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Economics: Principles and Policies

by
Edition:
8th
ISBN13:

9780030259487

ISBN10:
0030259487
Format:
Paperback
Pub. Date:
8/2/1999
Publisher(s):
South-Western College Pub
List Price: $213.66

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Summary

Since introducing the aggregate supply/aggregate demand model as a fundamental tool for learning economics in the first edition of their textbook, William Baumol and Alan Blinder have, for over two decades, led the teaching and learning of economics with their authoritative and timely discussion of the field. Now in its eighth edition, Economics: Principles and Policy remains a time-tested tool in teaching and learning the ever-evolving field of economics.

Table of Contents

About the Authors vi(1)
Preface vii
PART I Getting Acquainted with Economics 1(90)
CHAPTER 1 WHAT IS ECONOMICS?
3(14)
IDEAS FOR BEYOND THE FINAL EXAM
4(5)
Idea 1 How Much Does It Really Cost?
4(1)
Idea 2 Attempts to Repeal the Laws of Supply and Demand--The Market Strikes Back
4(1)
Idea 3 The Surprising Principle of Comparative Advantage
5(1)
Idea 4 Trade Is a Win-Win Situation
5(1)
Idea 5 The Importance of Thinking at the Margin
6(1)
Idea 6 Externalities: A Shortcoming of the Market Cured by Market Methods
6(1)
Idea 7 Why the Costs of Education and Medical Care Keep Growing
6(1)
Idea 8 The Trade-off between Efficiency and Equality
7(1)
Idea 9 The Short-Run Trade-off between Inflation and Unemployment
8(1)
Idea 10 Inflation Distorts Measurements
8(1)
Idea 11 Why Was It Important to Reduce the Budget Deficit?
8(1)
Idea 12 Productivity Growth Is (Almost) Everything in the Long Run
9(1)
Epilogue
9(1)
INSIDE THE ECONOMIST'S TOOL KIT
9(6)
Economics as a Discipline
9(1)
The Need for Abstraction
10(2)
The Role of Economic Theory
12(1)
What Is an Economic Model?
13(1)
Reasons For Disagreements: Imperfect Information and Value Judgments
14(1)
Common Sense: Useful but Dangerous
15(1)
Summary
15(1)
Key Terms
16(1)
Questions For Review
16(1)
CHAPTER 2 THE USE AND MISUSE OF GRAPHS
17(14)
GRAPHS USED IN ECONOMIC ANALYSIS
18(1)
WHAT'S WRONG WITH THIS GRAPH?
18(5)
Two-Variable Diagrams
18(2)
The Definition and Measurement of Slope
20(2)
Rays through the Origin and 45(Degree) Lines
22(1)
Squeezing Three Dimensions into Two: Contour Maps
22(1)
PERILS IN THE INTERPRETATION OF GRAPHS
23(4)
The Interpretation of Growth Trends
24(1)
Distorting Trends by Choice of the Time Period
25(2)
DANGERS OF OMITTING THE ORIGIN: THE PUZZLE SOLVED
27(3)
Unreliability of Steepness and Choice of Units
28(2)
Summary
30(1)
Key Terms
30(1)
Questions for Review
30(1)
CHAPTER 3 THE ECONOMY: MYTH AND REALITY
31(20)
THE AMERICAN ECONOMY: A THUMBNAIL SKETCH
32(5)
A Private Enterprise Economy
32(2)
A Relatively "Closed" Economy
34(1)
A Growing Economy... but with Inflation
34(2)
Bumps along the Growth Path: Recessions
36(1)
THE INPUTS: LABOR AND CAPITAL
37(4)
The American Workforce: Who Is in It?
38(1)
The American Workforce: What It Does
38(2)
The American Workforce: What It Earns
40(1)
Capital and Its Earnings
41(1)
THE OUTPUTS: WHAT DOES AMERICA PRODUCE?
41(1)
THE CENTRAL ROLE OF BUSINESS FIRMS
42(1)
MEASURING ECONOMIC PROGRESS
43(2)
WHAT'S MISSING FROM THE PICTURE? GOVERNMENT
45(4)
The Government as Referee
46(1)
The Government as Business Regulator
46(1)
Government Expenditures
46(1)
Taxes in America
47(1)
The Government as Redistributor
48(1)
CONCLUSION: THE MIXED ECONOMY
49(1)
Summary
49(1)
Key Terms
50(1)
Questions for Review
50(1)
CHAPTER 4 SCARCITY AND CHOICE: THE ECONOMIC PROBLEM
51(16)
WHAT TO DO WITH THE BUDGET SURPLUS?
52(1)
SCARCITY, CHOICE, AND OPPORTUNITY COST
52(2)
Opportunity Cost and Money Cost
53(1)
SCARCITY AND CHOICE FOR A SINGLE FIRM
54(2)
The Production Possibilities Frontier
54(1)
The Principle of Increasing Costs
55(1)
SCARCITY AND CHOICE FOR THE ENTIRE SOCIETY
56(1)
Scarcity and Choice Elsewhere in the Economy
56(1)
ALLOCATING THE BUDGET SURPLUS
57(2)
Application: Economic Growth in the United States and the Asian "Tigers"
57(2)
THE CONCEPT OF EFFICIENCY
59(1)
THE THREE COORDINATION TASKS OF ANY ECONOMY
60(1)
SPECIALIZATION FOSTERS EFFCIENT RESOURCE ALLOCATION
60(2)
The Wonders of the Division of Labor
60(1)
The Amazing Principle of Comparative Advantage
61(1)
SPECIALIZATION LEADS TO EXCHANGE
62(1)
MARKETS, PRICES, AND THE THREE COORDINATION TASKS
63(1)
LAST WORD: DON'T CONFUSE ENDS WITH MEANS
64(1)
Summary
64(1)
Key Terms
65(1)
Questions For Review
65(2)
CHAPTER 5 SUPPLY AND DEMAND: AN INITIAL LOOK
67(24)
WHAT IN THE WORLD HAPPENED TO THOSE ASIAN CURRENCIES?
68(1)
THE INVISIBLE HAND
68(2)
DEMAND AND QUANTITY DEMANDED
70(3)
The Demand Schedule
70(1)
The Demand Curve
71(1)
Shifts of the Demand Curve
71(2)
SUPPLY AND QUANTITY SUPPLIED
73(4)
The Supply Schedule and the Supply Curve
73(2)
Shifts of the Supply Curve
75(2)
SUPPLY AND DEMAND EQUILIBRIUM
77(3)
The Law of Supply and Demand
79(1)
Effects of Demand Shifts on Supply-Demand Equilibrium
79(1)
APPLICATION: THE FALL OF THE RUPIAH
80(2)
Supply Shifts and Supply-Demand Equilibrium
80(1)
Application: Who Really Pays That Tax?
81(1)
FIGHTING THE INVISIBLE HAND: THE MARKET FIGHTS BACK
82(5)
Restraining the Market Mechanism: Price Ceilings
83(1)
Case Study: Rent Controls in New York City
83(2)
Restraining the Market Mechanism: Price Floors
85(1)
Case Study: Sugar Price Supports
85(1)
A Can of Worms
86(1)
A SIMPLE BUT POWERFUL LESSON
87(1)
Summary
87(1)
Key Terms
88(1)
Questions For Review
88(3)
PART II The Building Blocks Of Demand and supply 91(98)
CHAPTER 6 CONSUMER CHOICE: INDIVIDUAL AND MARKET DEMAND
93(24)
PARADOX: SHOULD WATER BE WORTH MORE THAN DIAMONDS?
