Economics

by Riddell, Tom; Shackelford, Jean A; Stamos, Steve C.; Schneider, Geoffrey

• ISBN13: 9780321241139
• ISBN10: 0321241134
• Edition: 7th
• Format: Paperback
• Copyright: 2005-01-01
• Publisher: Addison Wesley

Summary

The Seventh Edition of Economics: A Tool for Critically Understanding Society develops fundamental economic analysis tools in clear, simple, and understandable terms. This one-semester text introduces students to economic theories and ideas, and how those theories and ideas have changed over time. The overarching goal of this text is to encourage critical thinking and to challenge students to examine preconceived ideas and beliefs. It explores various and contending schools of economic thought and successfully gives students perspective on the historical changes in the material conditions, economic institutions, and social relations of human society. By providing students with an opportunity to use economic concepts to solve real-world problems, Economics: A Tool for Critically Understanding Society creates a foundation for future and continued learning.

Table of Contents

Foreword	xviii
The Seventh Edition	xx
Acknowledgments	xxi
Dedication	xxii
Preface to the Instructor	xxiii
Suggested One-Semester Course Outline	xxiv
Suggested One-Semester Micro Course Outline	xxv
Suggested One-Semester Macro Course Outline	xxv
Supplements	xxv
Preface to the Student	xxvi
Economics: What's in It for You?	xxvi
Objectives, or What We Have Designed This Book to Accomplish	xxvii
PART 1 Economics as a Tool for Critical Thinking in a Changing Global Economy	1	(48)
CHAPTER 1 Economics as a Social Science	3	(14)
Introduction	3	(1)
Definitions in This Book	3	(1)
What Is Economics?	4	(5)
One Method for Economic Theory	6	(1)
Economics and Economists	7	(2)
Paradigms and Ideologies	9	(2)
The Realm of Theory	9	(2)
The Realm of the Economist	11	(1)
Conservative, Liberal, and Radical Economics	11	(5)
Conservatives, Liberals, and Radicals on Poverty	15	(1)
Conclusion	16	(1)
Review Questions	16	(1)
CHAPTER 2 Exploring the Emerging Global Economy	17	(32)
Introduction	17	(1)
Globalization: Making a Big World Smaller	18	(1)
The World Economy	19	(9)
Global Investment Trends	20	(6)
Globalization's Winners and Losers	26	(2)
Why Nations Trade	28	(4)
The Theory of Comparative Advantage	28	(1)
Free Trade versus Protectionism	29	(1)
Trade Liberalization and the North American Free Trade Agreement (NAFTA)	30	(2)
Financing International Trade	32	(2)
Exchange Rates	33	(1)
Technological Change and Competitiveness	34	(2)
The New Global Economy and Competitiveness	35	(1)
The Rise of Toyota and World-Class Manufacturing	35	(1)
Multinational Corporations: The Global Firm	36	(2)
Energy and the Environment	38	(2)
Energy	38	(1)
The Environment	39	(1)
Conclusion	40	(2)
Review Questions	40	(2)
Thinking Critically: Economic Paradigms and Globalization: What Are Sweatshops For?	42	(8)
Low-Wage Costa Ricans Make Baseballs for Millionaires	44	(5)
PART 2 Economic History and the Development of Modem Economic Thought	49	(72)
CHAPTER 3 The Evolution of Economic Systems	50	(24)
Introduction	50	(1)
Economic Development	51	(1)
From Feudalism to Capitalism	52	(8)
Precursors of Feudalism	53	(1)
Feudalism	54	(2)
Feudalism	54	(2)
The Breakdown of Feudalism	56	(4)
Emergent Capitalism	60	(3)
Mercantilism	61	(1)
The Rise of Classical Liberalism and the Industrial Revolution	61	(2)
The Development of Capitalism in the United States	63	(9)
Sources of U.S. Development	64	(1)
Negative Aspects of U.S. Development	65	(2)
The Post-World War II Experience	67	(1)
