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is a professor of economics at Lewis and Clark College in Portland, Oregon. After receiving his B.S.
in economics at the University of Oregon, he spent two years in the Peace Corps, working with city
planners in the Philippines. He received his Ph.D. in economics from Princeton University in 1981
and has taught at the University of California, Davis, and Oregon State University, winning teaching
awards at both schools. He is the author of the best-selling textbook Urban Economics, currently in its
Professor O’Sullivan’s research explores economic issues concerning urban land use, environmental
protection, and public policy. His articles have appeared in many economics journals, including the
Journal of Urban Economics, Journal of Environmental Economics and Management, National Tax Journal,
Journal of Public Economics, and Journal of Law and Economics.
Professor O’Sullivan lives with his family in Portland, Oregon. For recreation, he enjoys hiking,
kiteboarding, and squash.
STEVEN M. SHEFFRIN
is professor of economics and executive director of the Murphy Institute at Tulane University. Prior to
joining Tulane in 2010, he was a faculty member at the University of California, Davis, and served as
department chairman of economics and dean of social sciences. He has been a visiting professor at
Princeton University, Oxford University, London School of Economics, and Nanyang Technological
University, and he has served as a financial economist with the Office of Tax Analysis of the United
States Department of the Treasury. He received his B.A. from Wesleyan University and his Ph.D. in
economics from the Massachusetts Institute of Technology.
Professor Sheffrin is the author of 10 other books and monographs and over 100 articles in the
fields of macroeconomics, public finance, and international economics. His most recent books
include Rational Expectations (second edition) and Property Taxes and Tax Revolts: The Legacy of
Proposition 13 (with Arthur O’Sullivan and Terri Sexton).
Professor Sheffrin has taught macroeconomics and public finance at all levels, from general introduction
to principles classes (enrollments of 400) to graduate classes for doctoral students. He is the
recipient of the Thomas Mayer Distinguished Teaching Award in economics.
He lives with his wife Anjali (also an economist) in New Orleans, Louisiana, and has two daughters
who have studied economics. In addition to a passion for current affairs and travel, he plays a
tough game of tennis.
STEPHEN J. PEREZ
is a professor of economics and NCAA faculty athletics representative at California State University,
Sacramento. After receiving his B.A. in economics at the University of California, San Diego, he was
awarded his Ph.D. in economics from the University of California, Davis, in 1994. He taught economics
at Virginia Commonwealth University and Washington State University before coming to California
State University, Sacramento, in 2001. He teaches macroeconomics at all levels as well as econometrics,
sports economics, labor economics, and mathematics for economists.
Professor Perez’s research explores most macroeconomic topics. In particular, he is interested
in evaluating the ability of econometric techniques to discover the truth, issues of causality in
macroeconomics, and sports economics. His articles have appeared in many economics journals,
including the Journal of Monetary Economics; Econometrics Journal; Economics Letters; Journal of
Economic Methodology; Public Finance and Management; Journal of Economics and Business; Oxford
Bulletin of Economics and Statistics; Journal of Money, Credit, and Banking; Applied Economics; and
Journal of Macroeconomics.
Table of Contents
PART 1 Introduction and Key Principles
1 Introduction: What Is Economics?
2 The Key Principles of Economics
3 Exchange and Markets
4 Demand, Supply, and Market Equilibrium
PART 2 The Basic Concepts in Macroeconomics
5 Measuring a Nation’s Production and Income
6 Unemployment and Inflation
PART 3 The Economy in the Long Run
7 The Economy at Full Employment
8 Why Do Economies Grow?
PART 4 Economic Fluctuations and Fiscal Policy
9 Aggregate Demand and Aggregate Supply
10 Fiscal Policy
11 The Income-Expenditure Model
12 Investment and Financial Markets
PART 5 Money, Banking, and Monetary Policy
13 Money and the Banking System
14 The Federal Reserve and Monetary Policy
PART 6 Inflation, Unemployment, and Economic Policy
15 Modern Macroeconomics: From the Short Run to the Long Run
16 The Dynamics of Inflation and Unemployment
17 Macroeconomic Policy Debates
PART 7 The International Economy
18 International Trade and Public Policy
19 The World of International Finance
PART 8 A Closer Look at Demand and Supply
20 Elasticity: A Measure of Responsiveness
21 Market Efficiency and Government Intervention
22 Consumer Choice Using Utility Theory
PART 9 Market Structures and Pricing
23 Production Technology and Cost
24 Perfect Competition
25 Monopoly and Price Discrimination
26 Market Entry and Monopolistic Competition
27 Oligopoly and Strategic Behavior
28 Controlling Market Power: Antitrust and Regulation
PART 10 Externalities and Information
29 Imperfect Information: Adverse Selection and Moral Hazard
30 Public Goods and Public Choice
31 External Costs and Environmental Policy
PART 11 The Labor Market and Income Distribution
32 The Labor Market, Income, and Poverty
33 Unions, Monopsony, and Imperfect Information