94(1)
SCARCITY AND DEMAND
94(1)
UTILITY: A TOOL TO ANALYZE PURCHASE DECISIONS
95(7)
Total versus Marginal Utility
96(1)
The "Law" of Diminishing Marginal Utility
96(3)
Using Marginal Utility: The Optimal Purchase Rule
99(2)
From Diminishing Marginal Utility to Downward-Sloping Demand Curves
101(1)
CONSUMER CHOICE AS A TRADE-OFF: OPPORTUNITY COST
102(2)
Consumer's Surplus: The Net Gain From a Purchase
102(2)
RESOLVING THE DIAMOND-WATER PARADOX
104(1)
Income and Quantity Demanded
105(1)
FROM INDIVIDUAL DEMAND CURVES TO MARKET DEMAND CURVES
105(2)
Market Demand as a Horizontal Sum
105(1)
The "Law" of Demand
105(2)
Exceptions to the Law of Demand
107(1)
Summary
107(1)
Key Terms
108(1)
Questions for Review
108(1)
APPENDIX: ANALYZING CONSUMER CHOICE GRAPHICALLY: INDIFFERENCE CURVE ANALYSIS
108(1)
GEOMETRY OF AVAILABLE CHOICES: THE BUDGET LINE
109(2)
Properties of the Budget Line
109(1)
Changes in the Budget Line
110(1)
WHAT THE CONSUMER PREFERS: PROPERTIES OF THE INDIFFERENCE CURVE
111(1)
THE SLOPES OF INDIFFERENCE CURVES AND BUDGET LINES
112(3)
Tangency Conditions
113(1)
Consequences of Income Changes: Inferior Goods
114(1)
Consequences of Price Changes: Deriving the Demand Curve
114(1)
Summary
115(1)
Key Terms
115(1)
Questions for Review
116(1)
CHAPTER 7 DEMAND AND ELASTICITY
117(20)
WILL TAXING CIGARETTES MAKE TEENAGERS STOP SMOKING?
118(1)
ELASTICITY: THE MEASURE OF RESPONSIVENESS
119(5)
Price Elasticity of Demand and the Shapes of Demand Curves
121(3)
PRICE ELASTICITY OF DEMAND: ITS EFFECT ON TOTAL REVENUE AND TOTAL EXPENDITURE
124(1)
SO, WILL A CIGARETTE TAX DECREASE TEENAGE SMOKING SIGNIFICANTLY?
125(1)
WHAT DETERMINES DEMAND ELASTICITY?
126(1)
ELASTICITY AS A GENERAL CONCEPT
127(2)
Income Elasticity
127(1)
Price Elasticity of Supply
127(1)
Cross Elasticity of Demand
127(2)
CHANGES IN DEMAND: MOVEMENT ALONG THE DEMAND CURVE VERSUS SHIFTS IN THE DEMAND CURVE
129(2)
Demand Shifters
129(2)
THE TIME PERIOD OF THE DEMAND CURVE AND ECONOMIC DECISION MAKING
131(1)
REAL-WORLD APPLICATION: POLAROID VERSUS KODAK
132(1)
Summary
133(1)
Key Terms
133(1)
Questions for Review
133(1)
APPENDIX: STATISTICAL ANALYSIS OF DEMAND RELATIONSHIPS
134(1)
AN ILLUSTRATION: DID THE ADVERTISING PROGRAM WORK?
135(2)
CHAPTER 8 PRODUCTION, INPUTS, AND COST: BUILDING BLOCKS FOR SUPPLY ANALYSIS
137(30)
ARE LARGER FIRMS MORE EFFICIENT?
138(1)
SHORT-RUN VERSUS LONG-RUN COSTS: WHAT MAKES AN INPUT VARIABLE?
139(2)
The Economic Short Run versus the Economic Long Run
140(1)
Fixed Costs and Variable Costs
140(1)
PRODUCTION, INPUT CHOICE, AND COST WITH ONE VARIABLE INPUT
141(9)
Total, Average, and Marginal Physical Products
141(1)
Marginal Physical Product and the "Law" of Diminishing Marginal Returns
142(2)
The Optimal Quantity of an Input and Diminishing Returns
144(1)
Input Quantities and Total, Average, and Marginal Cost Curves
145(3)
The Law of Diminishing Marginal Productivity and the U-Shaped Average Cost Curve
148(1)
The Average Cost Curve in the Short and Long Run
149(1)
MULTIPLE INPUT DECISIONS: THE CHOICE OF OPTIMAL INPUT COMBINATIONS
150(5)
Substitutability: The Choice of Input Proportions
150(1)
The Production Function and Substitutability
151(2)
The Marginal Rule for Optimal Input Proportions
153(1)
Changes in Input Prices and Optimal Input Proportions
154(1)
ECONOMIES OF SCALE
155(4)
The "Law" of Diminishing Returns and Returns to Scale
157(1)
Historical Costs versus Analytical Cost Curves
158(1)
RESOLVING THE ECONOMIES OF SCALE ISSUE
159(2)
Cost Minimization in Theory and Practice
160(1)
Summary
161(1)
Key Terms
161(1)
Questions for Review
161(1)
APPENDIX: PRODUCTION INDIFFERENCE CURVES
162(1)
CHARACTERISTICS OF THE PRODUCTION INDIFFERENCE CURVES, OR ISOQUANTS
163(1)
THE CHOICE OF INPUT COMBINATIONS
163(1)
COST MINIMIZATION, EXPANSION PATH, AND COST CURVES
164(1)
EFFECTS OF CHANGES IN INPUT PRICES
164(1)
Summary
164(1)
Key Terms
165(1)
Questions for Review
165(2)
CHAPTER 9 OUTPUT, PRICE, AND PROFIT: THE IMPORTANCE OF MARGINAL ANALYSIS
167(22)
TWO PUZZLES
168(1)
PRICE AND QUANTITY: ONE DECISION, NOT TWO
169(1)
TOTAL PROFIT: KEEP YOUR EYE ON THE GOAL
170(4)
Total, Average, and Marginal Revenue
170(2)
Total, Average, and Marginal Cost
172(1)
Maximization of Total Profit
172(2)
Profit Maximization: A Graphical Interpretation
174(1)
MARGINAL ANALYSIS AND MAXIMIZATION OF TOTAL PROFIT
174(5)
Marginal Revenue and Marginal Cost: Guides to Optimization
176(1)
Finding the Optimal Price from Optimal Output
177(2)
GENERALIZATION: THE LOGIC OF MARGINAL ANALYSIS AND MAXIMIZATION
179(2)
Application: Fixed Cost and the Profit-Maximizing Price
180(1)
MARGINAL ANALYSIS IIV REAL DECISION PROBLEMS
181(2)
CONCLUSION: THE FUNDAMENTAL ROLE OF MARGINAL ANALYSIS
183(1)
THE THEORY AND REALITY: A WORD OF CAUTION
183(2)
Summary
185(1)
Key Terms
185(1)
Questions for Review
185(1)
APPENDIX: THE RELATIONSHIPS AMONG TOTAL, AVERAGE, AND MARGINAL DATA
186(1)
GRAPHICAL REPRESENTATION OF MARGINAL AND AVERAGE CURVES
187(1)
Questions for Review
187(2)
PART III Markets, from Competition to Monopoly: Virtues and Vices 189(138)
CHAPTER 10 THE FIRM AND THE INDUSTRY UNDER PERFECT COMPETITION
191(18)
POLLUTION REDUCTION INCENTIVES THAT ACTUALLY INICREASE POLLUTION
192(1)
PERFECT COMPETITION DEFINED
192(1)
THE COMPETITIVE FIRM
193(5)
The Firm's Demand Curve under Perfect Competition
193(1)
Short-Run Equilibrium for the Perfectly Competitive Firm
194(2)
Short-Run Profit: Graphic Representation
196(1)
The Case of Short-Term Losses
196(1)
Shutdown and Break-Even Analysis
196(2)
The Competitive Firm's Short-Run Supply Curve
198(1)
THE COMPETITIVE INDUSTRY
198(6)
The Competitive Industry's Short-Run Supply Curve
198(2)
Industry Equilibrium in the Short Run
200(1)
Industry and Firm Equilibrium in the Long Run
200(3)
Zero Economic Profit: The Opportunity Cost of Capital
203(1)
The Long Run Industry Supply Curve
203(1)
PERFECT COMPETITION AND ECONOMIC EFFICIENCY
204(2)
WHICH IS BETTER TO CUT POLLUTION--THE CARROT OR THE STICK?
