Macroeconomics Private and Public Choice with Xtra! CD-ROM and InfoTrac College Edition

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  • Edition: 10th
  • Format: Paperback
  • Copyright: 2002-06-17
  • Publisher: South-Western College Pub
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Authors James D. Gwartney, Richard L. Stroup, Russell S. Sobel, and David Macpherson, believe that a course on principles of economics should focus on the power and relevance of the economic way of thinking. It is this belief and corresponding writing approach that has made Macroeconomics: Private and Public Choice one of South Western Thomson Learning's most solid and enduring texts. Throughout this text, the authors integrate applications and real-world data in an effort to make the basic concepts of economics come alive for the reader.

Table of Contents

The Economic Way of Thinkingp. 1
The Economic Approachp. 4
Outstanding Economist: The Importance of Adam Smith, The Father of Economic Sciencep. 5
What Is Economics About?p. 6
The Economic Way of Thinkingp. 9
Positive and Normative Economicsp. 15
Pitfalls to Avoid in Economic Thinkingp. 16
Economics as a Careerp. 17
Looking Aheadp. 18
Key Pointsp. 18
Critical Analysis Questionsp. 19
Addendum: Understanding Graphsp. 20
Some Tools of the Economistp. 27
What Shall We Give Up?p. 28
Trade Creates Valuep. 30
Outstanding Economist: Thomas Sowell (1930-)p. 30
The Importance of Property Rightsp. 32
Production Possibilities Curvep. 36
Applications in Economics: Protecting Endangered Species and the Environment with Private Property Rightsp. 37
Trade, Output, and Living Standardsp. 43
Is the Size of the Economic Pie Fixed or Variable?p. 45
Economic Organizationp. 46
Looking Aheadp. 47
Key Pointsp. 48
Critical Analysis Questionsp. 48
Addendum: Comparative Advantage, Specialization, and Gains from Tradep. 50
Markets and Governmentsp. 53
Supply, Demand, and the Market Processp. 56
Consumer Choice and Law of Demandp. 57
Changes in Demand Versus Changes in Quantity Demandedp. 61
Thumbnail Sketch: Factors That Cause Changes in Demand and Quantity Demandedp. 64
Producer Choice and Law of Supplyp. 65
Outstanding Economist: Alfred Marshall (1842-1924)p. 69
Changes in Supply Versus Changes in Quantity Suppliedp. 70
Thumbnail Sketch: Factors That Cause Changes in Supply and Quantity Suppliedp. 72
How Market Prices are Determined: Supply and Demand Interactp. 72
How Markets Respond to Changes in Demand and Supplyp. 75
Thumbnail Sketch: How Changes in Demand and Supply Affect Market Price and Quantityp. 77
Time and the Adjustment Processp. 78
Invisible Hand Principlep. 80
Looking Aheadp. 83
Key Pointsp. 83
Critical Analysis Questionsp. 84
Supply and Demand: Applications and Extensionsp. 86
Wage Rates, Interest Rates, and Exchange Ratesp. 87
The Economics of Price Controlsp. 92
Applications in Economics: The Imposition of Price Ceilings During Hurricane Hugop. 94
Black Markets and the Importance of the Legal Structurep. 99
The Impact of a Taxp. 100
Tax Rates, Tax Revenues, and the Laffer Curvep. 105
Applications in Economics: The Laffer Curve and Mountain Climbing Deathsp. 108
Looking Aheadp. 109
Key Pointsp. 109
Critical Analysis Questionsp. 110
The Economic Role of Governmentp. 112
Government Spending and Taxationp. 113
Characteristics of Governmentp. 114
Applications in Economics: Perspectives on the Cost of Political Competitionp. 117
Economic Efficiency and the Role of Governmentp. 117
Applications in Economics: The Importance of the Protective Functionp. 119
The Role of Government and Potential Shortcomings of the Marketp. 120
The Opportunity Cost of Governmentp. 127
Looking Aheadp. 128
Key Pointsp. 128
Critical Analysis Questionsp. 129
The Economics of Collective Decision Makingp. 130
An Overview of Collective Decision Makingp. 131
Outstanding Economist: James Buchanan (1919-)p. 132
When Voting Works Wellp. 135
When Voting Conflicts with Economic Efficiencyp. 138
Economic Organization: Who Produces, Who Pays, and Why it Mattersp. 144
Economics of the Transfer Societyp. 146
Public Sector versus the Market: A Summaryp. 147
Thumbnail Sketch: What Weakens the Case for Market-Sector Allocation versus Public-Sector Intervention, and Vice Versa?p. 148
Implications of Public Choice: Getting More from Governmentp. 148
