经济学：原理与政策PDF电子书下载

PART I 1

GETTING ACQUAINTED WITH ECONOMICS 1

1 What Is Economics? 3

2 The U.S. Economy: Myth and Reality 25

3 Scarcity and Choice: The Economic Problem 49

4 Supply and Demand: An Initial Look 67

PART II 93

ESSENTIALS OFMICROECONOMICS:CONSUMERS AND FIRMS 93

5 Consumer Choice: The Demand Side of the Market 95

6 Demand and Elasticity 125

7 Production, Inputs, and Cost: Building Blocks for Supply Analysis 147

8 Output, Price, and Profit:The Importance of Marginal Analysis 181

PART III 207

THE MARKET SYSTEM: VIRTUES AND VICES 207

9 The Firm and the Industry under Perfect Competition 209

10 The Price System and the Case for Laissez-Faire 233

11 Monopoly 255

12 Between Competition and Monopoly 275

13 The Market Mechanism: Shortcomings and Remedies 301

14 Real Firms and Their Financing: Stocks and Bonds 325

PART IV 349

THE DISTRIBUTION OF INCOME 349

15 Pricing the Factors of Production 351

16 Labor: The Human Input 377

17 Poverty, Inequality, and Discrimination 403

PART V 429

THE GOVERNMENT AND THE ECONOMY 429

18 Limiting Market Power: Regulation of Industry 431

19 Limiting Market Power: Antitrust Policy 451

20 Taxation and Resource Allocation 469

21 Environmental Protection and Resource Conservation: The Economist's Approach 491

PART VI 515

THE MACROECONOMY:AGGRSGATE SUPPLY AND OEMAND 515

22 The Realm of Macroeconomics 517

23 Unemployment and Inflation: The Twin Evils of Macroeconomics 537

24 Income and Spending: The Powerful Consumer 563

25 Demand-Side Equilibrium: Unemployment or Inflation? 587

26 Changes on the Demand Side: Multiplier Analysis 609

27 Supply-Side Equilibrium: Unemployment and Inflation? 627

PART VII 647

FISCAL AND MONETARY POLICY 647

28 Managing Aggregate Demand: Fiscal Policy 649

29 Money and the Banking System 671

30 Monetary Policy and the National Economy 695

31 The Debate over Monetary Policy 717

32 Budget Deficits and the National Debt: Fact and Fiction 745

33 The Trade-off between Inflation and Unemployment 769

PART VIII 795

THE UNITED STAES IN THE WORLD ECONOMY 795

34 International Trade and Comparative Advantage 797

35 The International Monetary System: Order or Disorder? 821

36 Macroeconomics in a World Economy 845

37 Productivity and Growth in the Wealth of Nations 865

38 Comparative Economic Systems: What Are the Choices? 897

ACQUAINTED WITH ECONOMICS 1

CHAPTER 1 WHAT IS ECONOMICS? 3

Ideas for Beyond the Final Exam 3

Idea 1: Mutual Gains from Voluntary Exchange 4

Idea 2: Rational Choice and True Economic Costs: The Role of Opportunity Cost 4

Idea 3: Attempts to Repeal the Laws of Supply and Demand: The Market Strikes Back 5

