Econ Usa 7E PA

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ISBN: 9780393926057 | 0393926052
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Copyright: 12/10/2004

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Now available in a carefully revised and updated Seventh Edition, the text continues to emphasize the real-world applications of the most current economic principles and data in a clear and inviting format.Carefully integrated with 28 half-hour video programs produced by the Educational Film Center in Annandale, Virginia, the text accessibly frames the concepts and issues students need to gain a thorough understanding of modern economics. Each video episode features original and archival film footage, newspaper clippings, graphics, animation, and expert commentary. One-third of the videos have been updated for the Seventh Edition.

Preface

xvii

PART 1 INTRODUCTION TO ECONOMICS

Prologue Economic Problems: A Sampler

(1)

Labor Productivity and Rising Living Standards

(1)

Unemployment and Inflation

(2)

Challenges Facing Emerging Market Economies

(2)

The Elimination of Poverty

(1)

Looking Ahead

(2)

What Is Economics?

(25)

What Is Economics?

(3)

Opportunity Cost: A Fundamental Concept

(3)

The Impact of Economics on Society

(1)

The Methodology of Economics

(3)

Land Use in Alaska

(2)

Graphs and Relationships

(2)

The Tasks of an Economic System

(3)

Eliminating Brown Lung Disease

(2)

Exploring Further: A Simple Introductory Model of the Economic System

(7)

Adam Smith, Father of Modern Economics

(4)

Producing Both Guns and Butter, 1939 to 1941

(3)

Review and Practice

(3)

Markets and Prices

(33)

Consumers and Firms

(1)

Markets

(1)

The Demand Side of a Market

(5)

The Supply Side of a Market

(2)

Equilibrium Price

(2)

Actual Price

(1)

The Price System and the Determination of What Is Produced

(1)

The Price System and the Determination of How Goods Are Produced

(2)

How the Price System Determines What Is Produced: Low-Cost Homes after World War II

(1)

The Price System and the Determination of Who Gets What

(1)

The Price System and Economic Growth

(1)

The Circular Flows of Money and Products

(1)

Limitations of the Price System

(3)

The Food Stamp Program and the Allocation of Resources

(1)

Exploring Further: Effects of Shifts in the Demand and Supply Curves

(3)

Review and Practice

(4)

The Key Role of Saving and Investment in Raising Per-Capita Income

(6)

PART 2 NATIONAL INCOME AND OUTPUT

National Income and Product

(20)

Measuring Gross Domestic Product

(2)

Adjusting GDP for Price Changes

(5)

Understanding the New Estimates of GDP

(4)

Using Value-Added to Calculate GDP

(2)

The Limitations of GDP

(1)

Two Approaches to GDP

(1)

Using GDP Estimates in World War II

(1)

The Expenditures Approach to GDP

(3)

The Income Approach to GDP

(3)

Review and Practice

(2)

Business Fluctuations and Unemployment

(27)

Business Fluctuations

(4)

The Aggregate Demand Curve

(2)

The Aggregate Supply Curve

(2)

Why the Short-Run Aggregate Supply Curve Slopes Upward to the Right

(1)

Why the Short-Run Aggregate Supply Curve Gets Steeper

(1)

National Output and the Price Level

(3)

Unemployment

101

(5)

Unemployment: The Classical View

103

(1)

Kark Marx on Unemployment

104

(2)

The Costs of Unemployment

106

(2)

John Maynard Keynes and the Great Depression

107

(1)

Exploring Further: Effects of Shifts in the Aggregate Demand and Short-Run Aggregate Supply Curves

108

(4)

Exploring Further: The Long-Run Aggregate Supply Curve

112

(1)

Review and Practice

113

(3)

The Determination of National Output and the Keynesian Multiplier

116

(27)

The Consumption Function

117

(4)

The Saving Function

121

(2)

Determinants of Investment

123

(1)

The Investment Decision

124

(1)

The Equilibrium Level of Gross Domestic Product

125

(1)

Aggregate Flows of Income and Expenditure

125

(5)

Reconciling Aggregate Demand and Supply Curves with an Income-Expenditure Analysis

130

(1)

Changes in Equilibrium Output

131

(1)

The Volatility of Investment

131

(2)

Effects of Changes in Intended Investment

133

(2)

Keynes's Criticisms of the Classical View

134

(1)

The Multiplier

135

(2)

Investment and a Great Crash

136

(1)

Exploring Further: Nonincome Determinants of Consumption

137

(3)

