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Kinh tế học Principles of Economics N.Gregory Mankiw

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  • Kinh tế học  Principles of Economics  N.Gregory Mankiw

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Principles of Economics: a Guided Tour Introduction  1 Ten Principles of Economics The study of economics is guided by a few big ideas  2 Thinking Like an Economist Economists view the world as both scientists and policymakers  3 Interdependence and the Gains from Trade The theory of comparative advantage explains how people benefit from economic interdependence How Markets Work  4 The Market Forces of Supply and Demand  5 Elasticity and Its Application  6 Supply, Demand, and Government Policies How does the economy coordinate interdependent economic actors? Through the market forces of supply and demand The tools of supply and demand are put to work to examine the effects of various government policies Markets and Welfare  7 Consumers, Producers, and the Efficiency of Markets  8 Application: The Costs of Taxation  9 Application: International Trade Why is the equilibrium of supply and demand desirable for society as a whole? The concepts of consumer and producer surplus explain the efficiency of markets, the costs of taxation, and the benefits of international trade The Economics of the Public Sector 10Externalities 11 Public Goods and Common Resources 12 The Design of the Tax System Market outcomes are not always efficient, and governments can sometimes remedy market failure To fund programs, governments raise revenue through their tax systems, which are designed with an eye toward balancing efficiency and equity Firm Behavior and the Organization of Industry 13 The Costs of Production 14 Firms in Competitive Markets The theory of the firm sheds light on the decisions that lie behind supply in competitive markets 15Monopoly 16 Monopolistic Competition 17Oligopoly Firms with market power can cause market outcomes to be inefficient The Economics of Labor Markets 18 The Markets for the Factors of Production 19 Earnings and Discrimination These chapters examine the special features of labor markets, in which most people earn most of their income 20 Income Inequality and Poverty Topics for Further Study 21 The Theory of Consumer Choice 22 Frontiers of Microeconomics Additional topics in microeconomics include household decision making, asymmetric information, political economy, and behavioral economics The Data of Macroeconomics 23 Measuring a Nation’s Income 24 Measuring the Cost of Living The overall quantity of production and the overall price level are used to monitor developments in the economy as a whole The Real Economy in the Long Run 25 Production and Growth 26 Saving, Investment, and the Financial System 27 The Basic Tools of Finance These chapters describe the forces that in the long run determine key real variables, including GDP growth, saving, investment, real interest rates, and unemployment 28Unemployment Money and Prices in the Long Run 29 The Monetary System 30 Money Growth and Inflation The monetary system is crucial in determining the long-run behavior of the price level, the inflation rate, and other nominal variables The Macroeconomics of Open Economies 31 Open-Economy Macroeconomics: Basic Concepts A nation’s economic interactions with other nations are described by its trade balance, net foreign investment, and exchange rate 32 A Macroeconomic Theory of the Open Economy A long-run model of the open economy explains the determinants of the trade balance, the real exchange rate, and other real variables Short-Run Economic Fluctuations 33 Aggregate Demand and Aggregate Supply 34 The Influence of Monetary and Fiscal Policy on Aggregate Demand 35 The Short-Run Trade-off between Inflation and Unemployment The model of aggregate demand and aggregate supply explains short-run economic fluctuations, the short-run effects of monetary and fiscal policy, and the short-run linkage between real and nominal variables Final Thoughts 36 Six Debates over Macroeconomic Policy A capstone chapter presents both sides of six major debates over economic policy Principles of Economics Ninth Edition N Gregory Mankiw Harvard University Australia • Brazil • Mexico • Singapore • United Kingdom • United States 38314_fm_hr_i-xxxii.indd review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial 23/09/19 11:58 am This is an electronic version of the print textbook Due to electronic rights restrictions, some third party content may be suppressed Editorial review has deemed that any suppressed content does not materially affect the overall learning experience The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest Important Notice: Media content referenced within the product description or the product text may not be available in the eBook version Principles of Economics, Ninth Edition © 2021, 2018 Cengage Learning, Inc N Gregory Mankiw Unless otherwise noted, all content is © Cengage ALL RIGHTS RESERVED No part of this work covered by the copyright Senior Vice President, Higher Education & Skills herein may be reproduced or distributed in any form or by any means, Product: Erin Joyner except as permitted by U.S copyright law, without the prior written Product Director: Jason Fremder permission of the copyright owner Product Manager: Chris Rader For product information and technology assistance, contact us at Senior Learning Designer: Sarah Keeling Cengage Customer & Sales Support, 1-800-354-9706 or Senior Content Manager: Anita Verma support.cengage.com In House Subject Matter Experts: For permission to use material from this text or product, Eugenia Belova, Kasie Jean, Shannon Aucoin submit all requests online at www.cengage.com/permissions Product Assistant: Matt Schiesl Digital Delivery Lead: Timothy Christy Marketing Manager: John Carey Intellectual Property Analysts: Ashley M Maynard, Reba Frederics Library of Congress Control Number: 2019941033 ISBN: 978-0-357-03831-4 Loose-leaf Edition: ISBN: 9780357133705 Intellectual Property Project Managers: Betsy Hathaway, Erika Mugavin Production Service: SPi Global US Art Director: Bethany Bourgeois Text Designer: Harasymczuk Design/ Bethany Bourgeois Cengage 200 Pier Boulevard Boston, MA 02210 USA Cengage is a leading provider of customized learning solutions with employees residing in nearly 40 different countries and sales in more Design Images: iStock.com/lolostock; iStock.com/ than 125 countries around the world Find your local representative at eurobanks; iStock.com/peeterv; George Rudy/ www.cengage.com Shutterstock.com; iStock.com/4x6 Cover Image: iStock.com/lolostock Cengage products are represented in Canada by Nelson Education, Ltd To learn more about Cengage platforms and services, register or access your online learning solution, or purchase materials for your course, visit www.cengage.com Printed in the United States of America Print Number: 01   Print Year: 2019 38314_fm_hr_i-xxxii.indd review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial 23/09/19 11:58 am To Catherine, Nicholas, and Peter, my other contributions to the next generation 38314_fm_hr_i-xxxii.indd review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial 23/09/19 11:58 am Jordi Cabré About the Author N Gregory Mankiw is the Robert M Beren Professor of Economics at Harvard University As a student, he studied economics at Princeton University and MIT As a teacher, he has taught macroeconomics, ­microeconomics, statistics, and principles of e­ conomics He even spent one summer long ago as a sailing i­nstructor on Long Beach Island Professor Mankiw is a prolific writer and a regular participant in academic and policy debates His work has been published in scholarly journals, such as the American Economic Review, Journal of Political Economy, and Quarterly Journal of Economics, and in more popular forums, such as the New York Times and The Wall Street Journal He is also author of the best-selling intermediate-level textbook Macroeconomics (Worth Publishers) In addition to his teaching, research, and writing, Professor Mankiw has been a research associate of the National Bureau of Economic Research, an adviser to the Congressional Budget Office and the Federal Reserve Banks of Boston and New York, a trustee of the Urban Institute, and a member of the ETS test development committee for the Advanced Placement exam in economics From 2003 to 2005, he served as chairman of the President’s Council of Economic Advisers iv Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_fm_hr_i-xxxii.indd review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial 23/09/19 11:58 am Preface: To the Instructor D uring my 20-year career as a student, the course that excited me most was the t­wo-semester sequence on the principles of economics that I took during my freshman ­ year in college It is no exaggeration to say that it changed my life I had grown up in a family that often discussed politics over the dinner table The pros and cons of various solutions to society’s problems generated fervent debate But in school, I had been drawn to the sciences Whereas politics seemed vague, rambling, and subjective, science was analytic, systematic, and objective While political debate continued without end, science made progress My freshman course on the principles of economics opened my eyes to a new way of thinking Economics combines the virtues of politics and science It is, truly, a social science Its subject matter is society—how people choose to lead their lives and how they interact with one another—but it approaches the s­ ubject with the dispassion of a science By bringing the methods of science to the questions of politics, economics tries to make progress on the challenges that all ­societies face I was drawn