Idea 4: The Importance of Marginal Analysis 5

Idea 5: Externalities: A Shortcoming of the Market Cured by Market Methods 6

Idea 6: The Cost Disease of the Personal Services 6

Idea 7: The Trade-off between Output and Equality 7

Idea 8: The Trade-off between Inflation and Unemployment 7

Idea 9: The Illusion of High Interest Rates 8

Idea 10: Do Budget Deficits Burden Future Generations? 8

Idea 11: The Overwhelming Importance of Productivity Growth in the Long Run 9

Idea I2: The Surprising Principle of Comparative Advantage 9

Inside the Economist's Tool Kit 10

Economics as a Discipline 10

The Need for Abstraction 10

The Role of Economic Theory 13

What Is an Economic "Model" 15

Reasons for Disagreements: Imperfect Information and Value Judgments 16

Last World: Common Sense Is Not Always Reliable 17

Summary 17

Key Terms 17

Questions for Review 18

Appendix: The Graphs Used in Economic Analysis 18

Two-Variable Diagrams 18

The Definition and Measurement of Slope 19

Rays through the Origin and 45？ Lines 22

Squeezing Three Dimensions into Two: Contour Maps 23

Summary 24

Key Terms 24

Questions for Review 24

CHAPTER 2 The U.S. Economy: MYTH AND REAUTY 25

The American Economy:A Thumbnail Sketch 25

A Growing Economy...but with Inflation 28

The Inputs:Labor and Capital 32

The Outputs:What America Produce? 34

Public Opinion on Profits 35

The Central Role of Business Firms 35

Is That an American Company? 36

What's Missing from the picture Government 36

Conclusion:The Mixed Economy 40

Summary 41

Key Terms 41

Questions for Review 41

Appendix:Further Perils in the Interpretation of Graphs 42

Distorting Trends by Choice of the Time Period 42

Dangers of Omitting the Origin 43

Unreliability of Steepness and Choice of Units 44

Summary 47

Questions for Review 47

CHAPTER 3 SCARCITY AND CHOICE: THE ECONOMIC PROBLEM 49

Problem:The"indispensable Necessity"Syndrome 50

Scarcity,Choice,and Opportunity cost 50

Scarcity and Choice for a Single Firm 52

The Principle of Increasing Costs 54

Scarcity and Choice for the Entire Society 55

A Military-Civilian Output Trade-off in Reality 55

Scarcity and Choice Elsewhere the Economy 57

The Concept of Efficiency 59

The Three Coordination Tasks of Any Economy 60

Specialization,Division of Labor,and Exchange 60

Adam Smith (1723--1790) 61

Markets,prices,and the Three Coordination Tasks 62

Liberal and Conservative Goals Can Both Be Served by the Market Mechanism 63

Summary 64

Key Terms 65

Questions for Review 65

CHAPTER 4 SUPPLY AND DEMAND:AN INITIAL LOOK 67

Fighting the Invisible Hand 68

Price COntrols at Valley Forge 68

Demand and the Quantity Demanded 69

Supply and the Quantity Supplied 71

Equilibrium of Supply and Demand 73

Shifts of the Demand Curve 75

Shifts of the Supply Curve 79

Restraining the Market Mechanism:Price Ceilings 83

Policy Debate: Economic Aspects of the War on Drugs 84

Restraining the Market Mechanism:Price Floors 86

A Can of Worms 87

A Simple but Powerful Lesson 89

Summary 89

Key Terms 90

Questions for Review 90

PART II ESSENTIALS OF MICROECONOMICS:CONSUMERS AND FIRMS 93

CHAPTER 5 CONSUMER CHOICE: THE DEMAND SIDE OF THE MARKET 95

A Paradox: Should Water Be Worth More Than Diamonds? 96

Scarcity and Demand 96

Total ond Marginal Utility 97

Do Consumers Really Behave "Rationally" and Maximize Utility? 101

From Marginal Utility to the Demand Curve 103

Consumer Choice as a Trade-off Opportunity Cost 104

Consumer Surplus: The Net Gain from a Purchase 105

Resolving the Diamond-Water Paradox 107

Price, Income, and Quantity Demanded 107

From Individual Demand Curves to Market Demand Curves 110

The "Law" of Demand 111

Summary 112

Key Terms 113

Questions for Review 113

Appendix: Indifference Curve Analysis 114

Geometry of Available Choices: The Budget Line 114

What the Consumer Prefers: The Indifference Curve 116

The Slopes of Indifference Curves and Budget Lines 118

The Consumer's Choice 119

Consequences of Income Changes: Inferior Goods 121

Consequences of Price Changes: Deriving the Demand Curve 121

Summary 123

Key Terms 123

Questions for Review 124

CHAPTER 6 DEMAND AND ELASTICITY 125

Two Illustrative Cases 125

Example I: The Revenue Effect of a Sales-Tax Cut 125

Example II: Polaroid v.Kodak 126

Elasticity: The Measure of Responsiveness 127

Price Elasticity of Demand and the Shapes of Demand Curves 130

The Relationship between Elasticity.ond Slope 132

Price Elasticity of Demand and Total Expenditure 133

What Determines Elasticity of Demand? 135

Price Elasticity:Ignore It at Your Peril 136

Elasticity as a General Concept 137

Cross Elasticify of Demand: Substitutes and Complements 137

How Large Is a Firm's Market share? Cross Elasticity as a Test 139

Shifts of the Demand Curve: Advertising, Income, and the Prices of Complements and Substitutes 139

The Time Dimension of the Demand Curve and Economic Decision Making 141

Two Illustrative Applications of Elasticity Analysis 142

Summary 143

Key Terms 143

Questions for Review 143

Appendix: Statistical Analysis of Demand Relationships 144

An Illustration: Did the Advertising Program Work? 146

CHAPTER 7 PRODUCTION, INPUTS, AND COST BUILDING BLOCKS FOR SUPPLY ANALYSIS 147

Application: Are Larger Firms More Efficient? 148

Production, Input Choice, and Cost with One Variable Input 149

The "law" of Diminishing Marginal Returns 151

The Optimal Quantity of an Input and Diminishing Returns 152

cost Curves and Input Quantities 153

Fixed Costs and Variable Costs 156

Long-Run versus Short-Run Costs 159

The Average Cost Curve in the Short and Long Run 160

Multiple Input Decisions:The Choice of Optimal Input Substitutability: The Choice of Input Proportions 162

The Marginal Rule for Optimal Input Proportions 164

The Production Function and the Firm's Cost Curves 165

Input Substitution in the Forest 165

Economies of Stale 167

Policy Debate: Should Water Be Provided to Western Farmers at Subsidized Prices? 167