206(1)
Summary
207(1)
Key Terms
208(1)
Questions For Review
208(1)
CHAPTER 11 THE PRICE SYSTEM AND THE CASE FOR FREE MARKETS
209(20)
HOW SHOULD CALTRANS SET THE PRICE TO CROSS THE SAN FRANCISCO--OAKLAND BAY BRIDGE?
210(1)
EFFICIENT RESOURCE ALLOCATION AND PRICING
210(3)
Pricing to Promote Efficiency: An Example
211(1)
Can Price Increases Ever Serve the Public Interest?
212(1)
SCARCITY AND THE NEED TO COORDINATE ECONOMIC DECISIONS
213(8)
Three Coordination Tasks in the Economy
214(3)
Input-Output Analysis: The Near Impossibility of Perfect Central Planning
217(2)
Which Buyers and Which Sellers Get Priority?
219(2)
HOW PERFECT COMPETITION ACHIEVES EFFICIENCY
221(5)
Example: Efficient Resource Allocation in Output Selection
221(2)
The Invisible Hand at Work
223(1)
Other Roles of Prices: Income Distribution and Fairness
223(1)
Yet Another Free-Market Achievement: Growth versus Efficiency
224(2)
SAN FRANCISCO BRIDGE PRICING REVISITED
226(1)
TOWARD ASSESSMENT OF THE PRICE MECHANISM
227(1)
Summary
227(1)
Key Terms
228(1)
Questions for Review
228(1)
CHAPTER 12 MONOPOLY
229(16)
COMPETITION IN LOCAL TELEPHONE SERVICE MARKETS?
230(1)
MONOPOLY DEFINED
230(3)
Sources of Monopoly: Barriers to Entry and Cost Advantages
231(1)
Natural Monopoly
232(1)
THE MONOPOLIST'S SUPPLY DECISION
233(6)
Determining the Profit-Maximizing Output
234(1)
Comparing Monopoly and Perfect Competition
235(2)
Monopoly Is Likely to Shift Demand
237(1)
Monopoly Is Likely to Shift Cost Curves
238(1)
ON BALANCE, CAN ANYTHING GOOD BE SAID ABOUT MONOPOLY?
239(1)
Monopoly May Aid Innovation
239(1)
Natural Monopoly: Where Single-Firm Production Is Cheapest
239(1)
PRICE DISCRIMINATION UNDER MONOPOLY
239(3)
Is Price Discrimination Always Undesirable?
241(1)
THE PUZZLE RESOLVED: COMPETITIVE LOCAL TELEPHONE SERVICE
242(1)
Summary
243(1)
Key Terms
244(1)
Questions for Review
244(1)
CHAPTER 13 BETWEEN COMPETITION AND MONOPOLY
245(24)
SOME PUZZLING OBSERVATIONS
246(2)
MONOPOLISTIC COMPETITION
248(3)
Characteristics of Monopolistic Competition
248(1)
Price and Output Determination under Monopolistic Competition
249(1)
The Excess Capacity Theorem and Resource Allocation
250(1)
EXPLAINING THE ABUNDANCE OF RETAILERS
251(1)
OLIGOPOLY
252(1)
WHY OLIGOPOLISTS ADVERTISE BUT PERFECTLY COMPETITIVE FIRMS GENERALLY DO NOT
252(6)
Why Oligopolistic Behavior Is So Hard to Analyze
253(1)
A Shopping List
254(3)
Sales Maximization: An Oligolopoly Model With Interdependence Ignored
257(1)
THE KINKED DEMAND CURVE MODE
258(6)
The Game-Theory Approach
260(4)
MONOPOLISTIC COMPETITION, OLIGOPOLY, AND PUBLIC WELFARE
264(2)
A GLANCE BACKWARD: COMPARING THE FOUR MARKET FORMS
266(1)
Summary
267(1)
Key Terms
267(1)
Questions for Review
267(2)
CHAPTER 14 THE MARKET MECHANISM: SHORTCOMINGS AND REMEDIES
269(22)
WHY ARE HEALTH-CARE COSTS IN CANADA RISING?
270(1)
WHAT DOES THE MARKET DO POORLY?
270(1)
EFFICIENT RESOURCE ALLOCATION: A REVIEW
271(1)
EXTERNALITIES: GETTING THE PRICES WRONG
272(4)
Externalities and Inefficiency
273(1)
Externalities Are Everywhere
274(1)
Government Policy and Externalities
275(1)
PROVISION OF PUBLIC GOODS
276(1)
ALLOCATION OF RESOURCES BETWEEN PRESENT AND FUTURE
277(2)
The Role of the Interest Rate
277(1)
How Does It Work in Practice?
278(1)
MARKET FAILURE AND GOVERNMENT FAILURE
279(1)
THE COST DISEASE OF THE SERVICE SECTOR
279(5)
Deteriorating Personal Services
279(1)
personal Services Are Getting More Expensive
280(1)
Why Are Personal Services Getting Worse but Costing More?
281(1)
Uneven Labor Productivity Growth in the Economy
282(1)
A Future of More Goods but Fewer Services: Is It Inevitable?
283(1)
Government May Make the Problem Worse
283(1)
EXPLAINING THE RISING COSTS OF CANADIAN HEALTH CARE
284(1)
SOME OTHER SOURCES OF MARKET FAILURE
285(2)
Imperfect Information
285(1)
Rent Seeking
285(1)
Moral Hazard
286(1)
THE MARKET SYSTEM ON BALANCE
287(1)
EPILOGUE: THE UNFORGIVING MARKET, ITS GIFT OF ABUNDANCE, AND ITS DANGEROUS FRIENDS
287(1)
Summary
288(1)
Key Terms
289(1)
Questions for Review
289(2)
CHAPTER 15 MICROECONOMICS OF INNOVATION: PRIME ENGINE OF GROWTH
291(16)
THE BIG PUZZLE: WHY 00 ALL RIVAL ECONOMIC SYSTEMS TRAIL SO FAR BEHIND FREE MARKET GROWTH RATES?
