9780716784517

Macroeconomics, Study Guide & Aplia Activation Card

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  • ISBN13:

    9780716784517

  • ISBN10:

    0716784513

  • Edition: 1st
  • Format: Display
  • Copyright: 2006-02-15
  • Publisher: Worth Publishers
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Table of Contents

Preface vi
Part 1 What Is Economics?
Introduction The Ordinary Business of Life
1(1)
Any Given Sunday
1(1)
The Invisible Hand
2(1)
My Benefit, Your Cost
3(1)
Good Times, Bad Times
4(1)
Onward and Upward
4(1)
An Engine for Discovery
4(1)
First Principles
5(15)
Common Ground
5(1)
Individual Choice: The Core of Economics
6(2)
Resources are scarce
6(1)
Opportunity cost: The real cost of something is what you must give up to get it
7(1)
For Inquiring Minds: Got a Penny?
8(2)
``How much?'' is a decision at the margin
8(1)
People usually exploit opportunities to make themselves better off
9(1)
For Inquiring Minds: Pay for Grades?
10(1)
Individual choice: Summing it up
10(1)
Economics in Action: A Woman's Work
10(1)
Interaction: How Economies Work
11(2)
There are gains from trade
12(1)
Markets move toward equilibrium
13(1)
For Inquiring Minds: Choosing Sides
13(3)
Resources should be used as efficiently as possible to achieve society's goals
14(1)
Markets usually lead to efficiency
15(1)
When markets don't achieve efficiency, government intervention can improve society's welfare
16(1)
Economics in Action: Restoring Equilibrium on the Freeways
16(1)
A Look Ahead
17(3)
Economic Models: Trade-offs and Trade
20(21)
Tunnel Vision
20(1)
Models in Economics: Some Important Examples
21(1)
For Inquiring Minds: Models for Money
21(12)
Trade-offs: The production possibility frontier
22(4)
Comparative advantage and gains from trade
26(3)
Misunderstanding Comparative Advantage
29(1)
Comparative advantage and international trade
29(1)
Transactions: The circular-flow diagram
30(3)
Economics in Action: Rich Nation, Poor Nation
33(1)
Using Models
34(2)
Positive versus normative economics
34(1)
When and why economists disagree
35(1)
For Inquiring Minds: When Economists Agree
36(1)
Economics in Action: Economists in Government
36(1)
A Look Ahead
37(4)
Appendix: Graphs in Economics
41(15)
Getting the Picture
41(1)
Graphs, Variables, and Economic Models
41(1)
How Graphs Work
41(3)
Two-variable graphs
41(2)
Curves on a graph
43(1)
A Key Concept: The Slope of a Curve
44(5)
The slope of a linear curve
44(1)
Horizontal and vertical curves and their slopes
45(1)
The slope of a nonlinear curve
46(1)
Calculating the slope along a nonlinear curve
47(1)
Maximum and minimum points
48(1)
Graphs That Depict Numerical Information
49(7)
Types of numerical graphs
49(3)
Problems in interpreting numerical graphs
52(4)
Part 2 Supply and Demand
Supply and Demand
56(27)
Gretzky's Last Game
56(1)
Supply and Demand: A Model of a Competitive Market
57(1)
The Demand Curve
57(6)
The demand schedule and the demand curve
58(1)
Shifts of the demand curve
59(1)
Understanding shifts of the demand curve
60(2)
Economics in Action: Beating the Traffic
62(1)
The Supply Curve
63(4)
The supply schedule and the supply curve
63(1)
Shifts of the supply curve
64(2)
Understanding shifts of the supply curve
66(1)
Economics in Action: Down (and Up) on the Farm
67(1)
Supply, Demand, and Equilibrium
68(3)
Bought and Sold?
68(1)
Finding the equilibrium price and quantity
68(1)
Why do all sales and purchases in a market take place at the same price?
69(1)
Why does the market price fall if it is above the equilibrium price?
70(1)
Why does the market price rise if it is below the equilibrium price?
70(1)
Using equilibrium to describe markets
70(1)
Economics in Action: A Fish Story
71(1)
Changes in Supply and Demand
72(4)
What happens when the demand curve shifts
72(1)
What happens when the supply curve shifts
73(1)
Which Curve Is It, Anyway?