The "law" of Diminishing Marginal Returns and Returns to Scale 169

Historical Costs versus Analytical Cost Curves 170

Resolving the Economies of Stale Puzzle 170

Cost Minimization in Theory and Practice 172

Summary 173

Key Terms 173

Questions for Review 174

Appendix: Production Indifference Curves 174

Characteristics of the Production Indifference Curves 175

The Choice of Input Combinations 176

Cost Minimization, Expansion Path, and Cost Curves 177

Effects of Changes in Input Prices 178

Summary 179

Key Terms 179

Questions for Review 179

CHAPTER 8 OUTPUT, PRICE, AND PROFIT: THE IMPORTANCE OF MARGINAL ANALYSIS 181

Two Illustrative Cases 182

Case 1: Making Profits by Selling Below Costs 182

Case 2: Pricing a Six-Pack 182

Price and Quantity: One Decision, Not Two 182

Do Firms Really Maximize Profits? 184

Total Profit: Keep Your Eye on the Goal 185

Maximization of Total Profit 189

Marginal Analysis and Maximization of Total Profit 191

Marginal Revenue and Marginal Cost: Guides to an Optimum 192

Polity Debate: Profit and the New Market Economies 195

Generalization:The Logic of Marginal Analysis and Maximization 196

Application: Fixed Cost and the Profit Maximization 196

Marginal Analysis in Real Decision Problems 198

Conclusion: The Fundamental Role of Marginal Analysis 200

The Theory and Reality:A Word of Caution 201

Summary 202

Key Terms 202

Questions for Review 202

Appendix:The Relationships among Total,Average,and Marginal Data 203

Graphical Representation of Marginal and Average Curves 204

Questions for Review 205

PART III 207

THE MARKET SYSTEM: VIRTUES AND VICES 207

CHAPTER 9 THE FIRM AND THE INDUSTRY UNDER PERFECT COMPETITION 209

Two Practical Puzzles 209

Issue 1: Pollution-Reduction Incentives That Increase Pollution 210

Issue 2: Can Firms Shift the Burden of Taxation to Consumers 210

Varieties of Market Structre: A Sneak Proview 210

Perfect Competition Defined 211

The Competitive Firm and Its Demand Curve 212

Short-Run Equilibrium of the Perfectly Competitive Firm 213

Short-Run Profit:graphic Representation 215

The Case of Short-Term Losses 215

Shutdown and Break-Even Analysis 216

The Short-Run Supply Curve of the Competitive Firm 218

The Short-Run Supply Curve of the Competitive Industry 218

Industry Equilibrium in the Short Run 220

Industry and Firm Equilibrium in the Long Run 221

The Long-Run Industry Supply Curve 224

Zero Economic Profit: The Opportunity Cost of Capital 225

Perfect Competition and Economic Efficiency 226

Policy Debate: Should Perfect Competition Be Used as a Guide by Government Regulators? 227

