Principles of Macroeconomics (10th Edition) (Pearson Series in Economics)

Cover......Page 1 Title Page......Page 5 Copyright Page......Page 6 Contents......Page 9 About the Authors......Page 7 Preface......Page 19 Acknowledgments......Page 28 1 The Scope and Method of Economics......Page 35 Why Study Economics?......Page 36 The Scope of Economics......Page 40 The Method of Economics......Page 43 Summary......Page 49 Problems......Page 50 Appendix: How to Read and Understand Graphs......Page 51 2 The Economic Problem: Scarcity and Choice......Page 59 Scarcity, Choice, and Opportunity Cost......Page 60 ECONOMICS IN PRACTICE: Frozen Foods and Opportunity Costs......Page 62 Economic Systems and the Role of Government......Page 73 Looking Ahead......Page 76 Review Terms and Concepts......Page 77 Problems......Page 78 Firms and Households: The Basic Decision-Making Units......Page 81 Input Markets and Output Markets: The Circular Flow......Page 82 Demand in Product/Output Markets......Page 84 ECONOMICS IN PRACTICE: Kindle in the College Market?......Page 89 Supply in Product/Output Markets......Page 94 Market Equilibrium......Page 100 ECONOMICS IN PRACTICE: High Prices for Tomatoes......Page 104 Looking Ahead: Markets and the Allocation of Resources......Page 106 ECONOMICS IN PRACTICE: Why Do the Prices of Newspapers Rise?......Page 107 Summary......Page 108 Review Terms and Concepts......Page 109 Problems......Page 110 The Price System: Rationing and Allocating Resources......Page 113 ECONOMICS IN PRACTICE: Prices and Total Expenditure: A Lesson From the Lobster Industry in 2008–2009......Page 115 Supply and Demand Analysis: An Oil Import Fee......Page 120 ECONOMICS IN PRACTICE: The Price Mechanism at Work for Shakespeare......Page 121 Supply and Demand and Market Efficiency......Page 123 Summary......Page 127 Problems......Page 128 5 Introduction to Macroeconomics......Page 131 Macroeconomic Concerns......Page 132 The Components of the Macroeconomy......Page 134 A Brief History of Macroeconomics......Page 137 The U.S. Economy Since 1970......Page 139 ECONOMICS IN PRACTICE: John Maynard Keynes......Page 141 Summary......Page 142 Problems......Page 143 Gross Domestic Product......Page 145 Calculating GDP......Page 147 ECONOMICS IN PRACTICE: Where Does eBay Get Counted?......Page 149 ECONOMICS IN PRACTICE GDP: One of the Great Inventions of the 20th Century......Page 153 Nominal versus Real GDP......Page 154 Limitations of the GDP Concept......Page 157 Summary......Page 159 Review Terms and Concepts......Page 160 Problems......Page 161 Unemployment......Page 163 ECONOMICS IN PRACTICE: A Quiet Revolution: Women Join the Labor Force......Page 167 Inflation......Page 169 ECONOMICS IN PRACTICE: The Politics of Cost-of-Living Adjustments......Page 172 Long-Run Growth......Page 174 Looking Ahead......Page 176 Problems......Page 177 PART III: The Core of Macroeconomic Theory......Page 179 8 Aggregate Expenditure and Equilibrium Output......Page 181 The Keynesian Theory of Consumption......Page 182 Planned Investment (I)......Page 186 The Determination of Equilibrium Output (Income)......Page 187 The Multiplier......Page 191 ECONOMICS IN PRACTICE: The Paradox of Thrift......Page 194 Looking Ahead......Page 195 Problems......Page 196 Appendix: Deriving the Multiplier Algebraically......Page 198 9 The Government and Fiscal Policy......Page 199 Government in the Economy......Page 200 Fiscal Policy at Work: Multiplier Effects......Page 204 The Federal Budget......Page 209 The Economy’s Influence on the Government Budget......Page 214 ECONOMICS IN PRACTICE: Governments Disagree on How Much More Spending Is Needed......Page 215 Summary......Page 216 Problems......Page 217 Appendix B: The Case in Which Tax Revenues Depend on Income......Page 219 An Overview of Money......Page 223 ECONOMICS IN PRACTICE: Dolphin Teeth as Currency......Page 225 How Banks Create Money......Page 227 The Federal Reserve System......Page 233 How the Federal Reserve Controls the Money Supply......Page 237 Review Terms and Concepts......Page 243 Problems......Page 244 Interest Rates and Bond Prices......Page 247 The Demand for Money......Page 248 ECONOMICS IN PRACTICE: ATMs and the Demand for Money......Page 253 The Equilibrium Interest Rate......Page 254 Summary......Page 257 Problems......Page 258 Appendix A: The Various Interest Rates in the U.S. Economy......Page 259 Appendix B: The Demand For Money: A Numerical Example......Page 261 12 Aggregate Demand in the Goods and Money Markets......Page 263 Planned Investment and the Interest Rate......Page 264 ECONOMICS IN PRACTICE: Small Business and the Credit Crunch......Page 265 Equilibrium in Both the Goods and Money Markets: The IS-LM Model......Page 266 Policy Effects in the Goods and Money Markets......Page 267 The Aggregate Demand (AD) Curve......Page 271 Summary......Page 275 Problems......Page 276 Appendix: The IS-LM Model......Page 277 The Aggregate Supply Curve......Page 281 The Equilibrium Price Level......Page 284 The Long-Run Aggregate Supply Curve......Page 285 