74(1)
Simultaneous shifts in supply and demand
74(2)
For Inquiring Minds: Supply, Demand, and Controlled Substances
76(1)
Economics in Action: Plain Vanilla Gets Fancy
76(1)
Competitive Markets---and Others
77(1)
A Look Ahead
78(5)
The Market Strikes Back
83(26)
Big City, Not-So-Bright Ideas
83(1)
Why Governments Control Prices
84(1)
Price Ceilings
84(4)
Modeling a price ceiling
85(1)
Why a price ceiling causes inefficiency
86(2)
For Inquiring Minds: The Rent Control Aristocracy
88(1)
So why are there price ceilings?
88(1)
Economics in Action: Oil Shortages in the 1970s
89(1)
Price Floors
90(2)
For Inquiring Minds: Price Floors and Butter Cookies
92(1)
Why a price floor causes inefficiency
92(1)
So why are there price floors?
93(1)
Economics in Action: ``Black Labor'' in Southern Europe
93(2)
Controlling Quantities
95(4)
The anatomy of quantity controls
95(3)
The costs of quantity controls
98(1)
Economics in Action: The Clams of New Jersey
99(1)
A Surprise Parallel: Taxes
99(4)
Why is a tax like a quota?
99(1)
Who pays an excise tax?
100(1)
The revenue from an excise tax
101(1)
The costs of taxation
102(1)
For Inquiring Minds: If Selling Cigarettes Is a Crime, Only Criminals will Sell Cigarettes
103(1)
Economics in Action: Who Pays the FICA?
103(1)
A Look Ahead
104(5)
Consumer and Producer Surplus
109(29)
Making Gains by the Book
109(1)
Consumer Surplus and the Demand Curve
110(5)
Willingness to pay and the demand curve
110(1)
Willingness to pay and consumer surplus
111(2)
How changing prices affect consumer surplus
113(2)
For Inquiring Minds: I Want a New Drug . . .
115(1)
Economics in Action: When Money Isn't Enough
116(1)
Producer Surplus and the Supply Curve
116(4)
Cost and producer surplus
116(3)
Changes in producer surplus
119(1)
Economics in Action: Gaining from Disaster
120(1)
Consumer Surplus, Producer Surplus, and the Gains from Trade
121(5)
The gains from trade
121(1)
The efficiency of markets: A preliminary view
122(3)
A few words of caution
125(1)
Economics in Action: eBay and Efficiency
126(1)
Applying Consumer and Producer Surplus: The Efficiency Costs of a Tax
127(5)
Deadweight loss and elasticities
130(2)
Economics in Action: Missing the Boats
132(1)
A Look Ahead
133(5)
Part 3 Introduction to Macroeconomics
Macroeconomics: The Big Picture
138(21)
Disappointed Graduates
138(2)
Microeconomics versus Macroeconomics
140(2)
Macroeconomics: The whole is greater than the sum of its parts
140(1)
Macroeconomic policy
141(1)
Long-run growth
141(1)
Economic aggregates
142(1)
Economics in Action: The Great Depression
142(2)
The Business Cycle
144(1)
For Inquiring Minds: Defining Recessions and Expansions
145(1)
Employment and Unemployment
145(3)
Aggregate output
146(2)
Taming the business cycle
148(1)
Economics in Action: Has the Business Cycle Been Tamed?
148(1)
Long-Run Economic Growth
149(1)
For Inquiring Minds: When Did Long-Run Growth Start?
150(1)
Economics in Action: The Difference a Point Makes
150(1)
Inflation and Deflation
151(2)
Economics in Action: A Fast (Food) Measure of Inflation
153(1)
The Open Economy
153(2)
Economics in Action: North of the Border
155(1)
A Look Ahead
156(3)
Tracking the Macroeconomy
159(27)
After the Revolution
159(1)
The National Accounts
160(5)
The circular-flow diagram, revisited and expanded
160(3)
Gross domestic product
163(1)
Calculating GDP
164(1)
For Inquiring Minds: Our Imputed Lives
165(2)
GDP: What's In and What's Out
166(1)
For Inquiring Minds: Gross What?