293(1)
THE FREE MARKET'S GROWTH RECORD
293(2)
Innovation and the Growth Process
294(1)
What Is Different about Free-Market Economies?
294(1)
INNOVATION VERSUS PRICE AS THE PRIME COMPETITIVE WEAPON
295(7)
How Much Will the Profit-Maximizing Firm Spend on Innovation?
296(1)
The Profits of Innovation
297(1)
Reducing Risk by Sharing Technology
298(1)
A Kinked Revenue Curve Model of Spending on Innovation
299(3)
THREE GROWTH-CREATING PROPERTIES OF INNOVATION
302(1)
Cumulative Innovation
302(1)
The Public Good Property of Innovation
302(1)
The Accelerator Property of Innovation
303(1)
DO FREE MARKETS SPEND ENOUGH ON R&D ACTIVITIES?
303(2)
Innovation as a Positive Externality
304(1)
Effects of Process Research on Amounts of Goods Produced and on Their Prices
305(1)
THE PUZZLE REVISITED: EXTRAORDINARY GROWTH IN FREE-MARKET ECONOMIES
305(1)
Summary
306(1)
key Terms
306(1)
Questions for Review
306(1)
CHAPTER 16 REAL FIRMS AND THEIR FINANCING: STOCKS AND BONDS
307(20)
THE STOCK MARKET'S UNPREDICTABILITY
308(1)
FIRMS IN THE UNITED STATES
308(4)
Proprietorships
309(1)
Partnerships
309(1)
Corporations
310(1)
The Effect of Double Taxation of Corporate Earnings
311(1)
FINANCING CORPORATE ACTIVITY
312(3)
Loans
312(1)
Stocks and Bonds
312(2)
Plowback, or Retained Earnings
314(1)
FROM THE INVESTOR'S VIEWPOINT: BUYING STOCKS AND BONDS
315(2)
Selecting a Portfolio: Diversification
315(1)
Following a Portfolio's Performance
316(1)
STOCK EXCHANGES AND THEIR FUNCTIONS
317(2)
Regulation of the Stock Market
318(1)
Stock Exchanges and Corporate Capital Needs
319(1)
SPECULATION
319(3)
UNPREDICTABLE STOCK PRICES AS "RANDOM WALKS"
322(3)
Summary
325(1)
Key Terms
326(1)
Questions for Review
326(1)
PART IV The Distribution of Income 327(76)
CHAPTER 17 PRICING THE FACTORS OF PRODUCTION
329(22)
THE PRINCIPLE OF MARGINAL PRODUCTIVITY
330(1)
INPUTS AND THEIR DERIVED DEMAND CURVES
331(2)
INVESTMENT, CAPITAL, AND INTEREST
333(4)
The Demand for Funds
334(1)
The Downward-Sloping Demand Curve for Funds
335(1)
The Supply of Funds
336(1)
The Issue of Usury Laws: Are Interest Rates Too High?
336(1)
THE DETERMINATION OF RENT
337(7)
Land Rents: Complicated Version
338(2)
Generalization: Economic Rent Seeking
340(2)
An Application of gent Theory: Shaquille O'Neal's Salary
342(1)
Rent Controls: The Misplaced Analogy
343(1)
PAYMENTS TO ENTREPRENEURSHIP: ARE PROFITS TOO HIGH OR TOO Low?
344(3)
What Accounts for Profits?
345(1)
Taxing Profits
346(1)
CRITICISMS OF MARGINAL PRODUCTIVITY THEORY
347(1)
Summary
348(1)
Key Terms
348(1)
Questions for Review
348(1)
APPENDIX: DISCOUNTING AND PRESENT VALUE
349(1)
Summary
350(1)
Key Terms
350(1)
Questions for Review
350(1)
CHAPTER 18 LABOR: THE HUMAN INPUT
351(28)
DO CHEAP FOREIGN LABOR AND TECHNOLOGICAL PROGRESS CONTRIBUTE TO LAGGING WAGES?
353(1)
WAGE DETERMINATION IN COMPETITIVE LABOR MARKETS
354(3)
The Demand for Labor and the Determination of Wages
354(1)
Influences an MRP(L) Shifts in the Demand for Labor
355(1)
Technical Change, Productivity Growth, and the Demand for Labor
355(1)
The Service Economy and the Demand for Labor
356(1)
THE SUPPLY OF LABOR
357(4)
Rising Labor-Force Participation
357(2)
An Important Labor Supply Puzzle
359(1)
The Labor Supply Puzzle Resolved
360(1)
WHY DO WAGES DIFFER?
361(6)
Labor Demand in General
362(1)
Labor Supply in General
362(1)
Ability and Earnings: The Rent Component of Wages
363(1)
Investment in Human Capital
363(1)
Education and Earnings: Dissenting Views
364(1)
The Effects of Minimum Wage Legislation
365(2)
UNIONS AND COLLECTIVE BARGAINING
367(4)
The Development of Unionism in America
368(2)
Unions as Labor Monopolies
370(1)
FOREIGN COMPETITION, TECHNOLOGY, AND AMERICAN JOBS: ARE UNION FEARS JUSTIFIED?
371(4)
Monopsony and Bilateral Monopoly
372(1)
Collective Bargaining and Strikes
373(2)
Summary
375(1)
Key Terms
376(1)
Questions for Review
376(3)
CHAPTER 19 POVERTY, INEQUALITY, AND DISCRIMINATION
379(24)
ENDING WELFARE AS WE KNOW IT
380(1)
THE FACTS: POVERTY
381(3)
Counting the Poor: The Poverty Line
382(1)
Absolute versus Relative Poverty
383(1)
THE FACTS: INEQUALITY
384(3)
Depicting Income Distributions: The Lorenz Curve
385(2)
SOME REASONS FOR UNEQUAL INCOMES
387(1)
THE FACTS: DISCRIMINATION
388(1)
THE ECONOMIC THEORY OF DISCRIMINATION
389(3)
Discrimination by Employers
390(1)
Discrimination by Fellow Workers
390(1)
Statistical Discrimination
391(1)
The Roles of the Market and the Government
391(1)
THE OPTIMAL AMOUNT OF INEQUALITY
392(1)
THE TRADE-OFF BETWEEN EQUALITY AND EFFCIENCY
393(2)
POLICIES TO COMBAT POVERTY
395(3)
Education as a Way Out
395(1)
The Welfare Debate
395(1)
Welfare Reform and the Trade-off
396(1)
The Negative Income Tax
396(2)
OTHER POLICIES TO COMBAT INEQUALITY
398(1)
The Personal Income Tax
398(1)
Death Duties and Other Taxes
398(1)
POLICIES TO COMBAT DISCRIMINATION
398(2)
A LOOK BACK
400(1)
Summary
400(1)
Key Terms
401(1)
Questions for Review
401(2)
PART V The Government and the Economy 403(74)
CHAPTER 20 LIMITING MARKET POWER: REGULATION AND ANTITRUST
405(28)
THE PUBLIC INTEREST ISSUE: MONOPOLY POWER VERSUS MERE SIZE
406(1)
PART 1: REGULATION
407(1)
How and Why Did Regulation Arise?
