Principles of Economics

by Holt, Jeff

• ISBN13: 9780073542850
• ISBN10: 0073542857
• Edition: 3rd
• Format: Paperback
• Copyright: 2006-03-13
• Publisher: McGraw-Hill Primis Custom Publishing

Summary

Principles of Economics, 3rd Edition, by Jeff Holt is a clear, concise, and economical alternative to the typical textbook. This text includes a built-in study guide that enables students to reinforce concepts and better comprehend the material. The book is spiral bound which allows it to lay flat when open, making it easier for students to work the problems in the study guide. Supplemental materials available for adopting instructors include an Instructor's Manual, Test Bank, and Power Point slides--all prepared by the author.

This text is in use at the following Colleges and Universities:

American International College

Austin Peay State University

Black Hills State University

Cazenovia College

Colorado State University – Pueblo

Davidson County Community College

Eastern Maine Community College

El Camino College

Elizabethtown Community College

Florence Darlington Technical College

Geneva College

Georgia Highlands College

Georgia Southern University

Goldey-Beacom College

Idaho State University

Johnson State College

Malvern Preparatory School

Mesa Community College

Mesabi Range Technical and Community College

Millersville University

Nicolet Area Technical College

Otero Junior College

Palm Beach Atlantic University

Penn State Worthington Scranton

Providence College

Sierra College

Southern Polytechnic State University

Southwestern Oregon Community College

Spokane Community College

St. Gregory’s University

SUNY – Cortland

Thomas University

Trinity College

Tulsa Community College

University of Arkansas Community College at Hope

University of Cincinnati

University of Hartford

University of Massachusetts Dartmouth

University of Montana – Western

Utah Valley State College

Valdosta Technical College

Western Dakota Technical Institute

Table of Contents

Introduction: A Brief History of U.S. Economic Growth

1. From Jamestown to the Present

2. Increases in Per Capita Output

3. Improvements in the Standard of Living

4. Thirty Largest National Economies

5. Questions for Introduction

6. Answers for Introduction

Chapter 1: Scarcity and Choices

1. The Basic Economic Problem - Scarcity

2. Human Wants Are Unlimited

3. Resources Are Limited

4. Categories of Resources

5. Resource Owner Motivation

6. Opportunity Cost

7. Rationing

8. Marginal Benefits and Marginal Costs

9. Scientific Thinking

10. Macroeconomics versus Microeconomics

11. Appendix: Graphs

12. Direct Relationship

13. Inverse Relationship

14. Slope

15. Questions for Chapter 1

16. Answers for Chapter 1

Chapter 2: Trade and Economic Systems

1. Self-sufficiency or Trade

2. Consumers Surplus and Producers Surplus

3. Externalities

4. The Production Possibilities Frontier

5. Law of Increasing Opportunity Cost

6. Economic Efficiency

7. Economic Growth

8. Economic Systems

9. Capitalist Vision

10. Socialist Vision

11. Three Economic Questions

12. Appendix: A Movement Along a Curve versus a Shift in a Curve

13. Questions for Chapter 2

14. Answers for Chapter 2

Chapter 3: Demand, Supply, and Equilibrium

1. Demand

2. Law of Demand

3. Substitution Effect

4. Income Effect

5. Demand Schedule and Demand Curve

6. Determinants of Demand

7. Change in Demand versus Change in Quantity Demanded

8. Supply

9. Law of Supply

10. Determinant of Supply

11. Change in Supply versus Change in Quantity Supplied

12. Equilibrium: Putting Demand and Supply Together

13. Moving from Disequilibrium to Equilibrium

14. Free Markets and Economic Efficiency I

15. Free Markets and Economic Efficiency II

16. A Change in Equilibrium Price and Quantity

17. Price Controls

18. A Price Ceiling

19. A Price Floor

20. Price Controls and Economic Inefficiency

21. Questions for Chapter 3

22. Answers for Chapter 3

Chapter 4: Inflation and Unemployment

1. Three Macroeconomic Goals

2. Inflation

3. The Price Level, Money, and Production

4. Consumer Price Index

5. Computing the Rate of Inflation

6. Consumer Price Index Table

7. Adjusting Nominal Values to Real Values

8. Unemployment

9. Full Employment

10. Measuring Unemployment

11. Types of Unemployment

12. Frictional Unemployment

13. Structural Unemployment

14. Natural Unemployment Rate

15. Cyclical Unemployment

