Foundations of Economics, 8th Edition

Foundations of Economics, 8th Edition

by Robin Bade, Michael Parkin
Released January 2017
Publisher(s): Pearson
ISBN: 9780134486819

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Book description

An engaging, practice-oriented approach to understanding core economic principles

Foundations of Economics,8th Edition introduces readers to the economic principles they can use to navigate the financial decisions of their futures. Each chapter concentrates on a manageable number of ideas, usually 3 to 4, with each reinforced several times throughout the text. This patient approach helps guide individuals through unfamiliar terrain and focus them on the most important concepts.

The text does four core things to help readers grasp and apply economic principles: it motivates with compelling issues and questions, focuses on core ideas, offers concise points, and encourages learning with activities and practice questions. After completing this text, readers will have the foundational knowledge of how the economy works and can apply it to their lives going forward.

Table of contents

  1. Practice, Engage, and Assess with MyEconLab®
  2. Foundations of Economics
  3. About the Authors
  4. Economics Brief Contents
  5. Contents
  6. Preface
    1. What’s New in the EIGHTH Edition
    2. The Foundations Vision
    3. Organization
    4. MyEconLab
    5. Support Materials for Instructors and Students
    6. Foundations of Economics: Flexibility Chart
  7. Reviewers
  8. Part 1 Introduction
    1. 1 Getting Started
      1. Chapter Checklist
      2. 1.1 Definition and Questions
        1. Scarcity
        2. Economics Defined
          1. Microeconomics
          2. Macroeconomics
        3. What, How, and For Whom?
          1. What?
          2. How?
          3. For Whom?
        4. Can the Pursuit of Self-Interest Be in the Social Interest?
          1. Self-Interest and the Social Interest
          2. Globalization
          3. The Information Revolution
          4. Climate Change
          5. Government Budget Deficit and Debt
        5. Checkpoint 1.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      3. 1.2 The Economic Way of Thinking
        1. A Choice Is a Tradeoff
        2. Cost: What You Must Give Up
        3. Benefit: What You Gain
        4. Rational Choice
        5. How Much? Choosing at the Margin
          1. Marginal Cost
          2. Marginal Benefit
          3. Making a Rational Choice
        6. Choices Respond to Incentives
        7. Checkpoint 1.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      4. 1.3 Economics as a Life Skill
        1. Economics as a Decision Tool
          1. Personal Decisions
          2. Business Decisions
          3. Government Decisions
        2. Economics as a Social Science
          1. Economic Models
          2. Check Predictions of Models Against Facts
          3. Disagreement: Normative versus Positive
        3. Economics as an Aid to Critical Thinking
          1. What is Critical Thinking?
          2. Learning-by-Doing
            1. Checkpoint 1.3
              1. Practice Problem
              2. In the News
              3. Solution to Practice Problem
              4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
      7. Appendix: Making and Using Graphs
        1. Interpreting Data Graphs
        2. Interpreting Graphs Used in Economic Models
        3. The Slope of a Relationship
        4. Relationships Among More Than Two Variables
          1. Ceteris Paribus
        5. Appendix Checkpoint
          1. Study Plan Problems
          2. Instructor Assignable Problems
          3. Key Terms
    2. 2 The U.S. and Global Economies
      1. Chapter Checklist
      2. 2.1 What, How, and for Whom?
        1. What Do We Produce?
          1. Consumption Goods and Services
          2. Capital Goods
        2. How Do We Produce?
          1. Land
          2. Labor
          3. Capital
            1. Financial Capital Is Not Capital
          4. Entrepreneurship
        3. For Whom Do We Produce?
        4. Checkpoint 2.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 2.2 The Global Economy
        1. The People
        2. The Economies
          1. Advanced Economies
          2. Emerging Market and Developing Economies
        3. What in the Global Economy
          1. Where Is the Global Pie Baked?
          2. Some Differences in What Is Produced
          3. Some Similarities in What Is Produced
        4. How in the Global Economy
          1. Human Capital Differences
          2. Physical Capital Differences
        5. For Whom in the Global Economy
          1. Personal Distribution of Income
          2. International Distribution
          3. A Happy Paradox and a Huge Challenge
        6. Checkpoint 2.2
          1. Practice Problems
          2. Solutions to Practice Problems
      4. 2.3 The Circular Flows
        1. Households and Firms
        2. Markets
        3. Real Flows and Money Flows
        4. Governments
          1. Federal Government
          2. State and Local Government
        5. Governments in the Circular Flow
        6. Circular Flows in the Global Economy
          1. International Trade
          2. International Finance
        7. Checkpoint 2.3
          1. Practice Problems
          2. Solutions to Practice Problems
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 3 The Economic Problem
      1. Chapter Checklist
      2. 3.1 Production Possibilities
        1. Production Possibilities Frontier
        2. How the PPF Illustrates Scarcity and Its Consequences
          1. Attainable and Unattainable Combinations
          2. Efficient and Inefficient Production
          3. Tradeoffs and Free Lunches
        3. Checkpoint 3.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 3.2 Opportunity Cost
        1. The Opportunity Cost of a Smartphone
        2. Opportunity Cost and the Slope of the PPF
        3. Opportunity Cost Is a Ratio
        4. Increasing Opportunity Costs Are Everywhere