The Last Decades of the Twentieth Century	68	(4)
Conclusion	72	(2)
Review Questions	72	(2)
CHAPTER 4 Property, Adam Smith, and the Division of Labor	74	(12)
Introduction	74	(1)
The Development of Property in England	74	(4)
The Significance of Property	76	(1)
Those without Property-The Peasants	76	(1)
Property and Economic Thought	77	(1)
Adam Smith and the Division of Labor	78	(4)
Side Effects of the Division of Labor	81	(1)
The Distribution of Income	82	(2)
Conclusion	84	(2)
Review Questions	84	(2)
CHAPTER 5 The Rise and Fall of Laissez-Faire	86	(14)
Introduction	86	(1)
The Flow of Economic Activity	87	(1)
J.B. Say and Gluts	87	(2)
Laissez-Faire	89	(1)
The Socialist Critique of Laissez-Faire	90	(3)
The Flowering of Laissez-Faire	93	(1)
The Situation in the United States and Veblen's Critique	94	(3)
The Keynesian Critique of Laissez-Faire	97	(2)
Schumpeter, Laissez-Faire, and Creative Destruction	98	(1)
Conclusion	99	(1)
Review Questions	99	(1)
CHAPTER 6 The Marxian Critique of Capitalism	100	(21)
Introduction	100	(1)
Karl Marx: Political Economist and Revolutionary	101	(1)
Marx's General System of Thought	101	(4)
Dialectics	102	(1)
Materialism	103	(1)
The Materialist Conception of History: Historical Materialism	103	(2)
The Marxian Analysis of Capitalism	105	(4)
Social Revolution	109	(2)
An Assessment of Marxism	111	(2)
Conclusion	113	(1)
Review Questions	113	(1)
Thinking Critically: Technological Innovation, the New Economy, and the Future	114	(9)
Catch the Wave	116	(5)
PART 3 Microeconomics	121	(198)
CHAPTER 7 Scarcity: "You Can't Always Get What You Want"	123	(13)
Introduction	123	(1)
Scarcity: A Fundamental Economic Fact of Modern Life	124	(1)
The Production Possibilities Curve	125	(4)
Economic Growth and the Production Possibilities Curve	128	(1)
Military versus Civilian Priorities	129	(4)
Applying the Concept of Choice to Personal Decisions	133	(1)
Conclusion	134	(2)
Review Questions	134	(2)
CHAPTER 8 The Theory of Markets	136	(30)
Introduction	136	(1)
Markets and Price Determination: Supply-and-Demand Analysis	136	(17)
Demand	139	(2)
Ceteris Paribus and the Demand Curve	141	(3)
Supply	144	(2)
Ceteris Paribus and the Supply Curve	146	(1)
The Market and the Equilibrium Price	147	(2)
A Tinge of Reality: It's Not a Ceteris Paribas World	149	(4)
A Word of Caution	153	(1)
Applying Supply and Demand	153	(5)
Gasoline Prices	154	(1)
Supply and Demand and the Value of the Dollar	155	(3)
Elasticity	158	(6)
Price Elasticity of Demand	158	(5)
Price Elasticity of Supply	163	(1)
Income Elasticity	163	(1)
Conclusion	164	(2)
Review Questions	164	(2)
CHAPTER 9 Perfect Competition and Efficiency	166	(32)
Introduction	166	(1)
Profit Maximization and the Competitive Firm	166	(2)
Specialization, Diminishing Returns, and Short-Run Costs	168	(6)
Fixed Costs	169	(1)
Variable Costs	169	(4)
Average Cost	173	(1)
The Firm's Revenues	174	(1)
Profit Maximization	175	(13)
An Example of Profit Maximization in the Short Run	176	(8)
The Firm in the Long Run	184	(4)
Competitive Markets in the Long Run	188	(7)
Competition and Efficiency	190	(2)
The "Invisible Hand" and Consumer Sovereignty	192	(3)
Conclusion	195	(3)
Review Questions	196	(2)
CHAPTER 10 Noncompetitive Markets and Inefficiency	198	(28)
Introduction	198	(1)
Noncompetitive Market Structures	198	(1)
Monopoly	199	(8)
Short-Run Equilibrium for the Monopolist	200	(3)
Long-Run Equilibrium for the Monopolist	203	(1)
Monopoly and Inefficiency	204	(3)
Disrupting Regulated Monopolies	206	(1)
Monopolistic Competition and Oligopoly	207	(13)
Monopolistic Competition	207	(6)
Monopolistic Competition in Fast Foods	212	(1)
