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Brief Principles of Macroeconomics

by
Edition:
4th
ISBN13:

9780324236972

ISBN10:
0324236972
Format:
Paperback
Pub. Date:
2/17/2006
Publisher(s):
South-Western College Pub
List Price: $226.95

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This is the 4th edition with a publication date of 2/17/2006.
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Summary

Mankiw's Principles of Economics textbooks continue to be the most popular and widely used text in the economics classroom. BRIEF PRINCIPLES OF MACROECONOMICS, 4th Edition features a strong revision of content in all 18 chapters while maintaining the clear and accessible writing style that is the hallmark of the highly respected author. The 4th edition also features an expanded instructor's resource package designed to assist instructors in course planning and classroom presentation and full integration of content with Aplia, the leading online Economics education program. In the 4th edition Greg Mankiw has created a full educational program for students and instructors -- Experience Mankiw 4th edition. "I have tried to put myself in the position of someone seeing economics for the first time. My goal is to emphasize the material that students should and do find interesting about the study of the economy." - N. Gregory Mankiw.

Table of Contents

Preface: To the Instructor vii
Preface: To the Student xx
PART 1 INTRODUCTION
1(60)
Ten Principles of Economics
3(16)
How People Make Decisions
4(4)
Principle 1: People Face Trade-offs
4(1)
Principle 2: The Cost of Something Is What You Give Up to Get It
5(1)
Principle 3: Rational People Think at the Margin
6(1)
Principle 4: People Respond to Incentives
7(1)
How People Interact
8(3)
Principle 5: Trade Can Make Everyone Better Off
8(1)
Principle 6: Markets Are Usually a Good Way to Organize Economic Activity
9(1)
Principle 7: Governments Can Sometimes Improve Market Outcomes
10(1)
FYI: Adam Smith and the Invisible Hand
10(1)
How the Economy as a Whole Works
11(3)
Principle 8: A Country's Standard of Living Depends on Its Ability to Produce Goods and Services
12(1)
Principle 9: Prices Rise When the Government Prints Too Much Money
12(1)
Principle 10: Society Faces a Short-Run Trade-off between Inflation and Unemployment
13(1)
FYI: How to Read This Book
14(1)
Conclusion
14(1)
Summary
15(1)
Key Concepts
15(1)
Questions for Review
16(1)
Problems and Applications
16(3)
Thinking Like an Economist
19(28)
The Economist as Scientist
20(8)
The Scientific Method: Observation, Theory, and More Observation
20(1)
The Role of Assumptions
21(1)
Economic Models
22(1)
Our First Model: The Circular-Flow Diagram
22(2)
Our Second Model: The Production Possibilities Frontier
24(2)
Microeconomics and Macroeconomics
26(1)
FYI: Who Studies Economics?
27(1)
The Economist as Policy Adviser
28(4)
Positive versus Normative Analysis
28(1)
Economists in Washington
29(1)
In the News: Super Bowl Economics
30(1)
Case Study: Mr. Mankiw Goes to Washington
31(1)
Why Economists Disagree
32(2)
Differences in Scientific Judgments
32(1)
Differences in Values
33(1)
Perception versus Reality
33(1)
Let's Get Going
34(2)
In the News: Why You Should Study Economics
35(1)
Summary
36(1)
Key Concepts
36(1)
Questions for Review
36(1)
Problems and Applications
36(2)
Appendix Graphing: A Brief Review
38(9)
Graphs of a Single Variable
38(1)
Graphs of Two Variables: The Coordinate System
39(1)
Curves in the Coordinate System
40(2)
Slope
42(2)
Cause and Effect
44(3)
Interdependence and the Gains from Trade
47(14)
A Parable for the Modern Economy
48(4)
Production Possibilities
48(2)
Specialization and Trade
50(2)
Comparative Advantage: The Driving Force of Specialization
52(3)
Absolute Advantage
52(1)
Opportunity Cost and Comparative Advantage
52(2)
Comparative Advantage and Trade
54(1)
FYI: The Legacy of Adam Smith and David Ricardo
55(1)
Applications of Comparative Advantage
55(3)
Should Tiger Woods Mow His Own Lawn?
55(1)
In the News: Evolution and Economics
56(1)
Should the United States Trade with Other Countries?
56(2)
Conclusion
58(1)
Summary
58(1)
Key Concepts
59(1)
Questions for Review
59(1)
Problems and Applications
59(2)
PART 2 HOW MARKETS WORK
61(28)
The Market Forces of Supply and Demand
63(26)
Markets and Competition
64(1)
What Is a Market?
64(1)
What Is Competition?