Looking Aheadp. 149
Key Pointsp. 149
Critical Analysis Questionsp. 150
Core Macroeconomicsp. 153
Taking the Nation's Economic Pulsep. 156
GDP--a Measure of Outputp. 157
Outstanding Economist: Simon Kuznets (1901-1985)p. 157
Two Ways of Measuring GDPp. 159
Adjusting for Price Changes and Deriving Real GDPp. 164
Using the GDP Deflator to Derive Real GDPp. 165
Applications in Economics: Converting Prior Data to Current Dollars: The Case of Gasolinep. 167
Problems with GDP as a Measuring Rodp. 168
Differences in GDP Over Time and Across Countriesp. 170
Applications in Economics: The Time of Goods: Today and Yesterdayp. 173
The Great Contribution of GDPp. 174
Related Income Measuresp. 174
The Link Between Output and Incomep. 176
Looking Aheadp. 176
Key Pointsp. 176
Critical Analysis Questionsp. 177
Addendum: The Construction of a Price Indexp. 179
Economic Fluctuations, Unemployment, and Inflationp. 180
Swings in the Economic Pendulump. 181
Economic Fluctuations and the Labor Marketp. 183
Applications in Economics: Deriving the Unemployment Ratep. 185
Thumbnail Sketch: Formulas for Key Labor Market Indicatorsp. 185
Three Types of Unemploymentp. 186
Myths of Economics: "Unemployed resources would not exist if the economy were operating efficiently"p. 188
Employment Fluctuations--The Historical Recordp. 190
Actual and Potential GDPp. 192
Effects of Inflation: An Overviewp. 193
Looking Aheadp. 196
Key Pointsp. 197
Critical Analysis Questionsp. 197
An Introduction to Basic Macroeconomic Marketsp. 200
Understanding Macroeconomics: Our Game Planp. 201
Four Key Markets: Resources, Goods and Services, Loanable Funds, and Foreign Exchangep. 201
Aggregate Demand for Goods and Servicesp. 203
Thumbnail Sketch: Why Is the Aggregate Quantity Demanded Inversely Related to the Price Level?p. 206
Aggregate Supply of Goods and Servicesp. 206
Equilibrium in the Goods and Services Marketp. 208
Thumbnail Sketch: Why Is the Short-Run Aggregate Quantity Supplied Directly Related to the Price Level?p. 209
Resource Marketp. 212
Loanable Funds Marketp. 214
Applications in Economics: Bonds, Interest Rates, and Bond Pricesp. 217
Foreign Exchange Marketp. 218
Leakage and Injections from the Circular Flow of Incomep. 220
Thumbnail Sketch: Key Macro Market Relationshipsp. 221
Looking Aheadp. 221
Key Pointsp. 222
Critical Analysis Questionsp. 222
Working With Our Basic Aggregate Demand/Aggregate Supply Modelp. 224
Anticipated and Unanticipated Changesp. 225
Factors That Shift Aggregate Demandp. 225
Thumbnail Sketch: What Factors Will Influence Aggregate Demand?p. 228
Shifts in Aggregate Supplyp. 228
Thumbnail Sketch: What Factors Will Influence Long-run and Short-run Aggregate Supply?p. 231
Steady Economic Growth and Anticipated Changes in Long-run Aggregate Supplyp. 231
Unanticipated Changes and Market Adjustmentsp. 232
Price Level, Inflation, and the AD/AS Modelp. 237
The Business Cycle Revisitedp. 237
Does a Market Economy Have a Self-correcting Mechanism?p. 239
Looking Aheadp. 244
Key Pointsp. 244
Critical Analysis Questionsp. 245
Keynesian Foundations of Modern Macroeconomicsp. 247
Outstanding Economist: John Maynard Keynes (1883-1946)p. 248
The Great Depression and Macroeconomicsp. 248
Keynesian Equilibriump. 253
The Keynesian Model within the AD/AS Frameworkp. 257
The Multiplierp. 258
Applications in Economics: Sports Stadiums, Development Subsides, and the Multiplierp. 261
Keynesian View of the Business Cyclep. 262
Evolution of Modern Macroeconomicsp. 263
Looking Aheadp. 264
Key Pointsp. 265
Critical Analysis Questionsp. 265
Fiscal Policyp. 267
Budget Deficits and Surplusesp. 268
Keynesian View of Fiscal Policyp. 269
Outstanding Economist: Paul Samuelson (1915-)p. 271
Fiscal Policy and the Crowding-Out Effectp. 271
New Classical View of Fiscal Policyp. 273
Fiscal Policy: Problems of Proper Timingp. 276
Fiscal Policy as a Stabilization Tool: A Modern Synthesisp. 278
Supply-side Effects of Fiscal Policyp. 279
The Fiscal Policy of the United Statesp. 283
Thumbnail Sketch: Impact of Expansionary Fiscal Policy--A Summary of Four Modelsp. 283
Looking Aheadp. 287
Key Pointsp. 287
Critical Analysis Questionsp. 288
Money and the Banking Systemp. 290
What is Money?p. 291
Why Is Money Valuable?p. 292
The Supply of Moneyp. 293
The Business of Bankingp. 295
Bank Runs, Bank Failures, and Deposit Insurancep. 298