to write this book in the hope that I could convey some of the excitement about economics that I felt as a student in my first economics course Economics is a subject in which a little knowledge goes a long way (The same cannot be said, for instance, of the study of physics or the Chinese language.) Economists have a unique way of viewing the world, much of which can be taught in one or two semesters My goal in this book is to transmit this way of thinking to the widest possible audience and to convince readers that it illuminates much about the world around them I believe that everyone should study the fundamental ideas that economics has to offer One purpose of general education is to inform people about the world and thereby make them better citizens The study of economics, as much as any discipline, serves this goal Writing an economics textbook is, therefore, a great honor and a great responsibility It is one way that economists can help promote better government and a more prosperous future As the great economist Paul Samuelson put it, “I don’t care who writes a nation’s laws, or crafts its advanced treaties, if I can write its economics textbooks.” What’s New in the Ninth Edition? Economics is fundamentally about understanding the world in which we live Most chapters of this book include Case Studies illustrating how the principles of economics can be applied In addition, In the News boxes offer excerpts from newspapers, magazines, and online news sources showing how economic ideas shed light on current issues facing society After students finish their first course v Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_fm_hr_i-xxxii.indd review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial 23/09/19 11:58 am vi Preface: To the Instructor in economics, they should think about news stories from a new perspective and with greater insight To keep the study of economics fresh and relevant for each new cohort of students, I update each edition of this text to keep pace with the ever-changing world The new applications in this ninth edition are too numerous to list in their entirety, but here is a sample of the topics covered (and the chapters in which they appear): • Technology companies are increasingly using economists to better run their businesses (Chapter 2) • The hit Broadway show Hamilton has brought renewed attention to the issue of ticket reselling (Chapter 7) • President Trump has taken a new and controversial approach to international trade (Chapter 9) • A carbon tax and dividend plan has become a focal policy in the debate about global climate change (Chapter 10) • Social media share many features, along with many of the problems, associated with common resources (Chapter 11) • The Supreme Court hears a case about international price discrimination (Chapter 15) • Amazon looks like it might be the next target for antitrust regulators (Chapter 17) • The winners and losers from immigration have become a major issue in the political debate (Chapter 18) • Research on tax data shows by how much the super-rich have gotten even richer (Chapter 20) • Some economists suggest that, despite little change in the official poverty rate, we are winning the war on poverty (Chapter 20) • The theory of economic growth can help explain why so many of the world’s poorest nations are in sub-Saharan Africa (Chapter 25) • Economist Martin Feldstein explains why the United States is so prosperous (Chapter 25) • Cryptocurrencies may be the money of the future, or they may be a passing fad (Chapter 29) • Living during a hyperinflation, such as the recent situation in Venezuela, is a surreal experience (Chapter 30) • Recent discussion of trade deficits has included a lot of misinformation (Chapter 32) • The Federal Reserve has started to reassess what it means to target an inflation rate of percent (Chapter 36) In addition to updating the book, I have refined its coverage and pedagogy with input from many users of the previous edition There are numerous changes, large and small, aimed at making the book clearer and more student-friendly All the changes that I made, and the many others that I considered, were evaluated in light of the benefits of brevity Like most things that we study in economics, a student’s time is a scarce resource I always keep in mind a dictum from the great novelist Robertson Davies: “One of the most important things about writing is to boil it down and not bore the hell out of everybody.” Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_fm_hr_i-xxxii.indd review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial 23/09/19 11:58 am 804 Index Expectations rational, 761 role of, 749–756 shift in Phillips curve, 749–756 shifts in demand curve, 67 shifts in supply curve, 72 Expected inflation, 753 short-run Phillips curve and, 754 Expenditures, nation’s overall economy and, 468–469 Explicit costs, 245, 246, 259, 279 Exports, 54, 640 See also International trade gains and losses from exporting country, 170–171 net, 474–475, 640–642 Externalities, 10, 148, 187–207, 188, 516 business-stealing, 325 carbon tax, 198–199 Coase theorem, 202–203 command-and-control policies, 193–194 corrective taxes and subsidies, 194–197 education as, 191–193 gas tax and, 195 internalizing, 191 market inefficiency and, 189–193 negative, 188, 190–191 positive, 188, 191–193 private solutions to, 201–204 product-variety, 325 public policies toward, 193–201 technology spillovers, 192–193 tradable pollution permits, 197–200 transaction costs, 203 Extractive institutions, 523 ExxonMobil, 345 Eyeglasses, 327 F Facebook, 220 Factors of production, 20–22, 358, 510 competitive profit-maximizing firm, 358–359 demand for labor, 358–364 equilibrium in labor market, 366–370 land and capital, 370–373 linkages among, 372–373 markets for, 20–21, 357–378 production function and marginal product of labor, 359–361 shifting labor-demand curve, 362–363 supply of labor, 364–365 value of marginal product, 361–362 Fair Labor Standards Act of 1938, 116 Fairly valued stock, 559 Fairness, behavioral economics and, 459–460 Farming, applications of supply, demand, and elasticity, 101–103 Federal Deposit Insurance Corporation (FDIC), 605 Federal funds rate, 606, 606–608, 727 Federal government receipts of, 227 taxes collected by, 227–229 Federal Open Market Committee (FOMC), 596, 727, 736, 775, 777 Federal Reserve (Fed), 28, 595, 780–781 cost of reducing inflation, 759–765 creation of, 606–607 federal funds rate, 606–608 FOMC, 596 lending to banks, 603 monetary policy and, 775–777 organization of, 595–596 Phillips curve during financial crisis, 764–765 problems in controlling money supply, 604–605 quantity of reserves, 602–603 reserve ratio, 598, 604 role of interest-rate target in, 727 stock market, 727–728 system, 595–596 tools of monetary control, 602–608 zero inflation debate, 779 Feldstein, Martin, 524–525 Fiat money, 592, 592, 595 FICA (Federal Insurance Contributions Act), 124 Final good, GDP includes value of, 471 Finance, 552 Financial aid, price discrimination and, 306–307 Financial intermediaries, 532 banks, 532–533 mutual funds, 533–534 Financial markets, 530 bond market, 530–531 stock market, 531–532 Financial system, 530 Firm(s) See also Competitive firms in circular-flow diagram, 20–21 efficient scale of, 324 marginal, 281 market supply with fixed number of, 276 profit-maximizing, 358–359 Firm-specific risk, 556, 557 diversification of, 556–557 Fiscal policy, 730 See also Government spending aggregate demand and, 730–735 aggregate supply and, 735 automatic stabilizers, 741 changes in government purchases, 730 changes in taxes, 734–735 crowding-out effect, 733–734 multiplier effect, 730–731, 738–739 savings and, 543 spending multiplier, formula for, 731–732 stabilization, 736–741, 770–771 unbalanced, 648 Fisher effect, 624–625, 625, 629 Fisher, Franklin, 351 Fisher, Irving, 625 Fixed costs, 251 average, 252 Flypaper theory of tax incidence, 238 Fogel, Robert, 516, 517 Food stamp program, 214, 237, 404, 412 Ford, Gerald, 12, 614 Ford, Henry, 511, 585 Ford Motor Company, 256, 340, 515, 585 Foreign-currency exchange market for, 664–666 supply and demand, 662–666 Foreign investment direct, 515 economic growth and, 515 portfolio, 515 401(k) plans, 232, 459, 461, 786 403(b), 786 Fractional-reserve banking, 598, 598, 602, 604, 605, 708 France, income inequality in, 401 Franklin, Ben, 225, 387, 554 Free rider, 212, 212–215, 349 Free-silver debate, 632–633 Free To Be You and Me style, 56 Free trade, 167–186 economic growth and, 518–519 Frictional unemployment, 575, 575–579 Friedman, Milton, 614, 618, 631, 632, 749–756, 761, 766 Friedman rule, 632 Fundamental analysis, 559, 559–560 Future value, 552, 552 G Gains from trade comparative advantage, 50–55 deadweight losses and, 155–156 of exporting country, 170–171 of importing country, 171–173 production possibilities, 46–48 specialization, 48–50 Gale, William, 415 Game theory, 335, 336, 341, 342, 344, 460 Gapper, John, 220 Gasoline prices, incentive effects of, Gasoline tax, 235 as corrective tax, 195–196 road congestion and, 195 Gates, Bill, 351 GATT See General Agreement on Tariffs and Trade GDP See Gross domestic product GDP deflator, 477, 477–479 computing inflation rate, 478 vs consumer price index, 492–493 Gender, 383 See also Women General Agreement on Tariffs and Trade (GATT), 181, 642 General Mills, 328 General Motors, 340,553, 576, 646, 675 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 804deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am Index General Theory of Employment, Interest and Money, The (Keynes), 714, 721, 737, 772 Generic drugs vs monopoly drugs, 297–298 Germany average income in, 507 economic growth of, 507 hyperinflation in, 622, 623, 635 income inequality in, 401 inflation in, 11–12 Giberson, Michael, 80–81 Giffen goods, 436 