        5. Your Increasing Opportunity Cost
        6. Checkpoint 3.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 3.3 Economic Growth
        1. Checkpoint 3.3
          1. Practice Problems
          2. Solutions to Practice Problems
      5. 3.4 Specialization and Trade
        1. Absolute Advantage and Comparative Advantage
        2. Comparative Advantage: A Model
          1. Liz’s Smoothie Bar
          2. Joe’s Smoothie Bar
          3. Liz’s and Joe’s PPFs
          4. Liz’s Greater Productivity
          5. Liz’s Comparative Advantage
          6. Joe’s Comparative Advantage
        3. Achieving Gains from Trade
        4. The Economy’s Production Possibilities Frontier
        5. Checkpoint 3.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    4. 4 Demand and Supply
      1. Chapter Checklist
      2. Competitive Markets
      3. 4.1 Demand
        1. The Law of Demand
        2. Demand Schedule and Demand Curve
        3. Individual Demand and Market Demand
        4. Changes in Demand
          1. Prices of Related Goods
          2. Expected Future Prices
          3. Income
          4. Expected Future Income and Credit
          5. Number of Buyers
          6. Preferences
        5. Change in Quantity Demanded Versus Change in Demand
        6. Checkpoint 4.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 4.2 Supply
        1. The Law of Supply
        2. Supply Schedule and Supply Curve
        3. Individual Supply and Market Supply
        4. Changes in Supply
          1. Prices of Related Goods
            1. A Change in the Price of a Substitute in Production
            2. A Change in the Price of a Complement in Production
          2. Prices of Resources and Other Inputs
          3. Expected Future Prices
          4. Number of Sellers
          5. Productivity
        5. Change in Quantity Supplied Versus Change in Supply
        6. Checkpoint 4.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 4.3 Market Equilibrium
        1. Price: A Market’s Automatic Regulator
        2. Predicting Price Changes: Three Questions
        3. Effects of Changes in Demand
        4. Effects of Changes in Supply
        5. Effects of Changes in Both Demand and Supply
          1. Both Demand and Supply Change in the Same Direction
          2. Both Demand and Supply Change in Opposite Directions
        6. Checkpoint 4.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  9. Part 2 A Closer Look at Markets
    1. 5 Elasticities of Demand and Supply
      1. Chapter Checklist
      2. 5.1 The Price Elasticity of Demand
        1. Percentage Change in Price
          1. A Rise in Price
          2. A Fall in Price
          3. The Midpoint Method
        2. Percentage Change in Quantity Demanded
        3. Comparing the Percentage Changes in Price and Quantity
        4. Elastic and Inelastic Demand
        5. Influences on the Price Elasticity of Demand
          1. Availability of Substitutes
            1. Luxury Versus Necessity
            2. Narrowness of Definition
            3. Time Elapsed Since Price Change
          2. Proportion of Income Spent
        6. Computing the Price Elasticity of Demand
        7. Interpreting the Price Elasticity of Demand Number
        8. Elasticity Along a Linear Demand Curve
        9. Total Revenue and the Price Elasticity of Demand
        10. Checkpoint 5.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 5.2 The Price Elasticity of Supply
        1. Elastic and Inelastic Supply
        2. Influences on the Price Elasticity of Supply
          1. Production Possibilities
            1. Time Elapsed Since Price Change
          2. Storage Possibilities
        3. Computing the Price Elasticity of Supply
        4. Checkpoint 5.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 5.3 Cross Elasticity and Income Elasticity
        1. Cross Elasticity of Demand
        2. Income Elasticity of Demand
        3. Checkpoint 5.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 6 Efficiency and Fairness of Markets
      1. Chapter Checklist
      2. 6.1 Allocation Methods and Efficiency
        1. Resource Allocation Methods
          1. Market Price
          2. Command
          3. Majority Rule
          4. Contest
          5. First-Come, First-Served
          6. Sharing Equally
          7. Lottery
          8. Personal Characteristics
          9. Force
        2. Using Resources Efficiently
          1. Efficiency and the PPF
          2. Marginal Benefit
          3. Marginal Cost
          4. Efficient Allocation
        3. Checkpoint 6.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 6.2 Value, Price, and Consumer Surplus
        1. Demand and Marginal Benefit
        2. Consumer Surplus
        3. Checkpoint 6.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 6.3 Cost, Price, and Producer Surplus
        1. Supply and Marginal Cost
        2. Producer Surplus
        3. Checkpoint 6.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 6.4 Are Markets Efficient?
        1. Marginal Benefit Equals Marginal Cost
        2. Total Surplus Is Maximized
        3. The Invisible Hand
        4. Market Failure
          1. Underproduction and Overproduction
          2. Deadweight Loss
        5. Sources of Market Failure
          1. Price and Quantity Regulations
          2. Taxes and Subsidies
          3. Externalities
          4. Public Goods and Common Resources
          5. Monopoly
          6. High Transactions Costs
        6. Alternatives to the Market
        7. Checkpoint 6.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. 6.5 Are Markets Fair?
        1. It’s Not Fair If the Rules Aren’t Fair
        2. It’s Not Fair If the Result Isn’t Fair
        3. Compromise
        4. Checkpoint 6.5
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      7. Chapter Summary
        1. Key Points
        2. Key Terms
      8. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  10. Part 3 How Governments Influence the Economy