How Banks Create Money by Extending Loansp. 299
The Federal Reserve Systemp. 301
Outstanding Economist: Alan Greenspan (1926-)p. 302
Ambiguities in the Meaning and Measurement of the Money Supplyp. 309
Thumbnail Sketch: What Are the Differences between the U.S. Treasury and the Federal Reserve Banking System?p. 310
The Future of Moneyp. 312
Looking Aheadp. 315
Key Pointsp. 315
Critical Analysis Questionsp. 316
Modern Macroeconomics: Monetary Policyp. 319
Impact of Monetary Policyp. 320
Outstanding Economist: Milton Friedman (1912-)p. 320
Thumbnail Sketch: Transmission of Monetary Policy--A Summaryp. 326
Monetary Policy in the Long Runp. 329
Monetary Policy When Effects Are Anticipatedp. 333
Interest Rates and Monetary Policyp. 334
Effects of Monetary Policy--A Summaryp. 336
Thumbnail Sketch: What Is the Impact of Monetary Policy?p. 337
Testing the Major Implications of Monetary Theoryp. 338
Looking Aheadp. 342
Key Pointsp. 343
Critical Analysis Questionsp. 343
Stabilization Policy, Output, and Employmentp. 346
Economic Fluctuations--The Historical Recordp. 347
Promoting Economic Stability--Activist and Nonactivist Viewsp. 348
The Conduct of Discretionary Stabilization Policyp. 349
Applications in Economics: Perverse Macroeconomic Policy and the Great Depressionp. 350
Measures of Economic Activity: Index of Lending Indicatorsp. 353
How Are Expectations Formed?p. 355
Outstanding Economist: Robert Lucas (1937-)p. 357
How Macro Policy Works: The Implications of Adaptive and Rational Expectationsp. 358
Thumbnail Sketch: Expectations and the Impact of Shifts in Macro Policyp. 360
Nonactivist Stabilization Policyp. 360
Role of Monetary Policy: A Consensus Viewp. 362
Emerging Consensus on Other Mattersp. 363
Stabilization Policy and the U.S. Economyp. 363
Looking Aheadp. 366
Key Pointsp. 366
Critical Analysis Questionsp. 367
Economic Growthp. 369
The Importance of Economic Growthp. 370
The Best and Worst Growth Recordsp. 372
Applications in Economics: China: Is It a Special Case?p. 374
Sources of Economic Growthp. 374
Outstanding Economist: Douglass C. North (1920-)p. 377
Institutions and Policies Conducive to Economic Growthp. 377
Thumbnail Sketch: Sources of Economic Growthp. 377
The Role of Government and Economic Progressp. 380
Economic Freedom and Growthp. 384
Sound Policy and the Irish Miracle: A Case Studyp. 387
Importance of Institutions and Policies--Concluding Thoughtsp. 390
Looking Aheadp. 391
Key Pointsp. 391
Critical Analysis Questionsp. 392
International Economicsp. 393
Gaining from International Tradep. 397
Cross Country Differences in the Size of the Trade Sectorp. 398
The Trade Sector of the United Statesp. 398
Gains from Specialization and Tradep. 400
Export-Import Linkp. 405
Supply, Demand, and International Tradep. 405
Economics of Trade Restrictionsp. 407
Why Do Nations Adopt Trade Restrictions?p. 411
Applications in Economics: Tomatoes, Regulations, and Trade Restrictionsp. 414
Impact of Trade Openness--Empirical Evidencep. 415
The Changing Nature of Global Tradep. 417
Looking Aheadp. 419
Key Pointsp. 419
Critical Analysis Questionsp. 420
International Finance and the Foreign Exchange Marketp. 421
Foreign Exchange Marketp. 422
Determinants of the Exchange Ratep. 424
Thumbnail Sketch: What Factors Cause a Nation's Currency to Appreciate or Depreciate?p. 429
Balance of Paymentsp. 429
More Popular Trade Fallaciesp. 433
Macroeconomic Policy, Exchange Rates, and Capital Flowsp. 436
Thumbnail Sketch: How Will Monetary and Fiscal Policy Affect the Exchange-Rate and Balance-of-Payments Components?p. 438
International Finance and Exchange-Rate Regimesp. 438
Key Pointsp. 441
Critical Analysis Questionsp. 442
Beyond the Basicsp. 445
Government Spending and Taxationp. 448
The Internet: How Is it Changing the Economy?p. 459
The Economics of Social Securityp. 469
The Stock Market: What Does It Do and How Has It Performed?p. 480
The Federal Budget and the National Debtp. 493
Labor Market Policies and the Natural Rate of Unemployment: A Cross-Country Analysisp. 505
The Phillips Curve: Is There a Trade-off Between Inflation and Unemployment?p. 517
General Business and Economic Indicatorsp. 529
Answers to Selected Critical Analysis Questionsp. 539
Glossaryp. 551
Creditsp. 559
Indexp. 560
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