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Table of Contents

Chapter 1: Welcome to Economics!

1.1 What Is Economics, and Why Is It Important?

1.2 Microeconomics and Macroeconomics

1.3 How Economists Use Theories and Models to Understand Economic Issues

1.4 How Economies Can Be Organized: An Overview of Economic Systems

Chapter 2: Choice in a World of Scarcity

2.1 How Individuals Make Choices Based on Their Budget Constraint

2.2 The Production Possibilities Frontier and Social Choices

2.3 Confronting Objections to the Economic Approach

Chapter 3: Demand and Supply

3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services

3.2 Shifts in Demand and Supply for Goods and Services

3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process

3.4 Price Ceilings and Price Floors

3.5 Demand, Supply, and Efficiency

Chapter 4: Labor and Financial Markets

4.1 Demand and Supply at Work in Labor Markets

4.2 Demand and Supply in Financial Markets

4.3 The Market System as an Efficient Mechanism for Information

Chapter 5: Elasticity

5.1 Price Elasticity of Demand and Price Elasticity of Supply

5.2 Polar Cases of Elasticity and Constant Elasticity

5.3 Elasticity and Pricing

5.4 Elasticity in Areas Other Than Price

Chapter 6: Consumer Choices

6.1 Consumption Choices

6.2 How Changes in Income and Prices Affect Consumption Choices

6.3 Labor-Leisure Choices

6.4 Intertemporal Choices in Financial Capital Markets

Chapter 7: Cost and Industry Structure

7.1 Explicit and Implicit Costs, and Accounting and Economic Profit

7.2 The Structure of Costs in the Short Run

7.3 The Structure of Costs in the Long Run

Chapter 8: Perfect Competition

8.1 Perfect Competition and Why It Matters

8.2 How Perfectly Competitive Firms Make Output Decisions

8.3 Entry and Exit Decisions in the Long Run

8.4 Efficiency in Perfectly Competitive Markets

Chapter 9: Monopoly

9.1 How Monopolies Form: Barriers to Entry

9.2 How a Profit-Maximizing Monopoly Chooses Output and Price

Chapter 10: Monopolistic Competition and Oligopoly

10.1 Monopolistic Competition

10.2 Oligopoly

Chapter 11: Monopoly and Antitrust Policy

11.1 Corporate Mergers

11.2 Regulating Anticompetitive Behavior

11.3 Regulating Natural Monopolies

11.4 The Great Deregulation Experiment

Chapter 12: Environmental Protection and Negative Externalities

12.1 The Economics of Pollution

12.2 Command-and-Control Regulation

12.3 Market-Oriented Environmental Tools

12.3 Market-Oriented Environmental Tools

12.4 The Benefits and Costs of U.S. Environmental Laws

12.5 International Environmental Issues

12.6 The Tradeoff between Economic Output and Environmental Protection

Chapter 13: Positive Externalities and Public Goods

13.1 Why the Private Sector Under Invests in Innovation

13.2 How Governments Can Encourage Innovation

13.3 Public Goods

Chapter 14: Poverty and Economic Inequality

14.1 Drawing the Poverty Line

14.2 The Poverty Trap

14.3 The Safety Net

14.4 Income Inequality: Measurement and Causes

14.5 Government Policies to Reduce Income Inequality

Chapter 15: Issues in Labor Markets: Unions, Discrimination, Immigration

15.1 Unions

15.2 Employment Discrimination

15.3 Immigration

Chapter 16: Information, Risk, and Insurance

16.1 The Problem of Imperfect Information and Asymmetric Information

16.2 Insurance and Imperfect Information

Chapter 17: Financial Markets

17.1 How Businesses Raise Financial Capital

17.2 How Households Supply Financial Capital

17.3 How to Accumulate Personal Wealth

Chapter 18: Public Economy

18.1 Voter Participation and Costs of Elections

18.2 Special Interest Politics

18.3 Flaws in the Democratic System of Government

Chapter 19: The Macroeconomic Perspective

19.1 Measuring the Size of the Economy: Gross Domestic Product

19.2 Adjusting Nominal Values to Real Values

19.3 Tracking Real GDP over Time

19.4 Comparing GDP among Countries

19.5 How Well GDP Measures the Well-Being of Society

Chapter 20: Economic Growth

20.1 The Relatively Recent Arrival of Economic Growth

20.2 Labor Productivity and Economic Growth