Our Two Puzzles Resolved 228

Summary 230

Key Terms 231

Questions for Review 231

CHAPTER 10 THE PRICE SYSTEM AND THE CASE FOR LASSEZ-FAIRE 233

Puzzle: San Francisco Bay Bridge Pricing 234

Efficient Resource Allocation: The Concept 234

Pricing to Promote Efficiency: An Example 235

Earthquake, Bridge Congestion, and Route Substitution 237

Con Price Increases Ever Serve the Public Interest? 237

Scarcity and the Need to Coordinate Economic Decisions 239

Economic Shock Therapy in Poland 240

Three Coordination Tasks in the Economy 240

Input-Output Analysis: The Near Impossibility of Perfect Central Planning 243

Input-Output Equations: An Example 245

How Perfect Competition Achieves Efficiency: What to Produce 245

Other Roles of Prices: Income Distribution and Fairness 248

San Francisco Bridge Pricing Revisited 249

Toward Assessment of the Price Mechanism 230

Another Look at the Market's Achievement:Growth versus Efficiency 250

Policy Debate: User Charges for Public Facilities 251

Summary 252

Key Terms 252

Questions for Review 252

CHAPTER 11 MONOPOLY 255

Application: Monopoly and Pollution Charges 255

Monopoly Defined 256

Causes of Monopoly: Barriers to Entry and Cosi Advantages 257

Natural Monopoly 258

The Monopolist's Supply Decision 259

Determining the Profit -Maximizing Output 261

Comparison of Monopoly and Perfect Competition 263

Con Anything Good Be Said about Monopoly? 265

Price Discrimination under Monopoly 267

Monopoly ond the Shifting of Pollution Charges 270

Summary 272

Key Terms 273

Questions for Review 273

CHAPTER 12 BETWEEN COMPETITION AND MONOPOLY 275

Some Puzzling Observations 276

Monopolistic Competition 276

Price and Output Determination under Monopolistic Competition 218

The Excess Capacity Theorem and Resource Allocation 280

Oligopoly 281

A Shopping List 283

OPEC Keeps the Ceiling on Oil Output 285

Policy Debate: Acting on Recognized InterdePendence versus "Tacit Collusion" 286

The Kinked Demand Curve Model 288

The Game-Theory Approach 290

Monopolistic Competition, Oligopoly, and Public Welfare 294

Billion-Dollar APPlication: Game Theory and the FCC Auction 295

A Glance Backward: Comparison of the Four Market Forms 296

Summary 297

Key Terms 298

Questions for Review 298

CHAPTER 13 THE MARKET MECHANISM: SHORTCOMINGS ANO REMEDIES 301

Puzzle: Rising Health-Care Costs in Canada 302

What Does the Market Do Poorly? 302

Efficient Resource Allocation: A Review 302

Externalities:Getting the Prices Wrong 304

Provision of Public Goods 309

Allocation of Resources between Present and Future 311

Some Other Sources of Market Failure 313

Asymmetric Information, Lemons, and Agents 314

Market Failure and Government Failure 315

The Politics of Economic Policy 316

The Cost Disease of the Service Sector 316

Evaluative Comments 321

Epilogue:The Unforgiving Market, Its Gift of Abundance, and Its Dangerous Friends 322