Review and Practice

140

(3)

Fiscal Policy and National Output

143

(24)

Government Expenditure and Gross Domestic Product

143

(3)

Taxation and Gross Domestic Product

146

(3)

Fiscal Policy: Aggregate Demand and Supply Curves

149

(3)

Makers of Fiscal Policy

152

(2)

The Employment Act of 1946

154

(1)

Automatic Stabilizers

154

(1)

President Eisenhower and Automatic Stabilizers

156

Discretionary Fiscal Policy

155

(4)

President Kennedy and the Tax Cut of 1964

158

(1)

Size and Nature of Government Activities

159

(3)

Exploring Further: Including Net Exports in the Simple Keynesian Model

162

(2)

Review and Practice

164

(3)

Inflation

167

(20)

What Is Inflation?

167

(2)

The Measurement of Inflation

169

(1)

Impact of Inflation

170

(4)

Demand-Side and Supply-Side Inflation

174

(1)

The Phillips Curve

175

(4)

Demand-Side Inflation and the Tax Surcharge of 1968

176

(2)

What Is the NAIRU?

178

(1)

Review and Practice

179

(3)

The Treasury Launches a New Type of Security

182

(5)

PART 3 MONEY, BANKING, AND STABILIZATION POLICY

Money and the Banking System

187

(24)

What Is Money?

187

(2)

The Money Supply, Narrowly Defined

189

(2)

The Money Supply, Broadly Defined

191

(1)

Commercial Banks in the United States

192

(1)

How Banks Operate

193

(2)

The Balance Sheet of an Individual Bank

195

(1)

Fractional-Reserve Banking

196

(3)

The Safety of the Banks

199

(3)

The Failure of the Knickerbocker Trust in 1907

200

(2)

How Banks Can Create Money

202

(5)

Comparing the U.S. Savings and Loan Crisis and the Japanese Banking Crisis

206

(1)

Exploring Further: A General Proposition Concerning the Effect of Excess Reserves

207

(1)

Review and Practice

208

(3)

The Federal Reserve and Monetary Policy

211

(19)

The Aims of Monetary Policy

211

(2)

Makers of Monetary Policy

213

(1)

The Federal Reserve System

214

(1)

Functions of the Federal Reserve

215

(1)

The Federal Reserve Banks: Their Consolidated Balance Sheet

216

(1)

Open Market Operations

217

(2)

Changes in Legal Reserve Requirements

219

(3)

The Independence of the Federal Reserve

222

(1)

Changes in the Discount Rate

222

(2)

Exploring Further: More on the Effects of Monetary Policy

224

(4)

Crisis Management by the Fed

226

(2)

Review and Practice

228

(2)

Supply Shocks and Inflation

230

(17)

Supply-Side Inflation

230

(1)

Difficulties in Distinguishing Supply-Side from Demand-Side Inflation

231

(1)

The Instability of the Phillips Curve

232

(3)

Stagflation

234

(1)

The Transitory Nature of the Trade-off between Inflation and Unemployment

235

(1)

The Importance of Expectations

235

(2)

How Serious of a Threat Is Deflation?

236

(1)

How the Phillips Curve Self-Destructs: An Example

237

(2)

Wage and Price Controls

239

(1)

Incomes Policies

240

(4)

Exploring Further: The Fed and Supply-Side Inflation

244

(1)

Review and Practice

245

(2)

Productivity, Growth, and Technology Policy

247

(18)

Growth of Per-Capita Output in the United States

247

(3)

The Productivity Slowdown and Its Consequences

250

(2)

Causes of Productivity Swings

252

(2)

Has There Been a Decline in the U.S. Innovation Rate?

254

(1)

Various Mechanisms for Additional Federal Support of Civilian Technology

255

(2)

Asian Growth: Miraculous or Not?

256

(1)

Importance of Investment in Plant and Equipment

257

(2)

How Widespread Was the Productivity Boom of the Late 1990s?

258

(1)

Importance of the General Economic Climate

259

(2)

Supply-Side Economics and Tax Cuts

260

(1)

Exploring Further: Supply-Side Government Policies and the Aggregate Supply Curve

261

(1)

Review and Practice

262

(3)

Surpluses, Deficits, Public Debt, and the Federal Budget

265

(21)

How Big Are U.S. Budget Surpluses or Deficits?

265

(1)

Controversies over Deficits

266

(1)

Are Budget Deficits Inflationary?

267

(1)

Do Budget Deficits Crowd Out Private Investment?