Giffen, Robert, 436 Gifts as signals, 451 GNP See Gross national product Gold standard, 591, 632 Gone with the Wind, 495 Good(s), 66 club, 211, 290 complements, 67 CPI basket of, 490 currently produced, GDP includes, 471 different kinds of, 210–212 excludability of, 210, 211, 213, 214 final, 471 inferior, 66, 96, 430 intermediate, 471 international flows of, 640–649 international trade increases variety of, 176 markets for, 20–21 normal, 66, 96, 429 private, 210, 211 public, 210, 211, 213–215, 519 related, 66–67 rivalry in consumption, 210 substitutes, 66 tangible, 471 types of, 210–211 Google, 26, 27, 288 Government See also Federal government balance budget debate, 782–784 benefits of, 9–10 debate over spending hikes, 772–774 discrimination by, 391–392 Government budget deficits, 542–543, 545, 648, 671–672 Government-created monopolies, 289, 302 Government debt, 542 crowding out, 543 history of U.S., 544–545 Government policies price control and, 110–118 supply, demand, and, 109–110 taxes and, 119–126 Government purchases, 474 aggregate-demand curve shifts due to changes in, 693, 694 as component of GDP, 474, 475 fiscal policy changes in, 730 Government spending, 773 See also Fiscal policy Graph(s), 35–43 cause and effect, 41–43 curves in, 37–39 measuring profit in, 274–275 of single variable, 35–36 slope of, 39–41 of two variable, 36–37 Great Britain caloric consumption and height of population, 516–517 malnutrition and, 517 unilateral approach to free trade, 181 Great Depression, 487, 771–773, 779 bank runs during, 605 shift in aggregate demand, 707–709 Great Recession, 684, 709–710, 728, 772, 773 Greenspan, Alan, 232, 562, 603, 763, 764 Greenspan era, 763–764 Gross domestic income (GDI), 472 Gross domestic product (GDP), 468, 470, 507–509, 515, 535 components of, 473–475 consumption, 473, 475 drugs and, 482–483 as economy’s income and expenditure, 468–469 GDP deflator, 477–478 government purchases, 474, 475 international differences in, 481–482 investment, 475, 479–480 measurement of, 470–472 as measure of economic well-being, 480–483 net exports, 474–475 nominal (See Nominal GDP) prostitution and, 482–483 quality of life and, 481–482 U.S., components of, 475 Gross national product (GNP), 472, 515 Growth, production and, 505–525 “Guns and butter” tradeoff, H Hamermesh, Daniel, 383 Hamilton, 147 Hamilton, Alexander, 606 Hamlet (Shakespeare), 350, 547 Hanke, Steve, 634 Hard Heads, Soft Hearts (Blinder), 781 Health economic growth and, 516–517 efficiency wages and, 583–584 Health insurance, 450, 555 Hemel, Daniel, 306–307 Hemingway, Mark, 205 Hill, Adriene, 80–81 Holmes, Oliver Wendell, Jr., 151 Homo economicus, 458, 462 Homo sapiens, 458 Honda, 340 805 Hoover, Herbert, 182, 487, 495 Horizontal equity, 235, 235, 237–238 Horizontal mergers, 308 Households in circular-flow diagram, 20–21 decisions faced by, Housing in basket of goods of CPI, 490 rent control, 113–114 Human capital, 380, 380–382, 510 as determinant of productivity, 510 economic growth and, 510 education as, 380–382, 516 health and nutrition as investment in, 516–517 role of, 388 Human-capital theory, 384 Human life, value of, 215–216 Human organs, market for, 145 Hume, David, 614, 619, 620, 688 Hungary, hyperinflation in, 622, 623 Hyperinflation, 614, 634–635 money and prices during, 622, 623 nominal exchange rates, 655 IImmigration, 366 American workers, impact on, 374–375 Imperfect competition, 318, 342, 352 Implicit costs, 245, 246, 259 Import quota, 30, 673 compared to tariff, 175 Imports, 54, 640 See also International trade gains and losses of importing country, 171–173 Impression Products v Lexmark International, 306–307 Incentives, 5, 5–6, 155, 163, 191, 193–195, 231, 233, 234, 276, 289, 329, 336, 398, 407, 408, 413–415, 449, 451, 521, 525, 539, 541, 577, 584, 783, 785 Income See also Wages capital, 372 changes in affect consumers’ choices, 429–430 disposable personal, 472 economic life cycle, 403 effect, 432–433, 787 in-kind transfers as, 403 measuring a nation’s, 467–483 national, 472 nation’s overall economy and, 468–469 other measures of, 472 permanent, 403–404 personal, 472 political philosophy of redistributing, 406–410 shifts in demand and, 66 tax credits, 403 transitory vs permanent, 403–404 U.S distribution of, 398–399 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 805deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am 806 Index Income effect, 364, 365, 432–436, 442, 787 Income elasticity of demand, 96 Income inequality alternative measures of, 404 around world, 399–400, 414–415 economic mobility, 405–406 measurement of, 398–406 poverty and, 400–402 in U.S., 398–399 Income or consumption debate, taxation, 231–232 Income redistribution, international differences in, 414–415 Income tax, negative, 411–412 Inconsistency, behavioral economics and, 460–461 Indexation, 497, 630, 778 Index funds, 534, 561 random walk and, 561–562 India average income in, 505 economic growth of, 507 income inequality in, 401 Indifference curve(s), 423 extreme examples of, 426–427 income effect, 432–433 perfect complements, 426–427 perfect substitutes, 426 properties of, 424–425 Individual demand, 64–65 Individual retirement account (IRA), 232, 786 Individual supply vs market supply, 70–71 Indonesia average income in, 507 economic growth of, 507 income inequality in, 401 Industrial organization, 243, 244, 311, 319 Industrial policy, 192–193 Inefficiency, externalities and, 189–193 Inelastic demand, 88, 91, 92, 95, 102, 125 Inelastic supply, 97, 103, 126 Inequality alternative measures of, 404 around world, 399–400 Infant-industry argument for trade restrictions, 180 Inferior goods, 66, 430 income elasticity of demand and, 96 Information, 329 Inflation, 11, 11–12, 478, 488, 613–614 arbitrary redistributions of wealth, 631 brief look at adjustment process, 618–619 classical dichotomy, 619–620 confusion and inconvenience, 630 correcting economic variables for effect of, 494–499 cost of reducing, 759–765 costs of, 626–634 economy and, 614 effects of monetary injection, 617–618 effects of on box office receipts, 495 expected, 753 fall in purchasing power, 626–627 Fisher effect, 624–625 inflation-induced tax distortions, 629–630 inflation tax, 622–624 level of prices and value of money, 615 measures of, 493 measuring a nation’s income, 467 money growth and, 613–614 money supply and, 12 money supply, money demand, and monetary equilibrium, 615–617 protection, 531 quantity equation, 620–622 raises tax burden on saving, 629 relative-price variability and misallocation of resources, 628 shoeleather costs, 627–628 short-run trade-off between unemployment and, 12, 745–766 six costs of, 778 special cost of unexpected, 631 theory of, 614–626 velocity of money, 620–622 zero, 778–781 Inflation fallacy, 626–627, 779 Inflation-induced tax distortions, 629–630 Inflation rate, 478, 488, 490 calculating, 488–490 equilibrium price level and, 622 high, 498 nominal interest rate and, 625 in U.S economy, 499 Inflation targeting, 777 Inflation tax, 622–624, 623, 627 Informational efficiency, 561 Information, asymmetry See Asymmetric information In-kind transfers, 403 policies to reduce poverty, 412–413 problems in measuring inequality, 403 Input demand and output supply, 363 Input prices and supply, 71–72 Inquiry into the Nature and Causes of the Wealth of Nations, An (Smith), 7, Insolvency, 546, 601 Insurance adverse selection, 556 health, 555–556 market for, 555–556 social (See Social insurance taxes) unemployment, 577–578 Intangible services, GDP includes, 471 Interest rate(s), 497–498, 498 equilibrium, 723 federal funds rate, 606, 727 in long run, 724 market for loanable funds, 538 net capital outflow, 668 nominal, 497–498, 539, 624, 721 real, 539, 624, 721 in short run, 724 supply and demand for loanable funds, 538–539 targets in Fed policy, role of, 727 in U.S economy, 499 Interest-rate effect, 690–691, 694, 720, 721, 725 Intermediate good, 471 Internalizing the externality, 191 International Monetary Fund (IMF), 515, 614 International trade, 167–186 benefits of, 176–177 comparative advantage, 169–170 determinants of, 168–170 effects of tariffs, 173–175 equilibrium without, 168–169 gains and losses of exporting country, 170–171 gains and losses of importing country, 171–173 import quota compared to tariff, 175 job losses, 678 lessons for policy of, 175–176 multilateral approach to free trade, 181 relative demand for skilled and unskilled labor and, 382 restriction of, 175 of United States, 54–55 winners and losers from, 170–178 world price, 169–170 International transactions, prices for, 649–652 Intrinsic value, 589, 591, 592 Intuit, 288 Inventory, GDP and, 474 Investment, 473, 473–474 from abroad, 515 aggregate-demand curve shifts due to changes in, 692–694 as component of GDP, 473–475 as demand for loanable funds, 538 economic growth and, 513 foreign, 515 incentives, 541 national income accounts, 534–537 in people, 380 price level and, aggregate-demand curve downward slope, 690–691 saving, and their relationship to international flows, 645–646 savings and, 536–537 schooling as, 386 Investment accelerator, 731 Investment tax credit, 541, 693, 774 Invisible hand, 8–10, 82, 187, 197, 288, 299, 325, 346, 398, 450, 452, 462, 517, 522, 524, 539 Inward-oriented policies, 518 IRA See Individual retirement account Irwin, Douglas, 182–183 Israel, shifts in labor supply and, 366 Italy, income inequality in, 401 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 806deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am Index JJackson, Penfield, 351 Jackson, C Kirabo, 386 James, LeBron, 54 Japan average income in, 507 economic growth of, 507 income inequality in, 401 inflation, 631 Jekyll Island, 606–607 Jensen, Robert, 436 Job(s) argument for trade restrictions, 178–179 characteristics of, 388 number, 575 Job search, 576 public policy and, 576–577 