    1. 7 Government Actions in Markets
      1. Chapter Checklist
      2. 7.1 Price Ceilings
        1. A Rent Ceiling
          1. A Black Market
          2. Increased Search Activity
        2. Are Rent Ceilings Efficient?
        3. Are Rent Ceilings Fair?
        4. If Rent Ceilings Are So Bad, Why Do We Have Them?
        5. Checkpoint 7.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 7.2 Price Floors
        1. The Minimum Wage
          1. Increased Job-Search Activity
          2. Illegal Hiring
        2. Is the Minimum Wage Efficient?
        3. Is the Minimum Wage Fair?
        4. If the Minimum Wage Is So Bad, Why Do We Have It?
        5. Checkpoint 7.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 7.3 Production Quotas
        1. Production Quota: An Example
          1. Free Market Reference Point
          2. The Market with an Effective Production Quota
          3. Production Quota is Inefficient
          4. Production Quota is Unfair
        2. Checkpoint 7.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 8 Taxes
      1. Chapter Checklist
      2. 8.1 Taxes on Buyers and Sellers
        1. Tax Incidence
        2. Taxes and Efficiency
        3. Tax Burden
        4. Incidence, Inefficiency, and Elasticity
        5. Incidence, Inefficiency, and the Elasticity of Demand
          1. Perfectly Inelastic Demand: Buyer Pays and Efficient
          2. Perfectly Elastic Demand: Seller Pays and Inefficient
        6. Incidence, Inefficiency, and the Elasticity of Supply
          1. Perfectly Inelastic Supply: Seller Pays and Efficient
          2. Perfectly Elastic Supply: Buyer Pays and Inefficient
        7. Checkpoint 8.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 8.2 Income Taxes and Social Security Taxes
        1. The Effects of the Income Tax
          1. Tax on Labor Income
          2. Tax on Capital Income
          3. Tax on Income from Land and Other Unique Resources
        2. The Social Security Tax
        3. Checkpoint 8.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 8.3 Fairness and the Big Tradeoff
        1. The Benefits Principle
        2. The Ability-to-Pay Principle
          1. Horizontal Equity
          2. Vertical Equity
        3. Ability to Pay and Tax Progressivity
        4. The Big Tradeoff and Alternative Tax Proposals
          1. A Flat Tax
          2. The FairTax
        5. Checkpoint 8.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 9 Global Markets in Action
      1. Chapter Checklist
      2. 9.1 How Global Markets Work
        1. International Trade Today
        2. What Drives International Trade?
        3. Why the United States Imports T-Shirts
        4. Why the United States Exports Airplanes
        5. Checkpoint 9.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 9.2 Winners, Losers, and Net Gains From Trade
        1. Gains and Losses from Imports
        2. Gains and Losses from Exports
        3. Checkpoint 9.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 9.3 International Trade Restrictions
        1. Tariffs
          1. The Effects of a Tariff
            1. Rise in Price of a T-Shirt
            2. Decrease in Purchases
            3. Increase in Domestic Production
            4. Decrease in Imports
            5. Tariff Revenue
          2. Winners, Losers, and the Social Loss from a Tariff
            1. U.S. Producers of the Good Gain
            2. U.S. Consumers of the Good Lose
            3. U.S. Consumers Lose More Than U.S. Producers Gain
        2. Import Quotas
          1. The Effects of an Import Quota
          2. Winners, Losers, and the Social Loss from an Import Quota
        3. Other Import Barriers
          1. Health, Safety, and Regulation Barriers
          2. Voluntary Export Restraints
        4. Export Subsidies
        5. Checkpoint 9.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 9.4 The Case Against Protection
        1. Three Traditional Arguments for Protection
          1. The National Security Argument
          2. The Infant-Industry Argument
          3. The Dumping Argument
            1. Predatory Pricing
            2. Subsidy
        2. Four Newer Arguments for Protection
          1. Saves Jobs
          2. Allows Us to Compete with Cheap Foreign Labor
          3. Brings Diversity and Stability
          4. Penalizes Lax Environmental Standards
        3. Why Is International Trade Restricted?
        4. Checkpoint 9.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  11. Part 4 Market Failure and Public Policy
    1. 10 Externalities
      1. Chapter Checklist
      2. Externalities in our Daily Lives
        1. Negative Production Externalities
        2. Positive Production Externalities
        3. Negative Consumption Externalities
        4. Positive Consumption Externalities
      3. 10.1 Negative Externalities: Pollution
        1. Private Costs and Social Costs
          1. Valuing an External Cost
          2. External Cost and Output
        2. Production and Pollution: How Much?
        3. Establish Property Rights
          1. Use an Abatement Technology
          2. Produce Less and Pollute Less
          3. The Coase Theorem
          4. Application of the Coase Theorem
          5. Efficient Market Equilibrium With Property Rights
        4. Mandate Clean Technology
        5. Tax or Cap and Price Pollution
          1. Taxes
          2. Cap-and-Trade
        6. Checkpoint 10.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 10.2 Positive Externalities: Education
        1. Private Benefits and Social Benefits
        2. Government Actions in the Face of External Benefits
          1. Public Provision
          2. Private Subsidies
            1. Public Provision Versus Private Subsidy
          3. Vouchers
            1. Do Vouchers Beat Public Provision and Subsidy?
        3. Checkpoint 10.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 11 Public Goods and Common Resources
      1. Chapter Checklist
      2. 11.1 Classifying Goods and Resources
        1. Excludable
        2. Rival
        3. A Fourfold Classification
          1. Private Goods
          2. Public Goods
          3. Common Resources
          4. Natural Monopoly Goods
        4. Checkpoint 11.1
          1. Practice Problems
          2. Solutions to Practice Problems
      3. 11.2 Public Goods and The Free-Rider Problem
        1. The Free-Rider Problem
        2. The Marginal Benefit from a Public Good
        3. The Marginal Cost of a Public Good
        4. The Efficient Quantity of a Public Good
        5. Private Provision: Underproduction
        6. Public Provision: Efficient Production
        7. Obstacles to Efficient Public Provision
          1. Determining Benefits and Costs
          2. Bureaucrats’ Goals and Rationally Uninformed Voters
          3. Limited Funds
        8. Checkpoint 11.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 11.3 The Tragedy of The Commons
        1. Unsustainable Use of a Common Resource
        2. Inefficient Use of a Common Resource
          1. Marginal Social Cost
          2. Marginal Social Benefit and Demand
          3. Overfishing Equilibrium
          4. Efficient Equilibrium
          5. Deadweight Loss from Overfishing
        3. Using the Commons Efficiently
          1. Property Rights
          2. Production Quotas
          3. Individual Transferable Quotas
        4. Checkpoint 11.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 12 Private Information and Healthcare Markets
      1. Chapter Checklist
      2. 12.1 The Lemons Problem and its Solution
        1. A Market for Used Cars with a Lemons Problem
          1. Buyers’ Decisions and Demand
          2. Sellers’ Decisions and Supply
          3. The Market Outcome
          4. Adverse Selection
        2. A Used-Car Market with Dealers’ Warranties
          1. Pooling Equilibrium and Separating Equilibrium
        3. Checkpoint 12.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 12.2 Information Problems in Insurance Markets
        1. Insurance Markets
        2. Asymmetric Information in Insurance
          1. Moral Hazard
          2. Adverse Selection
        3. Screening in Insurance Markets
          1. No-Claim Bonus
          2. Deductible
        4. Separating Equilibrium with Screening
        5. Checkpoint 12.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      4. 12.3 The Economics of Healthcare
        1. Healthcare Market Failure
          1. Asymmetric Information
            1. Adverse Selection and Moral Hazard in Health Insurance
