Description
- Cover
- Title
- Copyright
- About the Authors
- Brief Contents
- Contents
- Preface
- Acknowledgments
- PART 1 INTRODUCTION
- CHAPTER 1 Ten Principles of Economics
- 1-1 How People Make Decisions
- 1-1a Principle #1: People Face Tradeoffs
- 1-1b Principle #2: The Cost of Something Is What You Give Up to Get It
- 1-1c Principle #3: Rational People Think at the Margin
- 1-1d Principle #4: People Respond to Incentives
- In the News: Even Criminals Respond to Incentives
- Case Study: Ready, Set, Go . . .
- 1-2 How People Interact
- 1-2a Principle #5: Trade Can Make Everyone Better Off
- 1-2b Principle #6: Markets Are Usually a Good Way to Organize Economic Activity
- Case Study: Adam Smith Would Have Loved Uber
- 1-2c Principle #7: Governments Can Sometimes Improve Market Outcomes
- 1-3 How the Economy as a Whole Works
- 1-3a Principle #8: A Country’s Standard of Living Depends on Its Ability to Produce Goods and Services
- 1-3b Principle #9: Prices Rise When the Government Prints Too Much Money
- 1-3c Principle #10: Society Faces a Short-Run Tradeoff between Inflation and Unemployment
- 1-4 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 2 Thinking Like an Economist
- 2-1 The Economist as Scientist
- 2-1a The Scientific Method: Observation, Theory, and More Observation
- 2-1b The Role of Assumptions
- 2-1c Economic Models
- 2-1d Our First Model: The Circular-Flow Diagram
- 2-1e Our Second Model: The Production Possibilities Frontier
- 2-1f Microeconomics and Macroeconomics
- 2-2 The Economist as Policy Adviser
- 2-2a Positive versus Normative Analysis
- 2-2b Economists in Ottawa
- 2-2c Why Economists’ Advice Is Not Always Followed
- 2-3 Why Economists Disagree
- 2-3a Differences in Scientific Judgments
- 2-3b Differences in Values
- 2-3c Perception versus Reality
- Ask the Experts: Ticket Resale
- 2-4 Let’s Get Going
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- Appendix Graphing: A Brief Review
- Graphs of a Single Variable
- Graphs of Two Variables: The Coordinate System
- Curves in the Coordinate System
- Slope
- Graphing Functions
- Cause and Effect
- Omitted Variables
- Reverse Causality
- Problems and Applications
- CHAPTER 3 Interdependence and the Gains from Trade
- 3-1 A Parable for the Modern Economy
- 3-1a Production Possibilities
- 3-1b Specialization and Trade
- 3-2 Comparative Advantage: The Driving Force of Specialization
- 3-2a Absolute Advantage
- 3-2b Opportunity Cost and Comparative Advantage
- 3-2c Comparative Advantage and Trade
- FYI: The Legacy of Adam Smith and David Ricardo
- 3-2d The Price of Trade
- 3-3 Applications of Comparative Advantage
- 3-3a Should Connor McDavid Shovel His Own Sidewalk?
- In the News: The Future of Free Trade in Canada
- 3-3b Should Canada Trade with Other Countries?
- Ask the Experts: Trade with China
- 3-4 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- PART 2 HOW MARKETS WORK
- CHAPTER 4 The Market Forces of Supply and Demand
- 4-1 Markets and Competition
- 4-1a What Is a Market?
- 4-1b What Is Competition?
- 4-2 Demand
- 4-2a The Demand Curve: The Relationship between Price and Quantity Demanded
- 4-2b Market Demand versus Individual Demand
- 4-2c Shifts in the Demand Curve
- Case Study: Two Ways to Reduce the Quantity of Smoking Demanded
- 4-3 Supply
- 4-3a The Supply Curve: The Relationship between Price and Quantity Supplied
- 4-3b Market Supply versus Individual Supply
- 4-3c Shifts in the Supply Curve
- 4-4 Supply and Demand Together
- 4-4a Equilibrium
- 4-4b Three Steps to Analyzing Changes in Equilibrium
- Case Study: Marijuana Legalization
- In the News: Supply, Demand, and Technology
- 4-5 Conclusion: How Prices Allocate Resources
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- Appendix the Mathematics of Market equilibrium
- Problems and Applications
- PART 3 THE DATA OF MACROECONOMICS
- CHAPTER 5 Measuring a Nation’s Income
- 5-1 The Economy’s Income and Expenditure
- 5-2 the Measurement of Gross Domestic product
- 5-2a “GDP Is the Market Value …”
- 5-2b “… Of All …”
- 5-2c “… Final …”
- 5-2d “… Goods and Services …”
- 5-2e “… Produced …”
- 5-2f “… Within a Country …”
- 5-2g “… In a Given Period of Time”
- 5-3 the Components of GDP
- 5-3a Consumption
- 5-3b Investment
- 5-3c Government Purchases
- 5-3d Net Exports
- Case Study: The Components of Canadian GDP
- 5-4 real versus Nominal GDP
- 5-4a A Numerical Example
- 5-4b The GDP Deflator
- Case Study: Real GDP over Recent History
- 5-5 GDp and Economic Well-Being
- FYI: Canada’s Official Poverty Line
- Case Study: Measuring Economic Well-Being in Canada
- Case Study: International Differences in GDP and the Quality of Life
- In the News: Identifying the 1 Percent
- 5-6 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 6 Measuring the Cost of Living
- 6-1 The Consumer Price Index
- 6-1a How the Consumer Price Index Is Calculated
- 6-1b Problems in Measuring the Cost of Living
- FYI: What Is in the CPI’s Basket?