16. Appendix: Economic Growth and Job Destruction

17. Appendix: Female Labor Force Participation

18. Questions for Chapter 4

19. Answers for Chapter 4

Chapter 5: Measuring Total Output: GDP

1. Gross Domestic Product

2. Exclusions From GDP

3. Two Measures of Total Output

4. Per Capita Output

5. Per Capita Personal Income - 2004

6. Real GDP

7. Historical Data on Nominal and Real GDP

8. The Business Cycle

9. Appendix: The Three Economic Goals and the U.S. Economy

10. Appendix: Circular Flow Diagram

11. Questions for Chapter 5

12. Answers for Chapter 5

Chapter 6: The Aggregate Market

1. Aggregate Demand

2. Shifts in the Aggregate Demand Curve

3. Aggregate Supply

4. Shifts in the SRAS Curve

5. Short-Run Equilibrium: Putting AD and SRAS Together

6. Changes in AD and SRAS

7. Appendix: Why the Aggregate Demand Curve Slopes Downward

8. Appendix: Why the Short-Run Aggregate Supply Curve Slopes Upward

9. Questions for Chapter 6

10. Answers for Chapter 6

Chapter 7: Classical Economic Theory

1. Adam Smith

2. The Ideal Quantity of Total Output

3. The Self-Regulating Economy

4. Marxs Criticism of Classical Theory

5. Says Law

6. Says Law, Savings, and Flexible Interest Rates

7. Says Law and Flexible Wages and Prices

8. Natural Real GDP

9. A Recessionary Gap

10. An Inflationary Gap

11. Long-Run Equilibrium

12. Automatically Closing a Recessionary Gap

13. Automatically Closing an Inflationary Gap

14. Long-Run Aggregate Supply

15. Laissez-faire

16. Questions for Chapter 7

17. Answers for Chapter 7

Chapter 8: Keynesian Economic Theory

1. John Maynard Keynes

2. Keynesian Theory and Says Law

3. Keynesian Theory and Closing a Recessionary Gap

4. Consumption

5. Marginal Propensity to Consume

6. The 45 Angle Line

7. The Total Expenditures Curve

8. Equilibrium Real GDP

9. Equilibrium Real GDP and the 45 Angle Line

10. A Change in Total Expenditures

11. Formula for Change in Real GDP

12. The Multiplier

13. Questions for Chapter 8

14. Answers for Chapter 8

Chapter 9: Fiscal Policy

1. Keynesian Fiscal Policy

2. Keynesian Fiscal Policy Theory and a Recessionary Gap

3. Keynesian Fiscal Policy Theory and an Inflationary Gap

4. Automatic Stabilizers

5. Potential Problems with Fiscal Policy

6. Supply-side Fiscal Policy

7. The Laffer Curve

8. Supply-side Tax Cuts

9. Appendix: History of the Federal Governments Budget

10. Questions for Chapter 9

11. Answers for Chapter 9

Chapter 10: Money and Money Creation

1. Money

2. Barter

3. Functions of Money

4. Why Money is Valuable

5. Measuring the Money Supply

6. Checks and Credit Cards

7. Money Creation

8. Required Reserves

9. Reserves

10. Excess Reserves

11. A Simplified Balance Sheet

12. U.S. Government Securities

13. Potential Deposit Multiplier

14. Questions for Chapter 10

15. Answers for Chapter 10

Chapter 11: The Federal Reserve System and Inflation

1. The U.S. Central Bank

2. Functions of the Federal Reserve System

3. Monetary Base and the Money Supply

4. The Actual Money Multiplier

5. Tools for Controlling the Money Supply

6. Open Market Operations

7. Changing the Reserve Requirement

8. Changing the Discount Rate

9. Inflation

10. Effects of Inflation

11. Appendix: The Independence of the Federal Reserve System

12. Appendix: Recent Fed Monetary Policy

13. Questions for Chapter 11

14. Answers for Chapter 11

Chapter 12: Monetary Policy

1. Classical Monetary Theory

2. Velocity of Money

3. Monetarism

4. Keynesian Monetary Theory

5. Failure of the Keynesian Monetary Transmission Mechanism

6. Monetarist Transmission Mechanism

7. Monetary Policy and Closing Gaps

8. Keynesian Theory and the Proper Policies

9. Monetarist Theory and the Proper Policies

10. Appendix: The Great Depression

11. Keynesian Theory of the Great Depression

12. Classical Theory of the Great Depression

13. Questions for Chapter 12

14. Answers for Chapter 12

Chapter 13: Taxes, Deficits, and the National Debt

1. Classifications of Taxes

2. Major Federal Taxes

3. History of the Federal Personal Income Tax

4. Characteristics of a Good Tax

5. Excess Burden

6. Is the Federal Personal Income Tax a Good Tax?

7. What Would Make the Federal Personal Income Tax a Better Tax?

8. The Burden of the Federal Personal Income Tax

9. Major Federal Spending Programs

10. Deficits and the National Debt

11. The Burden of Deficit Spending

12. Questions for Chapter 13

13. Answers for Chapter 13