            2. Moral Hazard in Healthcare Services
          2. Underestimation of Benefit
          3. Underestimation of Future Needs
          4. Inequality in the Ability to Pay
        2. Alternative Public Choice Solutions
          1. Universal Coverage, Single Payer
          2. Private and Government Insurance
            1. Inefficient Overproduction?
            2. Uncontrolled Expenditure
          3. Obamacare
        3. A Reform Idea?
        4. Checkpoint 12.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  12. Part 5 A Closer Look at Decision Makers
    1. 13 Consumer Choice and Demand
      1. Chapter Checklist
      2. 13.1 Consumption Possibilities
        1. The Budget Line
        2. A Change in the Budget
        3. Changes in Prices
          1. A Fall in the Price of Water
          2. A Rise in the Price of Water
        4. Prices and the Slope of the Budget Line
        5. Checkpoint 13.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 13.2 Marginal Utility Theory
        1. Total Utility
        2. Marginal Utility
        3. Graphing Tina’s Utility Schedules
        4. Maximizing Total Utility
          1. Allocate the Available Budget
          2. Equalize the Marginal Utility Per Dollar
            1. Calculating the Marginal Utility Per Dollar
            2. Tina’s Utility-Maximizing Choice
        5. Finding an Individual Demand Curve
        6. Checkpoint 13.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 13.3 Efficiency, Price, and Value
        1. Consumer Efficiency
        2. The Paradox of Value
          1. Consumer Surplus
        3. Checkpoint 13.3
          1. Practice Problems
          2. Solutions to Practice Problems
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
      7. Appendix: Indifference Curves
        1. Appendix Checkpoint
          1. Study Plan Problems and Applications
          2. Instructor Assignable Problems and Applications
          3. Key Terms
    2. 14 Production and Cost
      1. Chapter Checklist
      2. 14.1 Economic Cost and Profit
        1. The Firm’s Goal
        2. Accounting Cost and Profit
        3. Opportunity Cost
          1. Explicit Costs and Implicit Costs
        4. Economic Profit
        5. Checkpoint 14.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
        6. Short Run and Long Run
      3. 14.2 Short-Run Production
        1. Total Product
        2. Marginal Product
          1. Increasing Marginal Returns
          2. Decreasing Marginal Returns
        3. Average Product
        4. Checkpoint 14.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 14.3 Short-Run Cost
        1. Total Cost
        2. Marginal Cost
        3. Average Cost
        4. Why the Average Total Cost Curve Is U-Shaped
        5. Cost Curves and Product Curves
        6. Shifts in the Cost Curves
          1. Technology
          2. Prices of Factors of Production
        7. Checkpoint 14.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 14.4 Long-Run Cost
        1. Plant Size and Cost
          1. Economies of Scale
            1. Specialization of Labor
            2. Specialization of Capital
          2. Diseconomies of Scale
          3. Constant Returns to Scale
        2. The Long-Run Average Cost Curve
          1. Economies and Diseconomies of Scale
        3. Checkpoint 14.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  13. Part 6 Prices, Profits, And industry Performance
    1. 15 Perfect Competition
      1. Chapter Checklist
      2. Market Types
        1. Perfect Competition
        2. Other Market Types
      3. 15.1 A Firm’s Profit-Maximizing Choices
        1. Price Taker
        2. Revenue Concepts
        3. Profit-Maximizing Output
        4. Marginal Analysis and the Supply Decision
        5. Temporary Shutdown Decision
          1. Loss When Shut Down
          2. Loss When Producing
          3. The Shutdown Point
        6. The Firm’s Short-Run Supply Curve
        7. Checkpoint 15.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 15.2 Output, Price, and Profit In The Short Run
        1. Market Supply in the Short Run
        2. Short-Run Equilibrium in Normal Times
        3. Short-Run Equilibrium in Good Times
        4. Short-Run Equilibrium in Bad Times
        5. Checkpoint 15.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 15.3 Output, Price, and Profit In The Long Run
        1. Entry and Exit
          1. The Effects of Entry
        2. The Effects of Exit
        3. Change in Demand
        4. Technological Change
        5. Is Perfect Competition Efficient?
        6. Is Perfect Competition Fair?
        7. Checkpoint 15.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 16 Monopoly
      1. Chapter Checklist
      2. 16.1 Monopoly and How it Arises
        1. No Close Substitute
        2. Barrier to Entry
          1. Natural Barrier to Entry
          2. Legal Barrier to Entry
          3. Ownership Barrier to Entry
        3. Monopoly Price-Setting Strategies
          1. Single Price
          2. Price Discrimination
        4. Checkpoint 16.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 16.2 Single-Price Monopoly
        1. Price and Marginal Revenue
        2. Marginal Revenue and Elasticity
        3. Output and Price Decision
        4. Checkpoint 16.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 16.3 Monopoly and Competition Compared
        1. Output and Price
        2. Is Monopoly Efficient?
        3. Is Monopoly Fair?
        4. Rent Seeking
          1. Buy a Monopoly
          2. Create a Monopoly
          3. Rent-Seeking Equilibrium
        5. Checkpoint 16.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 16.4 Price Discrimination
        1. Price Discrimination and Consumer Surplus
          1. Discriminating Among Groups of Buyers
          2. Discriminating Among Units of a Good
        2. Profiting by Price Discriminating
        3. Perfect Price Discrimination
        4. Price Discrimination and Efficiency
        5. Checkpoint 16.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. 16.5 Monopoly Regulation
        1. Efficient Regulation of a Natural Monopoly
        2. Second-Best Regulation of a Natural Monopoly
          1. Average Cost Pricing
          2. Government Subsidy
          3. And the Second-Best Is…
          4. Rate of Return Regulation
          5. Price Cap Regulation
        3. Checkpoint 16.5
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      7. Chapter Summary
        1. Key Points
        2. Key Terms
      8. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 17 Monopolistic Competition
      1. Chapter Checklist
      2. 17.1 What is Monopolistic Competition?
        1. Describing Monopolistic Competition
          1. Large Number of Firms
            1. Small Market Share
            2. No Market Dominance
            3. Collusion Impossible
          2. Product Differentiation
          3. Competing on Price, Quality, and Features
            1. Price
            2. Quality
            3. Features
          4. Advertising
          5. Entry and Exit
        2. Identifying Monopolistic Competition
          1. The Four-Firm Concentration Ratio
          2. The Herfindahl-Hirschman Index
          3. Limitations of Concentration Measures
            1. Geographical Scope of the Market
            2. Barriers to Entry and Firm Turnover
        3. Checkpoint 17.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 17.2 Output and Price Decisions
        1. The Firm’s Profit-Maximizing Decision
        2. Profit Maximizing Might Be Loss Minimizing
        3. Long Run: Zero Economic Profit
        4. Monopolistic Competition and Perfect Competition
          1. Excess Capacity
          2. Markup
        5. Is Monopolistic Competition Efficient?
          1. Deadweight Loss
          2. Making the Relevant Comparison
          3. The Bottom Line
        6. Checkpoint 17.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 17.3 Innovation and Advertising
        1. Design and Quality Decision
        2. Advertising
        3. The Demand for Advertising
          1. Advertising and Cost
          2. Advertising and Demand
          3. Using Advertising to Signal Quality
          4. Brand Names
        4. The Supply of Advertising
          1. Two-Sided Market
          2. Profit-Maximizing Decisions
        5. Equilibrium and Efficiency in the Advertising Market
        6. Checkpoint 17.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    4. 18 Oligopoly
      1. Chapter Checklist
      2. 18.1 What is Oligopoly?