Oligopoly	213	(11)
Game Theory	217	(3)
Movie Rental Oligopoly	220	(1)
The Importance of Noncompetitive Markets in the U.S. Economy	220	(3)
Sources of Concentration in the Economy	223	(1)
Conclusion	224	(2)
Review Questions	225	(1)
CHAPTER 11 Resource Markets and the Distribution of Income	226	(26)
Introduction	226	(1)
The Economics of Resource Markets	226	(5)
Demand for a Resource	227	(3)
Supply of a Resource	230	(1)
The Economics of the Minimum Wage	231	(4)
The Distribution of Income	235	(16)
The Size Distribution of Income	235	(5)
The Influence of Property	240	(1)
The Influence of Labor Incomes	241	(3)
Transfer Income	244	(1)
The Influence of Race and Gender	245	(4)
Income Distribution and Child Poverty	249	(2)
Conclusion	251	(1)
Review Questions	251	(1)
CHAPTER 12 Corporations and Labor Unions	252	(24)
Introduction	252	(1)
Kinds of Firms	252	(2)
The Corporation	254	(1)
The Role of Profits in the Corporate System	255	(1)
U.S. Corporations Go Global	256	(3)
Free Enterprise versus Regulation	259	(3)
The Corporate Climate Today	260	(2)
Labor Unions in the United States	262	(4)
The History of U.S, Labor Unions	262	(4)
The Economic Effects of Labor Unions	266	(7)
The Future of Labor Unions	270	(4)
Labor-Centered Principles	271	(2)
Corporations and Labor: The Twenty-first Century	273	(1)
Conclusion	274	(2)
Review Questions	275	(1)
CHAPTER 13 The Economic Role of Government	276	(43)
Introduction	276	(1)
The Role of Government in the Economy	277	(3)
The Growth of Government's Role	280	(8)
Market Failure, Public Goods, and Externalities	288	(8)
Public Goods	289	(1)
External Benefits	290	(2)
External Costs	292	(4)
The Tragedy of the Commons: Property Rights and Atlantic Fishing	295	(1)
Regulation of Economic Concentration	296	(6)
Regulating Monopolies	296	(3)
Antitrust and Economic Concentration	299	(7)
The Microsoft Monopoly Case	300	(2)
Poverty and Income Redistribution	302	(3)
The Limits of Government's Role	305	(1)
Conclusion	306	(2)
Review Questions	307	(1)
Thinking Critically: Explorations in Microeconomics Affirmative Action	308	(13)
Acme and Affirmative Action	311	(8)
PART 4 Macroeconomics	319	(172)
CHAPTER 14 Macroeconomics: Issues and Problems	321	(25)
Introduction	321	(1)
Macroeconomic Goals	321	(9)
Economic Growth	322	(1)
Full Employment	323	(5)
Price Stability	328	(2)
Macroeconomic Tools	330	(5)
The Rise of Pax Americana: 1946 to the 1960's	330	(1)
The Decline of Pax Americana: 1970's to mid-1980'	331	(1)
The U.S. Economy: Late 1980's and Early 1990's	332	(1)
A Rebirth of Pax Americana? 1992 and Beyond	333	(2)
National Accounting Measures	335	(1)
Potential Problems with the National Income Accounts	336	(8)
Real versus Nominal GDP 338 Value-Added Counting	340	(1)
What Is Counted in GDP?	341	(3)
Conclusion	344	(2)
Review Questions	344	(2)
CHAPTER 15 Macroeconomic Theory: Classical and Keynesian Models	346	(38)
Introduction	346	(1)
The Classical Model	347	(1)
THE BIG PICTURE An Introduction to the Classical Model	347	(4)
The Quantity Theory of Money	347	(2)
The Goods and Labor Markets in Classical Economics	349	(1)
Say's Law	350	(1)
The Classical Credit Market	350	(1)
Flaws in the Classical Model	351	(1)
The Great Depression	352	(2)
Enter John Maynard Keynes	354	(2)
Capitalism's Savior	355	(1)
THE BIG PICTURE The Keynesian Model	356	(9)
The Keynesian Model: The Details	363	(2)
The Keynesian Economic Model	365	(15)
Consumption	365	(3)
Marginal Propensity to Consume	368	(2)
Saving	370	(1)
Marginal Propensity to Save	370	(1)
Consumption and Real GDP	371	(1)
Investment and the Two-Sector Model	371	(3)
Changes in Investment and the Keynesian Multiplier	374	(3)