some frictional unemployment is inevitable, 576 unemployment insurance, 577–578 Johnson, Rucker, 386 Jones, Jamal, 389 Journal of Economic History, 390 Journal of Labor Economics, 392 Journal of Law and Economics, The, 327 Junk bonds, 531 K Kahn, Richard, 738 Karabell, Zachary, 482–483 Kellogg, 328, 329 Kennedy, John F., 401, 737 Kennedy, Robert, 480 Kenya, elephant poaching, 219 Kershaw, Clayton, 487 Keynesians in White House, 737–739 Keynes, John Maynard, 28, 32–33, 562, 714, 721, 737, 738, 772 King, Stephen, 317 Knee, Defender, 204 Kremer, Michael, 521 LLabor aggregate-supply curve shifts and, 696 demand for, 358–364 international trade and demand for skilled and unskilled, 382 jobs argument for trade restrictions, 178–179 marginal product of, 361–362 measures of underutilization, 573 supply of, 364–365 taxes on, 158–159 technology and demand for skilled and unskilled, 382 Labor demand minimum wage and, 117 shifts in, 368–370 Labor-demand curve output price, 362 supply of other factors, 363 technological change, 363 Labor force, 102, 117, 388, 467, 510, 511, 516, 519, 524, 569, 570, 571–573, 576, 577, 579, 580, 581, 584, 683, 686, 772, 783 Labor-force participation rate, 569, 570, 572 Labor market discrimination, measuring, 387–389 equilibrium in, 366–370 minimum wage effects on, 116–117 racial discrimination in, 389, 390 Labor supply shifts in, 366–368 Labor-supply curve changes in alternative opportunities, 365 changes in tastes, 365 immigration, 365 shift in, 365 Labor tax, deadweight loss of, 158–159 Laffer, Arthur, 161–162 Laffer curve, 160, 161–162 Laffer curve and supply-side economics, 161–162 Laibson, David, 807 Laissez faire, 144 Land factors of production, 370–373 Larmer, Brook, 634–635 Law of demand, 63, 64, 66, 88, 200, 435, 436 Law of one price, 653 Law of supply, 69, 70, 75, 97, 243 Law of supply and demand, 75 Learning by doing, 57 Leisure, trade-off between work and, 364–365 Lemons problem, 450 Lender of last resort, 595, 605, 606 Lenin, Vladimir, 634–635 Leverage, 600–601 Leverage ratio, 601 Lexmark, 306–307 Liberalism, 408–409 Libertarianism, 409 Life cycle, 403 Lighthouses as public goods, 214–215 Liquidity, 591 of asset, 722 of money, 722 theory of liquidity preference, 721–723 trap, 728 Loanable funds, 537 market for, 662–664 supply and demand, 662–666 Local government, taxes collected by, 229–230 Lochner, Lance, 387 807 Logarithmic scales, 623 Lohr, Steve, 26 Long run costs in, 256–258 decision to exit or enter a market, 276–278 disinflationary monetary policy, 760 interest rates, 724 market supply, 276–278 Phillips curve, 749–751 rent control, 113–114 shift in demand, 279 supply curve, 276–281 Long-run equilibrium, 264, 277, 279, 280, 322–324, , 704, 705, 706, 711, 750 Long, Russell, 234 Los Angeles Dodgers, 487 Losses See also Deadweight loss of exporting country, 170–171 of importing country, 171–173 Low capital investment, 522 Low educational attainment, 522 Lowenstein, Roger, 606–607 Lucas, Robert, 506, 761 Lump-sum taxes, 233, 233–234 Luxuries income elasticity of demand and, 96 price elasticity of demand and, 88–89 Luxury tax, 126 M Macroeconomics, 24, 24–25, 468 quantities fluctuate together in, 686 six debates over policy for, 769–787 Maduro, Nicolás, 635 Malawi, elephants as private good, 220 Malthus, Thomas Robert, 520 Mankiw, N Gregory, 198 Marginal benefits, 4–6 Marginal buyers, 133, 144, 155, 189, 300 Marginal change, Marginal cost (MC), 4–5, 251–252, 252, 259, 363 markup over, 324 pricing for a natural monopoly, 309 related to average total cost, 254 rising, 253 Marginal-cost (MC) curve and average-cost curves, 253 firm’s supply decision and, 268–269 Marginal firm, 281 Marginally attached workers, 573 Marginal product, 248 demand for labor and value of, 361–362 diminishing, 249, 361 Marginal product of labor (MPL), 360, 361 production function and, 359–361 value of, 361–362 Marginal propensity to consume (MPC), 731–733 Marginal rate of substitution (MRS), 424, 425, 426, 428, 429, 430, 432, 433, 443 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 807deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am 808 Index Marginal revenue (MR), 266, 293 for competitive firm, 264–266 Marginal revenue product, 361 Marginal seller, 138, 144, 189 Marginal tax rates, 158, 228, 233 vs average tax rates, 233 Margin, defined, Market(s), 62 See also Competitive market bond, 530–531 competition and, 62–63 definition of, 89 efficiency of, 131–148 financial, 530–532 firm’s long-run decision to exit or enter, 276–278 for foreign-currency exchange, 664–666 for goods and services, 20–21 for insurance, 555–556 for land and capital, equilibrium in, 370–373 for loanable funds, 662–664 with only few sellers, 336–340 perfectly competitive, 62 risk, 557 size of oligopoly affecting, 339–340 stock, 531–532 Market demand, 64–65, 67, 70, 73, 133, 269, 291, 292, 297, 300, 335, 689 Market economy, 7, 7–8 Market efficiency, 141–148 consumer surplus and, 141–147 market failure and, 147–148 producer surplus and, 141–147 Market equilibrium, evaluating, 142–145 Market failure, 10, 147–148, 177, 189, 191, 205, 210, 212, 218, 221, 311, 313, 348, 452 See also Externalities Market for loanable funds, 537, 662–664 government budget deficits and surpluses, 542–546 investment incentives, 541 saving incentives, 539–541 supply and demand for loanable funds, 538–539 Market irrationality, 562–563 Market power, 10, 147, 148, 177, 263, 264, 282, 288, 289, 291, 298, 300, 301, 302, 308, 318, 324, 327, 340, 343, 348, 349– 351, 370, 385, 581, 582, 586, 745, 749, 751, 756, 758 Market risk, 557 Market share, 340 Market structure, types of, 319 Market supply with entry and exit, long run, 276–278 with fixed number of firms, short run, 276 vs individual supply, 70–71 as sum of individual supplies, 71 Markup over marginal cost, 324, 327 Marron, Donald, 205 Martin, William McChesney, 737 Mattis, Jim, 183 Maximin criterion, 408, 409, MC See Marginal cost McDonald’s, 54, 329–330, 643, 656, McKinley, William, 632, 633 Median voter theorem, 455–457, 456 Medicaid, 230, 237, 412, 413, 785 Medicare, 124, 158, 228, 229, 237, 415, 545 Medium of exchange, 533, 590, 591, 592, 593, 594, 598, 609, 615, 616, 723 Menu costs, 628, 632, 634, 636, 700, 778, 779 Mexico economic growth of, 507 effect of capital flight on economy, 676 income inequality in, 401 NAFTA and, 181 political instability, 675 Meyer, Bruce D., 404–405 Microeconomics, 24, 24–25, 468 asymmetric information, 448–453 behavioral economics, 458–463 political economy, 453–457 Microsoft Corporation, 26, 27, 287, 288, 351, 532, 556 Midpoint method, 90 Miller, Nolan, 436 Miller, Tracy C., 146–147 Mill, John Stuart, 407 Minimum wage, 116–117, 120–121 advocates and opponents of, 117 Fair Labor Standards Act of 1938, 116 labor market and, 116–117 price floor, 116, 118 teenage labor market and, 117 who earns, 579–580 Minimum-wage laws, 578–580 determinant of equilibrium wages, 385 evaluating price controls, 118 policies to reduce poverty, 410–411 Miranda, Lin-Manuel, 147 Misery index, 745, 758 Misperceptions theory, 701, 703 Model of aggregate demand and aggregate supply, 684, 688, 688–689 aggregate-demand curve, 689–694 aggregate-supply curve, 695–703 long-run Phillips Curve, 751 Phillips curve, 748 Monetary equilibrium, 615–617 Monetary income, 403 Monetary injection, 617–618, 726 Monetary neutrality, 619–620, 620 Fischer effect, 624–625 revisited, 707 Monetary policy, 595 aggregate demand and, 720–729 changes in money supply, 725–726 debate, policy made by rule or discretion, 775–777 disinflationary, 760 expansionary, 728, 729 free-silver debate, 632–633 inflation targeting, 777 monetary injection, 726 role of interest-rate targets in Fed policy, 727 stabilization policy arguments, 770–771 theory of liquidity preference, 721–723 zero lower bound, 728–729 Monetary system, 590 banks and the money supply, 597–601 Federal Reserve system, 595–596, 602–608 meaning of money, 590–594 Money, 590 commodity, 591 creation with fractional-reserve banking, 598 credit cards and, 594 fiat, 592 functions of, 590–591 future value, 552–553 during hyperinflations, 622, 623 kinds of, 591–592 liquidity of, 722 measuring time value of, 552–553 present value, 552–553 quantity theory of, 614, 618 stock, 593 in U.S economy, 593–594 value of, 615 velocity of, 620–622 Money demand, 615–617 theory of liquidity preference, 722–723 Money market equilibrium in, 723 slope of the aggregate-demand curve, 725 Money multiplier, 599–600 Money supply, 595, 615–617 bank capital, leverage, and financial crisis of 2008–2009, 600–601 bank runs and, 605 banks and, 597–601 discount rate, 603 excess reserves, 598 Fed’s tools of monetary control, 602–608 inflation and, 12 monetary neutrality, 620 money multiplier, 599–600 open-market operations, 596, 602–603 paying interest on reserves, 604 problems in controlling, 604–605 reserve requirements, 598, 604 theory of liquidity preference, 721–723 Monopolistically competitive firms in the short run, 320–321 Monopolistic competition, 317–332, 318 advertising, 326–330 competition with differentiated products, 320–326 excess capacity, 324 free entry and exit of firms, 319 long-run equilibrium, 322–323 many sellers, 319 markup over marginal cost, 324 between monopoly and perfect competition, 318–320 vs perfect competition, 318–320, 323–324 product differentiation, 319 and welfare of society, 324–325 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 808deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am Index Monopolistic competitors in the short run, 321 Monopoly(ies), 63, 287–316, 288, 318–320 arising, 288–291 cartels and, 336–338 vs competition, 291–292, 312 deadweight loss in, 299–301 demand and marginal-revenue curves for, 294 economies of scale as a cause of, 290 government-created, 289 inefficiency of, 301 marginal-cost pricing for a natural, 309 