Chapter 14: Economic Growth

1. Absolute Economic Growth

2. Per Capita Economic Growth

3. Economic Growth in the U.S.

4. Determinants of Economic Growth

5. Governmental Policies and Economic Growth

6. Industrial Policy

7. Theories of Economic Growth

8. Classical Growth Theory

9. Neoclassical Growth Theory

10. New Growth Theory

11. Appendix: New Ideas and Central Planning

12. Appendix: Worries about Future Economic Growth

13. Questions for Chapter 14

14. Answers for Chapter 14

Chapter 15: Less Developed Countries

1. Developed Countries versus Less Developed Countries

2. Common Hardships for LDCs

3. Economic Growth and the Rule of 70

4. The Importance of Economic Growth Rates

5. Economic Freedom and Economic Growth

6. Obstacles to Economic Development

7. Counterproductive Governmental Policies

8. Appendix: Per Capita GDP for Selected Countries

9. Appendix: The Power of Productivity

10. Questions for Chapter 15

11. Answers for Chapter 15

Chapter 16: International Trade

1. Some International Trade Facts

2. Why Nations Trade

3. Comparative Advantage Example

4. Trade Restrictions

5. The Effects of a Quota of Zero

6. Gain to Domestic Producers

7. Loss to Domestic Consumers

8. The Politics of Trade Restrictions

9. Arguments for Trade Restrictions

10. The Movement toward Freer Trade

11. Appendix: Comparative Advantage versus Absolute Advantage

12. Appendix: Exchange Rates

13. Questions for Chapter 16

14. Answers for Chapter 16

Chapter 17: Elasticity

1. Elasticity

2. Price Elasticity of Demand

3. Two Extreme Examples

4. Computing Price Elasticity of Demand

5. Price Elasticity of Demand Classifications

6. Price Elasticity of Demand and Total Revenue

7. Determinants of Price Elasticity of Demand

8. Income Elasticity of Demand

9. Normal Goods and Inferior Goods

10. Cross Elasticity of Demand

11. Substitutes and Complements

12. Price Elasticity of Supply

13. The Burden of a Tax and Price Elasticity

14. Questions for Chapter 17

15. Answers for Chapter 17

Chapter 18: Utility

1. Utility

2. Utility is a Subjective Measurement

3. Marginal Utility

4. Law of Diminishing Marginal Utility

5. Diminishing Marginal Utility and Income Distribution

6. Diamond-Water Paradox

7. Utility Maximization

8. Utility Maximization Rules

9. Providing Essential Goods Free of Charge

10. Efficiency: Equating Marginal Benefit and Marginal Cost

11. Appendix: Consumer Behavior, Indifference Curves and Budget Constraints

12. Questions for Chapter 18

13. Answers for Chapter 18

Chapter 19: The Firm

1. Firms and Efficiency

2. Firms and Reduced Transaction Costs

3. Firms and Team Production

4. Shirking in Team Production

5. The Principal-Agent Problem

6. Business Firms

7. The Chief Goal of Business Firms

8. Legal Types of Business Firms

9. Financing Business Activity

10. The Balance Sheet of a Business Firm

11. Nonprofit Firms

12. Questions for Chapter 19

13. Answers for Chapter 19

Chapter 20: Production and Costs

1. Explicit Costs versus Implicit Costs

2. Accounting Profit versus Economic Profit

3. Sunk Cost

4. Short Run Production versus Long Run Production

5. Marginal Physical Product

6. Law of Diminishing Marginal Returns

7. Diminishing Marginal Returns and Marginal Cost

8. Fixed Costs versus Variable Costs

9. Total Cost

10. Average Costs of Production

11. Cost Curves Graph

12. Appendix: Total Revenue, Total Cost, and Break-Even

13. Questions for Chapter 20

14. Answers for Chapter 20

Chapter 21: Perfect Competition

1. Market Structure and Market Power

2. The Key Characteristic of Perfect Competition

3. The Demand Curve for a Perfect Competitor

4. Profit-Maximization

5. Shutdown Point

6. The Supply Curve for a Perfect Competitor

7. Perfect Competition in the Long Run

8. Perfect Competition and Economic Efficiency

9. Perfect Competitions Happy Coincidence

10. Perfect Competition and Individual Freedom

11. Appendix: Economic Profit and Loss

12. Appendix: Perfect Competition in the Long Run

13. Questions for Chapter 21

14. Answers for Chapter 21

Chapter 22: Monopoly

1. Monopoly and Market Power

2. Monopoly and Barriers to Entry

3. Demand and Marginal Revenue for a Monopoly

4. Demand Curve and MR Curve for a Monopoly

5. Profit-Maximization

6. Comparing Monopoly to Perfect Competition

7. The Economic Inefficiency of Monopoly

8. Rent Seeking

9. Other Problems with Monopoly

10. Price Discrimination