20.3 Components of Economic Growth

20.4 Economic Convergence

Chapter 21: Unemployment

21.1 How the Unemployment Rate is Defined and Computed

21.2 Patterns of Unemployment

21.3 What Causes Changes in Unemployment over the Short Run

21.4 What Causes Changes in Unemployment over the Long Run

Chapter 22: Inflation

22.1 Tracking Inflation

22.2 How Changes in the Cost of Living are Measured

22.2 How Changes in the Cost of Living are Measured

22.4 The Confusion Over Inflation

22.5 Indexing and Its Limitations

Chapter 23: The International Trade and Capital Flows

23.1 Measuring Trade Balances

23.2 Trade Balances in Historical and International Context

23.3 Trade Balances and Flows of Financial Capital

23.4 The National Saving and Investment Identity

23.5 The Pros and Cons of Trade Deficits and Surpluses

23.6 The Difference between Level of Trade and the Trade Balance

Chapter 24: The Aggregate Demand/Aggregate Supply Model

24.1 Macroeconomic Perspectives on Demand and Supply

24.2 Building a Model of Aggregate Demand and Aggregate Supply

24.3 Shifts in Aggregate Supply

24.4 Shifts in Aggregate Demand

24.5 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation

24.6 Keynes’ Law and Say’s Law in the AD/AS Model

Chapter 25: The Keynesian Perspective

25.1 Aggregate Demand in Keynesian Analysis

25.2 The Building Blocks of Keynesian Analysis

25.3 The Phillips Curve

25.4 The Keynesian Perspective on Market Forces

Chapter 26: The Neoclassical Perspective

26.1 The Building Blocks of Neoclassical Analysis

26.2 The Policy Implications of the Neoclassical Perspective

26.3 Balancing Keynesian and Neoclassical Models

Chapter 27: Money and Banking

27.1 Defining Money by Its Functions

27.2 Measuring Money: Currency, M1, and M2

27.3 The Role of Banks

27.4 How Banks Create Money

Chapter 28: Monetary Policy and Bank Regulation

28.1 The Federal Reserve Banking System and Central Banks

28.2 Bank Regulation

28.3 How a Central Bank Executes Monetary Policy

28.4 Monetary Policy and Economic Outcomes

28.5 Pitfalls for Monetary Policy

Chapter 29: Exchange Rates and International Capital Flows

29.1 How the Foreign Exchange Market Works

29.2 Demand and Supply Shifts in Foreign Exchange Markets

29.3 Macroeconomic Effects of Exchange Rates

29.4 Exchange Rate Policies

Chapter 30: Government Budgets and Fiscal Policy

30.1 Government Spending

30.2 Taxation

30.3 Federal Deficits and the National Debt

30.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation

30.5 Automatic Stabilizers

30.6 Practical Problems with Discretionary Fiscal Policy

30.7 The Question of a Balanced Budget

Chapter 31: The Impacts of Government Borrowing

31.1 How Government Borrowing Affects Investment and the Trade Balance

31.2 Fiscal Policy, Investment, and Economic Growth

31.3 How Government Borrowing Affects Private Saving

31.4 Fiscal Policy and the Trade Balance

Chapter 32: Macroeconomic Policy Around the World

32.1 The Diversity of Countries and Economies across the World

32.2 Improving Countries’ Standards of Living

32.3 Causes of Unemployment around the World

32.4 Causes of Inflation in Various Countries and Regions

32.5 Balance of Trade Concerns

Chapter 33: International Trade

33.1 Absolute and Comparative Advantage

33.2 What Happens When a Country Has an Absolute Advantage in All Goods

33.3 Intra-industry Trade between Similar Economies

33.4 The Benefits of Reducing Barriers to International Trade

Chapter 34: Globalization and Protectionism

34.1 Protectionism: An Indirect Subsidy from Consumers to Producers

34.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions

34.3 Arguments in Support of Restricting Imports

34.4 How Trade Policy Is Enacted: Globally, Regionally, and Nationally

34.5 The Tradeoffs of Trade Policy

Appendix A: The Use of Mathematics in Principles of Economics

Appendix B: Indifference Curves

Appendix C: Present Discounted Value

Appendix D: The Expenditure-Output Model




David L. Heiserman, Editor

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Revised: June 06, 2015