ECONOMICS IN PRACTICE: The Simple “Keynesian” Aggregate Supply Curve......Page 286 Monetary and Fiscal Policy Effects......Page 287 Causes of Inflation......Page 289 ECONOMICS IN PRACTICE: Inflationary Expectations in China......Page 292 The Behavior of the Fed......Page 293 ECONOMICS IN PRACTICE: Markets Watch the Fed......Page 295 Summary......Page 298 Problems......Page 299 The Labor Market: Basic Concepts......Page 303 The Classical View of the Labor Market......Page 304 Explaining the Existence of Unemployment......Page 306 ECONOMICS IN PRACTICE: Does Unemployment Insurance Increase Unemployment or Only Protect the Unemployed?......Page 308 The Short-Run Relationship Between the Unemployment Rate and Inflation......Page 310 The Long-Run Aggregate Supply Curve, Potential Output, and the Natural Rate of Unemployment......Page 315 Summary......Page 317 Problems......Page 318 15 Financial Crises, Stabilization, and Deficits......Page 321 The Stock Market, the Housing Market, and Financial Crises......Page 322 ECONOMICS IN PRACTICE: Bubbles or Rational Investors?......Page 325 Time Lags Regarding Monetary and Fiscal Policy......Page 328 Government Deficit Issues......Page 332 Summary......Page 334 Problems......Page 335 Households: Consumption and Labor Supply Decisions......Page 337 ECONOMICS IN PRACTICE: Household Reactions to Winning the Lottery......Page 344 Firms: Investment and Employment Decisions......Page 346 Productivity and the Business Cycle......Page 351 The Short-Run Relationship Between Output and Unemployment......Page 352 The Size of the Multiplier......Page 353 Summary......Page 354 Problems......Page 355 17 Long-Run Growth......Page 357 The Growth Process: From Agriculture to Industry......Page 358 Sources of Economic Growth......Page 359 ECONOMICS IN PRACTICE: Education and Skills in the United Kingdom......Page 363 Growth and the Environment and Issues of Sustainability......Page 366 Summary......Page 368 Problems......Page 369 Keynesian Economics......Page 371 Monetarism......Page 372 Supply-Side Economics......Page 375 New Classical Macroeconomics......Page 377 ECONOMICS IN PRACTICE: How Are Expectations Formed?......Page 379 Summary......Page 382 Problems......Page 383 19 International Trade, Comparative Advantage, and Protectionism......Page 385 Trade Surpluses and Deficits......Page 386 The Economic Basis for Trade: Comparative Advantage......Page 387 The Sources of Comparative Advantage......Page 394 Trade Barriers: Tariffs, Export Subsidies, and Quotas......Page 395 Free Trade or Protection?......Page 398 ECONOMICS IN PRACTICE: A Petition......Page 401 Summary......Page 404 Problems......Page 405 20 Open-Economy Macroeconomics: The Balance of Payments and Exchange Rates......Page 409 The Balance of Payments......Page 410 ECONOMICS IN PRACTICE: The Composition of Trade Gaps......Page 413 Equilibrium Output (Income) in an Open Economy......Page 414 ECONOMICS IN PRACTICE: The Recession Takes Its Toll on Trade......Page 417 The Open Economy with Flexible Exchange Rates......Page 418 ECONOMICS IN PRACTICE: China’s Increased Flexibility......Page 424 ECONOMICS IN PRACTICE: Losing Monetary Policy Control......Page 426 Summary......Page 427 Review Terms and Concepts......Page 428 Problems......Page 429 Appendix: World Monetary Systems Since 1900......Page 430 21 Economic Growth in Developing and Transitional Economies......Page 435 Life in the Developing Nations: Population and Poverty......Page 436 Economic Development: Sources and Strategies......Page 437 ECONOMICS IN PRACTICE: Corruption......Page 440 ECONOMICS IN PRACTICE: Cell Phones Increase Profits for Fishermen in India......Page 444 Development Interventions......Page 445 The Transition to a Market Economy......Page 449 Summary......Page 453 Review Terms and Concepts......Page 454 Problems......Page 455 C......Page 457 F......Page 458 L......Page 459 N......Page 460 S......Page 461 Y......Page 462 C......Page 463 D......Page 464 F......Page 465 H......Page 466 L......Page 467 M......Page 468 P......Page 469 S......Page 470 V......Page 471 Z......Page 472 Photo Credits......Page 473 The scope and method of economics The economic problem : scarcity and choice Demand, supply, and market equilibrium Demand and supply applications Introduction to macroeconomics Measuring national output and national income Unemployment, inflation, and long-run growth Aggregate expenditure and equilibrium output The government and fiscal policy The money supply and the federal reserve system Money demand and the equilibrium interest rate Aggregate demand in the goods and money markets Aggregate supply and the equilibrium price level The labor market in the macroeconomy Financial crises, stabilization, and deficits Household and firm behavior in the macroeconomy : a further look* Long-run growth Alternative views in macroeconomics International trade, comparative advantage, and protectionism Open-economy macroeconomics : the balance of payments and exchange rates Economic growth in developing and transitional economies.