Summary 323

Key Terms 324

Questions for Review 324

CHAPTER 14 REAL FIRMS AND THEIR FINANCING: STOCKS AND BONDS 325

Puzzle: The Stock Market's Unpredictability 325

Firms in the United States 326

Proprietorships 326

Partnerships 327

Corporations 328

Stocks and Bonds 330

Financing Corporate Activity 332

Corporate Choice between Stocks and Bonds 333

Buying Stocks and Bonds 334

Selecting a portfolio:Diversification 334

Following a Portfolio's Performance 335

Stock Exchanges and Their Functions 337

You Are There: An Event on the Trading Floor of the New York Stock Exchange 338

Regulation of the Stock Market 338

Stock Exchanges and Corporate Capital Needs 339

The Recent Surge in Takeover Battles 340

The lssue of Speculation 341

How to Lose a Billion Dollars in One Easy Step: The Derivatives Craze 342

Stock Prices as Random Walks 343

Football and Financial Forecasting 344

Summary 346

Key Terms 346

Questions for Review 347

PART IV 349

THE DISTRIBUTION OF INCOME 349

CHAPTER 15 PRICING THE FACTORS OF PRODUCTION 351

The Principle of Marginal Productivity 352

The Derived Demand Curve for an Input 353

Investment, Capital, and Interest 355

The Determination of Rent:Simple Version 361

Japanese Land Prices 363

The Rent of Land: Some Complications 364

Generalization:What Determines Shoquille O'Neal's Salary? 365

Rent Seeking 366

Rent Controls:The Misplaced Analogy 368

Issue:Are Profits Too High or Too Low? 369

What Accounts for Profits? 370

EntrepreneurshiP in Poland 371

Criticisms of Marginal Productivity Theory 372

Summary 373

Key Terms 374

Questions for Review 374

Appendix: Discounting and Present Value 315

Summary 376

Key Terms 376

Questions for Review 376

CHAPTER l6 LABOR: THE HUMAN INPUT 317

ISSUE: Lagging Wages and Growing Inequality 311

Competitive Labor Markets 378

The Supply of Labor 319

The Demand for Labor and the Determination of Wages 381

Why Wages Differ 382

Ability and Earnings:The Rent Component of Wages 383

Investment in Human Capital 384

Education and Earnings:Dissenting Views 385

The Effects of Minimum Wage Legislation 387

Unions and collective Bargaining 388

The Development of Unionism in America 390

The Way It Was 391

Union as Labor Monopolies 392

Monopsony and Bilateral Monopoly 395

Collective Bargaining and Strikes 396

The 1994--1995 Baseball Strike 397

Recent Developments in the u.s.Labor Market 399

Summary 401

Key Terms 401

Questions for Review 402

CHAPTER 17 POVERTY, INEQUALITY,AND DISCRIMINATION 403

Issue:Welfare Reform and the Trade-off between Equality and Efficiency 403

The Facts:Poverty 404

The Poorest Place in America 406

The Facts:Inequality 407

Depicting Income Distributions:The Lorenz Curve 409

Some Reasons for Unequal Incomes 410

How Important Is the Bell Curve? 411

The Facts: Discrimination 412

The Economic Theory of DIscrimination 413

Are Women Better Workers? 415

The Optimal Amount of Inequality 416

The Trade-off between Equality and Efficiency 417

Policies to Combat Poverty 419

The Negative Income 421

The Personal Income Tax 423

Death Duties and Other Taxes 424

Policies to Combat Discrimination 424

Has Affirmative Action Outlived Its Usefulness? 425

Postscript on the Distribution of Income 425

Summary 426

Key Terms 426

Questions for Review 427

PART V 429

THE GOVERNMENT AND THE ECONOMY 429

CHAPTER 18 LIMITING MARKET POWER:REGULATION OF INDUSTAY 431

puzzle: Industry Opposition to Deregulation 431

Monopoly,Regulation,and Nationalization 432

What Is Regulated?BY Whom? 432

A Brief History of Regulation 433

Why Regulation? 434

Why Regulators Sometimes Raise Prices 436

A Problem of Marginal-Cost Prices 438

Economic Theory in an ICC Coal Rate Decision 440

Regulation of Profit and Incentives for Efficiency 441

Price Caps as Incentives for Efficiency 442

Pricing of Access to "Bottleneck" Services 443

The Privy Council Approves Parity-Principle Access Pricing 444

Some Effects of Deregulation 445

Consequences of Deregulation:General Comments 446

A Word on Privatization 447

Industry Opposition to Deregulation--The Puzzle Revisited 449

Summary 449

Key Terms 450

Questions for Review 450

CHAPTER 19 LIMITING MRKET POWER: ANTITRUST POLICY 451

The Public Image of Business When the Antitrust Laws Were Born 452

Can Antitrust Law Be Used to Prevent Competition? 453

The Antitrust Laws 454

Protection of Competition, Not Protection of Competitors 456

Merger Policy 458

You Are There:An Antitrust Trial 459

Issues in Concentration of Industry 460

Evidence on Concentration in Industry 462

The Pros and Cons of Bigness 463

Other Government Programs Related to Bigness 465

Issues in Antitrust Policy 465

Summary 467

Key Terms 468

Questions for Review 468

CHAPTER 20 TAXATION AND RESOURCE ALLOCATION 469

Issue: Should We Flatten the Income Tax? 470

The Level and Types of Taxation 470

The Payroll Tax and the Social Security System 474

The State and Local Tax System 475

The Concept of Equity in Taxation 476

The Concept of Efficiency in Taxation 478

Excess Burden and Mr.Figg 480

Tax Loopholes and Excess Burden 481

Shifting the Burden of Taxation: Tax Incidence 481