natural, 211, 290–291 parable about pricing, 302–303 prevalence of, 311–312 price discrimination and, 302–308 production and pricing decisions in, 291–298 profit, 296–298 profit as social cost, 301–302 profit maximization in, 295 public ownership and, 310 public policy toward, 308–311 regulation, 309–310 resources, 289 revenue, 292–294 supply curve, 297 welfare cost of, 299–302 Monopoly drugs vs generic drugs, 297 Monopoly firms, demand curves for, 292 Monopsony, 370 Moore, Stephen, 162 Moral hazards, 448, 448–449 insurance, 556 Moretti, Enrico, 387 Movie tickets, price discrimination and, 305 MPC See Marginal propensity to consume MPL See Marginal product of labor MR See Marginal revenue MRS See Marginal rate of substitution Mullainathan, Sendhil, 389 Multiplier effect, 730, 772 aggregate demand, 730 formula for spending, 731–732 other applications of, 732–733 Municipal bonds, 233, 531 Muskie, Edmund, 200 Mutual funds, 533 as financial intermediaries, 533–534 index funds, 534 portfolio, 533 N Nadal, Rafael, 384, 385 Nader, Ralph, NAFTA See North American Free Trade Agreement Nakamoto, Satoshi, 592 Namibia, elephants as private good, 220 NASDAQ See National Association of Securities Dealers Automated Quotations Nash equilibrium, 338, 342, 460 Nash, John, 338 National Association of Securities Dealers Automated Quotations (NASDAQ), 532 National defense, important public goods, 211, 213 National Highway Traffic Safety Administration, 195 National income, 35, 162, 357, 472, 474, 475, 534–537, 546, 731, 732, 733, 750 National Institutes of Health (NSF), 213, 519 National Labor Relations Act, 582 National saving, 535, 782, 785–787 economic well-being and, 785 ways to increase, 787 National Science Foundation, 213, 519 National-security argument for trade restrictions, 179–180 Natural disasters, price and, 80–81 Natural level of output, 696, 724, Natural monopolies, 211, 290, 290–291 marginal-cost pricing for, 309 Natural-rate hypothesis, 754 natural experiment for, 754–756 Natural rate of unemployment, 568, 571, 751–752 809 Newton, Isaac, 18 New York Stock Exchange, 532 New York Times, 348 New York Yankees, 487 Nigeria average income in, 505 income inequality in, 401 inflation rate, 614 living standards in, 11 NNP See Net national product Nominal exchange rates, 649 during hyperinflations, 655 Nominal GDP, 477, 619 numerical example of real vs., 476–477 real GDP vs., 476–479 velocity and quantity equation, 621 Nominal interest rates, 497–498, 498, 539, 624, 721 Fisher effect, 624–625 inflation rate and, 625 in U.S economy, 499 Nominal variables, 619, 620, 687, 688, 696, 707, 751 Normal goods, 66, 200, 429, 430, 432, 435, 438, 442, income elasticity of demand and, 96 Normative statements, 25–27, 26 North American Free Trade Agreement (NAFTA), 181, 642, 679, Nozick, Robert, 409 Nutrition, health and, 516–517 natural-rate hypothesis, 754–756 Natural resources, 18, 509, 510, 511, 513, 514, 523, 695 aggregate-supply curve shifts and, 697 as determinant of productivity, 510 limit to growth, 512 population growth stretching of, 520 Negative correlation, 37, 746, 752 Negative externalities, 188, 190–191, 194, 195, 200, 325, Negative income tax, 31, 411–412, 412 Negative public saving, 671, 782 Neoclassical theory of distribution, 374 Net capital outflow, 642 equality of net exports, 643–645 flow of financial resources, 642–643 interest rates, 668 link between two markets, 667, 668 Net exports, 474, 474–475, 640 aggregate-demand curve shifts due to changes in, 693, 694 as component of GDP, 474–475 equality of, 643–645 price level and, aggregate-demand curve downward slope, 691 trade policy, 673–675 Netflix, 26 Net foreign investment, 643 Net national product (NNP), 472 Neumark, David, 120–121 O Obama, Barack, 198, 240, 414, 415, 463, 545, 710, 738, 739, 764, 772–773 Observation, 18–19 Oceans, common resources, 219 Office of Management and Budget, 28 Oikonomos, Oligopoly, 318, 335 economics of cooperation, 341–347 equilibrium for, 338–339 markets with only a few sellers, 336–340 as prisoners’ dilemma, 342–343 public policy toward, 347–352 size of, affecting market outcome, 339–340 Omitted variable, 41, 42, 43, 383 OPEC See Organization of the Petroleum Exporting Countries Open economy, 535, 640 equality of net exports and net capital outflow, 643–645 equilibrium, 667–669 Euro, 651 flow of financial resources, 642–643 flow of goods, 640–649 government budget deficits, 671–672 how policies and events affect, 670–679 increasing openness of U.S economy, 641–642 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 809deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am 810 Index Open economy (Continued ) international flows of goods and capital, 640–649 market for foreign-currency exchange, 664–666 market for loanable funds, 662–664 nominal exchange rates, 649–650 political instability and capital flight, 675–677 prices for international transactions, 649–652 purchasing-power parity, 652–655 real equilibrium, 669 real exchange rates, 650–652 trade policy, 673–675 Open-market operations, 596, 602, 602– 603, 616, 708, 710, 721–722, 725, 727, 729 Opportunity cost(s), 4, 50, 50–51, 244 comparative advantage and, 50–51 cost of capital as, 245 costs as, 244–245 economists vs accountants, 246 explicit and implicit costs, 245, 259 production possibilities frontier and, 21–24 Optimization consumer optimal choice, 428–429 deriving demand curve, 433–434 income changes and, 429–430 income effect, 432–433 price changes and, 430–431 substitution effect, 432–433 utility of, 430 Optimum, 155, 161, 174, 190, 191, 192, 193, 195, 300, 347, 428, 429, 430, 431, 432, 433, 435, 437, 440, 441 Ordered pair, 36 Oreopoulos, Philip, 389 Organization of the Petroleum Exporting Countries (OPEC), 343 inflation, 763 and price of oil, 103–104 supply shocks and, 756 and world oil market, 343 world oil market and price ceilings and lines at gas pump, 112–113 Organs (human), market for, 145 Origin, of graph, 36, 425 Oster, Emily, 56–57 Ouellette, Lisa Larrimore, 306–307 Output, 724 Output effect, 293, 339 Output price, 362 Outward-oriented policies, 518 Overvalued stock, 559 Owners’ equity, 600, 601 P Pakistan economic growth of, 506–507 income inequality in, 401 Palestine, shifts in labor supply and, 366 Patent protection, 192–193 Payoff matrix, 341 Payroll taxes, 228 burden of, 123 Peltzman, Sam, PepsiCo, 308 Perception vs reality, 30–32 Perfect competition, 318–320 excess capacity, 324 markup over marginal cost, 324 vs monopolistic competition, 323–324 Perfect complements, 426–427, 427 Perfectly competitive markets, 62, 63, 264, 281, 318, 323, 325, 331 Perfectly elastic supply, 98, 278 Perfectly inelastic demand, 91, 92 Perfectly inelastic supply, 98, 199 Perfect price discrimination, 304, 305 Perfect substitutes, 89, 291, 298, 426, 427, 656, 666 Permanent income, 403, 403–404 Perpetuity, bonds, 531 Persico, Claudia, 386 Personal income, 225, 230, 233, 472, 686, 734, 741 Personal income taxes, 225, 227–229, 231, 236, 734, 741 Philbrick, Nathaniel, 317 Philippines, income inequality in, 401 Phillips, A W., 746, 752, 753, 755, 766 Phillips curve, 746 aggregate demand, aggregate supply, and, 747–749 breakdown of, 756 during financial crisis, 764–765 long-run, 749–751 natural-rate hypothesis, 754–756 origins of, 746–747 rational expectations, 761–762 reconciling theory and evidence, 752–753 in 1960s, 755 sacrifice ratio, 759–761 shifts in, 749–756 short-run, 753–754 supply shocks and, 756–758 Physical capital, 509 as determinant of productivity, 509–510 Pie chart, 35 Pigou, Arthur, 194, 195 Pigovian taxes, 194 Piketty, Thomas, 400 Pin factory, 258 Poland, hyperinflation in, 622, 623 Political business cycle, 775, 776 Political economy, 453, 453–457 Arrow’s impossibility theorem, 454–455 Condorcet voting paradox, 453–454 median voter theorem, 455–457 politicians’ behavior, 457 Political failure, 311 Political instability, capital flight and, 675–677 Politicians, behavior of, 457 Pollution clean air and water as common resource, 218 corrective taxes and, 194–200 Environmental Protection Agency (EPA), 194 gas tax, 196 as negative externality, 218 objections to economic analysis of, 200 regulation and, 194 social optimum and, 190 tradable pollution permits, 197–200 Population growth diluting the capital stock, 520–521 economic growth and, 519–521 promoting technological progress, 521 stretching natural resources, 520 Porter, Eduardo, 414–415 Portfolio, mutual funds, 533 Positive correlation, 37, 785 Positive externalities, 188, 191–193 technology spillovers, industrial policy, and patent protection, 192–193 Positive statements, 25–27, 26 Poverty, 404–405 correlated with age, race, and family composition, 402 fighting, as public good, 214–215 income inequality and, 400–402 in-kind transfers, 412–413 policies to reduce, 410–415 Poverty line, 117, 400, 401, 402, 405 Poverty rate, 179, 400, 400–403, 405 Predatory pricing, 349–350 Preferences consumer choices, 423–427 marginal rate of substitution, 424 representing with indifference curves, 423–424 utility and, 430 Present value, 552, 552–553, 559, 563 Prevalence of monopolies, 311–312 Price(s) See also Consumer price index (CPI) advertising affects, 327–328 allocation of resources and, 81–82 changes in consumer choices, 430–431 control on, 110–118 equilibrium, 73 higher price raises producer surplus, 140–141 during hyperinflations, 622, 623 input prices and supply, 71–72 international transactions, 649–652 level of, 615 lower price raises consumer surplus, 134–135 market-clearing, 73 natural disasters and, 80–81 output, 362 quantity demanded and, 63–64 quantity supplied and, 69–70 of related goods and demand, 66–67 relative, 628 rental, of land or capital, 371–372 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 810deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am Index shortages