- 6-1c The GDP Deflator versus the Consumer Price Index
- 6-2 Correcting Economic Variables for the Effects of Inflation
- 6-2a Dollar Figures from Different Times
- FYI: The Bank of Canada’s Inflation Calculator
- Case Study: Mr. Index Goes to Hollywood
- 6-2b Indexation
- 6-2c Real and Nominal Interest Rates
- Case Study: Interest Rates in the Canadian Economy
- 6-3 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- PART 4 THE REAL ECONOMY IN THE LONG RUN
- CHAPTER 7 Production and Growth
- 7-1 Economic Growth Around the World
- FYI: Are You Richer Than the Richest American?
- 7-2 Productivity: Its Role and Determinants
- 7-2a Why Productivity Is So Important
- 7-2b How Productivity Is Determined
- FYI: The Production Function
- Case Study: Are Natural Resources a Limit to Growth?
- 7-3 Economic Growth and Public Policy
- 7-3a The Importance of Saving, Investment, and Stable Financial Markets
- 7-3b Diminishing Returns and the Catch-Up Effect
- 7-3c Investment from Abroad
- 7-3d Education
- In the News: Using Experiments to Evaluate Aid
- 7-3e Health and Nutrition
- 7-3f Property Rights and Political Stability
- 7-3g Free Trade
- In the News: One Economist’s Answer
- 7-3h Research and Development
- Case Study: Productivity Slowdowns and Speedups
- 7-3i Population Growth
- Ask the Experts: Innovation and Growth
- 7-4 Conclusion: The Importance of Long-Run Growth
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 8 Saving, Investment, and the Financial System
- 8-1 Financial Institutions in the Canadian Economy
- 8-1a Financial Markets
- FYI: How to Read Stock Tables
- 8-1b Financial Intermediaries
- 8-1c Summing Up
- 8-2 Saving and Investment in the National Income Accounts
- FYI: Financial Institutions in Crisis
- 8-2a Some Important Identities
- 8-2b The Meaning of Saving and Investment
- 8-3 The Market for Loanable Funds
- 8-3a Supply and Demand for Loanable Funds
- 8-3b Policy 1: Saving Incentives
- 8-3c Policy 2: Investment Incentives
- 8-3d Policy 3: Government Budget Deficits and Surpluses
- Ask the Experts: Fiscal Policy and Saving
- Case Study: The Accumulation of Government Debt in Canada
- FYI: How Large Is Government Debt?
- 8-4 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 9 Unemployment and Its Natural Rate
- 9-1 Identifying Unemployment
- 9-1a How Is Unemployment Measured?
- Case Study: Labour-Force Participation of Women in the Canadian Economy
- 9-1b Does the Unemployment Rate Measure What We Want It To?
- FYI: The Employment Rate
- 9-1c How Long Are the Unemployed without Work?
- 9-1d Why Are There Always Some People Unemployed?
- FYI: A Tale of Two Recessions
- 9-2 Job Search
- 9-2a Why Some Frictional Unemployment Is Inevitable
- 9-2b Public Policy and Job Search
- 9-2c Employment Insurance
- 9-3 Minimum-Wage Laws
- FYI: Who Earns the Minimum Wage?
- 9-4 Unions and Collective Bargaining
- 9-4a The Economics of Unions
- 9-4b Are Unions Good or Bad for the Economy?