The Incidence of Excise Taxes 482

The Incidence of the Payroll Tax 484

When Taxation Con Improve Efficiency 485

Equity,Efficiency,and the Optimal Tax 486

Conclusion:The Virtues and Vices of a Flat Tax 486

Summary 487

Key Terms 488

Questions for Review 488

CHAPTER 21 ENVIRONMENTAL PROTECTION AND RESOURCE CONSERVATION:THE ECONOMIST'S APPROACH 491

Part 1: The Economics of Environmental Protection 492

The Facts: Is Everything Really Getting Steadily Worse? 491

The Law of Conservation of Matter and Energy 495

Governments and Individuals as Damagers of the Environment 496

Environmental Damage as an Externality 496

Supply-Demand Analysis of Environmental Externalities 497

Basic Approaches to Environmental Policy 498

Emissions Taxes versus Direct Controls 500

Other Financial Devices to Profect the Environment: Emissions Permits 502

A Market Approach to Cutting Environmental Protectiotn Costs 503

Two Cheers for the Market 504

Part 2: The Economics of Energy and Natural Resources 504

The Permanent Fuel Crisis 505

The Free Market and Pricing of Depletable Resources 505

Resource Prices in the 20th Century 508

On the Virtues of Rising Prices 511

Growing Reserves of Exhaustible Resources: Our Puzzle Revisited 512

Summary 512

Key Terms 513

Questions for Review 513

PART VI 515

THE MACROECONOMY:AGGREGATE SUPPLY AND DEMAND 515

CHAPTER 22 THE REALM MACROECONOMICS 517

Drawing o Line between Macroeconomics and Microeconomics 517

Supply and Demand in Macroeconomics 519

Gross Domestic Product 521

Limitations of the GDP: What GDP Is Not 523

Are Americans Working More? 525

The Economy on o Roller Coaster 525

"Green" GDP 526

Life in "Hooverville" 529

From World War 11 to 1973 529

John Maynard Keynes (1883--1946) 530

The Great Stagflation,1973--1980 531

Reaganomics and Its Aftermath 531

Clintonomics: Deficit Reduction and the Resumption of Growth 532

The Problem of Macroeconomic Stabilization:A Sneak Preview 532

Summary 535

Key Terms 535

Questions for Review 536

CHAPTER 23 UNEMPLOYMENT AND INFLATION: THE TWON EVILS OF MACROECONOMICS 537

The Costs of Unemployment 538

The Economic Costs of High Unemployment 539

Counting the Unemployed: The official Statistics 541

Types of Unemployment 542

How Much Employment Is "Full Employment"? 543

Policy Debate: Does the Minimum Wage Cause Unemployment? 544

Unemployment Insurance: The Invaluable Cushion 544

Unemployment Insurance and the Costs of Unemployment 545

The Costs of Inflation 546

Inflationt The Myth and the Reality 546

Inflation as a Redistributor of Income and Wealth 549

Real versus Nominal Interest Rates 550

Inflation and the Tax System 551

Interest Rate Ceilings and Other Impediments 553

Other Costs of Inflation 554

The Costs of Low versus High Inflation 554

Hyperinflation and the Piggy Bank 556

Summary 557

Key Terms 558

Questions for Review 558

Appendix: How Statisticians Measure Inflation 558

Index Numbers for Inflation 558

The Consumer Price Index 559

How to Use a Price Index to "Deflate" Monetary Figures 560

The GDP Deflator 560

Your Personal CPI 561

Summary 561

Key Terms 562

Questions for Review 562

CHAPTER 24 INCOME AND SPENDING: THE POWERFUL CONSUMER 563

A Puzzle: Demand Management and the Ornery Consumer 564

Case 1: The 1964 Tax Cut 564

Case 2: The 1975 Tax Cut 564

Case 3: The 1981--1984 Tax Cuts 564

Aggregate Demand, Domestic Product, and National Income 565

The Cirtular Flow of Spending, Production, and Income 566

Consumer SPending and Income: The Important Relationship 568

The Consumption Function and the Marginal Propensity to Consume 571

Movements along versus Shifts of the Consumption Function 573

Other Determinants of Consumer Spending 574

Policy Debate: Using the Tax Code to Spur Saving 576

Why Tax Policy Failed in 1975 576

The Predictability of Consumer Behavior 578

Summary 578

Key Terms 579

Questions for Review 579

Appendix: National Income Accounting 580

Defining GDP: Exceptions to the Rules 580

GDP as the Sum of Final Goods and Services 581

GDP as the Sum of All Factor Payments 581

GDP as the Sum of Values Added 584

Summary 585

Key Terms 586

Questions for Review 586

CHAPTER 25 DEMAND-SIDE EQUILIBRIUM: UNEMPLOYMENT OR INFLATION? 587

Puzzle: Why Does the Market Permit Unemployment? 588

The Extreme Variability of Investment 588

The Investment Boom of the Nineties 589

The Determinants of Net Exports 591

The Meaning of Equilibrium GDP 592

Equilibrium on the Demand Side of the Economy 594

Constructing the Expenditure schedule 594

The Mechanics of Income Determination 596

The Aggregate Demand Curve 598

Demand-side Equilibrium and Full Employment 600

The Coordination of saving and Investment 602

Unemployment and Inflation as Coordination Failures 604

Summary 605

Key Terms 605

Questions for Review 606

Appendix:The Simple Algebra of Income Determination 607

Questions for Review 607

CHAPTER 26 CHANGES ON THE DEMAND SIDE:MULTIPLIER ANALYSIS 609

Case Study: How Did Kansas Do It? 609

The Magic of the Multiplier 610

Demystifying the Multiplier:How it Works 611

Algebraic Statement of the Multiplier 614