407(1)
What Is Regulated? By Whom?
408(1)
WHY DO REGULATORS OFTEN RAISE PRICES?
408(1)
SOME OBJECTIVES OF REGULATION
409(3)
Control of Market Power Resulting from Economies of Scale and Scope
409(1)
Monopoly Power and the Prices of "Bottleneck" Facilities
409(2)
Universal Service and Rate Averaging
411(1)
TWO KEY ISSUES THAT FACE REGULATORS
412(1)
HOW CAN REGULATORS SET PRICES THAT BEST PROTECT CONSUMERS' INTERESTS BUT ENABLE REGULATED FIRMS TO COVER THEIR COSTS?
412(4)
Marginal versus Average Cost Pricing
413(1)
Preventing Monopoly Profit but Keeping Incentives for Efficiency and Innovation
414(2)
THE PROS AND CONS OF "BIGNESS"
416(1)
Economies of Large Size
416(1)
Required Scale For Innovation
416(1)
DEREGULATION
417(2)
The Effects of Deregulation
417(2)
THE REASON WHY REGULATORS OFTEN PUSH PRICES UPWARD
419(1)
PART 2: ANTITRUST LAWS AND POLICIES
420(1)
THE PUBLIC IMAGE OF BUSINESS WHEN THE ANTITRUST LAWS WERE BORN
420(1)
THE ANTITRUST LAWS
421(2)
Sherman Act
422(1)
Clayton Act of 1914
422(1)
FTC Act
423(1)
Robinson-Patman Act
423(1)
MEASURING MARKET POWER: CONCENTRATION
423(2)
The Evidence on Concentration in Reality
424(1)
A CRUCIAL PROBLEM FOR ANTITRUST: THE RESEMBLANCE OF MONOPOLIZATION AND VIGOROUS COMPETITION
425(1)
ANTICOMPETITIVE PRACTICES AND ANTITRUST
426(1)
Predatory Pricing
426(1)
Other Possibly Anticompetitive Practices: Bottleneck Pricing and Bundling
426(1)
MERGERS AND COMPETITION
427(1)
USE OF ANTITRUST LAWS TO PREVENT COMPETITION
428(1)
CONCLUDING OBSERVATIONS
429(1)
Summary
430(1)
Key Terms
431(1)
Questions for Review
431(2)
CHAPTER 21 TAXATION AND RESOURCE ALLOCATION
433(20)
SHOULD WE FLATTEN THE INCOME TAX?
434(1)
THE LEVEL AND TYPES OF TAXATION
434(2)
Progressive, Proportional, and Regressive Taxes
435(1)
Direct versus Indirect Taxes
435(1)
THE FEDERAL TAX SYSTEM
436(3)
The Federal Personal Income Tax
436(1)
The Payroll Tax
437(1)
The Corporate Income Tax
437(1)
Excise Taxes
438(1)
The Payroll Tax and the Social Security System
438(1)
THE STATE AND LOCAL TAX SYSTEM
439(2)
Sales and Excise Taxes
440(1)
Property Taxes
440(1)
Fiscal Federalism
440(1)
THE CONCEPT OF EQUITY IN TAXATION
441(1)
Horizontal Equity
441(1)
Vertical Equity
441(1)
The Benefits Principle
442(1)
THE CONCEPT OF EFFICIENCY IN TAXATION
442(4)
Tax Loopholes and Excess Burden
445(1)
SHIFTING THE TAX BURDEN: TAX INCIDENCE
446(2)
The Incidence of Excise Taxes
447(1)
The Incidence of the Payroll Tax
447(1)
WHEN TAXATION CAN IMPROVE EFFICIENCY
448(1)
EQUITY, EFFICIENCY, AND THE OPTIMAL TAX
449(1)
CONCLUSION: THE PROS AND CONS OF A FLAT TAX
450(1)
summary
451(1)
Key Terms
451(1)
Questions for Review
452(1)
CHAPTER 22 EXTERNALITIES, THE ENVIRONMENT, AND NATURAL RESOURCES
453(24)
PART 1: THE ECONOMICS OF ENVIRONMENTAL PROTECTION
454(1)
EXTERNALITIES: A CRITICAL SHORTCOMING OF THE MARKET MECHANISM
454(5)
The Facts: Is Everything Really Getting Steadily Worse?
454(4)
The Law of Conservation of Matter and Energy
458(1)
The Role of Individuals and Governments in Environmental Damage
459(1)
Envrironmental Damage as an Externality
459(1)
SUPPLY-DEMAND ANALYSIS OF ENVIRONMENTAL EXTERNALITIES
459(2)
BASIC APPROACHES TO ENVIRONMENTAL POLICY
461(5)
Emissions Taxes versus Direct Controls
462(2)
Another Financial Device to Protect the Environment: Emissions Permits
464(2)
TWO CHEERS FOR THE MARKET
466(1)
PART 2: THE ECONOMICS OF NATURAL RESOURCES
467(1)
THOSE RESILIENT RESOURCE SUPPLIES
467(1)
ECONOMIC ANALYSIS: THE FREE MARKET AND PRICING OF DEPLETABLE RESOURCES
467(4)
Scarcity and Rising Prices
468(2)
Supply-Demand Analysis and Consumption
470(1)
ACTUAL RESOURCE PRICES IN THE 20TH CENTURY
471(3)
Interferences with Price Patterns
471(1)
Is Price Interference Justified?
472(1)
On the Virtues of Rising Prices
473(1)
GROWING RESERVES OF EXHAUSTIBLE RESOURCES
474(1)
Summary
474(1)
Key Terms
474(1)
Questions for Review
475(2)
PART VI The Macroeconomy: Aggregate Supply and Demand 477(120)
CHAPTER 23 THE REALM OF MACROECONOMICS
479(20)
HOW DID WE GROW SO FAST?
480(1)
DRAWING A LINE BETWEEN MACROECONOMICS AND MICROECONOMICS
480(2)
Aggregation and Macroeconomics
480(1)
Foundations of Aggregation
481(1)
The Line of Demarcation Revisited
481(1)
SUPPLY AND DEMAND REINTERPRETED THROUGH A MACROECONOMIC LENS
482(1)
A Quick Review
482(1)
Moving to Macroeconomic Aggregates
482(1)
Inflation
483(1)
Recession and Unemployment
483(1)
Economic Growth
483(1)
GROSS DOMESTIC PRODUCT
483(4)
Money as the Measuring Rod: Real versus Nominal GDP
484(1)
What Gets Counted in GDP?
484(1)
Limitations of the GDP: What GDP Is Not
485(2)
THE ECONOMY ON A ROLLER COASTER
487(7)
Growth, But with Fluctuations
487(2)
Inflation and Deflation
489(1)
The Great Depression
489(2)
From World War II to 1973
491(1)
The Great Stagflation, 1973-1980
492(1)
Reaganomics and Its Aftermath
492(1)
Clintonomics: Deficit Reduction and "The Best Economy in 30 Years"
493(1)
THE PROBLEM OF MACROECONOMIC STABILIZATION: A SNEAK PREVIEW
494(2)
Combating Unemployment
495(1)
Combating Inflation
495(1)
Does It Really Work?