        1. Small Number of Firms
          1. Interdependence
          2. Temptation to Collude
        2. Barriers to Entry
        3. Identifying Oligopoly
        4. Checkpoint 18.1
          1. Practice Problems
          2. Solutions to Practice Problems
      3. 18.2 The Oligopolists’ Dilemma
        1. Monopoly Outcome
          1. Cartel to Achieve Monopoly Outcome
        2. Perfect Competition Outcome
        3. Other Possible Cartel Breakdowns
          1. Boeing Increases Output to 4 Airplanes a Week
          2. Airbus Increases Output to 4 Airplanes a Week
          3. Boeing Increases Output to 5 Airplanes a Week
        4. The Oligopoly Cartel Dilemma
        5. Checkpoint 18.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 18.3 Game Theory
        1. What Is a Game?
        2. The Prisoners’ Dilemma
          1. Rules
          2. Strategies
          3. Payoffs
          4. Equilibrium
          5. Not the Best Outcome
        3. The Duopolists’ Dilemma
        4. The Payoff Matrix
          1. Equilibrium of the Duopolists’ Dilemma
          2. Collusion Is Profitable but Difficult to Achieve
        5. Advertising and Research Games in Oligopoly
          1. Advertising Game
          2. Research and Development Game
        6. Repeated Games
        7. Is Oligopoly Efficient?
        8. Checkpoint 18.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 18.4 Antitrust Law
        1. The Antitrust Laws
        2. Three Antitrust Policy Debates
          1. Resale Price Maintenance
            1. Inefficient Resale Price Maintenance
            2. Efficient Resale Price Maintenance
          2. Predatory Pricing
          3. Tying Arrangements
        3. Recent Antitrust Showcase: The United States Versus Microsoft
          1. The Case Against Microsoft
          2. Microsoft’s Response
          3. The Outcome
        4. Merger Rules
        5. Checkpoint 18.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  14. Part 7 Incomes and Inequality
    1. 19 Markets for Factors of Production
      1. Chapter Checklist
      2. The Anatomy of Factor Markets
      3. 19.1 The Demand for A Factor of Production
        1. Value of Marginal Product
          1. The Value of Marginal Product Curve
        2. A Firm’s Demand for Labor
        3. A Firm’s Demand for Labor Curve
        4. Changes in the Demand for Labor
          1. The Price of the Firm’s Output
          2. The Prices of Other Factors of Production
          3. Technology
        5. Checkpoint 19.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 19.2 Labor Markets
        1. The Supply of Labor
          1. Market Supply Curve
        2. Influences on the Supply of Labor
          1. Adult Population
          2. Preferences
          3. Time in School and Training
        3. Competitive Labor Market Equilibrium
        4. Labor Unions
          1. A Union Enters a Competitive Labor Market
          2. How Labor Unions Try to Increase the Demand for Labor
        5. Checkpoint 19.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 19.3 Capital and Natural Resource Markets
        1. Capital Markets
        2. Land Markets
        3. Nonrenewable Natural Resource Markets
          1. The Quantity of a Nonrenewable Natural Resource
          2. The Supply of a Nonrenewable Natural Resource
          3. Equilibrium in a Nonrenewable Natural Resource Market
        4. Checkpoint 19.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 20 Economic Inequality
      1. Chapter Checklist
      2. 20.1 Measuring Economic Inequality
        1. Lorenz Curves
        2. Inequality over Time
        3. Poverty
        4. Economic Mobility
          1. Mobility Through the Income Quintiles
          2. Mobility In and Out of Poverty
          3. The Sources of Economic Mobility
        5. Checkpoint 20.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 20.2 How economic Inequality Arises
        1. Human Capital
          1. The Demand for High-Skilled and Low-Skilled Labor
          2. The Supply of High-Skilled and Low-Skilled Labor
          3. Wage Rates of High-Skilled and Low-Skilled Labor
        2. Discrimination
        3. Financial and Physical Capital
        4. Entrepreneurial Ability
        5. Personal and Family Characteristics
        6. Checkpoint 20.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 20.3 Income Redistribution
        1. How Governments Redistribute Income
          1. Income Taxes
          2. Income Maintenance Programs
            1. Social Security Programs
            2. Unemployment Compensation
            3. Welfare Programs
          3. Subsidized Services
        2. The Scale of Income Redistribution
        3. Why We Redistribute Income
          1. Normative Theories of Income Redistribution
          2. Positive Theories of Income Redistribution
        4. The Major Welfare Challenge
          1. The Current Approach: TANF
          2. Negative Income Tax
        5. Checkpoint 20.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  15. Part 8 Monitoring the Macroeconomy
    1. 21 GDP: A Measure of Total Production and Income
      1. Chapter Checklist
      2. 21.1 GDP, Income, and Expenditure
        1. GDP Defined
          1. Value Produced
          2. What Produced
          3. Where Produced
          4. When Produced
        2. Circular Flows in the U.S. Economy
          1. Consumption Expenditure
          2. Investment
          3. Government Expenditure on Goods and Services
          4. Net Exports of Goods and Services
          5. Total Expenditure
          6. Income
        3. Expenditure Equals Income
          1. The value of production equals income equals expenditure.
        4. Checkpoint 21.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 21.2 Measuring U.S. GDP
        1. The Expenditure Approach
          1. Expenditures Not in GDP
            1. Used Goods
            2. Financial Assets
        2. The Income Approach
          1. Wage Income
          2. Interest, Rent, and Profit Income
          3. Net Domestic Product at Factor Cost
          4. From Factor Cost to Market Price
          5. From Net Product to Gross Product
          6. Statistical Discrepancy
        3. GDP and Related Measures of Production and Income
          1. Gross National Product
          2. Disposable Personal Income
        4. Real GDP and Nominal GDP
        5. Calculating Real GDP
        6. Using the Real GDP Numbers
        7. Checkpoint 21.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 21.3 The Uses and Limitations of Real GDP
        1. The Standard of Living Over Time
        2. Tracking the Course of the Business Cycle
        3. The Standard of Living Among Countries
        4. Goods and Services Omitted from GDP
          1. Household Production
          2. Underground Production
          3. Leisure Time
          4. Environment Quality
        5. Other Influences on the Standard of Living
          1. Health and Life Expectancy
          2. Political Freedom and Social Justice
        6. Checkpoint 21.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
      7. Appendix: Measuring Real GDP
    2. 22 Jobs and Unemployment
      1. Chapter Checklist
      2. 22.1 Labor Market Indicators
        1. Current Population Survey
        2. Population Survey Criteria
        3. Three Labor Market Indicators
          1. The Unemployment Rate
          2. The Employment–Population Ratio
          3. The Labor Force Participation Rate