268

(3)

The Structural Deficit

271

(1)

The National Debt: Size and Growth

272

(3)

The Political Economy of Budget Deficits

275

(1)

Alternative Philosophies Regarding the Federal Budget

276

(2)

Can We Afford Social Security and Medicare?

278

(1)

Changes in Public Attitudes

278

(4)

What Happened to the Federal Budget Surplus

280

(2)

Recent U.S. Experience with Fiscal Policy and Deficits

282

(2)

Review and Practice

284

(2)

Monetary Policy, Interest Rates, and Economic Activity

286

(30)

The Value of Money

286

(3)

Inflation and the Quantity of Money

289

(1)

Unemployment and the Quantity of Money

289

(1)

Determinants of the Quantity of Money

290

(1)

The Demand for Money

290

(3)

Changes in the Money Supply and National Output

293

(3)

Effects of a Change in the Money Supply: No Assumption of a Constant Price Level

296

(1)

Closing a Recessionary Gap

297

(1)

Closing an Inflationary Gap

298

(1)

The Monetarists

299

(1)

The Velocity of Money

300

(1)

The Equation of Exchange

301

(1)

The Crude Quantity Theory of Money and Prices

302

(2)

The Velocity of Money and the Fed's 1975 Decision

304

(1)

When Is Monetary Policy Tight or Easy?

304

(2)

Should the Fed Pay More Attention to Interest Rates or the Money Supply?

306

(2)

Problems in Formulating Monetary Policy

308

(2)

How Much Attention Should the Fed Pay to the Stock Market?

309

(1)

Should the Fed Be Governed by a Rule?

310

(1)

Exploring Further: More on the Velocity of Money

311

(3)

Review and Practice

314

(2)

Controversies over Stabilization Policy

316

(25)

Monetarists versus Keynesians: The Central Debate of the 1960s and 1970s

316

(2)

Supply-Side Economists

318

(1)

The New Classical Macroeconomists

318

(1)

Rational Expectations

318

(2)

Inflation Targeting by Central Banks

318

(2)

Unemployment and Business Fluctuations

320

(1)

Reactions Pro and Con

321

(2)

Recession as a Means to Stop Inflation in 1982

322

(1)

Real Business Cycle Models

323

(1)

The Effect of a Supply Shock

324

(1)

Responses to the Models

325

(1)

Enthusiasm and Skepticism

325

(1)

The New Keynesians

326

(1)

How Do New Keynesians Differ from Old Keynesians?

327

(1)

Menu Costs and Sticky Prices

327

(2)

Long-Term Labor Contracts and Sticky Wages

329

(1)

Implicit Contracts

330

(1)

Policy Activism: Pro and Con

331

(1)

Policy Rules and Time Inconsistency

332

(1)

The New Keynesian Response

333

(1)

Divergent Political Beliefs

334

(1)

Review and Practice

335

(2)

Has the Business Cycle Been Tamed?

337

(4)

PART 4 ECONOMIC DECISION MAKING: THE FIRM, THE CONSUMER, AND SOCIETY

The Business Firm: Organization, Motivation, and Optimal Input Decisions

341

(22)

General Motors: A Study

342

(3)

Studebaker and the Low-Volume Trap

344

(1)

U.S. Firms, Large and Small

345

(1)

Proprietorships

345

(1)

Partnerships

346

(1)

Corporations

347

(1)

Motivation of the Firm

348

(1)

Technology, Inputs, and the Production Function

348

(3)

The Collapse of Enron and the Importance of Corporate Governance

349

(2)

Types of Inputs

351

(1)

The Short Run and the Long Run

352

(1)

Average Product of an Input

353

(1)

Marginal Product of an Input

353

(2)

The Law of Diminishing Marginal Returns

355

(1)

The Coca-Cola Company and Input Costs

356

(1)

The Optimal Input Decision

356

(2)

Exploring Further: How to Produce Kansas Corn

358

(2)

Review and Practice

360

(3)

Getting behind the Demand and Supply Curves

363

(29)

The Demand Curve

363

(1)

Consumer Expenditures

364

(2)

A Model of Consumer Behavior

366

(3)

The Equilibrium Market Basket

369

(2)

The Consumer's Demand Curve

371

(1)

Deriving the Market Demand Curve

372

(2)

The Supply Curve

374

(1)

What Are Costs?