495(1)
Summary
496(1)
Key Terms
497(1)
Questions for Review
497(2)
CHAPTER 24 THE GOALS OF MACROECONOMIC POLICY
499(28)
PART 1: THE GOAL OF ECONOMIC GROWTH
500(1)
IS MORE GROWTH ALWAYS BETTER?
500(1)
THE CAPACITY TO PRODUCE: POTENTIAL GDP
501(1)
ALTERNATIVE MEASURES OF ECONOMIC GROWTH
502(1)
THE U.S. PRODUCTIVITY SLOWDOWN: IS AMERICA ON THE DECLINE?
503(1)
EXPLANATIONS FOR THE PRODUCTIVITY SLOWDOWN
504(1)
Lagging Investment
504(1)
High Energy Prices
504(1)
Workforce Skills
505(1)
A Technological Slowdown
505(1)
PART 2: THE COSTS OF UNEMPLOYMENT
505(2)
THE HUMAN COSTS OF HIGH UNEMPLOYMENT
507(1)
COUNTING THE UNEMPLOYED: THE OFFICIAL STATISTICS
508(1)
TYPES OF UNEMPLOYMENT
509(1)
HOW MUCH EMPLOYMENT IS "FULL EMPLOYMENT"?
510(1)
UNEMPLOYMENT INSURANCE: THE INVALUABLE CUSHION
510(2)
PART 3: THE COSTS OF INFLATION
512(1)
INFLATION: THE MYTH AND THE REALITY
512(3)
Inflation and Real Wages
512(1)
The Illusion of Traditional "Fair" Prices
513(1)
The Importance of Relative Prices
513(2)
INFLATION AS A REDISTRIBUTOR OF INCOME AND WEALTH
515(1)
REAL VERSUS NOMINAL INTEREST RATES
515(1)
INFLATION DISTORTS MEASUREMENTS
516(2)
Confusing Real and Nominal Interest Rates
517(1)
Public Utility Regulation
517(1)
The Malfunctioning Tax System
517(1)
Usury Laws
517(1)
OTHER COSTS OF INFLATION
518(1)
THE COSTS OF LOW VERSUS HIGH INFLATION
518(1)
LOW INFLATION DOES NOT NECESSARILY LEAD TO HIGH INFLATION
519(2)
Summary
521(1)
Key Terms
521(1)
Questions for Review
521(1)
APPENDIX: HOW STATISTICIANS MEASURE INFLATION
522(1)
INDEX NUMBERS FOR INFLATION
522(1)
THE CONSUMER PRICE INDEX
522(1)
HOW TO USE A PRICE INDEX TO "DEFLATE" MONETARY FIGURES
523(1)
THE GDP DEFLATOR
524(1)
Summary
524(1)
Key Terms
524(1)
Questions for Review
525(2)
CHAPTER 25 INCOME AND SPENDING: THE POWERFUL CONSUMER
527(20)
DEMAND MANAGEMENT AND THE ORNERY CONSUMER
528(1)
AGGREGATE DEMAND, DOMESTIC PRODUCT, AND NATIONAL INCOME
529(1)
THE CIRCULAR FLOW OF SPENDING, PRODUCTION, AND INCOME
530(2)
CONSUMER SPENDING AND INCOME: THE IMPORTANT RELATIONSHIP
532(2)
THE CONSUMPTION FUNCTION AND THE MARGINAL PROPENSITY TO CONSUME
534(2)
MOVEMENTS ALONG VERSUS SHIFTS OF THE CONSUMPTION FUNCTION
536(2)
Other Determinants of Consumer Spending
536(2)
WHY TAX POLICY FAILED IN 1975
538(1)
HOW PREDICTABLE IS CONSUMER BEHAVIOR?
539(1)
Summary
540(1)
Key Terms
540(1)
Questions to Review
541(1)
APPENDIX: NATIONAL INCOME ACCOUNTING
541(1)
DEFINING GDP: EXCEPTIONS TO THE RULES
541(1)
GDP AS THE SUM OF FINAL GOODS AND SERVICES
542(1)
GDP AS THE SUM OF ALL FACTOR PAYMENTS
542(2)
GDP AS THE SUM OF VALUES ADDED
544(1)
Summary
545(1)
Key Terms
546(1)
Question for Review
546(1)
CHAPTER 26 DEMAND-SIDE EQUILIBRIUM: UNEMPLOYMENT OR INFLATION?
547(18)
WHY DOES THE MARKET PERMIT UNEMPLOYMENT?
548(1)
THE EXTREME VARIABILITY OF INVESTMENT
549(2)
Business Confidence and Expectations about the Future
549(1)
The Level and Growth of Demand
550(1)
Technical Change and Product Innovation
550(1)
The Real Rate of Interest
550(1)
Tax Provisions
551(1)
THE DETERMINANTS OF NET EXPORTS
551(1)
National Incomes
551(1)
Relative Prices and Exchange Rates
552(1)
EQUILIBRIUM ON THE DEMAND SIDE OF THE ECONOMY
552(5)
The Meaning of Equilibrium GDP
553(1)
Constructing the Expenditure Schedule
554(2)
The Mechanics of Income Determination
556(1)
THE AGGREGATE DEMAND CURVE
557(2)
DEMAND-SIDE EQUILIBRIUM AND FULL EMPLOYMENT
559(1)
THE COORDINATION OF SAVING AND INVESTMENT
560(2)
Summary
562(1)
Key Terms
563(1)
Questions for Review
563(1)
APPENDIX: THE SIMPLE ALGEBRA OF INCOME DETERMINATION
563(1)
Questions for Review
564(1)
CHAPTER 27 CHANGES ON THE DEMAND SIDE: MULTIPLIER ANALYSIS
565(16)
WOULD CUTTING TAXES WORK IN JAPAN?
566(1)
THE MAGIC OF THE MULTIPLIER
566(4)
Demystifying the Multiplier: How It Works
567(1)
Algebraic Statement of the Multiplier
568(2)
THE MULTIPLIER: A GENERAL CONCEPT
570(2)
The Multiplier Effect of Consumer Spending
570(1)
Other Multipliers
571(1)
THE MULTIPLIER IN REVERSE
572(1)
The Paradox of Thrift
572(1)
TAX CUTTING IN JAPAN
573(1)
THE MULTIPLIER AND THE AGGREGATE DEMAND CURVE
574(1)
Summary
575(1)
Key Terms
575(1)
Questions for Review
575(1)
APPENDIX A: THE SIMPLE ALGEBRA OF THE MULTIPLIER
576(1)
APPENDIX B: THE MULTIPLIER WITH VARIABLE IMPORTS
576(2)
Summary
578(1)
Questions for Review
579(2)
CHAPTER 28 SUPPLY-SIDE EQUILIBRIUM: UNEMPLOYMENT AND INFLATION?
581(16)
HOW COULD INFLATION FALL WHILE THE ECONOMY BOOMED?
582(1)
THE AGGREGATE SUPPLY CURVE
582(3)
Why the Aggregate Supply Curve Slopes Upward
582(1)
Shifts of the Aggregate Supply Curve
583(2)
EQUILIBRIUM OF AGGREGATE DEMAND AND SUPPLY
585(1)
RECESSIONARY AND INFLATIONARY GAPS REVISITED
586(2)
ADJUSTING TO A RECESSIONARY GAP: DEFLATION OR UNEMPLOYMENT?