11. Appendix: Comparing Monopoly to Perfect Competition; Profit

12. Questions for Chapter 22

13. Answers for Chapter 22

Chapter 23: Monopolistic Competition and Oligopoly

1. Monopolistic Competition

2. Product Differentiation

3. Demand and Marginal Revenue for a Monopolistic Competitor

4. Profit-Maximization for a Monopolistic Competitor

5. Comparing Monopolistic Competition to Perfect Competition

6. The Economic Inefficiency of Monopolistic Competition

7. Monopolistic Competition and Profits in the Long Run

8. Oligopoly

9. Theories of Oligopoly Behavior

10. The Economic Inefficiency of Oligopoly

11. Appendix: Game theory

12. Questions for Chapter 23

13. Answers for Chapter 23

Chapter 24: Factor Markets

1. Demand for a Factor

2. Marginal Revenue Product

3. Marginal Factor Cost

4. Profit-Maximization Rule for Employing Factors

5. Demand Curve for a Factor

6. Determinants of Factor Demand

7. Value of the Marginal Product

8. Cost-Minimizing Combination of Factors

9. Elasticity of Demand for Labor

10. Labor Supply Curve for a Perfectly Competitive Employer

11. Labor Supply Curve in a Particular Labor Market

12. Determinants of Labor Supply

13. Differences in Wage Rates

14. Screening Devices

15. Questions for Chapter 24

16. Answers for Chapter 24

Chapter 25: Labor Unions

1. Types of Labor Unions

2. Demand Curve for a Union

3. Union Goals

4. Right-to-work Laws

5. Collective Bargaining

6. Monopsony

7. Profit-Maximization for a Monopsony

8. The Union and the Monopsony

9. Unions and Wages

10. Unions and Productivity

11 Questions for Chapter 25

12. Answers for Chapter 25

Chapter 26: Interest, Present Value, Rent, and Profit

1. The Loanable Funds Market

2. Supply of Loanable Funds

3. Private Demand for Loanable Funds

4. Changes in the Demand for Loanable Funds

5. Interest Rates Vary

6. Real Interest Rate

7. Present Value

8. Economic Rent

9. Economic Profit

10. Profit as a Signal

11. Appendix: Present Value Table

12. Questions for Chapter 26

13. Answers for Chapter 26

Chapter 27: Market Failure

1. Economic Efficiency Rule

2. Externalities

3. Private Market Equilibrium

4. External Benefit

5. External Cost

6. Controlling Externalities

7. Internalizing Externalities

8. Government Regulation of Externalities

9. Pollution Control

10. Public Goods

11. Other Causes of Market Failure

12. Questions for Chapter 27

13. Answers for Chapter 27

Chapter 28: Public Choice and Government Failure

1. Government Failure

2. Voters

3. Low Voter Turnover

4. Rational Ignorance

5. Candidates and the Median Voter Model

6. Elected Officials

7. Elected Officials and Short Run Focus

8. Elected Officials and Special-Interest Groups

9. The Influence of Special-Interest Groups

10. A Congressional District as a Special-Interest Group

11. Government Bureaus

12. Other Sources of Government Failure

13. Questions for Chapter 28

14. Answers for Chapter 28

Chapter 29: Government Regulation of Business

1. Attributes of Private Markets

2. Government Regulation of Natural Monopoly

3. Deadweight Loss of Unregulated Natural Monopoly

4. Problems with Regulating Natural Monopoly

5. Public Interest Theory of Regulation

6. Capture Theory of Regulation

7. Public Choice Theory of Regulation

8. Costs of Regulations

9. Deregulation

10. Appendix: Antitrust Law

11. Questions for Chapter 29

12. Answers for Chapter 29

Chapter 30: Agriculture

1. Resources Devoted to Agriculture

2. Good News about U.S. Agriculture

3. The Long Run Problem for Farmers

4. The Short Run Problem for Farmers

5. Traditional Farm Policies

6. The FAIR Act of 1996

7. The Farm Security and Rural Investment Act of 2002

8. Appendix: Some Comments on the Governments Agricultural Policies

9. Questions for Chapter 30

10. Answers for Chapter 30

Chapter 31: The Distribution of Income and Poverty

1. Some Income Distribution Facts

2. Economic Mobility

3. The Lorenz Curve

4. Overstating the Degree of Income Inequality

5. Distribution of Wealth

6. Overstating the Inequality in Wealth Distribution

7. Causes of Continuing Income Inequality

8. Standards of Income Distribution

9. Income Redistribution

10. Ideal Income Redistribution

11. Actual Income Redistribution

12. Negative Income Tax

13. Poverty

14. Poverty and Economic Mobility

15. Appendix: Four Keys to Achieving Financial Security

16. Questions for Chapter 31

17. Answers for Chapter 31