64(1)
Demand
65(6)
The Demand Curve: The Relationship between Price and Quantity Demanded
65(1)
Market Demand versus Individual Demand
66(1)
Shifts in the Demand Curve
67(2)
Case Study: Two Ways to Reduce the Quantity of Smoking Demanded
69(2)
Supply
71(4)
The Supply Curve: The Relationship between Price and Quantity Supplied
71(1)
Market Supply versus Individual Supply
71(1)
Shifts in the Supply Curve
72(3)
Supply and Demand Together
75(7)
Equilibrium
75(2)
Three Steps to Analyzing Changes in Equilibrium
77(4)
In the News: Political Unrest Shifts the Supply Curve
81(1)
Conclusion: How Prices Allocate Resources
82(2)
Summary
84(1)
Key Concepts
84(1)
Questions for Review
85(1)
Problems and Applications
85(4)
PART 3 THE DATA OF MACROECONOMICS
89(42)
Measuring a Nation's Income
91(22)
The Economy's Income and Expenditure
92(2)
The Measurement of Gross Domestic Product
94(2)
``GDP Is the Market Value . . .''
94(1)
``. . . Of All . . . ''
94(1)
``. . . Final . . .''
95(1)
``. . . Goods and Services . . .''
95(1)
``. . . Produced . . .''
95(1)
``. . . Within a Country . . .''
95(1)
``. . . In a Given Period of Time.''
95(1)
The Components of GDP
96(3)
Consumption
96(1)
FYI: Other Measures of Income
97(1)
Investment
97(1)
Government Purchases
98(1)
Net Exports
98(1)
Case Study: The Components of U.S. GDP
99(1)
Real versus Nominal GDP
99(5)
A Numerical Example
100(1)
The GDP Deflator
101(1)
Case Study: Real GDP over Recent History
102(1)
In the News: GDP Lightens Up
103(1)
In the News: The Underground Economy
104(1)
Is GDP a Good Measure of Economic Well-Being?
104(4)
Case Study: International Differences in GDP and the Quality of Life
106(1)
Case Study: Who Wins at the Olympics?
107(1)
Conclusion
108(1)
Summary
109(1)
Key Concepts
109(1)
Questions for Review
109(1)
Problems and Applications
110(3)
Measuring the Cost of Living
113(18)
The Consumer Price Index
114(8)
How the Consumer Price Index Is Calculated
114(2)
Problems in Measuring the Cost of Living
116(1)
FYI: What Is in the CPI's Basket?
117(1)
In the News: Accounting for Quality Change
118(2)
The GDP Deflator versus the Consumer Price Index
120(2)
Correcting Economic Variables for the Effects of Inflation
122(4)
Dollar Figures from Different Times
122(1)
Case Study: Mr. Index Goes to Hollywood
123(1)
Indexation
123(1)
Real and Nominal Interest Rates
124(1)
Case Study: Interest Rates in the U.S. Economy
125(1)
Conclusion
126(1)
Summary
127(1)
Key Concepts
128(1)
Questions for Review
128(1)
Problems and Applications
128(3)
PART 4 THE REAL ECONOMY IN THE LONG RUN
131(92)
Production and Growth
133(26)
Economic Growth around the World
134(4)
FYI: A Picture Is Worth a Thousand Statistics
136(2)
FYI: Are You Richer Than the Richest American?
138(1)
Productivity: Its Role and Determinants
138(4)
Why Productivity Is So Important
138(1)
How Productivity Is Determined
139(2)
FYI: The Production Function
141(1)
Case Study: Are Natural Resources a Limit to Growth?