        4. Alternative Measures of Unemployment
          1. Marginally Attached Workers
          2. Part-Time Workers Who Want Full-Time Work
        5. Checkpoint 22.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 22.2 Labor Market Trends and Fluctuations
        1. Unemployment Rate
        2. The Participation Rate
          1. Downward Trend Since 2000
        3. Alternative Measures of Unemployment
        4. Checkpoint 22.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      4. 22.3 Unemployment and Full Employment
        1. Frictional Unemployment
        2. Structural Unemployment
        3. Cyclical Unemployment
        4. “Natural” Unemployment
          1. The Age Distribution of the Population
          2. The Pace of Structural Change
          3. The Real Wage Rate
          4. Unemployment Benefits
        5. Unemployment and Real GDP
        6. Checkpoint 22.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 23 The CPI and the Cost of Living
      1. Chapter Checklist
      2. 23.1 The Consumer Price Index
        1. Reading the CPI Numbers
        2. Constructing the CPI
        3. The CPI Market Basket
        4. The Monthly Price Survey
        5. Calculating the CPI
        6. Measuring Inflation and Deflation
        7. The Price Level, Inflation, and Deflation in the United States
        8. Checkpoint 23.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 23.2 The CPI and Other Price Level Measures
        1. Sources of Bias in the CPI
          1. New Goods Bias
          2. Quality Change Bias
          3. Commodity Substitution Bias
          4. Outlet Substitution Bias
        2. The Magnitude of the Bias
        3. Two Consequences of the CPI Bias
          1. Distortion of Private Contracts
          2. Increases in Government Outlays and Decreases in Taxes
        4. Alternative Consumer Price Indexes
          1. Chained Consumer Price Index (C-CPI)
          2. Personal Consumption Expenditures Price Index (PCEPI)
          3. PCEPI Excluding Food and Energy
        5. Checkpoint 23.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 23.3 Nominal and Real Values
        1. Dollars and Cents at Different Dates
        2. Nominal and Real Values in Macroeconomics
        3. Nominal GDP and Real GDP
        4. Nominal Wage Rate and Real Wage Rate
        5. Nominal Interest Rate and Real Interest Rate
        6. Checkpoint 23.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  16. Part 9 The Real Economy
    1. 24 Potential GDP and the Natural Unemployment Rate
      1. Chapter Checklist
      2. Macroeconomic Approaches and Pathways
        1. The Three Main Schools of Thought
          1. Classical Macroeconomics
          2. Keynesian Macroeconomics
          3. Monetarist Macroeconomics
        2. Today’s Consensus
        3. The Road Ahead
      3. 24.1 Potential GDP
        1. The Production Function
        2. The Labor Market
          1. The Demand for Labor
            1. The Demand for Labor in a Soda Factory
            2. Labor Demand Schedule and Labor Demand Curve
          2. The Supply of Labor
            1. Hours per Person
            2. Labor Force Participation
            3. Other Influences on Labor Supply Decisions
          3. Labor Market Equilibrium
          4. Full Employment and Potential GDP
        3. Checkpoint 24.1
          1. Practice Problem
          2. In the News
          3. Solution to Practice Problem
          4. Solution to In the News
      4. 24.2 The Natural Unemployment Rate
        1. Job Search
          1. Demographic Change
          2. Unemployment Benefits
          3. Structural Change
        2. Job Rationing
          1. Efficiency Wage
          2. The Minimum Wage
          3. Union Wage
          4. Job Rationing and Unemployment
        3. Checkpoint 24.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 25 Economic Growth
      1. Chapter Checklist
      2. 25.1 The Basics of Economic Growth
        1. Calculating Growth Rates
        2. The Magic of Sustained Growth
        3. Checkpoint 25.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 25.2 Labor Productivity Growth
        1. Labor Productivity
        2. Saving and Investment in Physical Capital
          1. Capital Accumulation and Diminishing Marginal Returns
          2. Illustrating the Law of Diminishing Marginal Returns
        3. Expansion of Human Capital and Discovery of New Technologies
          1. Illustrating the Effects of Human Capital and Technological Change
        4. Combined Influences Bring Labor Productivity Growth
        5. Checkpoint 25.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 25.3 Causes and Effects of Economic Growth
        1. Old Growth Theory
        2. New Growth Theory
          1. Choices and Innovation
            1. Human Capital Expansion and Choices
            2. Discoveries and Choices
            3. Discoveries and Profits
            4. Discoveries Used by All
            5. Replicating Activities
          2. Perpetual Motion
        3. Economic Growth and the Distribution of Income
          1. The Data
          2. The Explanations
        4. Checkpoint 25.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 25.4 Achieving Faster Growth
        1. Preconditions for Economic Growth
          1. Economic Freedom
          2. Property Rights
          3. Markets
        2. Policies to Achieve Faster Growth
          1. Create Incentive Mechanisms
          2. Encourage Saving
          3. Encourage Research and Development
          4. Encourage International Trade
          5. Improve the Quality of Education
        3. How Much Difference Can Policy Make?
        4. Checkpoint 25.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 26 Finance, Saving, and Investment
      1. Chapter Checklist
      2. 26.1 Financial Institutions and Financial Markets
        1. Some Finance Definitions
        2. Markets for Financial Capital
          1. Loan Markets
          2. Bond Markets
          3. Stock Markets
        3. Financial Institutions
          1. Investment Banks
          2. Commercial Banks
          3. Government-Sponsored Mortgage Lenders
          4. Pension Funds
          5. Insurance Companies
        4. Insolvency and Illiquidity
        5. Interest Rates and Asset Prices
        6. Checkpoint 26.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 26.2 The Loanable Funds Market
        1. Flows in the Loanable Funds Market
        2. The Demand for Loanable Funds
          1. Demand for Loanable Funds Curve
          2. Changes in the Demand for Loanable Funds
        3. The Supply of Loanable Funds
          1. The Supply of Loanable Funds Curve
          2. Changes in the Supply of Loanable Funds
            1. Disposable Income
            2. Wealth
            3. Expected Future Income
            4. Default Risk
          3. Shifts of the Supply of Loanable Funds Curve
        4. Equilibrium in the Loanable Funds Market
        5. Changes in Demand and Supply
        6. Checkpoint 26.2
          1. Practice Problem
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 26.3 Government in Loanable Funds Market
        1. A Government Budget Surplus
        2. A Government Budget Deficit
          1. The Ricardo-Barro Effect
        3. Checkpoint 26.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  17. Part 10 The Money Economy
    1. 27 The Monetary System
      1. Chapter Checklist
      2. 27.1 What is Money?
