TABLE OF CONTENTS:

Cover Page
Title Page
Copyright Page
Dedication
Preface
About the Authors

PART 1. GETTING ACQUAINTED WITH ECONOMICS

1. What Is Economics?
1-1. Ideas for Beyond the Final Exam
1-2. Inside the Economist’s Tool Kit
2. The Economy: Myth and Reality
2-1. The American Economy: A Thumbnail Sketch
2-2. The Inputs: Labor and Capital
2-3. The Outputs: What Does America Produce?
2-4. The Central Role of Business Firms
2-5. What’s Missing from the Picture? Government
2-6. Conclusion: It’s a Mixed Economy

3. The Fundamental Economic Problem: Scarcity and Choice
3-1. Scarcity, Choice, and Opportunity Cost
3-2. Scarcity and Choice for a Single Firm
3-3. Scarcity and Choice for The Entire Society
3-4. The Three Coordination Tasks of Any Economy
3-5. The Concept of Efficiency
3-6. Task 1. How the Market Fosters Efficient Resource Allocation
3-7. Task 2. Market Exchange and Deciding How Much of Each Good to Produce
3-8. Task 3. How to Distribute the Economy’s Outputs among Consumers
3-9. Looking Ahead

4. Supply and Demand: An Initial Look
4-1. The Invisible Hand
4-2. Demand and Quantity Demanded
4-3. Supply and Quantity Supplied
4-4. Supply and Demand Equilibrium
4-5. Effects of Demand Shifts on Supply-Demand Equilibrium
4-6. Supply Shifts and Supply-Demand Equilibrium
4-7. Battling the Invisible Hand: The Market Fights Back
4-8. A Simple But Powerful Lesson

PART 2. THE BUILDING BLOCKS OF DEMAND AND SUPPLY

5. Consumer Choice: Individual and Market Demand
5-1. Scarcity and Demand
5-2. Utility: A Tool to Analyze Purchase Decisions
5-3. Behavioral Economics: Are Economic Decisions Really Made “Rationally”?
5-4. Consumer Choice as a Trade-Off: Opportunity Cost
5-5. From Individual Demand Curves to Market Demand Curves

6. Demand and Elasticity
6-1. Elasticity: The Measure of Responsiveness
6-2. What Determines Price Elasticities of Demand?
6-3. Price Elasticity of Demand: Its Effect on Total Revenue and Total Expenditure
6-4. Elasticity as a General Concept
6-5. The Time Period of the Demand Curve and Economic Decision Making
6-6. Real-World Application: AOL’s Flat Rate Internet Pricing
6-7. In Conclusion

7. Production, Inputs, and Cost: Building Blocks for Supply Analysis
7-1. The Economic Short Run Versus the Economic Long Run
7-2. Production, Input Choice, and Cost with One Variable Input
7-3. Multiple Input Decisions: The Choice of Optimal Input Combinations
7-4. Cost and Its Dependence on Output
7-5. Economies of Scale

8. Output, Price, and Profit: The Importance of Marginal Analysis
8-1. Price and Quantity: One Decision, Not Two
8-2. Total Profit: Keep your Eye on the Goal
8-3. Economic Profit and Optimal Decision Making
8-4. Marginal Analysis and Maximization of Total Profit
8-5. Generalization: The Logic of Marginal Analysis and Maximization
8-6. Conclusion: The Fundamental Role of Marginal Analysis
8-7. The Theory and Reality: A Word of Caution

9. The Financial Markets and the Economy: The Tail that Wags the Dog?
9-1. Corporations and their Unique Characteristics
9-2. Stock Exchanges and their Functions
9-3. Betting on Securities: Risks to the Entire Economy

PART 3. THE VIRTUES OF THE FREE MARKET

10. The Firm and the Industry Under Perfect Competition
10-1. Perfect Competition Defined
10-2. The Perfectly Competitive Firm
10-3. The Perfectly Competitive Industry
10-4. Perfect Competition and Productive Efficiency

11. The Case for Free Markets: The Price System
11-1. Efficient Resource Allocation and Pricing
11-2. Scarcity and the Need to Coordinate Economic Decisions
11-3. How Perfect Competition Achieves Efficiency: A Graphic Analysis
11-4. How Perfect Competition Achieves Efficient Output: Marginal Analysis
11-5. Toward Assessment of the Price Mechanism