and, 74 surplus and, 74 of trade, 52–53 when supply and demand shifts, 78–79 willingness to pay, 132–133 world, 169–170 Price ceiling, 110 binding constraint, 110 lines at gas pump, 112–113 market outcomes and, 110–111 not binding, 110 rent control, 113–114 Price controls, evaluating, 118 Price discrimination, 302 airline prices, 305 analytics of, 304–305 discount coupons, 305–306 examples of, 305–307 financial aid, 306–307 monopolies and, 302–308 movie tickets, 305 quantity discounts, 307 Supreme Court decisions, 306–307 welfare with and without, 304 Price effect, 293, 294, 339, 340 Price elasticity of demand, 88, 88–89 computing, 89 determinants of, 88–89 elasticity and total revenue along a linear demand curve, 94–96 midpoint method, 90 total revenue and, 93–94 variety of demand curves, 91–93 Price elasticity of supply, 97 computing, 98 determinants of, 97 variety of supply curves, 100–101 Price floor, 110 market outcomes and, 114–115 minimum wage, 116–117 Price gouging, 80–81, 82 Price level, 724 consumption and, 690 exchange-rate effect, 691 investment and, 690–691 net exports and, 691 Price maker, 287, 297, 317 Price takers, 62, 170, 264, 268, 269, 282, 287, 292, 294, 297, 317, 318, 319, 340, 359 Pricing congestion, 218 in monopoly, 302–303 predatory, 349–350 Pricing decisions, in monopolies, 291–298 Principal, bonds, 531 Principals, 448, 448–449 Principles of Political Economy and Taxation (Ricardo), 53 Prisoners’ dilemma, 341, 341–346 arms races, 344 common resources, 345 cooperation and, 346–347 examples of, 344–345 oligopolies as, 342–343 tournament, 347 and the welfare of society, 345–346 Private goods, 210, 211, 214, 215, 217–220, 235, 519 Private saving, 536, 538, 542, 543, 671, 784, 787, 788 Producer price index, 491 Producer surplus, 137–141, 138, 299 cost and willingness to sell, 137–138 evaluating market equilibrium, 142–145 higher price raises, 140–141 market efficiency and, 141–147 using supply curve to measure, 138–140 Product differentiation, 319, 327 Production cost of, 244 and costs, 247–249 within country, GDP measures value of, 471 factors of, 20–22, 357–378, 510 growth and, 505–525 resources, limited quantities of, 279 within specific interval of time, GDP measures value of, 471–472 Production decisions in monopolies, 291–298 Production function, 247, 360, 511 from, to the total-cost curve, 249 illustration, 514 marginal product of labor and, 359–361 total cost and, 247–249 Production possibilities frontier, 21, 21–24 economic growth and, 21–24 efficiency and, 22 gains from trade, 46–48 opportunity costs and, 21–24 trade-offs and, 23–24 Productivity, 11, 509 determinants of, 509–512 health and nutrition affects, 516–517 importance of, 509 living standards and, 508, 509 production function, 511 relationship between living standards and, 11 role of, 508–512 wages and, 369 Product-variety externality, 325 Profit, 244, 244 accounting, 246 as area between price and average total cost, 274 economic, 246 measuring in graph for competitive firm, 274–275 in monopoly, 296–298 Profit maximization competitive firm’s supply curve and, 266–276 example of, 266–267 in monopoly, 295 811 Progressive tax, 236 Property rights, importance of, 221–222 technology and, 193 Property taxes, 225, 229 Proportional tax, 236, 412 Prostitution, GDP and, 482–483 Protection-as-a-bargaining-chip argument for trade restrictions, 180–182 Protectionism, 182–183 Public good(s), 210, 211, 519 antipoverty programs, 214 basic research, 213–214 cost-benefit analysis, 215–216 free-rider problem, 212–213 importance of property rights, 221–222 lighthouses as, 214 national defense, 213 value of human life, 215–216 Public investment, schooling as, 386 Public ownership, monopolies and, 310 Public policy, 10, 452–453 See also Antitrust laws; Fiscal policy; Monetary policy diminishing returns and catch-up effect, 513–5156 economic growth and, 513–524 education and, 516 free trade and, 518–519 health and nutrition, 516–517 investment from abroad, 515 job search and, 576–577 population growth and, 519–521 property rights and political stability, 517–518 research and development, 519 saving and investment, 513 toward externalities, 193–201 toward monopolies, 308–311 toward oligopolies, 347–352 Public policymakers, 5, 189, 193 Public saving, 536, 782, 787 budget deficit and, 787 negative, 783 saving incentives and, 787 Purchase price, 371–372, 630 Purchasing power, 653 inflation and, 626–627 Purchasing-power parity, 652–657, 653 basic logic of, 653 hamburger standard, 656–657 implications of, 653–655 limitations of, 656 as special case, 666 Putnam, Howard, 348 Q Quality advertising as a signal of, 328–329 theory of efficiency wages and worker quality, 584 Quality of life, 11, 481–482, 505 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 811deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am 812 Index Quantitative easing, 710, 729 Quantity equilibrium, 73 of reserves, Fed influences, 602–603 Quantity demanded, 63 change in, 77 relationship between price and, 63–64 Quantity discounts, price discrimination and, 307 Quantity equation, 620–622, 621 Quantity supplied, 69, 76 Quantity theory of money, 614, 618 Quarterly Journal of Economics, 392, 440, 521 Quintile ratio, 400 Quintiles, 237, 398, 399 Quotas, import, 30, 173, 175, 642, 675, R Race discrimination in labor market, 389, 390 discrimination in sports, 391–392 median annual earnings by, 388 segregated streetcars and, 390–391 Random walk, 561 index funds and, 561–562 Rational expectations, 761 and possibility of costless disinflation, 761 Rationality, behavioral economics and, 458–459, 462–463 Rational people, 4, 4–5, 136, 233, 248, 267, 281, 294, 361, 409 Rawls, John, 408, 416 Reagan, Ronald, 29, 161, 162, 239, 415, 545, 614, 648, 671, 758, 762, 773, 777 government debt, 545 tax cuts under, 161–162 Real exchange rates, 650, 650–652, 654, 665, 666, 669 Real GDP, 477 half century of, 478–479 vs nominal GDP, 476–479 numerical example of nominal vs., 476–477 Real interest rates, 497–499, 498, 624, 721 Fisher effect, 624–625 Reality, perception vs., 30–32 Real variables, 619, 620, 687 Recession, 545, 684 government debate over spending hikes or tax cuts, 772–774 real GDP and, 478–479 Volcker’s decision, 777 Recession (2008–2009), 709–710 Phillips curve during and after, 765 Reconciling theory, 752–753 Regional differences, cost of living and, 495–497 Regional price parities, 496 Regressive tax, 236, 414 Regulation of externalities, 193–194 “Relationship between Unemployment and the Rate of Change of Money Wages in the United Kingdom, 1861–1957” (Phillips), 746 Relative price misallocation of resources and, 628 variability, 628 Rental price, 371–373 Rent control, 30 evaluating price controls, 118 price ceiling, 113–114 in short run and long run, 113–114 Rent subsidies, 118 Resale price maintenance, 349 Research and development, economic growth and, 519 Reserve ratio, 598, 599, 600, 604 Reserve requirements, 598, 604, 604 Reserves, 597, 602–603 Resources common, 211, 217–221, 345 flow of financial, 642–643 limited quantities of production, 279 monopoly, 289 natural, 524, 534, 510, 512, 520 prices and allocation of, 81–82 relative-price variability and misallocation of, 628 scarcity of, Restraint of trade, 347–349 Retained earnings, 472, 560 Revenue See also Total revenue average, 266, 292 of competitive firm, 264–266 marginal, 264–266, 293 monopoly, 292–294 tax, 153 total, 292 Reverse causality, 41, 42–43 Rhodes, Cecil, 289 Ricardo, David, 53 Right-to-work laws, 582 Risk diversification reduces, 557 firm-specific, 557 managing, 554–558 market, 557 and return, trade-off between, 557–558 Risk aversion, 555, 555 Rivalry in consumption, 210 Road congestion, gasoline tax and, 195, 218 Roback, Jennifer, 390 Robinson Crusoe (Defoe), 509 Robinson, James, 523 Rockefeller, John D., 508 “Role of Monetary Policy, The” (Friedman), 749 Roth, Alvin E., 26 Rule of 70, 554 Russia, income inequality in, 401 Ruth, Babe, 487–488, 494–495 S Sacrifice ratio, 759–761, 760 Saez, Emmanuel, 400 Sales taxes, 229 Salinger, Michael, 80–81 Samuelson, Paul, 727, 746, 747, 749, 752, 753, 755, 766 Sargent, Thomas, 761, 766 Satisficers, 458 Saving(s), 535, 785–787 economic growth and, 513 fiscal policy and, 543 incentives, 539–541 inflation raises tax burden on, 629 investment and, 536–537 investment, and their relationship to international flows, 645–646 national, 535, 785–787 national income accounts, 534–537 negative public, 782 private, 536 public, 536, 783–784 as supply of loanable funds, 538 tax law reform debate to encourage saving, 785–787 Scalia, Antonin, 352 Scalping, 32, 146–147 Scarcity, 2, 512 Scatterplot, 36, 37 Schmalensee, Richard, 351 Schumer, Chuck, 146 Scientific judgments, differences among economists, 29–30 Scientific method, 18–19 Screening, 452 Seasonal adjustment, 471 Second Bank of the United States, 606 Sectoral shifts, 576 Segregation, segregated streetcars and profit motive, 390–391 Seller(s) number of, and shifts in supply curve, 73 taxes on, affect market outcomes, 119–122 variables that influence, 73 Services CPI basket of, 490 currently produced, GDP includes, 471 intangible, 471 markets for, 20–21 Sex, median annual earnings by, 388 Shaw, George Bernard, 29 Sherman Antitrust Act, 308, 348 Shoeleather costs, 627, 627–628, 778 Shortage, 74 lines at gas pump, 112–113 price ceilings and, 110 Short run aggregate-supply curve, 699 costs in, 256–258 disinflationary monetary policy, 760 economic fluctuations, 687–689 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 812deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am Index increase in demand, 280 interest rates, 724 market supply with fixed number of firms, 276 monopolistically competitive firm in, 320–321 monopolistic competitors in, 320–321 Phillips curve, 753–754 rent control, 113–114 shift in demand, 