141(1)
Economic Growth and Public Policy
142(13)
Saving and Investment
143(1)
Diminishing Returns and the Catch-Up Effect
143(2)
Investment from Abroad
145(1)
Education
146(1)
Health and Nutrition
146(1)
In the News: Promoting Human Capital
147(1)
Property Rights and Political Stability
148(1)
Free Trade
149(1)
Research and Development
150(1)
Population Growth
150(1)
In the News: Rich Farmers versus the World's Poor
151(1)
In the News: Foreign Aid
152(3)
Conclusion: The Importance of Long-Run Growth
155(1)
Summary
155(1)
Key Concepts
156(1)
Questions for Review
156(1)
Problems and Applications
156(3)
Saving, Investment, and the Financial System
159(22)
Financial Institutions in the U.S. Economy
160(5)
Financial Markets
160(2)
Financial Intermediaries
162(1)
FYI: How to Read the Newspaper's Stock Tables
163(2)
Summing Up
165(1)
Saving and Investment in the National Income Accounts
165(3)
Some Important Identities
166(1)
The Meaning of Saving and Investment
167(1)
The Market for Loanable Funds
168(8)
Supply and Demand for Loanable Funds
168(2)
Policy 1: Saving Incentives
170(1)
Policy 2: Investment Incentives
171(1)
Policy 3: Government Budget Deficits and Surpluses
172(2)
Case Study: The History of U.S. Government Debt
174(2)
Conclusion
176(1)
Summary
177(1)
Key Concepts
177(1)
Questions for Review
177(1)
Problems and Applications
178(3)
The Basic Tools of Finance
181(16)
Present Value: Measuring the Time Value of Money
182(2)
FYI: The Magic of Compounding and the Rule of 70
184(1)
Managing Risk
184(5)
Risk Aversion
184(1)
The Markets for Insurance
185(1)
FYI: The Peculiarities of Health Insurance
186(1)
Diversification of Firm-Specific Risk
187(1)
The Trade-off between Risk and Return
188(1)
Asset Valuation
189(4)
Fundamental Analysis
190(1)
The Efficient Markets Hypothesis
190(1)
Case Study: Random Walks and Index Funds
191(1)
In the News: Nobel Caliber Investment Advice
192(1)
Market Irrationality
193(1)
Conclusion
193(1)
Summary
194(1)
Key Concepts
194(1)
Questions for Review
194(1)
Problems and Applications
195(2)
Unemployment
197(26)
Identifying Unemployment
198(9)
How Is Unemployment Measured?
198(3)
Case Study: Labor-Force Participation of Men and Women in the U.S. Economy
201(1)
Does the Unemployment Rate Measure What We Want It To?
202(2)
In the News: The Rise of Adult Male Joblessness
204(1)
How Long Are the Unemployed without Work?
204(2)
Why Are There Always Some People Unemployed?
206(1)
Job Search
207(4)
Why Some Frictional Unemployment Is Inevitable
207(1)
Public Policy and Job Search
207(1)
In the News: German Unemployment
208(2)
Unemployment Insurance
210(1)
Minimum-Wage Laws
211(2)
FYI: Who Earns the Minimum Wage?
212(1)
Unions and Collective Bargaining
213(3)
The Economics of Unions
213(1)
Are Unions Good or Bad for the Economy?
214(1)
In the News: Should You Join a Union?
215(1)
The Theory of Efficiency Wages
216(2)
Worker Health
216(1)
Worker Turnover
216(1)
Worker Quality
217(1)
Worker Effort
217(1)
Case Study: Henry Ford and the Very Generous $5-a-Day Wage
218(1)
Conclusion
218(1)
Summary
219(1)
Key Concepts
219(1)
Questions for Review
220(1)
Problems and Applications
220(3)
PART 5 MONEY AND PRICES IN THE LONG RUN
223(50)
The Monetary System
225(20)
The Meaning of Money
226(6)
The Functions of Money
226(1)
The Kinds of Money
227(1)
In the News: The History of Money
228(1)
Money in the U.S. Economy
229(2)
FYI: Credit Cards, Debit Cards, and Money
231(1)
Case Study: Where Is All the Currency?
231(1)
The Federal Reserve System
232(2)
The Fed's Organization
232(1)
The Federal Open Market Committee
233(1)
Banks and the Money Supply
234(7)
The Simple Case of 100-Percent-Reserve Banking
234(1)
Money Creation with Fractional-Reserve Banking
235(1)
The Money Multiplier
236(1)
The Fed's Tools of Monetary Control
237(2)
Problems in Controlling the Money Supply
239(1)
Case Study: Bank Runs and the Money Supply
239(1)
FYI: The Federal Funds Rate
240(1)
Conclusion
241(1)
Summary
241(1)
Key Concepts
242(1)
Questions for Review
242(1)
Problems and Applications
242(3)
Money Growth and Inflation
245(28)
The Classical Theory of Inflation
246(13)
The Level of Prices and the Value of Money
246(1)
Money Supply, Money Demand, and Monetary Equilibrium
247(1)
The Effects of a Monetary Injection
248(1)
A Brief Look at the Adjustment Process
249(2)
The Classical Dichotomy and Monetary Neutrality
251(1)
Velocity and the Quantity Equation
252(2)
Case Study: Money and Prices during Four Hyperinflations
254(1)
The Inflation Tax
255(1)
In the News: The German Hyperinflation
256(1)
The Fisher Effect
257(2)
The Costs of Inflation
259(9)
A Fall in Purchasing Power? The Inflation Fallacy
260(1)
Shoeleather Costs
260(1)
Menu Costs
261(1)
Relative-Price Variability and the Misallocation of Resources
262(1)
Inflation-Induced Tax Distortions
262(2)
Confusion and Inconvenience
264(1)
A Special Cost of Unexpected Inflation: Arbitrary Redistributions of Wealth
264(1)
Case Study: The Wizard of Oz and the Free-Silver Debate
265(1)
In the News: How to Protect Your Savings from Inflation
266(2)
Conclusion
268(1)
Summary
269(1)
Key Concepts
269(1)
Questions for Review
269(1)
Problems and Applications
270(3)
PART 6 THE MACROECONOMICS OF OPEN ECONOMIES
273(48)
Open-Economy Macroeconomics: Basic Concepts
275(24)
The International Flows of Goods and Capital
276(9)
The Flow of Goods: Exports, Imports, and Net Exports
276(1)
Case Study: The Increasing Openness of the U.S. Economy
277(1)
The Flow of Financial Resources: Net Capital Outflow
278(1)
The Equality of Net Exports and Net Capital Outflow
279(1)
Saving, Investment, and Their Relationship to the International Flows
280(1)
In the News: Americans Rely on Capital Flows from Abroad
281(1)
Summing Up
282(1)
Case Study: Is the U.S. Trade Deficit a National Problem?