374

(1)

Short-Run Cost Functions

375

(4)

Conserving Water in a California Drought

376

(3)

Average Costs in the Short Run

379

(4)

Oil Price Increases and Drilling Activity

380

(3)

Marginal Cost in the Short Run

383

(3)

Long-Run Average Cost Function

386

(1)

Returns to Scale

387

(2)

Review and Practice

389

(3)

Market Demand and Price Elasticity

392

(27)

Market Demand Curves

392

(3)

The Price Elasticity of Demand

395

(3)

Determinants of the Price Elasticity of Demand

398

(2)

Price Elasticity and Total Money Expenditure

400

(3)

Instability of Farm Prices and the Price Elasticity of Demand

401

(2)

Industry and Firm Demand Curves

403

(1)

Income Elasticity of Demand

404

(1)

Cross Elasticity of Demand

404

(1)

Exploring Further: The Farm Problem

405

(11)

Review and Practice

416

(3)

Economic Efficiency, Market Supply, and Perfect Competition

419

(22)

Market Structure and Economic Performance

420

(2)

Perfect Competition

422

(1)

The Output of the Firm

423

(6)

The Market Supply Curve

429

(2)

Price and Output: The Short Run

431

(1)

Price and Output: The Long Run

432

(2)

The Allocation of Resources Under Perfect Competition: A More-Detailed View

434

(4)

Price Ceilings and Price Supports

436

(1)

Starting from Scratch: The Transition from Communism to Capitalism

437

(1)

Review and Practice

438

(3)

Monopoly and Its Regulation

441

(26)

Causes of Monopoly

442

(1)

Demand Curve and Marginal Revenue under Monopoly

443

(3)

Price and Output: The Short Run

446

(4)

Price and Output: The Long Run

450

(1)

Perfect Competition and Monopoly: A Comparison

450

(2)

The Case against Monopoly

452

(4)

John D. Rockefeller and Standard Oil of Ohio

453

(3)

Public Regulation of Monopoly

456

(2)

Efficiency Incentives

458

(2)

Network Effects and the Case against Microsoft

459

(1)

The Deregulation Movement

460

(1)

Exploring Further: The Defense of Monopoly Power

460

(4)

The Saga of AT&T

462

(2)

Review and Practice

464

(3)

Monopolistic Competition, Oliogopoly, and Antitrust Policy

467

(25)

Monopolistic Competition and Oligopoly: Their Major Characteristics

468

(1)

Monopolistic Competition

468

(1)

Price and Output under Monopolistic Competition

468

(4)

Oligopoly

472

(1)

Oligopoly Models

472

(1)

The Theory of Games

473

(1)

Definitions of Terms

473

(1)

A Simple Two-Person Game

473

(2)

Collusion and Cartels

475

(1)

Barriers to Collusion

476

(3)

The Electrical Conspiracy

477

(2)

Price Leadership

479

(1)

Nonprice Competition

480

(2)

How Ford Became Number Two and General Motors Became Number One

481

(1)

Comparison of Oligopoly with Perfect Competition

482

(1)

Airplane Deregulation: Success or Failure?

484

The Antitrust Laws

483

(1)

The Sherman Act

483

(3)

The Role of the Courts

486

(1)

The Role of the Justice Department

487

(2)

The Effectiveness of Antitrust Policy

489

(1)

Review and Practice

490

(2)

Pollution and the Environment

492

(21)

Our Environmental Problems

492

(1)

The Important Role of External Diseconomies

493

(2)

Economic Growth and Environmental Pollution

495

(2)

Reserve Mining: The Price of Cleaner Water

496

(1)

Public Policy toward Pollution

497

(1)

The Kyoto Environmental Summit, Emissions Targets, and Tradable Permits

499

Pollution-Control Programs in the United States

498

(2)

How Clean Should the Environment Be?

500

(5)

Dolphin-Safe Tuna

503

(2)

Review and Practice

505

(2)

What Should Be Done about Global Warming?

507

(6)

PART 5 THE DISTRIBUTION OF INCOME

The Supply and Demand for Labor

513

(22)

The Labor Force and the Price of Labor

513

(2)

The Equilibrium Wage and Employment under Perfect Competition

515

(3)

The Market Demand Curve for Labor

518

(1)

The Market Supply Curve for Labor

518

(2)

Equilibrium Price and Quantity of Labor

520

(1)

Labor Unions

521

(2)

The U.S. Labor Movement

523

(3)

How Unions Increase Wages

526

(1)

Collective Bargaining

527

(3)

The Closing of the Herald Tribune

529

(1)

Recent Trends

530

(2)

Why Is Europe's Unemployment Rate So High?