279 Shut down, 270 competitive firm’s short-run decision to, 270–271 near-empty restaurants and, 272 off-season miniature golf and, 272 Sierra Club, 201 Signaling, 450, 450–451 advertising, 384 education, 384–385 Simon, Herbert, 458 Singapore, pursued outward-oriented policies, 518 Skill-biased technological change, 382 Skills, increasing value of, 381–382 Slope, 39–41, 94, 249, 279–281, 435–436, 439, 689–692, 699–702, 723–725, Smith, Adam, 7–9, 53, 82, 145, 187, 258, 348, 397, 452 Smith, Noah, 386–387 Smoking, reducing, 68–69 SNAP See Supplemental Nutrition Assistance Program Social Choice and Individual Values (Arrow), 455 Social cost, 190 monopoly’s profit as, 301–302 Social insurance, 408 Social insurance taxes, 228, 229 Social media, 220–221 Social Security, 124, 228, 237 indexation of benefits under, 497 tax, 158 Society decisions faced by, faces short-run trade-off between inflation and unemployment, 12 Solow, Robert, 738, 746, 747, 749, 752, 753, 755, 766 Sound of Music, The, 495 South Africa, income inequality in, 401 South Korea caloric consumption and height of population, 516–517 economic growth rate of, 514–515 GDP to investment, 514 pursued outward-oriented policies, 518 unilateral approach to free trade, 181 Soviet Union, collapse of communism in, 7 Specialization, 257 driving force of, 50–53 economies of scale and, 257–258 trade and, 48–50 Speculative bubble, 562 Spending multiplier, formula for, 731–732 Sports, discrimination in, 391–392 SSI See Supplemental Security Income Stabilization automatic stabilizers, 741 debate, 770–771 policy arguments, 736–741 Stagflation, 711, 713, 757 Standard of living determinants of, 11 relationship between productivity and, 11 Standard & Poor’s, 531, 532 Starbucks, 21 Star Wars: The Force Awakens, 495 State government taxes collected by, 229–230 Statistical discrepancy, 472 Statistical discrimination, 392, 392–393 Sticky-price theory, 700–701 Sticky-wage theory, 699–700, 703, 706, 711, Stigler, George, 311 Stock, 531 diversification of firm-specific risk, 557 efficient markets hypothesis, 560–561 fundamental analysis, 559 index funds, 561–562 market irrationality, 562–563 money, 593 random walks, 561–562 Stock index, 532, 534, 561 Stockman, David, 161 Stock market, 531–532 Federal Reserve (Fed), 727–728 Stoll, John D., 352 Stone, Emma, 384, 385 Store of value, 533, 590, 591 Strike, 385, 581 Structural unemployment, 575 Sub-Saharan Africa, 517, 521–523 Subsidies market-based policy, 194–197 rent, 118 wage, 118 Substitutes, 66 cross-price elasticity of demand, 96 price elasticity of demand, 88 Substitution bias, 491 Substitution effect, 365, 432–433, 787 Sullivan, James X., 404–405 Sunk costs, 270–272, 271 Superheroes, 350 Superstar phenomenon, 384–385 Supplemental Nutrition Assistance Program (SNAP), 214, 404, 412 Supplemental Security Income (SSI), 411 Supply, 69–73 See also Model of aggregate demand and aggregate supply applications of, 100–106 change in, 77 813 decrease in, 71, 78 disentangling demand and, 670 elasticity of, 97–100 equilibrium of demand and, 74–75 excess, 74 increase in, 71, 101 individual, 70–71 inelastic, 97 input prices and, 71–72 of labor, 364–365 law of, 69 market vs individual, 70–71 number of sellers and, 73 perfectly elastic, 98 perfectly inelastic, 98 price elasticity of, 98, 99 relationship between price and quantity supplied, 69–70 shift in, and market equilibrium, 76 technology and, 72 Supply and demand, 73–79, 109–110 disentangling, 670 equilibrium of, 73–75 for foreign-currency exchange, 662–666 law of, 75 for loanable funds, 662–666 market forces of, 61–82 shift in, 78–79 versatility of, 359 Supply curve(s), 70 in competitive market, 276–281 price elasticity of supply, 98–100 shifts in, 71–73 shifts in vs movements along, 76 supply schedule and, 70, 139 using to measure producer surplus, 138–140 variety of, 98–100 Supply schedule, 70 supply curve and, 69–70, 139 Supply shock(s), 757 accommodating adverse, 758 adverse shock to aggregate supply, 757 Phillips curve and, 756–758 role of, 756–758 of the 1970s, 758 Supply-side economics and Laffer curve, 161–162 Supply siders (economists), 162, 735 Supreme court price discrimination in, 306–307 Surplus, 74 See also Budget surplus; Consumer surplus; Total surplus; Trade surplus government budget deficits and, 542–543 price floors and, 116 producer (See Producer surplus) trade, 640 Sweden income inequality in, 401 Laffer curve, 162 Synergies, 309 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 813deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am 814 Index T T-account, 597 Taiwan economic growth rate of, 518 pursued outward-oriented policies, 518 TANF See Temporary Assistance for Needy Families Tangible goods, GDP includes, 471 Tanzania, elephant poaching, 219 Tariff(s), 30, 173, 673 compared to import quotas, 175 deadweight loss and, 174 effects of in international trade, 173–175 Tastes changes in, 365 shifts in the demand curve and, 66 Tax burden distributed, 237 divided, 126 Tax credits, 403 Tax cuts under George W Bush, 735, 772 under Kennedy, 738 under Reagan, 161–162 Tax equity, 238–239 Taxes, 119–126 ability-to-pay principle, 235–238 administrative burden, 232–233 benefits principle, 235 on buyers, market outcomes and, 122–124 carbon, 198–199 collected by state and local governments, 229–230 collected by the federal government, 227–229 consumption, 232 corporate income, 229, 238–239 corrective, 194–197 costs of, 151–165 cuts under Reagan, 161–162 deadweight losses, 231–232 deadweight loss of taxation, 152–156 and efficiency, 230–234 and equity, 234–239 excise, 229 fiscal policy changes, 734–735 gas, 195–196 incidence, 119 income or consumption debate, 231–232 inflation, 622–624 on labor, 158–159 lump-sum, 233–234 luxury, 126 marginal tax rates vs average tax rates, 233 negative income, 411–412 payroll, 124, 228 personal income, 227–228 Pigovian, 194 progressive, 236 property, 229 proportional, 236 regressive, 236 sales, 229 on sellers, market outcomes and, 119–122 social insurance, 228 tax effects on market participants, 152–155 tax equity, 238–239 tax incidence, 238–239 Tax incidence, 119, 238–239 elasticity and, 125–126 Tax laws debate, 785–787 Tax revenue, 153, 160–163 Tax systems, design of, 225–241 Tax treatment, bonds, 531 Taylor, John, 738 Tech companies hiring economists, 26–27 Technological change, 363, 382, 511 Technological knowledge, 510, 510–511 aggregate-supply curve shifts and, 697 specific, 213 Technology demand for skilled and unskilled labor and, 382 population growth promoting of, 521 property rights and, 193 shifts in supply curve and, 72 spillovers, 192–193 Teenage labor market, minimum wage and, 117 Temporary Assistance for Needy Families (TANF), 214, 411, 414 Term auction facility, 603 Term, bonds, 531 Textile market, 168–173 Thaler, Richard H., 81, 462–463 Theory, 18–19 Theory of inflation, 614–626 Theory of Justice, A (Rawls), 408 Theory of liquidity preference, 721 equilibrium, money market, 723 money demand, 722–723 money supply, 721–722 Ticket resellers, 146–147 Time horizon, price elasticity of demand, 89 Time inconsistency of policy, 776 practical importance of, 777 Time-series graph, 35, 36 Time value of money, measuring, 552–553 Timiraos, Nick, 780–781 Tit-for-tat strategy, 347 Tobin, James, 738 Tools of monetary control, 602–608 Total-cost curve, 248, 249, 251 Total costs, 244, 244 average, 252, 259 Total revenue, 93, 244, 244 along a linear demand curve, 94–96 changes with price changes, 94 for competitive firm, 264–266 price elasticity of demand and, 93–94 Total surplus, 142, 143, 144, 154, 155, 160, 161, 170, 171, 172, 173, 174, 190, 231, 299, 300, 301, 303, 304, 305, 309, 325, 346, 452, Toyota, 311, 340, 639, 642, 646 Tradable pollution permits, 197–200 Trade See also Free trade; Gains from trade; International trade agreements and World Trade Organization, 181–182 benefits of, comparative advantage and, 52 deadweight losses and gains from, 155–156 equilibrium without international, 168–169 five big truths, 678–679 interdependence and gains from, 45–56 price of, 52–53 restraint of, 347–349 restrictions (See Trade restrictions) specialization and, 48–50 as a tool for economic development, 178 Trade balance, 640 Trade barriers, 31, 181, 355, 642 Trade deficit, 640 measuring a nation’s income, 468 in U.S., 647–649 Trade Expansion Act of 1962, 182 Trade-offs, 2–3 between equity and efficiency, 239–240 between inflation and unemployment, 12 policy decisions and, 27 production possibilities frontier and, 23–24 and return, trade-off between, 557–558 between work and leisure, 364–365 Trade policy, 182–183, 673, 673–675 import quota, 673 tariff, 673 Trade restrictions arguments for, 178–179 infant-industry argument, 180 jobs argument for, 178–179 national-security argument, 179–180 protection-as-a-bargaining-chip argument, 180–182 tariffs, 30 unfair-competition argument for, 180 Trade surplus, 640 Traffic, congested roads as public goods or common resources, 218–219 Tragedy of the Commons, 217, 217–218 Transaction costs, 203 Transfer payments, 474 Transitivity, 454, 455, Transitory income, 403–404 Transportation, 89, 194, 218, 405, 490, 641 Treasury Inflation-Protected Securities (TIPS), 531 Truman, Harry, 27, 28 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 814deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am Index Trump, Donald, 31, 162, 168, 182–183, 198, 199, 237, 239, 240, 352, 374, 375, 414, 495, 545, 595, 642, 679, 735 Trumponomics (Laffer and Moore), 162 Trusts, 308 Turkey inflation rate, 614 Turnover, efficiency wages and, 584 Twitter, 220, 221, 551 Tying, 350 Uber, 9, 26, 430 Uganda, elephant poaching, 219 Ultimatum game, 459, 460 Underground economy, 159 Undervalued stock, 559 Unemployment benefits, 577–578 cyclical, 568, 571 efficiency wages and, 583–585 frictional, 575, 576 how long