        1. Definition of Money
          1. A Commodity or Token
          2. Generally Accepted
          3. Means of Payment
        2. The Functions of Money
          1. Medium of Exchange
          2. Unit of Account
          3. Store of Value
        3. Money Today
          1. Currency
          2. Deposits
          3. Currency Inside the Banks Is Not Money
        4. Official Measures of Money: M1 and M2
          1. Are M1 and M2 Means of Payment?
        5. Checks, Credit Cards, Debit Cards, and Mobile Wallets
          1. Checks
          2. Credit Cards
          3. Debit Cards
          4. Mobile Wallets
        6. An Embryonic New Money: E-Cash
        7. Checkpoint 27.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 27.2 The Banking System
        1. Commercial Banks
          1. Bank Deposits
          2. Profit and Risk: A Balancing Act
          3. Reserves
          4. Liquid Assets
          5. Securities and Loans
          6. Bank Assets and Liabilities: The Relative Magnitudes
        2. Thrift Institutions
        3. Money Market Funds
        4. Checkpoint 27.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 27.3 The Federal Reserve System
        1. The Structure of the Federal Reserve
          1. The Chair of the Board of Governors
          2. The Board of Governors
          3. The Regional Federal Reserve Banks
          4. The Federal Open Market Committee
        2. The Fed’s Policy Tools
          1. Required Reserve Ratios
          2. Discount Rate
          3. Open Market Operations
          4. Extraordinary Crisis Measures
            1. Quantitative Easing (QE)
            2. Credit Easing
            3. Operation Twist
        3. How the Fed’s Policy Tools Work
        4. Checkpoint 27.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 27.4 Regulating the Quantity Of Money
        1. Creating Deposits by Making Loans
          1. The Monetary Base
          2. Desired Reserves
          3. Desired Currency Holding
        2. How Open Market Operations Change the Monetary Base
          1. The Fed Buys Securities
            1. A Commercial Bank Sells
            2. The Nonbank Public Sells
          2. The Fed Sells Securities
        3. The Multiplier Effect of an Open Market Operation
        4. The Money Multiplier
        5. Checkpoint 27.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 28 Money, Interest, and Inflation
      1. Chapter Checklist
      2. Where We are and Where We’re Heading
      3. 28.1 Money and The Interest Rate
        1. The Demand for Money
          1. Benefit of Holding Money
          2. Opportunity Cost of Holding Money
          3. Opportunity Cost: Nominal Interest Is a Real Cost
          4. The Demand for Money Schedule and Curve
        2. Changes in the Demand for Money
          1. The Price Level
          2. Real GDP
          3. Financial Technology
        3. The Supply of Money
        4. The Nominal Interest Rate
        5. Changing the Interest Rate
        6. Checkpoint 28.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 28.2 Money, The Price Level, and Inflation
        1. The Money Market in the Long Run
          1. The Long-Run Demand for Money
          2. The Value of Money
          3. Money Market Equilibrium in the Long Run
        2. A Change in the Quantity of Money
        3. The Price Level in a Baby-Sitting Club
        4. The Quantity Theory of Money
          1. The Velocity of Circulation and Equation of Exchange
          2. The Quantity Theory Prediction
        5. Inflation and the Quantity Theory of Money
          1. Constant Inflation
          2. A Change in the Inflation Rate
            1. Increase in Money Growth Rate
            2. Decrease in Money Growth Rate
        6. Hyperinflation
        7. Checkpoint 28.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 28.3 The Cost of Inflation
        1. Tax Costs
          1. Inflation Is a Tax
          2. Inflation, Saving, and Investment
        2. Shoe-Leather Costs
        3. Confusion Costs
        4. Uncertainty Costs
        5. How Big Is the Cost of Inflation?
        6. Checkpoint 28.3
          1. Practice Problems
          2. Solutions to Practice Problems
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  18. Part 11 Economic Fluctuations
    1. 29 Aggregate Supply and Aggregate Demand
      1. Chapter Checklist
      2. 29.1 Aggregate Supply
        1. Aggregate Supply Basics
          1. Why the AS Curve Slopes Upward
          2. Change in Output Rate
          3. Temporary Shutdowns and Restarts
          4. Business Failure and Startup
        2. Changes in Aggregate Supply
          1. Change in Potential GDP
          2. Change in Money Wage Rate
          3. Change in Money Prices of Other Resources
        3. Checkpoint 29.1
          1. Practice Problem
          2. In the News
          3. Solution to Practice Problem
          4. Solution to In the News
      3. 29.2 Aggregate Demand
        1. Aggregate Demand Basics
          1. The Buying Power of Money
          2. The Real Interest Rate
            1. Anna and Mika Again
          3. The Real Prices of Exports and Imports
            1. Anna’s and Mika’s Imports
        2. Changes in Aggregate Demand
          1. Expectations
          2. Fiscal Policy and Monetary Policy
          3. The World Economy
        3. The Aggregate Demand Multiplier
        4. Checkpoint 29.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 29.3 Explaining Economic Trends and Fluctuations
        1. Macroeconomic Equilibrium
        2. Three Types of Macroeconomic Equilibrium
          1. Adjustment toward Full Employment
        3. Economic Growth and Inflation Trends
        4. The Business Cycle
        5. Inflation Cycles
          1. Demand-Pull Inflation
          2. Cost-Push Inflation
        6. Deflation and the Great Depression
        7. Checkpoint 29.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 30 Aggregate Expenditure Multiplier
      1. Chapter Checklist
      2. 30.1 Expenditure Plans and Real GDP
        1. The Consumption Function
          1. Consumption Plans
          2. Marginal Propensity to Consume
          3. Other Influences on Consumption Expenditure
            1. Real Interest Rate
            2. Wealth and Expected Future Income
        2. Imports and Real GDP
        3. Checkpoint 30.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 30.2 Equilibrium Expenditure
        1. Induced Expenditure and Autonomous Expenditure
        2. Aggregate Planned Expenditure and Real GDP
        3. Equilibrium Expenditure
        4. Convergence to Equilibrium
          1. Convergence from Below Equilibrium
          2. Convergence from Above Equilibrium
        5. Checkpoint 30.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 30.3 Expenditure Multipliers
        1. The Basic Idea of the Multiplier
        2. The Size of the Multiplier
        3. The Multiplier and the MPC
        4. The Multiplier, Imports, and Income Taxes
        5. Business-Cycle Turning Points
        6. Checkpoint 30.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. 30.4 The AD Curve and Equilibrium Expenditure
        1. Deriving the AD Curve from Equilibrium Expenditure
        2. Checkpoint 30.4
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      6. Chapter Summary
        1. Key Points
        2. Key Terms
      7. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 31 The Short-Run Policy Tradeoff