- 9-5 The Theory of Efficiency Wages
- 9-5a Worker Health
- 9-5b Worker Turnover
- 9-5c Worker Effort
- 9-5d Worker Quality
- Case Study: Henry Ford and the Very Generous $5-a-Day Wage
- FYI: Minimum, Efficiency, and Living Wages
- 9-6 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- PART 5 MONEY AND PRICES IN THE LONG RUN
- CHAPTER 10 The Monetary System
- 10-1 The Meaning of Money
- 10-1a The Functions of Money
- 10-1b The Kinds of Money
- 10-1c Money in the Canadian Economy
- In the News: Why Gold?
- FYI: Credit Cards, Debit Cards, and Money
- Case Study: Where Is All the Currency?
- 10-2 The Bank of Canada
- 10-2a The Bank of Canada Act
- 10-2b Monetary Policy
- 10-3 Commercial Banks and the Money Supply
- 10-3a The Simple Case of 100 Percent-Reserve Banking
- 10-3b Money Creation with Fractional-Reserve Banking
- 10-3c The Money Multiplier
- 10-3d Bank Capital, Leverage, and the Financial Crisis of 2007–09
- 10-3e The Bank of Canada’s Tools of Monetary Control
- 10-3f Problems in Controlling the Money Supply
- FYI: The Bank of Canada’s Response to the 2007–09 Financial Crisis
- Case Study: Bank Runs and the Money Supply
- 10-4 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 11 Money Growth and Inflation
- 11-1 The Classical Theory of Inflation
- 11-1a The Level of Prices and the Value of Money
- 11-1b Money Supply, Money Demand, and Monetary Equilibrium
- 11-1c The Effects of a Monetary Injection
- 11-1d A Brief Look at the Adjustment Process
- 11-1e The Classical Dichotomy and Monetary Neutrality
- 11-1f Velocity and the Quantity Equation
- Case Study: Money and Prices during Hyperinflations
- 11-1g The Inflation Tax
- FYI: Hyperinflation in Zimbabwe
- 11-1h The Fisher Effect
- 11-2 The Costs of Inflation
- 11-2a A Fall in Purchasing Power? The Inflation Fallacy
- 11-2b Shoeleather Costs
- 11-2c Menu Costs
- 11-2d Relative-Price Variability and the Misallocation of Resources
- 11-2e Inflation-Induced Tax Distortions
- 11-2f Confusion and Inconvenience
- 11-2g A Special Cost of Unexpected Inflation: Arbitrary Redistributions of Wealth
- 11-2h Inflation Is Bad, but Deflation May Be Worse
- Case Study: Money Growth, Inflation, and the Bank of Canada
- FYI: Total and Core Inflation and the Bank of Canada’s Inflation Target
- 11-3 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- PART 6 THE MACROECONOMICS OF OPEN ECONOMIES
- CHAPTER 12 Open-Economy Macroeconomics: Basic Concepts
- 12-1 The International Flows of Goods and Capital
- 12-1a The Flow of Goods: Exports, Imports, and Net Exports
- Case Study: The Increasing Openness of the Canadian Economy
- Ask the Experts: Steel and Aluminum Tariffs
- 12-1b The Flow of Financial Resources: Net Capital Outflow
- In the News: Breaking Up the Chain of Production
- 12-1c The Equality of Net Exports and Net Capital Outflow
- FYI: The Current Account Balance
- 12-1d Saving, Investment, and Their Relationship to the International Flows
- 12-1e Summing Up
- Case Study: Saving, Investment, and Net Capital Outflow of Canada
- 12-2 The Prices For International Transactions: Real and Nominal Exchange Rates
- 12-2a Nominal Exchange Rates
- 12-2b Real Exchange Rates
- FYI: The Value of the Canadian Dollar
- FYI: The Euro
- 12-3 A First Theory of Exchange-Rate Determination: Purchasing-Power Parity
- 12-3a The Basic Logic of Purchasing-Power Parity
- 12-3b Implications of Purchasing-Power Parity
- Case Study: The Nominal Exchange Rate during a Hyperinflation
- 12-3c Limitations of Purchasing-Power Parity
- Case Study: The Hamburger Standard
- 12-4 Interest Rate Determination in a Small Open Economy with Perfect Capital Mobility
- 12-4a A Small Open Economy
- 12-4b Perfect Capital Mobility
- 12-4c Limitations to Interest Rate Parity
- 12-5 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 13 A Macroeconomic Theory of the Small Open Economy
- 13-1 Supply and Demand for Loanable Funds and for Foreign-Currency Exchange
- 13-1a The Market for Loanable Funds