PART 4. THE LIMITATIONS OF FREE MARKETS

12. Monopoly
12-1. Monopoly Defined
12-2. The Monopolist’s Supply Decision
12-3. Can Anything Good be Said about Monopoly?
12-4. Price Discrimination Under Monopoly
12-5. Monopsony: The Case of a Single Buyer

13. Between Competition and Monopoly
13-1. Monopolistic Competition
13-2. Oligopoly
13-3. The Game Theory Approach
13-4. Contestable Markets
13-5. A Glance Backward: Comparing the Four Market Structures
13-6. Monopolistic Competition, Oligopoly, and Public Welfare

14. Limiting Market Power: Antitrust and Regulation
14-1. The Public Interest Issue: Monopoly Power Versus Mere Size
14-2. Antitrust Laws and Policies
14-3. Anticompetitive Behavior and Antitrust
14-4. Concentration
14-5. What Is Price Regulation?
14-6. The Logic behind Price Regulation
14-7. Difficulties with Price Regulation
14-8. The Deregulation Experience
15. The Shortcomings of Free Markets
15-1. What Does the Market Do Poorly?
15-2. Efficient Resource Allocation: A Review
15-3. Externalities: Getting the Prices Wrong
15-4. Provision of Public Goods
15-5. Allocation of Resources Between Present and Future
15-6. Imperfect Information
15-7. Market Failure and Government Failure
15-8. The Cost Disease of Personal Services
15-9. The Market System on Balance
15-10. Epilogue: The Unforgiving Market, Its Gift of Abundance, and Its Dangerous Friends

16. The Economics of the Environment and Natural Resources
16-1. The Economics of Environmental Protection
16-2. Review—Externalities: A Critical Shortcoming of the Market Mechanism
16-3. Basic Approaches to Environmental Policy
16-4. Two Cheers for the Market
16-5. The Economics of Natural Resources
16-6. The Free Market and Pricing of Natural Resources
16-7. Exhaustible Resources, Scarcity, and Rising Prices
16-8. The Bioeconomics of Renewable Resources
17. Taxation and Resource Allocation
17-1. Basic Tax Concepts
17-2. The Federal Tax System
17-3. The State and Local Tax System
17-4. The Concept of Equity in Taxation
17-5. The Concept of Efficiency in Taxation
17-6. Shifting the Tax Burden: Tax Incidence
17-7. When Taxation Can Improve Efficiency
17-8. Equity, Efficiency, and the Optimal Tax

PART 5. THE DISTRIBUTION OF INCOME

18. Pricing the Factors of Production
18-1. The Principle of Marginal Productivity
18-2. Inputs and Their Derived Demand Curves
18-3. Investment, Capital, and Interest
18-4. The Determination of Rent
18-5. Payments to Business Owners: Are Profits Too High or Too Low?
18-6. Criticisms of Marginal Productivity Theory

19. Labor and Entrepreneurship: The Human Inputs
19-1. The Markets For Labor
19-2. Wage Determination In Competitive Markets
19-3. The Supply of Labor
19-4. Why Do Wages Differ?
19-5. Unions And Collective Bargaining
19-6. The Entrepreneur: The Other Human Input
19-7. The Market Economy’s Incredible Growth Record
19-8. Sources of Free-Market Innovation: The Role of the Entrepreneur
19-9. Entrepreneurship and Growth
19-10. Institutions and the Supply of Innovative Entrepreneurship

20. Poverty, Inequality, and Discrimination
20-1. The Facts: Poverty
20-2. The Facts: Inequality
20-3. Some Reasons for Unequal Incomes
20-4. The Facts: Discrimination
20-5. The Trade-Off Between Equality and Efficiency
20-6. Policies to Combat Poverty
20-7. Other Policies to Combat Inequality
20-8. Policies to Combat Discrimination
20-9. A Look Back