531

(1)

Review and Practice

532

(3)

Interest, Rent, and Profit

535

(18)

The Nature of Interest

535

(1)

The Determination of the Interest Rate

536

(4)

Anti-Usury Laws and Mortgage Activity

538

(2)

Functions of the Interest Rate

540

(1)

Capitalization of Assets

541

(2)

The Present Value of Future Income

543

(1)

Rent: Nature and Significance

544

(2)

Profit

546

(2)

The Functions of Profits

548

(2)

eBay: The Story of a Successful Internet Company

549

(1)

Review and Practice

550

(3)

Poverty, Income Inequality, and Discrimination

553

(26)

How Much Inequality of Income?

553

(1)

Why Inequality?

554

(1)

Effect of the Tax Structure on Income Inequality

555

(1)

Income Inequality: The Pros and Cons

556

(2)

The Trade-off between Equality and Efficiency

558

(1)

What Is Poverty?

559

(3)

Social Insurance

562

(3)

Job Training Programs and the War on Poverty

564

(1)

Antipoverty Programs

565

(3)

Is Welfare Reform Working?

567

(1)

The Problem of Discrimination

568

(4)

Equal Pay for Work of ``Comparable Worth''

571

(1)

Review and Practice

572

(2)

The Biggest Investment You Will Probably Ever Make

574

(5)

PART 6 GROWTH, GOVERNMENT, AND INTERNATIONAL ECONOMICS

Economic Growth

579

(23)

What Is Economic Growth?

579

(1)

Economic Growth as a Policy Objective

580

(1)

Thomas Malthus and Population Growth

581

(3)

David Ricardo and Capital Formation

584

(5)

The Club of Rome's ``Limits to Growth'' Report

586

(3)

Capital Formation and Economic Growth

589

(2)

The Role of Human Capital

591

(1)

The Role of Technological Change

592

(1)

Endogenous Technological Change

593

(2)

Computer-Assisted Design and Manufacture at Boeing Aircraft

595

(1)

Entrepreneurship and the Social Environment

595

(1)

The Ford Assembly Line

597

The Gap between Actual and Potential Output

596

(2)

Review and Practice

598

(4)

Public Goods and the Role of the Government

602

(20)

What Functions Should the Government Perform?

602

(2)

Establishing ``Rules of the Game''

604

(1)

Redistribution of Income

605

(1)

Providing Public Goods

606

(1)

Externalities

607

(2)

The Theory of Public Choice

609

(3)

The Tennessee Valley Authority

610

(2)

Principles of Taxation

612

(2)

The Personal Income Tax

614

(1)

The Property Tax and the Sales Tax

615

(2)

Proposition 13

616

(1)

Tax Incidence

617

(3)

Review and Practice

620

(2)

International Trade

622

(20)

U.S. Foreign Trade

622

(1)

Specialization and Trade

623

(1)

Absolute Advantage

624

(2)

Comparative Advantage

626

(1)

A Numerical Example

627

(2)

The Terms of Trade

629

(1)

International Trade and Individual Markets

630

(3)

Tariffs and Quotas

633

(3)

Arguments for Tariffs and Quotas

636

(4)

Restrictions on U.S. Imports of Japanese Autos

637

(2)

NAFTA: ``Jobs, Jobs, Jobs'' or a ``Giant Sucking Sound''?

639

(1)

Review and Practice

640

(2)

Exchange Rates and the Balance of Payments

642

(27)

International Transactions and Exchange Rates

642

(1)

Exchange Rates under the Gold Standard

643

(1)

The Foreign Exchange Market

644

(5)

Fixed Exchange Rates

649

(2)

Balance-of-Payments Deficits and Surpluses

651

(2)

Exchange Rates: Pre-World War II Experience

653

(1)

The Gold-Exchange Standard

654

(2)

The Abandonment of the Gold Standard

655

(1)

Fixed versus Flexible Exchange Rates

656

(2)

Are Currency Speculators to Blame for the Volatility in International Financial Markets?

657

(1)

How Well Have Floating Exchange Rates Worked?

658

(3)

The Rise and Fall of the Bretton Woods System

659

(1)

The Euro: Europe's New Currency

660

(1)

Should the Value of the Dollar Be Stabilized?

661

(1)

Review and Practice

662

(3)

Globalization: Should We Fear It or Embrace It?

665

(4)

Glossary

669

(14)

Photo Credits

683

(2)

Index

685

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