without work, 574 identifying, 568–575 insurance, 577–578 job search and, 576–577 measuring a nation’s income, 467 measuring of, 568–572 minimum-wage laws and, 578–580 natural rate of, 568, 571, 751 short-run trade-off between inflation and, 12, 745–766 structural, 575 wages of, 578–579 why some people always experience, 574–575 Unemployment rate, 569 measures, 572–573 since 1960, 571 Unfair-competition argument for trade restrictions, 180 Unions, 385, 581 collective bargaining and, 581 determinant of equilibrium wages, 385 economics of, 581–582 good or bad for economy, 582–583 strike, 582 type of cartel, 581, 582 United Kingdom economic growth of, 507 real GDP per person, 507 United States average income in, 505–507 carbon tax, 198–199 distribution of income in, 398–399 economic growth of, 507 GDP to investment, 514–515 government debt, 544–545 income inequality in, 398–399 inflation in, 12 inflation rate, 614 interest rates in, 499 internationalization of economy, 641 international trade and finance, 641–642 international trade with, 54–55 living standards in, 11 malnutrition in, 517 money in, 593–594 NAFTA and, 181 prosperity, 524 real GDP in, 478–479 trade deficit, 647–649 various laws to manage use of fish and other wildlife, 219 United States Postal Service, 310 Unit of account, 590, 591, 592, 620, 630, 631, 778 Unmeasured quality change, 492 Unsafe at Any Speed (Nader), U-shaped average total cost, 253–254 Utilitarianism, 407, 407–409 Utility, 407 function of, 555 preferences and, 430 V Value-added tax (VAT), 232 Value of human life, cost-benefit analysis, 215–216 Value of marginal product, 361, 361–362 Values, differences among economists in, 30 Vanderlip, Frank, 607 Varadarajan, Tunku, 182–183 Variable costs, 251, 252, 259 average, 252, 259 Variables graphs of single, 35–36 graphs of two, 36–37 nominal, 619 omitted, 42 real, 619 that influence buyers, 67 that influence sellers, 73 Varian, Hal, 27 VAT See Value-added tax Velocity of money, 620, 620–622 Venezuela hyperinflation in, 634–635 inflation rate, 614 Verizon v Trinko, 352 Vertical equity, 235, 235–236, 239, 240 Vertical mergers, 308 Volcker, Paul A., 759, 760, 762 decision led to recession, 777 disinflation, 762–763 Volkswagen, 340 Voting systems Arrow’s impossibility theorem, 454–455 Condorcet voting paradox, 453–454 median voter theorem, 455–457 815 W Wage-price spiral, 712 Wages See also Income ability, effort, and chance, 382–383 above-equilibrium wages, 385 $5-a-day, 585 beauty and, 383 Black Death and, 373 compensating differentials, 380 determinants of equilibrium, 380 $15-an-hour, 120–121 education and, 384–385 efficiency, 385, 583–584 human capital, 380–382 immigration and, 366–368 labor supply and, 436–439 minimum, 116–117 minimum-wage laws, 578–580 minimum-wage laws, unions, and efficiency wages, 385 productivity and, 369 signaling, 384–385 superstar phenomenon, 384–385 of unemployment, 578–579 Wage subsidies, 118 Walmart, 352, 532, 644 Walsh, Emily, 389 Warburg, Paul, 606, 607 Warhol, Andy, 178–179 War on Poverty, 404–405 Wealth arbitrary redistributions of, 631 effect, 690, 694, 720 Wealth of Nations, The (Smith), 8, 53, 258, 348 Weimar Republic, 635 Welfare, 411 effects of free trade, 170 effects of tariffs, 173–175 policies to reduce poverty, 411 tax affects, 152–153 Welfare cost of monopolies, 299–302 Welfare economics, 132, 147, 148, 152, 189 Welfare of society monopolistic competition and, 324–325 prisoners’ dilemma and, 345 Whole Foods, 352 Wieland, Volker, 738 Williams, Johns, 780–781 Willingness to pay, 5, 132, 132–133, 136, 142, 143, 153, 189, 197, 299, 300, 303–307, 329, 350, 383, 451, 559 Willingness to sell, cost and, 137–138 Women gender differences in competition, 383, 388 labor-force participation in U.S economy of, 571–572 labor force participation rates since 1950, 572 Wonderful Wizard of Oz, The (Baum), 632 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 815deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am 816 Index Workers discouraged, 573 efforts, 584–585 health, 583–584 human capital per, 510 natural resources, 510 physical capital per, 510 quality, 584 turnover, 584 Work incentives, antipoverty programs and, 413–415 Work-leisure decision, 437 Work, trade-off between leisure and, 364–365 World Bank, 179, 515 World price, 103, 169, 169–176, 368, 576, 756, 757 World Trade Organization (WTO), 181–182 trade agreements and, 181–182 World War II, 344 shift in aggregate demand, 707–709 WTO See World Trade Organization Wu, Timothy, 352–353 X X-coordinate, 36, 40 Y Yahoo, 27, 560 Z Zero inflation, 498, 629, 729, 775, 778–781 Zero lower bound, 728–729 Zero profit competitive firms stay in business with, 278–279 equilibrium, 278 Zimbabwe income per person in, 506 Zwolinski, Matt, 81 Y-coordinate, 36, 40 Yukichi, Fukuzawa, 387 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) 38314_em_indx_hr_799-816.indd 816deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Editorial review has 23/09/19 11:59 am SUGGESTIONS FOR SUMMER READING If you enjoyed the economics course that you just finished, you might like to read more about economic issues in the following books Daron Acemoglu and James A Robinson Kimberly Clausing Why Nations Fail: The Origins of Power, Prosperity, and Poverty Open: The Progressive Case for Free Trade, Immigration, and Global Capital (New York: Crown Publishing, 2012) (Cambridge, MA: Harvard University Press, 2019) An economist and political scientist argue that establishing the right institutions is the key to economic success An economist explains why Americans benefit from interacting with the rest of the world Abhijit Banerjee and Esther Duflo Avinash Dixit and Barry Nalebuff Poor Economics The Art of Strategy: A Game Theorist’s Guide to Success in Business and Life (New York: Public Affairs, 2011) (New York: Norton, 2008) Two prominent development economists offer their proposal on how to fight global poverty This introduction to game theory discusses how all people—from corporate executives to criminals under arrest—should and make strategic decisions Yoram Bauman and Grady Klein The Cartoon Introduction to Economics (New York: Hill and Wang, 2010) Basic economic principles, with humor Bryan Caplan The Myth of the Rational Voter: Why Democracies Choose Bad Policies William Easterly The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor (New York: Basic Books, 2013) A former World Bank economist examines the many attempts to help the world’s poorest nations and why these attempts have so often failed (Princeton, NJ: Princeton University Press, 2008) Milton Friedman An economist asks why elected leaders often fail to follow the policies that economists recommend Capitalism and Freedom (Chicago: University of Chicago Press, 1962) In this classic book, one of the most important economists of the 20th century argues that society should rely less on the government and more on the free market Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Robert L Heilbroner Burton G Malkiel The Worldly Philosophers A Random Walk Down Wall Street (New York: Touchstone, 1953, revised 1999) (New York: Norton, 2015) A classic introduction to the lives, times, and ideas of the great economic thinkers, including Adam Smith, David Ricardo, and John Maynard Keynes This introduction to stocks, bonds, and financial economics is not a “get rich quick” book, but it might help you get rich slowly Steven E Landsburg John McMillan The Armchair Economist: Economics and Everyday Life Reinventing the Bazaar: A Natural History of Markets (New York: Free Press, 2012) A deep and nuanced, yet still very readable, analysis of how society can make the best use of market mechanisms Why does popcorn cost so much at movie theaters? Steven Landsburg discusses this and other puzzles of economic life (New York: Norton, 2002) Branko Milanovic Steven D Levitt and Stephen J Dubner The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (New York: Basic Books, 2011) (New York: Morrow, 2005) A series of provocative essays about economic inequality around the world Economic principles and clever data analysis applied to a wide range of offbeat topics, including drug dealing, online dating, and sumo wrestling Sendhil Mullainathan and Eldar Shafir Michael Lewis (New York: Times Books, 2013) The Big Short: Inside the Doomsday Machine (New York: Norton, 2010) Scarcity: Why Having Too Little Means So Much An economist and psychologist team up to examine the causes and consequences of our limited cognitive abilities How a few savvy investors managed to make money during the financial crisis of 2008 and 2009 Sylvia Nasar Roger Lowenstein (New York: Simon and Schuster, 2011) America’s Bank: The Epic Struggle to Create the Federal Reserve (New York: Penguin Press, 2015) A history of the founding of one of the most important policymaking institutions in the United States Grand Pursuit: The Story of Economic Genius A sweeping narrative that tells the story of economic discovery Roger W Spencer and David A Macpherson Lives of the Laureates (Cambridge, MA: MIT Press, 2014) Twenty-three winners of the Nobel Prize in Economics offer autobiographical essays about their lives and work Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it ... Versions of This Book Principles of Economics Brief Principles of Principles of Principles of Essentials of Microeconomics Macroeconomics Macroeconomics Economics 1  Ten Principles of Economics. . .Principles of Economics: a Guided Tour Introduction  1 Ten Principles of Economics The study of economics is guided by a few big ideas  2 Thinking... macroeconomics • Principles of Microeconomics This version contains 22 chapters and is designed for one-semester courses in introductory microeconomics • Principles of Macroeconomics This version
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