PART 6. THE MACROECONOMY: AGGREGATE SUPPLY AND DEMAND

21. An Introduction to Macroeconomics
21-1. Drawing a Line between Macroeconomics and Microeconomics
21-2. Supply and Demand in Macroeconomics
21-3. Gross Domestic Product
21-4. The Economy on a Roller Coaster
21-5. The Problem of Macroeconomic Stabilization: A Sneak Preview
22. The Goals of Macroeconomic Policy
22-1. The Goal of Economic Growth
22-2. The Capacity to Produce: Potential GDP and the Production Function
22-3. The Growth Rate of Potential GDP
22-4. The Goal of Low Unemployment
22-5. The Human Costs of High Unemployment
22-6. Counting the Unemployed: The Official Statistics
22-7. Types of Unemployment
22-8. How Much Employment Is “Full Employment”?
22-9. Unemployment Insurance: The Invaluable Cushion
22-10. The Goal of Low Inflation
22-11. Inflation as a Redistributor of Income and Wealth
22-12. Real Versus Nominal Interest Rates
22-13. Inflation Distorts Measurements
22-14. Other Costs of Inflation
22-15. The Costs of Low Versus High Inflation
22-16. Low Inflation does not Necessarily Lead to High Inflation

23. Economic Growth: Theory and Policy
23-1. The Three Pillars of Productivity Growth
23-2. Levels, Growth Rates, and the Convergence Hypothesis
23-3. Growth Policy: Encouraging Capital Formation
23-4. Growth Policy: Improving Education and Training
23-5. Growth Policy: Spurring Technological Change
23-6. Recent Productivity Performance in the United States
23-7. Growth in the Developing Countries
23-8. From the Long Run to the Short Run

24. Aggregate Demand and The Powerful Consumer
24-1. Aggregate Demand, Domestic Product, and National Income
24-2. The Circular Flow of Spending, Production, and Income
24-3. Consumer Spending and Income: The Important Relationship
24-4. The Consumption Function and the Marginal Propensity to Consume
24-5. Factors That Shift the Consumption Function
24-6. The Extreme Variability of Investment
24-7. The Determinants of Net Exports
24-8. How Predictable Is Aggregate Demand?

25. Demand-Side Equilibrium: Unemployment or Inflation?
25-1. The Meaning of Equilibrium GDP
25-2. The Mechanics of Income Determination
25-3. The Aggregate Demand Curve
25-4. Demand-Side Equilibrium and Full Employment
25-5. The Coordination of Saving and Investment
25-6. Changes on the Demand Side: Multiplier Analysis
25-7. The Multiplier Is a General Concept
25-8. The Multiplier and the Aggregate Demand Curve

26. Bringing in the Supply Side: Unemployment and Inflation?
26-1. The Aggregate Supply Curve
26-2. Equilibrium of Aggregate Demand and Supply
26-3. Inflation and the Multiplier
26-4. Recessionary and Inflationary Gaps Revisited
26-5. Adjusting to a Recessionary Gap: Deflation or Unemployment?
26-6. Adjusting to an Inflationary Gap: Inflation
26-7. Stagflation from a Supply Shock
26-8. Applying the Model to a Growing Economy
26-9. A Role for Stabilization Policy

PART 7. FISCAL AND MONETARY POLICY

27. Managing Aggregate Demand: Fiscal Policy
27-1. Income Taxes and the Consumption Schedule
27-2. The Multiplier Revisited
27-3. Planning Expansionary Fiscal Policy
27-4. Planning Contractionary Fiscal Policy
27-5. The Choice Between Spending Policy and Tax Policy
27-6. Some Harsh Realities
27-7. The Idea Behind Supply-Side Tax Cuts
28. Money and the Banking System
28-1. The Nature of Money
28-2. How the Quantity of Money is Measured
28-3. The Banking System
28-4. Systemic Risk and the “Too Big to Fail” Doctrine
28-5. The Origins of the Money Supply
28-6. Banks and Deposit Creation
28-7. Why the Deposit-Creation Formula is Oversimplified
28-8. The Need for Monetary Policy

29. Monetary Policy: Conventional and Unconventional
29-1. Money and Income: The Important Difference
29-2. America’s Central Bank: The Federal Reserve System
29-3. Implementing Monetary Policy in Normal Times: Open-Market Operations
29-4. Other Instruments of Monetary Policy
29-5. How Monetary Policy Works in Normal Times
29-6. Money and the Price Level
29-7. Application: Why the Aggregate Demand Curve Slopes Downward
29-8. Unconventional Monetary Policies
29-9. From Financial Distress to Recession
29-10. From Models to Policy Debates