283(2)
The Prices for International Transactions: Real and Nominal Exchange Rates
285(3)
Nominal Exchange Rates
285(1)
Real Exchange Rates
286(1)
FYI: The Euro
287(1)
A First Theory of Exchange-Rate Determination: Purchasing-Power Parity
288(7)
The Basic Logic of Purchasing-Power Parity
289(1)
Implications of Purchasing-Power Parity
289(2)
Case Study: The Nominal Exchange Rate during a Hyperinflation
291(1)
In the News: The Starbucks Index
292(1)
Limitations of Purchasing-Power Parity
292(2)
Case Study: The Hamburger Standard
294(1)
Conclusion
295(1)
Summary
295(1)
Key Concepts
295(1)
Questions for Review
296(1)
Problems and Applications
296(3)
A Macroeconomic Theory of the Open Economy
299(22)
Supply and Demand for Loanable Funds and for Foreign-Currency Exchange
300(4)
The Market for Loanable Funds
300(2)
The Market for Foreign-Currency Exchange
302(2)
FYI: Purchasing-Power Parity as a Special Case
304(1)
Equilibrium in the Open Economy
304(4)
Net Capital Outflow: The Link between the Two Markets
304(1)
Simultaneous Equilibrium in Two Markets
305(2)
FYI: Disentangling Supply and Demand
307(1)
How Policies and Events Affect an Open Economy
308(8)
Government Budget Deficits
308(2)
In the News: The U.S. Trade Deficit
310(1)
Trade Policy
311(2)
Political Instability and Capital Flight
313(2)
Case Study: Could Capital Flee from the United States?
315(1)
Conclusion
316(1)
Summary
317(1)
Key Concepts
317(1)
Questions for Review
318(1)
Problems and Applications
318(3)
PART 7 SHORT-RUN ECONOMIC FLUCTUATIONS
321(94)
Aggregate Demand and Aggregate Supply
323(38)
Three Key Facts about Economic Fluctuations
324(2)
Fact 1: Economic Fluctuations Are Irregular and Unpredictable
324(1)
Fact 2: Most Macroeconomic Quantities Fluctuate Together
324(2)
Fact 3: As Output Falls, Unemployment Rises
326(1)
Explaining Short-Run Economic Fluctuations
326(4)
The Assumptions of Classical Economics
326(1)
In the News: Offbeat Indicators
327(1)
The Reality of Short-Run Fluctuations
328(1)
The Model of Aggregate Demand and Aggregate Supply
328(2)
The Aggregate-Demand Curve
330(4)
Why the Aggregate-Demand Curve Slopes Downward
330(3)
Why the Aggregate-Demand Curve Might Shift
333(1)
The Aggregate-Supply Curve
334(10)
Why the Aggregate-Supply Curve Is Vertical in the Long Run
335(1)
Why the Long-Run Aggregate-Supply Curve Might Shift
336(2)
Using Aggregate Demand and Aggregate Supply to Depict Long-Run Growth and Inflation
338(1)
Why the Aggregate-Supply Curve Slopes Upward in the Short Run
339(3)
Why the Short-Run Aggregate-Supply Curve Might Shift
342(2)
Two Causes of Economic Fluctuations
344(11)
The Effects of a Shift in Aggregate Demand
345(2)
FYI: Monetary Neutrality Revisited
347(1)
Case Study: Two Big Shifts in Aggregate Demand: The Great Depression and World War II
348(1)
Case Study: The Recession of 2001
349(1)
FYI: The Origins of Aggregate Demand and Aggregate Supply
350(1)
The Effects of a Shift in Aggregate Supply
351(2)
Case Study: Oil and the Economy
353(1)
FYI: The Macroeconomic Impact of Hurricane Katrina
354(1)
Conclusion
355(1)
Summary
355(1)
Key Concepts
356(1)
Questions for Review
356(1)
Problems and Applications
357(4)
The Influence of Monetary and Fiscal Policy on Aggregate Demand
361(24)
How Monetary Policy Influences Aggregate Demand
362(9)
The Theory of Liquidity Preference
363(2)
The Downward Slope of the Aggregate-Demand Curve