167(1)
What GDP tells us
168(1)
Economics in Action: Creating the National Accounts
168(1)
Real GDP and Aggregate Output
169(3)
Calculating real GDP
169(1)
A technical detail: ``Chained'' dollars
170(1)
What real GDP doesn't measure
171(1)
Economics in Action: Good Decades, Bad Decades
172(1)
The Unemployment Rate
173(3)
Understanding the unemployment rate
173(2)
Growth and unemployment
175(1)
Economics in Action: Jobless Recoveries
176(1)
Price Indexes and the Aggregate Price Level
176(4)
Market baskets and price indexes
177(1)
The consumer price index
178(1)
Other price measures
179(1)
For Inquiring Minds: Is the CPI Biased?
180(1)
Economics in Action: Indexing to the CPI
180(1)
A Look Ahead
181(5)
Part 4 The Economy in the Long Run
Long-Run Economic Growth
186(24)
The Bad Old Days
186(1)
Comparing Economies Across Time and Space
187(3)
Real GDP per capita
187(1)
Change in Levels versus Rate of Change
188(1)
Growth rates
189(1)
Economics in Action: The Luck of the Irish
190(1)
The Sources of Long-Run Growth
191(2)
The crucial importance of productivity
191(1)
Explaining growth in productivity
191(1)
Accounting for growth: the aggregate production function
192(1)
For Inquiring Minds: The Wal-Mart Effect
193(4)
It May Be Diminished . . . But It's Still Positive
194(2)
What about natural resources?
196(1)
Economics in Action: The Information Technology Paradox
197(1)
Why Growth Rates Differ
198(3)
Savings and investment spending
198(1)
Foreign investment
199(1)
Education
200(1)
Infrastructure
200(1)
Research and development
200(1)
For Inquiring Minds: Inventing R&D
201(1)
Political stability, property rights, and excessive government intervention
201(1)
Economics in Action: The Brazilian Breadbasket
201(1)
Success, Disappointment, and Failure
202(3)
The East Asian miracle
203(1)
Latin America's disappointment
204(1)
Africa's troubles
204(1)
Economics in Action: Are Economies Converging?
205(1)
A Look Ahead
206(4)
Savings, Investment Spending, and the Financial System
210(26)
A Hole in the Ground
210(1)
Matching Up Savings and Investment Spending
211(5)
Investment versus Investment Spending
211(1)
The savings-investment spending identity
211(3)
The Different Kinds of Capital
214(2)
For Inquiring Minds: Who Enforces the Accounting?
216(5)
The market for loanable funds
216(3)
Savings, investment spending, and government policy
219(2)
Economics in Action: Budgets and Investment Spending in the 1990s
221(1)
The Financial System
221(7)
Three tasks of a financial system
222(3)
Types of assets
225(1)
Financial intermediaries
226(2)
Economics in Action: Banks and the South Korean Miracle
228(1)
Financial Fluctuations
229(1)
The demand for stocks
229(1)
For inquiring Minds: How Now, Dow Jones?
230(2)
Stock market expectations
230(1)
Stock prices and macroeconomics
231(1)
Economics in Action: ``Irrational Exuberance''
232(1)
A Look Ahead
233(3)
Part 5 Short-Run Economic Fluctuations
Aggregate Supply and Aggregate Demand
236(33)
Shocks to the system
236(1)
Aggregate Supply
237(2)
The short-run aggregate supply curve
237(2)
For Inquiring Minds: What's Truly Flexible, What's Truly Sticky
239(6)
Shifts of the short-run aggregate supply curve
240(2)
The long-run aggregate supply curve
242(2)
From the short run to the long run
244(1)
Are We There Yet? What the Long Run Really Means
245(1)
Economics in Action: Prices and Output in the Great Depression
245(1)
Aggregate Demand
246(4)
Why is the aggregate demand curve downward-sloping?