588(1)
Does the Economy Have a Self-Correcting Mechanism?
589(1)
An Example from Recent History: Disinflation in the 1990s
589(1)
ADJUSTING TO AN INFLATIONARY GAP: INFLATION
589(3)
Demand Inflation and Stagflation
590(1)
A Recent Example
591(1)
STAGFLATION FROM A SUPPLY SHOCK
592(1)
EXPLAINING THE ROARING NINETIES
592(1)
INFLATION AND THE MULTIPLIER
593(1)
A ROLE FOR STABILIZATION POLICY
594(1)
Summary
595(1)
Key Terms
595(1)
Questions for Review
595(2)
PART VII Fiscal and Monetary Policy 597(130)
CHAPTER 29 MANAGING AGGREGATE DEMAND: FISCAL POLICY
599(20)
HOW TO STIMULATE JAPAN'S ECONOMY
600(1)
INCOME TAXES AND THE CONSUMPTION SCHEDULE
600(3)
THE MULTIPLIER REVISITED
603(2)
Automatic Stabilizers
604(1)
Multipliers for Tax Policy
605(1)
THE JAPANESE ECONOMY
605(1)
Government Transfer Payments
606(1)
PLANNING EXPANSIONARY FISCAL POLICY
606(2)
PLANNING CONTRACTIONARY FISCAL POLICY
608(1)
THE CHOICE BETWEEN SPENDING POLICY AND TAX POLICY
608(1)
SOME HARSH REALITIES
609(1)
THE IDEA BEHIND SUPPLY-SIDE TAX CUTS
610(1)
SOME FLIES IN THE OINTMENT
611(2)
Toward an Assessment of Supply-Side Economics
612(1)
TWO SIDES TO THE SUPPLY SIDE
613(1)
Summary
614(1)
Key Terms
614(1)
Questions for Review
614(1)
APPENDIX: ALGEBRAIC TREATMENT OF FISCAL POLICY AND AGGREGATE DEMAND
615(4)
Questions for Review
617(2)
CHAPTER 30 MONEY AND THE BANKING SYSTEM
619(22)
WHAT CAUSED THE BIGGEST "BANK RUN" IN HISTORY?
620(1)
THE NATURE OF MONEY
621(3)
Barter versus Monetary Exchange
621(1)
The Conceptual Definition of Money
622(1)
What Serves as Money?
622(2)
HOW THE QUANTITY OF MONEY IS MEASURED
624(2)
M1
625(1)
M2
625(1)
Other Definitions of the Money Supply
626(1)
THE BANKING SYSTEM
626(4)
How Banking Began
627(2)
Principles of Bank Management: Profits versus Safety
629(1)
Bank Regulation
630(1)
THE ORIGINS OF THE MONEY SUPPLY
630(2)
How Bankers Keep Books
630(2)
BANKS AND MONEY CREATION
632(5)
The Limits to Money Creation by a Single Bank
632(2)
Multiple Money Creation by a Series of Banks
634(2)
The Process in Reverse: Multiple Contractions of the Money Supply
636(1)
WHY THE DEPOSIT CREATION FORMULA IS OVERSIMPLIFIED
637(1)
THE ASIAN BANK RUN EXPLAINED
638(1)
THE NEED FOR MONETARY POLICY
638(1)
Summary
639(1)
Key Terms
639(1)
Questions for Review
640(1)
CHAPTER 31 MONETARY POLICY AND THE NATIONAL ECONOMY
641(20)
JUST WHY IS ALAN GREENSPAN SO IMPORTANT?
642(1)
MONEY AND INCOME: THE IMPORTANT DIFFERENCE
643(1)
AMERICA'S CENTRAL BANK: THE FEDERAL RESERVE SYSTEM
643(3)
Origins and Structure
643(1)
The Independence of the Fed
644(2)
CONTROLLING THE MONEY SUPPLY: OPEN MARKET OPERATIONS
646(3)
Open Market Operations, Bond Prices, and Interest Rates
648(1)
OTHER METHODS OF MONETARY CONTROL
649(2)
Lending to Banks
650(1)
Changing Reserve Requirements
651(1)
SUPPLY-DEMAND ANALYSIS OF THE MONEY MARKET
651(3)
The Money Supply Mechanism
651(1)
The Demand for Money
652(1)
Equilibrium in the Money Market
653(1)
HOW MONETARY POLICY WORKS
654(1)
Investment and Interest Rates
655(1)
MONETARY POLICY AND TOTAL EXPENDITURE
655(1)
MONEY AND THE PRICE LEVEL IN THE KEYNESIAN MODEL
656(2)
Application: Why the Aggregate Demand Curve Slopes Downward
657(1)
From Models to Policy Debates
658(1)
Summary
658(1)
Key Terms
659(1)
Questions for Review
659(2)
CHAPTER 32 THE DEBATE OVER MONETARY POLICY
661(22)
SHOULD WE FORSAKE STABILIZATION POLICY?
662(1)
VELOCITY AND THE QUANTITY THEORY OF MONEY
662(5)
The Determinants of Velocity
664(2)
Monetarism: The Quantity Theory Modernized
666(1)
FISCAL POLICY, INTEREST RATES, AND VELOCITY
667(2)
Application: The Multiplier Formula Revisited
669(1)
Application: Deficit Reduction and Investment
669(1)
DEBATE: SHOULD STABILIZATION POLICY RELY ON FISCAL OR MONETARY POLICY?
669(2)
DEBATE: SHOULD THE FED CONTROL THE MONEY SUPPLY OR CONTROL INTEREST RATES?
671(3)
Two Imperfect Alternatives
672(1)
What Has the Fed Actually Done?
672(2)
DEBATE: THE SHAPE OF THE AGGREGATE SUPPLY CURVE
674(2)
DEBATE: SHOULD THE GOVERNMENT INTERVENE?
676(2)
Lags and the Rules-versus-Discretion Debate
677(1)
DIMENSIONS OF THE RULES-VERSUS-DISCRETION DEBATE
678(2)
How Fast Does the Economy's Self-Correcting Mechanism Work?
678(1)
How Long Are the Lags in Stabilization Policy?
678(1)
How Accurate Are Economic Forecasts?
678(1)
The Size of Government
678(1)
Uncertainties Caused by Government Policy
679(1)
A Political Business Cycle?
679(1)
WHAT SHOULD BE DONE?
680(1)
Summary
680(1)
Key Terms
681(1)
Questions for Review
681(2)
CHAPTER 33 DEFICITS, MONETARY POLICY, AND GROWTH
683(22)
ARE SMALLER DEFICITS GOOD OR BAD FOR GROWTH?
684(1)
SHOULD THE BUDGET BE BALANCED?
684(2)
The Importance of the Policy Mix
685(1)
DEFICITS AND DEBT: TERMINOLOGY AND FACTS
686(2)
Some Facts about the National Debt
686(2)
INTERPRETING THE BUDGET DEFICIT
688(4)
The Structural Deficit
688(2)
Inflation Accounting for Interest Payments
690(1)
Conclusion: What Happened after 1981?