365(1)
FYI: Interest Rates in the Long Run and the Short Run
366(2)
Changes in the Money Supply
368(1)
The Role of Interest-Rate Targets in Fed Policy
369(1)
Case Study: Why the Fed Watches the Stock Market (and Vice Versa)
370(1)
How Fiscal Policy Influences Aggregate Demand
371(6)
Changes in Government Purchases
371(1)
The Multiplier Effect
371(1)
A Formula for the Spending Multiplier
372(1)
Other Applications of the Multiplier Effect
373(1)
The Crowding-Out Effect
374(1)
Changes in Taxes
375(1)
FYI: How Fiscal Policy Might Affect Aggregate Supply
376(1)
Using Policy to Stabilize the Economy
377(3)
The Case for Active Stabilization Policy
377(1)
Case Study: Keynesians in the White House
378(1)
The Case against Active Stabilization Policy
379(1)
Automatic Stabilizers
380(1)
Conclusion
380(1)
Summary
381(1)
Key Concepts
381(1)
Questions for Review
382(1)
Problems and Applications
382(3)
The Short-Run Trade-Off Between Inflation and Unemployment
385(30)
The Phillips Curve
386(3)
Origins of the Phillips Curve
386(1)
Aggregate Demand, Aggregate Supply, and the Phillips Curve
387(2)
Shifts in the Phillips Curve: The Role of Expectations
389(9)
The Long-Run Phillips Curve
389(3)
The Meaning of ``Natural''
392(1)
Reconciling Theory and Evidence
392(1)
The Short-Run Phillips Curve
393(2)
The Natural Experiment for the Natural-Rate Hypothesis
395(2)
In the News: How to Keep Expected Inflation Low
397(1)
Shifts in the Phillips Curve: The Role of Supply Shocks
398(2)
The Cost of Reducing Inflation
400(8)
The Sacrifice Ratio
401(1)
Rational Expectations and the Possibility of Costless Disinflation
402(1)
The Volcker Disinflation
403(2)
The Greenspan Era
405(1)
In the News: The Case for Inflation Targeting
406(1)
Case Study: Why Were Inflation and Unemployment So Low at the End of the 1990s?
406(2)
Conclusion
408(1)
Summary
409(1)
Key Concepts
410(1)
Questions for Review
410(1)
Problems and Applications
411(4)
PART 8 FINAL THOUGHTS
415(26)
Five Debates Over Macroeconomic Policy
417(24)
Should Monetary and Fiscal Policymakers Try to Stabilize the Economy?
418(2)
Pro: Policymakers Should Try to Stabilize the Economy
418(1)
Con: Policymakers Should Not Try to Stabilize the Economy
418(2)
In the News: The Fine-Tuning of George W. Bush
420(1)
Should Monetary Policy Be Made by Rule Rather Than by Discretion?
420(5)
Pro: Monetary Policy Should Be Made by Rule
421(1)
In the News: Inflation Targeting as a Rule for Monetary Policy
422(2)
Con: Monetary Policy Should Not Be Made by Rule
424(1)
Should the Central Bank Aim for Zero Inflation?
425(3)
Pro: The Central Bank Should Aim for Zero Inflation
425(1)
Con: The Central Bank Should Not Aim for Zero Inflation
426(1)
In the News: The Optimal Rate of Inflation
427(1)
Should the Government Balance Its Budget?
428(4)
Pro: The Government Should Balance Its Budget
428(1)
Con: The Government Should Not Balance Its Budget
429(1)
In the News: Dealing with Deficits
430(2)
Should the Tax Laws Be Reformed to Encourage Saving?
432(3)
Pro: The Tax Laws Should Be Reformed to Encourage Saving
432(2)
In the News: Tax Reform
434(1)
Con: The Tax Laws Should Not Be Reformed to Encourage Saving
434(1)
Conclusion
435(1)
Summary
436(1)
Questions for Review
437(1)
Problems and Applications
437(4)
Appendix: Quick Quiz Answers 441(10)
Glossary 451(4)
Index 455


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