247(1)
Shifts in the aggregate demand curve
248(1)
Changes in Wealth: A Movement Along versus a Shift of the Aggregate Demand Curve
249(1)
Government policies and aggregate demand
249(1)
Economics in Action: Moving Along the Aggregate Demand Curve, 1979--80
250(1)
The Multiplier
251(3)
The AS--AD Model
254(6)
Short-run macroeconomic equilibrium
255(1)
Shifts of the SRAS curve
256(1)
Shifts in aggregate demand: Short-run effects
257(1)
Long-run macroeconomic equilibrium
258(2)
Economics in Action: Supply Shocks versus Demand Shocks in Practice
260(1)
Macroeconomic Policy
261(1)
For Inquiring Minds: Keynes and the Long Run
262(1)
Policy in the face of demand shocks
262(1)
Responding to supply shocks
263(1)
Economics in Action: The End of the Great Depression
263(1)
A Look Ahead
264(5)
Income and Expenditure
269(23)
Be a Patriot and Spend
269(1)
Consumer Spending
270(4)
Current disposable income and consumer spending
270(3)
Shifts of the aggregate consumption function
273(1)
Economics in Action: Famous First Forecasting Failures
274(2)
Investment Spending
276(3)
The interest rate and investment spending
276(1)
Expected future real GDP, production capacity, and investment spending
277(1)
Inventories and unplanned investment spending
278(1)
Economics in Action: A Tale of Two Investment Spending Slumps
279(1)
Behind Shifts of the Aggregate Demand Curve: The Income--Expenditure Model
280(1)
Planned aggregate spending and real GDP
281(7)
Income--expenditure equilibrium
283(1)
Income--Expenditure Equilibrium versus Short-Run Macroeconomic Equilibrium
284(1)
The multiplier process and inventory adjustment
285(3)
Economics in Action: Bad Times in Buenos Aires
288(1)
A Look Ahead
288(4)
Appendix: Deriving the Multiplier Algebraically
292(1)
Fiscal Policy
293(26)
A Bridge to Prosperity?
293(1)
Fiscal Policy: The Basics
294(2)
Taxes, purchases of goods and services, government transfers, and borrowing
294(1)
The government budget and total spending
295(1)
For Inquiring Minds: Investment Tax Credits
296(2)
Expansionary and contractionary fiscal policy
296(2)
A cautionary note: Lags in fiscal policy
298(1)
Economics in Action: Expansionary Fiscal Policy in Japan
298(1)
Fiscal Policy and the Multiplier
299(3)
Multiplier effects of an increase in government purchases of goods and services
299(1)
Multiplier effects of changes in government taxes and transfers
300(1)
How taxes affect the multiplier
301(1)
Economics in Action: How Much Bang for the Buck?
302(2)
The Budget Balance
304(3)
The budget balance as a measure of fiscal policy
304(1)
The business cycle and the cyclically adjusted budget balance
305(2)
Should the budget be balanced?
307(1)
Economics in Action: Stability Pact---or Stupidity Pact?
307(1)
Long-Run Implications of Fiscal Policy
308(4)
Deficits, surpluses, and debt
308(1)
Deficits versus Debt
309(1)
Problems posed by rising government debt
309(1)
Deficits and debt in practice
310(2)
For Inquiring Minds: What Happened to the Debt from World War II?
312(1)
Implicit liabilities
312(1)
Economics in Action: Argentina's Creditors Take a Haircut
313(2)
A Look Ahead
315(4)
Appendix: Taxes and the Multiplier
319(2)
Money, Banking, and the Federal Reserve System
321(21)
A Waggon-Way Through the Air
321(1)
The Meaning of Money
322(3)
What is money?
322(1)
Plastic and the Money Supply
322(1)
Roles of money
323(1)
Types of money
323(1)
Measuring the money supply
324(1)
For Inquiring Minds: What's with All the Currency?
325(1)
Economics in Action: The History of the Dollar
325(1)
The Monetary Role of Banks
326(2)
What banks do
326(1)
The problem of bank runs
327(1)
Bank regulation
328(1)
For Inquiring Minds: Is Banking a Con?