We Multiplier Effect of Consumer Spending 615

The Multiplier Effect of Government Purchase 616

The Multiplier Effect of Net Exports 617

The Multiplier in Reverse 618

The Paradox of Thrift 519

The Multiplier and the Aggregate Demand Curve 619

Summary 621

Key Terms 621

Questions for Review 621

Appendix A:The simple Algebra of the Multipler 622

Appendix B:The Multiplier with Variable Imports 622

Summary 626

Questions for Review 626

CHAPTER 27 SUPPLY-SIDE EQUILIBRIUM:UNEMPLOYMENT AND INFLATION? 627

Debate:Two Sides to the Supply Side 627

The Aggregate Supply Curve 628

Shifts of the Aggregate Supply Curve 630

Equilibrium of Aggregate Demand and Supply 632

Recessionary and Inflationary Gaps Revisited 633

Adjusting to a Recessionary Gap:Deflation or Unemployment? 635

An Example from Recent History:Disinflation in the 1990s 638

Adjusting to an inflationary Gap:Inflation 638

Tight Labor Markets in 1995 639

Demand Inflation and Stagflation 640

Stagflation from Supply shifts 641

Inflation and the Multiplier 642

A Role for Stabilization policy 645

Summary 645

Key Terms 645

Questions for Review 646

PART VII 647

FISCAL AND MONETARY POLICY 647

CHAPTER 28 MANAGING AGGREGA DEMAND:FISCAL POLICY AOOR.GALUCY 649

Issue:How Quickly Should We Balance the Budget? 649

Income Taxes and the Consumption Schedule 650

The Multiplier Revisited 654

Multipliers for Ta Policy 655

Government Transfer Payments 657

Planning Expansive Fiscal Policy 657

Planning Restrictive Fiscal Policy 658

The Choice between Spending Policy and Tax Policy 659

Some Harsh Realities 660

The Idea behind Supply-Side Tax Cuts 661

Some Files in the Ointment 663

Toward Assessment of Supply-Side Economics 664

Clintonomics and Supply-Side Economics 665

Summary 665

Key Terms 666

Questions for Review 666

Appendix:Algebraic Treatment of Fiscal Policy and Aggregate Demand 667

Questions for Review 669

CHAPTER 29 MONEY AND THE BANKING SYSTEM 671

Issue: To Regulate or to Deregulate?That is the Question 671

Barter Versus Monetary Exchange 672

The Conceptual Definition of Money 674

What Serves as Money? 674

How the Quantity of Money is Measured 676

How Banking Began 678

Is There a Smart Card in Your Future? 679

Principles of Band Management:profits versus Safety 680

Bank Regulation 680

The Savings and Loan Crisis: Over at Last 681

How Bankers Keep Books 681

Policy Debate: Abolish the Community Reinvestment Act? 682

The Limits to Money Creation by a Single Bank 683

Multiple Money Creation by a Series of Banks 685

The Process in Reverse:Multiple Contractions of the Money Supply 688

Why the Deposit Creation Formula is Oversimplified 690

The Need for Monetary Policy 691

Summary 691

Key Terms 692

Questions for Review 692

CHAPTER 30 MONETARY POLICY AND THE NATIONAL ECONOMY 695

Money and Income:The Important Difference 695

The Federal Reserve System:Origins and Structure 696

The Independence of the Fed 691

You Are There: The FOMC Meets 698

Policy Debate: How Independent Should the Central Bank Be? 699

Controlling the Money Supply: Open-Market Operations 699

Open-Market Operations,Bond Prices,and Interest Rates 701

Controlling the Money Supply:Lending to Banks 702

Controlling the Money Supply:Reserve REquirements 703

The Money Supply Mechanism 704

The Demand for Money 705

Equilibrium in the Money Market 706

Interest Rates and Total Expenditures 708

Monetary Policy and Aggregate Demand 709

Money and the Price Level in the Keynesian Model 711

From Models to Policy Debates 713

Summary 713

Key Terms 714

Questions for Review 714

CHAPTER 31 THE DEBATE OVER MONETARY POLICY 717

Issue: Should We Forsake Stabilization Policy? 717

Velocity and the Quantity Theory of Money 718

The Determinants of Velocity 720

Monetarism:The Quantity Theory Modernized 722

Fiscal Policy, Interest Rates, and Velocity 724

Debate:Should Stabilization Policy Rely on Fiscal or Monetary Policy? 725

Debate:Should the Fed Control the Money Supply or control Interest Rates? 727

Debate:The Shape of the Aggregate Supply Curve 730

Debate:Should the Government Intervene? 733

Debate:Rules or Discretion? 736

Techniques of Economic Forecasting 737

The Accuracy of Economic Forecasts 739

Other Dimensions of the Rules-Versus-Discretion Debate 739

Conclusion:What Should be Done? 741

Summary 742

Key Terms 743

Questions for Review 743

CHAPTER 32 BUDGET DEFICITS AND THE NATIONAL DEBT: FACT AND FICTION 745

Puzzle:Are Smaller Deficits Good or Bad for Growth? 746

Should the Budget Be Balanced? 746

Deficits and Debt:Some Terminology 747

Some Facts about the National Debt 748

Interpreting the Budget Deficit 750

Inflation Accounting for Interest Payments 752

Bogus Arguments about the Burden of Burden of the Debt 756

Budget Deficits and Inflation 757

Deficits,INterest Rates, and Crowding Out 761

POlicy Debate: A Balanced-Budget Amendment to the Constitution? 762

The True Burden of the National Debt 763

Deficit Reduction and Growth:Puzzle Resolved 764

Conclusion:The Economics and Politics of the Budget Deficit 765

America speaks: How to Reduce the Budget Deficit 766

Summary 767

Key Terms 768

Questions for Review 768