      1. Chapter Checklist
      2. 31.1 The Short-Run Phillips Curve
        1. Aggregate Supply and the Short-Run Phillips Curve
          1. Unemployment and Real GDP
          2. Inflation and the Price Level
        2. Aggregate Demand Fluctuations
        3. Why Bother with the Phillips Curve?
        4. Checkpoint 31.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 31.2 Short-Run and Long-Run Phillips Curves
        1. The Long-Run Phillips Curve
        2. Expected Inflation
        3. The Natural Rate Hypothesis
        4. Changes in the Natural Unemployment Rate
        5. Have Changes in the Natural Unemployment Rate Changed the Tradeoff?
        6. Checkpoint 31.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 31.3 Influencing Inflation and Unemployment
        1. Influencing the Expected Inflation Rate
        2. Targeting the Unemployment Rate
          1. Reversing the Policy to Lower Inflation
          2. Inflation Reduction in Practice
        3. Checkpoint 31.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  19. Part 12 Macroeconomic Policy
    1. 32 Fiscal Policy
      1. Chapter Checklist
      2. 32.1 The Federal Budget
        1. The Institutions and Laws
          1. The Roles of the President and Congress
        2. Budget Balance and Debt
          1. A Personal Analogy
        3. The Federal Budget in Fiscal 2017
        4. A Fiscal Policy Challenge
        5. Generational Accounting
          1. Fiscal Imbalance
          2. Generational Imbalance
        6. Checkpoint 32.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 32.2 Fiscal Stimulus
        1. Fiscal Policy and Aggregate Demand
        2. Automatic Fiscal Policy
          1. Induced Taxes
          2. Needs-Tested Spending
          3. Automatic Stimulus
        3. Cyclical and Structural Budget Balances
        4. Discretionary Fiscal Policy
          1. The Government Expenditure Multiplier
          2. The Tax Multiplier
          3. The Transfer Payments Multiplier
          4. The Balanced Budget Multiplier
        5. A Successful Fiscal Stimulus
        6. Limitations of Discretionary Fiscal Policy
          1. Lawmaking Time Lag
          2. Shrinking Area of Lawmaker Discretion
          3. Estimating Potential GDP
          4. Economic Forecasting
        7. Checkpoint 32.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 32.3 The Supply Side: Potential GDP and Growth
        1. Full Employment and Potential GDP
        2. Fiscal Policy, Employment, and Potential GDP
          1. Public Goods and Productivity
          2. Taxes and Incentives
        3. Fiscal Policy and Potential GDP: A Graphical Analysis
          1. Full Employment With No Income Tax
          2. The Effects of the Income Tax
          3. Changes in the Tax Rate
        4. Taxes, Deficits, and Economic Growth
          1. Interest Rate Tax Wedge
          2. Deficits and Crowding Out
        5. The Supply-Side Debate
        6. Long-Run Fiscal Policy Effects
        7. Checkpoint 32.3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    2. 33 Monetary Policy
      1. Chapter Checklist
      2. 33.1 How The Fed Conducts Monetary Policy
        1. Monetary Policy Objectives
          1. Federal Reserve Act
          2. Goals: The Dual Mandate
          3. Means for Achieving the Goals
          4. Prerequisite for Achieving the Goals
        2. Operational “Maximum Employment” Goal
        3. Operational “Stable Prices” Goal
        4. Responsibility for Monetary Policy
          1. The Role of the Fed
          2. The Role of Congress
          3. The Role of the President
        5. Policy Instrument
          1. The Federal Funds Rate
          2. Interest Rate Decision-Making
        6. Hitting the Federal Funds Rate Target
        7. Restoring Financial Stability in a Financial Crisis
        8. Checkpoint 33.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 33.2 Monetary Policy Transmission
        1. Quick Overview
        2. Interest Rate Changes
        3. Exchange Rate Changes
        4. Money and Bank Loans
        5. The Long-Term Real Interest Rate
        6. Expenditure Plans
        7. The Fed Fights Recession
        8. The Fed Fights Inflation
        9. Loose Links and Long and Variable Lags
          1. Loose Links from Federal Funds Rate to Spending
          2. Time Lags in the Adjustment Process
        10. A Final Reality Check
        11. Checkpoint 33.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      4. 33.3 Alternative Monetary Policy Strategies
        1. An Interest Rate Rule
        2. A Monetary Base Rule
        3. Inflation Targeting
        4. Money Targeting Rule
        5. Checkpoint 33. 3
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      5. Chapter Summary
        1. Key Points
        2. Key Terms
      6. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
    3. 34 International Finance
      1. Chapter Checklist
      2. 34.1 Financing International Trade
        1. Balance of Payments Accounts
          1. Personal Analogy
        2. Borrowers and Lenders, Debtors and Creditors
        3. Current Account Balance
          1. Timing
          2. Free Trade Agreements and the Quantity of Trade
          3. Current Account Deficit, Budget Deficit, and Private Saving Deficit
        4. Checkpoint 34.1
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solution to In the News
      3. 34.2 The Exchange Rate
        1. Demand in the Foreign Exchange Market
        2. The Law of Demand for Foreign Exchange
          1. Exports Effect
          2. Expected Profit Effect
        3. Changes in the Demand for Dollars
          1. Interest Rates in the United States and Other Countries
          2. The Expected Future Exchange Rate
        4. Supply in the Foreign Exchange Market
        5. The Law of Supply of Foreign Exchange
          1. Imports Effect
          2. Expected Profit Effect
        6. Changes in the Supply of Dollars
          1. Interest Rates in the United States and Other Countries
          2. The Expected Future Exchange Rate
        7. Market Equilibrium
          1. Why Exchange Rates Are Volatile
        8. Exchange Rate Expectations
        9. Purchasing Power Parity
          1. Interest Rate Parity
        10. Monetary Policy and the Exchange Rate
        11. Pegging the Exchange Rate
        12. The People’s Bank of China in the Foreign Exchange Market
        13. Checkpoint 34.2
          1. Practice Problems
          2. In the News
          3. Solutions to Practice Problems
          4. Solutions to In the News
      4. Chapter Summary
        1. Key Points
        2. Key Terms
      5. Chapter Checkpoint
        1. Study Plan Problems and Applications
        2. Instructor Assignable Problems and Applications
        3. Multiple Choice Quiz
  20. Glossary
  21. Index
  22. Photo Credits
    1. The Pearson Series in Economics

Product information

  • Title: Foundations of Economics, 8th Edition
  • Author(s): Robin Bade, Michael Parkin
  • Release date: January 2017
  • Publisher(s): Pearson
  • ISBN: 9780134486819