328(1)
Economics in Action: It's a Wonderful Banking System
329(1)
Determining the Money Supply
330(3)
How banks create money
330(1)
Reserves, bank deposits, and the money multiplier
331(1)
The money multiplier in reality
332(1)
Economics in Action: Multiplying Money Down
333(5)
The Federal Reserve system
334(1)
The Fed: America's central bank
334(1)
What the Fed does: Reserve requirements and the discount rate
335(1)
Open-market operations
336(2)
Economics in Action: Building Europe's Fed
338(1)
A Look Ahead
338(4)
Monetary Policy
342(26)
Eight Times a Year
342(1)
The Demand for Money
343(6)
The opportunity cost of holding money
343(2)
The money demand curve
345(1)
Prices and the demand for money
345(2)
Shifts of the real money demand curve
347(1)
The velocity approach to money demand
348(1)
Economics in Action: A Yen for Cash
349(1)
Money and Interest Rates
350(3)
The equilibrium interest rate
350(1)
Two models of interest rates?
351(1)
The Target versus the Market
351(1)
Monetary policy and the interest rate
351(2)
For inquiring Minds: Long-Term Interest Rates
353(1)
Economics in Action: The Fed Takes Action
353(1)
Monetary Policy and Aggregate Demand
354(5)
Expansionary and contractionary monetary policy
354(2)
Monetary policy and the multiplier
356(1)
Two models of interest rates, revisited
357(2)
Economics in Action: The Fed and the Output Gap, 1985--2004
359(1)
Money, Output, and Prices in the Long Run
360(3)
Short-run and long-run effects of an increase in the money supply
360(1)
Monetary neutrality
361(1)
The interest rate in the long run
362(1)
Economics in Action: International Evidence of Monetary Neutrality
363(1)
A Look Ahead
364(4)
Part 6 The Supply Side and the Medium Run
Labor Markets, Unemployment, and Inflation
368(25)
Two Paths to Unemployment
368(1)
The Nature of Unemployment
369(1)
For Inquiring Minds: Full Employment---It's the Law
369(7)
Job creation and job destruction
369(1)
Frictional unemployment
370(1)
Structural unemployment
371(2)
The natural rate of unemployment
373(1)
Changes in the natural rate of unemployment
374(2)
Economics in Action: Eurosclerosis
376(1)
Unemployment and the Business Cycle
377(3)
The output gap and the unemployment rate
377(2)
Okun's law
379(1)
When is a ``Law'' Not a Law
379(1)
Economics in Action: Jobless Recoveries
380(1)
Why Doesn't the Labor Market Move Quickly to Equilibrium?
380(2)
Economics in Action: Sticky Wages in the Great Depression
382(1)
Unemployment and Inflation: The Phillips Curve
382(2)
The short-run Phillips curve
383(1)
For Inquiring Minds; The Aggregate Supply Curve and the Short-Run Phillips Curve
384(4)
Inflation expectations and the short-run Phillips curve
385(2)
The long-run Phillips curve
387(1)
The natural rate, revisited
388(1)
Economics in Action: From the Scary Seventies to the Nifty Nineties
388(1)
A Look Ahead
389(4)
Inflation, Disinflation, and Deflation
393(22)
Hourly Wages
393(1)
Money and Inflation
394(3)
Money and prices, revisited
394(3)
For Inquiring Minds: Indexing to Inflation
397(2)
The inflation tax
397(1)
The Logic of Hyperinflation
398(1)
Economics in Action: Money and Prices in Brazil, 1985--1995
399(1)
Effects of Inflation
400(5)
Winners and losers from unexpected inflation
400(1)
Expected inflation and interest rates
401(2)
The costs of inflation
403(2)
The optimal rate of inflation
405(1)
For Inquiring Minds: A Case for Deflation?
405(1)
Economics in Action: Inflation and Interest Rates in the United States
406(1)
Moderate Inflation and Disinflation
407(1)
Causes of moderate inflation
407(1)
The problem of disinflation
407(1)
Economics in Action: The Great Disinflation of the 1980s
408(2)
Deflation
410(1)
Effects of unexpected deflation
410(1)
Effects of expected deflation
410(1)
Economics in Action: Japan's Trap
411(1)
A Look Ahead
411(4)
Part 7 Events and Ideas
The Making of Modern Macroeconomics
415(21)
Purge the Rottenness?
415(1)
Classical Macroeconomics
416(1)
Money and the price level
416(1)
The business cycle
417(1)
Economics in Action: When did the business cycle begin?