30. The Financial Crisis and the Great Recession
30-1. Roots of the Crisis
30-2. Leverage, Profits, and Risk
30-3. The Housing Price Bubble and the Subprime Mortgage Crisis
30-4. From the Housing Bubble to the Financial Crisis
30-5. From the Financial Crisis to the Great Recession
30-6. Hitting Bottom and Recovering
30-7. Lessons from the Financial Crisis

31. The Debate Over Monetary and Fiscal Policy
31-1. Velocity and the Quantity Theory of Money
31-2. Debate: Should the Fed Use Unconventional Monetary Policies?
31-3. Debate: Should Policymakers Fight Asset Price Bubbles?
31-4. Debate: Should We Rely on Fiscal or Monetary Policy?
31-5. Debate: The Shape of the Aggregate Supply Curve
31-6. Debate: Should the Government Intervene at All?
31-7. Dimensions of the Rules-Versus-Discretion Debate
32. Budget Deficits in the Short and Long Run
32-1. Should the Budget Always Be Balanced? The Short Run
32-2. The Importance of the Policy Mix
32-3. Deficits and Debt: Terminology and Facts
32-4. Interpreting the Budget Deficit or Surplus
32-5. Why Is the National Debt Considered a Burden?
32-6. Budget Deficits and Inflation
32-7. Debt, Interest Rates, and Crowding Out
32-8. The Main Burden of the National Debt: Slower Growth
32-9. The Economics And Politics of the U.S. Budget Deficit


33. The Trade-Off Between Inflation and Unemployment
33-1. Demand-Side Inflation Versus Supply-Side Inflation: A Review
33-2. Origins of the Phillips Curve
33-3. Supply-Side Inflation and the Collapse of the Phillips Curve
33-4. What the Phillips Curve Is Not
33-5. Fighting Unemployment with Fiscal and Monetary Policy
33-6. What Should Be Done?
33-7. Inflationary Expectations and the Phillips Curve
33-8. The Theory of Rational Expectations
33-9. Why Economists (and Politicians) Disagree
33-10. The Dilemma of Demand Management
33-11. Attempts to Improve the Trade-Off
PART 8. THE UNITED STATES IN THE WORLD ECONOMY

34. International Trade and Comparative Advantage
34-1. Why Trade?
34-2. International Versus Intranational Trade
34-3. The Principle of Comparative Advantage
34-4. The Arithmetic of Comparative Advantage
34-5. Tariffs, Quotas, and Other Interferences with Trade
34-6. Why Inhibit Trade?
34-7. Can Cheap Imports Hurt a Country?

35. The International Monetary System: Order or Disorder?
35-1. What Are Exchange Rates?
35-2. Exchange Rate Determination in a Free Market
35-3. When Governments Fix Exchange Rates: The Balance of Payments
35-4. A Bit of History: The Gold Standard and the Bretton Woods System
35-5. Adjustment Mechanisms Under Fixed Exchange Rates
35-6. Why Try to Fix Exchange Rates?
35-7. The Current “Nonsystem”
36. Exchange Rates and the Macroeconomy
36-1. International Trade, Exchange Rates, and Aggregate Demand
36-2. Aggregate Supply in an Open Economy
36-3. The Macroeconomic Effects of Exchange Rates
36-4. Fiscal and Monetary Policies in an Open Economy
36-5. International Aspects of Deficit Reduction
36-6. Should We Worry About the Trade Deficit?
36-7. On Curing the Trade Deficit
36-8. Conclusion: No Nation Is an Island

PART 9. THE ECONOMY TODAY

37. Contemporary Issues in the U.S. Economy
37-1. Will Artificial Intelligence Leave No Work for Humans to Do?
37-2. Are Uber and Airbnb the Markets of the Future?
37-3. Is the “Gig” Economy the Future of Work?
37-4. Is the Student Debt “Crisis” Really a Crisis?
37-5. How Will We Pay for Health Insurance?
37-6. Can We Grow Much Faster Than 2 Percent A Year?
37-7. Who Loses from Globalization?
37-8. Are Trade Wars “Good and Easy to Win”?
37-9. Where Is the National Debt Headed?
37-10. Has the Phillips Curve Disappeared?
Appendix
Glossary
Index