691(1)
BOGUS ARGUMENTS ABOUT THE BURDEN OF THE DEBT
692(2)
BUDGET DEFICITS AND INFLATION
694(2)
The Monetization Issue
695(1)
DEFICITS, INTEREST RATES, AND CROWDING OUT
696(2)
The Bottom Line
698(1)
THE TRUE BURDEN OF THE NATIONAL DEBT: SLOWER GROWTH
698(1)
RESOLVING THE ISSUE OF DEFICITS AND GROWTH
699(2)
The Importance of the Policy Mix
700(1)
THE ECONOMICS AND POLITICS OF THE U.S. BUDGET DEFICIT
701(1)
Summary
702(1)
Key Terms
703(1)
Questions for Review
703(2)
CHAPTER 34 THE PHILLIPS CURVE AND ECONOMIC GROWTH
705(22)
IS THE TRADE-OFF BETWEEN INFLATION AND UNEMPLOYMENT A RELIC OF THE PAST?
706(1)
DEMAND-SIDE INFLATION VERSUS SUPPLY-SIDE INFLATION: A REVIEW
706(1)
APPLYING THE MODEL TO A GROWING ECONOMY
707(1)
DEMAND-SIDE INFLATION AND THE PHILLIPS CURVE
708(3)
SUPPLY-SIDE INFLATION AND THE COLLAPSE OF THE PHILLIPS CURVE
711(1)
Explaining the 1990s
711(1)
WHY INFLATION AND UNEMPLOYMENT BOTH DECLINED
712(1)
WHAT THE PHILLIPS CURVE IS NOT
712(3)
Fighting Unemployment with Fiscal and Monetary Policy
714(1)
WHAT SHOULD BE DONE?
715(1)
The Costs of Inflation and Unemployment
715(1)
The Slope of the (Short-Run) Phillips Curve
715(1)
The Efficiency of the Economy's Self-Correcting Mechanism
715(1)
INFLATIONARY EXPECTATIONS AND THE PHILLIPS CURVE
716(2)
THE THEORY OF RATIONAL EXPECTATIONS
718(2)
What Are Rational Expectations?
718(1)
Rational Expectations and the Trade-off
719(1)
An Evaluation
720(1)
WHY ECONOMISTS (AND POLITICIANS) DISAGREE
720(1)
THE DILEMMA OF DEMAND MANAGEMENT
721(1)
The Trade-off between Inflation and Unemployment
721(1)
ATTEMPTS TO REDUCE THE NATURAL RATE OF UNEMPLOYMENT
721(2)
INDEXING
723(1)
Summary
724(1)
Key Terms
724(1)
Questions for Review
724(3)
PART VIII The United States in the World Economy 727(58)
CHAPTER 35 INTERNATIONAL TRADE AND COMPARATIVE ADVANTAGE
729(22)
HOW CAN AMERICANS COMPETE WITH "CHEAP FOREIGN LABOR"?
730(1)
WHY TRADE?
731(1)
Mutual Gains from Trade
732(1)
INTERNATIONAL VERSUS INTRANATIONAL TRADE
732(1)
Political Factors in International Trade
733(1)
The Many Currencies Involved in International Trade
733(1)
Impediments to Mobility of Labor and Capital
733(1)
THE LAW OF COMPARATIVE ADVANTAGE
733(4)
The Arithmetic of Comparative Advantage
734(1)
The Graphics of Comparative Advantage
735(2)
COMPARATIVE ADVANTAGE EXPOSES THE FALLACY OF "CHEAP FOREIGN LABOR"
737(1)
SUPPLY-DEMAND EQUILIBRIUM AND PRICING IN WORLD TRADE
738(1)
TARIFFS, QUOTAS, AND OTHER INTERFERENCES WITH TRADE
739(3)
How Tariffs and Quotas Work
740(2)
Tariffs versus Quotas
742(1)
WHY INHIBIT TRADE?
742(3)
Gaining a Price Advantage
742(1)
Protecting Particular Industries
743(2)
OTHER ARGUMENTS FOR PROTECTION
745(2)
National Defense and Other Noneconomic Considerations
745(1)
The Infant-Industry Argument
745(1)
Strategic Trade Policy
745(2)
CAN CHEAP IMPORTS HURT A COUNTRY?
747(1)
A LAST LOOK AT THE "CHEAP FOREIGN LABOR" ARGUMENT
748(1)
Summary
748(1)
Key Terms
749(1)
Questions for Review
749(2)
CHAPTER 36 THE INTERNATIONAL MONETARY SYSTEM: ORDER OR DISORDER?
751(20)
WHAT HAPPENED TO THE ASIAN TIGERS?
752(1)
WHAT ARE EXCHANGE RATES?
752(2)
EXCHANGE RATE DETERMINATION IN A FREE MARKET
754(4)
The Purchasing-Power Parity Theory: The Long Run
754(2)
Economic Activity and Exchange Rates: The Medium Run
756(1)
Interest Rates and Exchange Rates: The Short Run
757(1)
Market Determination of Exchange Rates: Summary
758(1)
FIXED EXCHANGE RATES AND THE BALANCE OF PAYMENTS
758(3)
Defining the Balance of Payments in Practice
760(1)
A BIT OF HISTORY: THE GOLD STANDARD AND THE BRETTON WOODS SYSTEM
761(1)
The Classical Gold Standard
761(1)
The Bretton Woods System
761(1)
ADJUSTMENT MECHANISMS UNDER FIXED EXCHANGE RATES
762(1)
WHY TRY TO FIX EXCHANGE RATES?
763(1)
THE CURRENT "NONSYSTEM"
764(4)
The Role of the IMF
765(1)
The Volatile Dollar
765(1)
The Dawn of the Euro
766(2)
THE FATE OF THE ASIAN TIGERS
768(1)
Summary
768(1)
Key Terms
769(1)
Questions for Review
769(2)
CHAPTER 37 EXCHANGE RATES AND THE MACROECONOMY
771(14)
SHOULD THE YEN RISE OR FALL?
772(1)
INTERNATIONAL TRADE, EXCHANGE RATES, AND AGGREGATE DEMAND
772(2)
Relative Prices, Exports, and Imports
773(1)
The Effects of Changes in Exchange Rates
773(1)
AGGREGATE SUPPLY IN AN OPEN ECONOMY
774(1)
THE MACROECONOMIC EFFECTS OF EXCHANGE RATES
775(1)
Interest Rates and International Capital Flows
776(1)
FISCAL AND MONETARY POLICIES IN AN OPEN ECONOMY
776(2)
Fiscal Policy Revisited
777(1)
Monetary Policy Revisited
778(1)
INTERNATIONAL ASPECTS OF DEFICIT REDUCTION
778(2)
The Loose Link between the Budget Deficit and the Trade Deficit
779(1)
IS THE TRADE DEFICIT A PROBLEM?
780(1)
ON CURING THE TRADE DEFICIT
781(2)
Change the Mix of Fiscal and Monetary Policy
781(1)
More Rapid Economic Growth Abroad
781(1)
Raise Domestic Saving or Reduce Domestic Investment?
781(1)
Protectionism
782(1)
CONCLUSION: NO NATION IS AN ISLAND
783(1)
THE YEN'S EFFECT ON SMALLER ASIAN ECONOMIES
783(1)
Summary
783(1)
Key Terms
784(1)
Questions for Review
784(1)
GLOSSARY 785(12)
INDEX 797


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