417(1)
The Great Depression and the Keynesian Revolution
418(2)
Keynes's theory
418(2)
For Inquiring Minds: The Politics of Keynes
420(1)
Policy to fight recessions
420(1)
Economics in Action: The End of the Great Depression
421(1)
Challenges to Keynesian Economics
422(4)
The revival of monetary policy
422(1)
Monetarism
422(3)
Inflation and the natural rate of unemployment
425(1)
The political business cycle
425(1)
Economics in Action: The Fed's Flirtation with Monetarism
426(1)
Rational Expectations, Real Business Cycles, and New Classical Macroeconomics
426(2)
Rational expectations
427(1)
Real business cycles?
427(1)
For Inquiring Minds: Supply-side Economics
428(1)
Economics in Action: Total Factor Productivity and the Business Cycle
428(1)
The Modern Consensus
429(3)
Is expansion and monetary policy helpful in fighting recessions?
430(1)
Is fiscal policy effective in fighting recessions?
430(1)
Can monetary and/or fiscal policy reduce unemployment in the long run?
430(1)
Should fiscal policy be used in a discretionary way?
430(1)
Should monetary policy be used in a discretionary way?
431(1)
The clean little secret of macroeconomics
432(1)
Economics in Action: After the Bubble
432(1)
A Look Ahead
433(3)
Part 8 The Open Economy
International Trade
436(24)
A Rose by Any Other Nation
436(1)
Comparative Advantage and International Trade
437(5)
Production possibilities and comparative advantage, revisited
438(2)
The gains from international trade
440(1)
The Pauper Labor Fallacy
441(1)
Sources of comparative advantage
441(1)
For Inquiring Minds: Does Trade Hurt Poor Countries?
442(1)
For Inquiring Minds: Increasing Returns and International Trade
443(1)
Economics in Action: The Comparative Advantage of the United States
444(1)
Supply, Demand, and International Trade
444(5)
The effects of imports
445(2)
The effects of exports
447(1)
International trade and factor markets
448(1)
Economics in Action: Trade, Wages, and Land Prices in the Nineteenth Century
449(1)
The Effects of Trade Protection
450(2)
The effects of a tariff
450(2)
The effects of an import quota
452(1)
Economics in Action: Trade Protection in the United States
452(1)
The Political Economy of Trade Protection
453(1)
Arguments for trade protection
453(1)
For Inquiring Minds: Bittersweet
454(1)
The politics of trade protection
454(1)
International trade agreements and the World Trade Organization
455(1)
Economics in Action: Declining Tariffs
455(1)
A Look Ahead
456(4)
Open-Economy Macroeconomics
460
Euro Dilemmas
460(1)
Capital Flows and the Balance of Payments
461(3)
Balance of payments accounts
461(3)
For Inquiring Minds: GDP, GNP, and the Current Account
464(3)
Modeling private international capital flows
464(3)
Underlying determinants of international capital flows
467(1)
For Inquiring Minds: Twin Deficits?
467(1)
Economics in Action: The Golden Age of Capital Flows
468(1)
The Role of the Exchange Rate
469(7)
Understanding exchange rates
469(1)
Which Way Is Up?
470(1)
The equilibrium exchange rate
470(3)
Inflation and real exchange rates
473(2)
Purchasing power parity
475(1)
For Inquiring Minds: Burgernomics
476(1)
Economics in Action: The Dollar and the Deficit
476(2)
Exchange Rate Policy
478(3)
Exchange rate regimes
478(1)
How can an exchange rate be held fixed?
478(2)
The exchange rate regime dilemma
480(1)
For Inquiring Minds: From Bretton Woods to the Euro
481(1)
Economics in Action: China Pegs the Yuan
482(1)
Exchange Rates and Macroeconomic Policy
482(3)
Devaluation and revaluation of fixed exchange rates
483(1)
Monetary policy under floating exchange rates
483(1)
International business cycles
484(1)
Economics in Actions: The Joy of a Devalued Pound
485
Supplemental chapter: Currencies and Crises Available on the Web, at www.worthpublishers.com/krugmanwells and in booklet form.
Solutions to ``Check Your Understanding'' Questions
1(1)
Macroeconomic Data 1929--2004 1(1)
Glossary 1(1)
Index 1

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