CHAPTER 33 THE TRADE-OFF BETWEN INFLATION AND UNEMPLOYMENT 769

Demand-Side Inflation Versus Supply-Side Inflation:A Review 770

Applying the Model to a Growing Economy 771

Demand-Side Inflation and the Phillips Curve 773

Supply-Side Inflation and the Collapse of the Phillip Curve 777

What the Phillips Curve is Not 778

Fighting Unemployment with Fiscal and Monetary Policy 781

What Should Be Done? 782

Inflationary Expectations and the Phillips Curve 783

The Theory of Rational Expectations 786

Why Economists(and Politicians)Disagree 788

The Dilemma of Demand Management 789

Attempts to Reduce the Natural Rate of Unemployment 789

Policy Debate:Should the Fed Concentrate Only on Reducing Inflation? 790

Wage-Price Controls 190

Indexing 191

Summary 792

Key Terms 793

Questions for Review 793

PART VIII 795

THE UNITED STAES IN THE WORLO ECONOMY 795

CHAPTER 34 INTERNATIONAL AND COMPARATIVE ADVANTAGE 797

Puzzle: How Can Americans Compete with"Cheap Foreign Labor"? 797

Why Trade? 798

Mutual Gains from Trade 799

International Versus Intranational Trade 800

The Law of Comparative Advantage 801

David Ricardo(1772--1823) 802

The Arithmetic of Comparative Advantage 802

The Graphics of Comparative Advantage 803

Comparative Advantage and Competition of "Cheap Foreign Labor" 806

Supply-Demand Equilibrium and Pricing in World Trade 807

Tariffs, Quotas, and other Interferences with Trade 808

How Tariffs and Quotas Work 809

How Sweet It Is:The U.S.Sugar Quota 810

Tariffs versus Quotas 811

Why Inhibit Trade? 812

Other Arguments for Protection 814

Can Protectionism save Free Trade? 816

Con Cheap Imports Be Bad for a Country 817

Conclusion:A Last Look at the "Cheap Foreign Labor"Argument 817

Unfair Foreign Competition 818

Summary 818

Key Terms 819

Questions for Review 819

CHAPTER 35 THE INTERNATIONAL MONTARY SYSTEM:ORDER OR DISORDER? 821

Puzzle: Whatever Happened to Mexico? 821

What Are Exchange Rates? 822

Exchange Rate Determination in a Free Market 823

The Purchasing-Power Parity Theory:The Long Rum 826

Economic Activity and Exchange Rates:The Medium Rum 827

Purchasing-Power Parity and the Big Mac 828

Interest Rates and Exchange Rates:The Short Run 829

Market Determination of Exchange Rates:Summary 830

Fixed Exchange Rates and the Balance of Payments 830

Defining the Balance of Payments in Practice 833

A Bit of History:The Gold Standard 834

The Bretton Woods System and the International Monetary Fund 835

Adiustment Mechanisms under Fixed Exchange Rates 836

Why Try to Fix Exchange Rates? 838

The Current Mixed System 839

The volatile Dollar 839

The European Exchang Rate Mechanism 841

Summary 842

Key Terms 842

Questions for Review 843

CHAPTER 36 MACROECONOMICS IN A WORLD ECONOMY 845

Issue:Deficit Reduction and the Dollar 845

International Trade and Aggregate Demand:A Quick Review 846

Relative Prices,Exports,and Imports 847

The Effects of Changes in Exchange Rates 847

Aggregate Supply in an Open Economy 849

The Macroeconomic Effects of Exchange Rates 850

Interest Rates and International Capital Flows 851

Fiscal Policy in an Open Economy 852

Monetary Policy in an Open Economy 854

International Aspects of Deficit Deficit Reduction 855

The Link Between the Budget Deficit and the trade Deficit 857

Is the Trade Deficit a Problem? 858

On Curing the Trade Deficit 862

Summary 862

Key Terms 863

Questions for Review 863

CHAPTER 31 PRODUCTIVITY AND GROWTH IN THE WEALTH OF NATIONS 865

Part 1: Growth in the United States and Other Industrial Countries 865

Life in the "Good Old Days" 865

The Magnitude of Productivity Growth 867

The Second Major Development:Convergence 871

The U.S. Productivity Slowdown:Is American Economic Leadership Doomed? 873

Productivity and the Deindustrialization Thesis 875

Unemployment and Productivity Growth 877

The Real Costs of Lagging Productivity:Lagging Wages and Living Standards 878

Requirements for Increased Growth 879

Growth without Sacrificing Consumption:Something for Nothing? 880

On Growth in population:Is Less Realty More? 880

Is More Growth Really Better? 883

Part 2: Problems of the Less Developed Countries 884

Recent Trends 886

Impediments to Development in the LDC： 887

Help from Industrialized Economies 891

Con LDC： Break Away from Poverty? 893

Summary 893

Key Terms 894

Questions for Review 895

CHAPTER 38 COMPARATIVE ECONOMIC SYSTEMS: WHAT ARE THE CHOICES? 897

Economic Systems:Two Important Distinctions 898

The Market or the Plan?Some Issues 899

The Market or the Plan:The Scoreboard 900

Capitalism of Socialism? 901

Socialism,Planning,and Freedom 902

The Administrative Command Economy:The Old Soviet Union 903

Economies in Transition: Russia and Her Neighbors 905

A Tale of Two Countries 907

China under Mao: Revolutionary Communism 908

China since Mao: Explosive Growth 909

Japan's Unique Brand of Capitalism 910

U.S.-Japanese Trade: Is Everyone Playing Fair? 911

Is Japan a Planned Economy? 912

Can America Import Japanese Manufacturing Methods? 913

What Can the United States born from (and Teach)Japan? 913

Summary 914

Key Terms 915

Questions for Review 915