A Simple Derivation of the Multiplier	375	(2)
The Three-Sector Model	377	(2)
The Four-Sector Model	379	(1)
THE BIG PICTURE Chapter 15 Wrap-up	380	(1)
Conclusion	381	(3)
Review Questions	382	(2)
CHAPTER 16 Fiscal Policy: Government Spending and Taxation	384	(24)
Introduction	384	(1)
Fiscal Policy	385	(1)
THE BIG PICTURE Fiscal Policy	386	(5)
Government Spending	387	(3)
Tax Policy and Income Effects	390	(1)
Transfer Payments	390	(1)
Problems with Fiscal Policy	391	(1)
Lags and Lumps in Fiscal Measures	391	(1)
Procyclical Tax and Spending Policy	392	(1)
Fiscal Policy in an Open Economy	392	(2)
The Federal Budget	394	(9)
The Federal Budget and the Economy	394	(4)
Federal Deficits and Surpluses	398	(4)
Cyclical and Structural Deficits and Surpluses	402	(1)
Conclusion	403	(5)
Review Questions	403	(6)
Note	404	(4)
CHAPTER 17 Financial Markets, Money, and Monetary Policy	408	(40)
Introduction	408	(1)
The Uses of Money	408	(1)
Demand for Money	409	(3)
Changes in the Demand for Money	411	(1)
Supply of Money	412	(12)
The Fed	412	(2)
Regulation of Financial Markets	414	(4)
Banking and Thrift Instability, 1980's- and 1990's-Style	416	(2)
Measures of the Money Supply	418	(2)
Suppliers of Money	420	(3)
The Myth and Mystique of Money	423	(1)
THE BIG PICTURE Money and the Keynesian System	424	(3)
Money and the Keynesian System: The Details	427	(2)
The Liquidity Trap	428	(1)
Monetary Policy	429	(7)
Tools of the Trade	429	(5)
Interest Rates, Bond Prices, and the Money Supply	431	(3)
Lags in Monetary Policy	434	(1)
Monetary Policy in an Open Economy	434	(2)
Monetarism	436	(6)
A Brief History of Monetary Policy	438	(1)
Greenspan's Fed: 1987-2004	438	(2)
Stock Markets in the Greenspan Era	440	(2)
The Future of Monetary Policy	442	(2)
Monetary and Fiscal Policy	444	(2)
Shortcomings of Monetary Policy	445	(1)
Coordination of Monetary and Fiscal Policy	445	(1)
Conclusion	446	(2)
Review Questions	446	(2)
CHAPTER 18 Aggregate Demand and Aggregate Supply	448	(21)
THE BIG PICTURE Introduction	448	(19)
Aggregate Analysis	449	(1)
Aggregate Demand	450	(5)
Conditions for Goods and Money Market Equilibrium: A Review	450	(3)
Shifts in the Aggregate Demand Curve	453	(2)
Short-Run Aggregate Supply	455	(3)
Causes of Shifts in the Short-Run Aggregate Supply Curve	456	(2)
Long-Run Aggregate Supply	458	(1)
Arriving at Equilibrium	458	(7)
Shifts in the Long-Run Aggregate Supply Curve	460	(1)
Productivity	460	(3)
Aggregate Supply and Economic Growth	463	(2)
Supply-Side Economic Policy	465	(3)
Rationale for Supply-Side Economics	465	(1)
Supply-Side Critics	466	(1)
THE BIG PICTURE And, The Big Picture Concluded	467	(1)
Conclusion	468	(1)
Review Questions	468	(1)
CHAPTER 19 Unemployment, Inflation, and Stabilization Policy in a Global Economy	469	(22)
Introduction	469	(1)
The Trade-Off: Unemployment and Inflation	469	(4)
The Phillips Curve	470	(3)
Inflation	473	(3)
The Impact of Unemployment and Inflation	476	(1)
Stabilization Policy: An International Perspective	477	(1)
Macroeconomic Solutions: The Alternatives	478	(4)
Monetarist Solutions	478	(1)
Supply-Side Solutions	479	(1)
New Classical Solutions	479	(1)
Post-Keynesian (Managed Capitalist) Solutions	480	(1)
Feminist Economists' Solutions	480	(1)
Radical Solutions	481	(1)
Conclusion	482	(1)
Review Questions	482	(1)
Thinking Critically: Spend Me to the Moon	483	(10)
Forget Bush and Gore; Our Economy Needs Another Khrushchev	486	(5)
PART 5 International Economics and Finance	491	(120)
CHAPTER 20 International Trade and Interdependence	493	(27)
Introduction	493	(1)
World Trade	494	(5)
