6b Con: The Tax Laws Should Not Be Reformed to Encourage Saving
23-7 Conclusion
Summary
Questions For Review
Problems and Applications
Glossary
Index

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