Increased Trade Flows: Facts and Trends	495	(1)
The Impact of International Trade on the United States	496	(3)
Multinational Firms and the Internationalization of Production	499	(2)
The Modern Theory of International Trade	501	(10)
Who Trades What, and Why?	502	(1)
Comparative Advantage and Output	503	(4)
Terms of Trade	507	(1)
Problems with the Theoretical Assumptions of Free Trade	508	(1)
Restrictions to Free Trade: Protectionism	508	(3)
International Trade Issues	511	(7)
North American Free Trade Agreement (NAFTA)	511	(4)
Mexico: Was NAFTA Worth It? A Tale of What Free Trade Can and Cannot Do	512	(3)
Free Trade Area of the Americas (FTAA)	515	(1)
Asia-Pacific Economic Cooperation (APEC) Agreements	515	(1)
The WTO and GATT	516	(1)
European Integration	516	(1)
Japan as a Neomercantilist Trading Partner	517	(1)
Conclusion	518	(2)
Review Questions	519	(1)
CHAPTER 21 International Finance	520	(28)
Introduction	520	(1)
The Balance of Payments	520	(9)
The Current Account	521	(2)
Sources of the U.S. Trade Deficit	523	(1)
The Capital Account	523	(1)
The Financial Account	524	(1)
Balancing the Accounts	524	(3)
Global Capital Flows	525	(2)
Trade Deficits	527	(2)
Exchange Rates and the Balance of Payments	529	(14)
The Dollar and the Euro	530	(4)
Cheapening the Dollar	532	(2)
Determinants of Exchange Rates	534	(2)
The Value of the Dollar since the 1970's	536	(6)
Trends in the U.S. Balance of Payments	539	(3)
Exchange Rates and the Foreign Exchange Market	542	(1)
Exchange Rate Systems: An Historical Perspective	543	(2)
The Gold Standard	543	(1)
The International Monetary Fund and the Bretton Woods System	544	(1)
International Monetary Crisis	544	(1)
Floating Exchange Rates	545	(1)
The Future of the International Financial System	545	(2)
Conclusion	547	(1)
Review Questions	547	(1)
CHAPTER 22 The Economics of Developing Nations	548	(29)
Introduction	548	(1)
Common Characteristics of Developing Nations	548	(3)
Global Poverty	549	(1)
Underdevelopment: The Reality and Significance	549	(2)
Components of the Human Development Paradigm	551	(1)
Basic Economic Problems of Developing Nations	551	(10)
Economic Growth	551	(1)
Population: Undermining Economic Growth	552	(1)
Macroeconomic Instability	553	(2)
International Trade	555	(3)
International Finance	558	(2)
Environmental Problems	560	(1)
Explanations and Solutions for Underdevelopment	561	(3)
The Neoliberal Model	561	(1)
The Structuralist Model	562	(1)
The Dependency Model	563	(1)
Recent Economic Trends	564	(11)
Why Mexico's Small Corn Farmers Go Hungry	565	(2)
Mexico: A Country in Transition	567	(8)
Chasing Mexico's Dreams into Squalor	568	(7)
Conclusion	575	(2)
Review Questions	576	(1)
CHAPTER 23 Economic Systems in Transition	577	(34)
Introduction	577	(1)
Looking Backward	578	(1)
Economic Systems Revisited: Capitalism and Socialism	579	(2)
Capitalism and Socialism	580	(1)
Collapse of the Soviet Union	581	(4)
Early History: 1917-1979	581	(1)
The Soviet Planning System	582	(1)
Crisis and Change: 1980-1986	583	(1)
Perestroika: 1987-1991	583	(1)
The Commonwealth of Independent States	584	(1)
Eastern Europe: Economic Liberalization	585	(1)
The People's Republic of China	586	(8)
Is the Wakening Giant a Monster?	588	(6)
The Japanese Economy	594	(1)
Sustainable Development and the Environmental Crisis	595	(3)
Global Restructuring and the Future of Capitalism	598	(1)
Conclusion	599	(2)
Review Questions	600	(1)
Thinking Critically: Globalization in the Twenty-first Century	601	(10)
Global Capitalism: Can It Be Made to Work Better?	602	(4)
Is Your Job Next?	606	(5)
Glossary	611	(14)
Name Index	625	(2)
Subject Index	627