- 13-1b The Market for Foreign-Currency Exchange
- 13-1c Disentangling Supply and Demand in the Market for Foreign-Currency Exchange
- FYI: Purchasing-Power Parity as a Special Case
- 13-2 Equilibrium in the Small Open Economy
- 13-2a Net Capital Outflow: The Link between the Two Markets
- 13-2b Simultaneous Equilibrium in Two Markets
- 13-3 How Policies and Events Affect a Small Open Economy
- 13-3a Increase in World Interest Rates
- FYI: Negative Values of Net Capital Outflow
- 13-3b Government Budget Deficits and Surpluses
- 13-3c Trade Policy
- 13-3d Political Instability and Capital Flight
- In the News: The Open-Economy Trilemma
- 13-3e Currency Manipulation
- 13-4 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- PART 7 SHORT-RUN ECONOMIC FLUCTUATIONS
- CHAPTER 14 Aggregate Demand and Aggregate Supply
- 14-1 Three Key Facts about Economic Fluctuations
- 14-1a Fact 1: Economic Fluctuations Are Irregular and Unpredictable
- 14-1b Fact 2: Most Macroeconomic Quantities Fluctuate Together
- 14-1c Fact 3: As Output Falls, Unemployment Rises
- 14-2 Explaining Short-Run Economic Fluctuations
- 14-2a The Assumptions of Classical Economics
- 14-2b The Reality of Short-Run Fluctuations
- 14-2c The Model of Aggregate Demand and Aggregate Supply
- In the News: The Social Influences of Economic Downturns
- 14-3 The Aggregate-Demand Curve
- 14-3a Why the Aggregate-Demand Curve Slopes Downward
- 14-3b Why the Aggregate-Demand Curve Might Shift
- Case Study: Housing Wealth
- 14-4 The Aggregate-Supply Curve
- 14-4a Why the Aggregate-Supply Curve Is Vertical in the Long Run
- 14-4b Why the Long-Run Aggregate-Supply Curve Might Shift
- 14-4c Using Aggregate Demand and Aggregate Supply to Depict Long-Run Growth and Inflation
- 14-4d Why the Aggregate-Supply Curve Slopes Upward in the Short Run
- 14-4e Why the Short-Run Aggregate-Supply Curve Might Shift
- 14-5 Two Causes of Economic Fluctuations
- 14-5a The Effects of a Shift in Aggregate Demand
- FYI: Monetary Neutrality Revisited
- Case Study: Big Shifts in Aggregate Demand: Two Depressions and World War II
- Case Study: The Recession of 2008–09
- 14-5b The Effects of a Shift in Aggregate Supply
- FYI: The Origins of Aggregate Demand and Aggregate Supply
- Case Study: Oil and the Economy
- 14-6 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 15 The Influence of Monetary Policy on Aggregate Demand
- 15-1 How Monetary Policy Influences Aggregate Demand
- 15-1a The Theory of Liquidity Preference
- 15-1b The Downward Slope of the Aggregate-Demand Curve
- 15-1c Changes in the Money Supply
- 15-1d Open-Economy Considerations
- FYI: The Zero Lower Bound
- Case Study: Why Central Banks Watch the Stock Market (and Vice Versa)
- 15-2 Using Monetary Policy to Stabilize the Economy
- 15-2a The Case for Active Monetary Stabilization Policy
- 15-2b The Case against Active Monetary Stabilization Policy
- 15-2c The Flexible Exchange Rate as a Stabilizer
- Case Study: The Monetary Policy Response to the Recession of 2007–09
- 15-3 A Quick Summary
- FYI: Interest Rates in the Long Run and the Short Run
- 15-4 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 16 The Influence of Fiscal Policy on Aggregate Demand
- 16-1 How Fiscal Policy Influences Aggregate Demand
- 16-1a Changes in Government Purchases
- 16-1b The Multiplier Effect
- 16-1c A Formula for the Spending Multiplier
- 16-1d Other Applications of the Multiplier Effect
- 16-1e The Crowding-Out Effect on Investment
- 16-1f Open-Economy Considerations
- 16-1g Changes in Taxes
- FYI: How Fiscal Policy Might Affect Aggregate Supply
- 16-2 Using Fiscal Policy to Stabilize the Economy
- 16-2a The Case for Active Fiscal Stabilization Policy
- 16-2b The Case against Active Fiscal Stabilization Policy
- FYI: How Large Is the Influence of Fiscal Policy on Aggregate Demand?
- 16-2c Automatic Stabilizers
- Case Study: The Fiscal Policy Recession of 2007–09
- 16-3 A Quick Summary
- 16-4 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- CHAPTER 17 The Short-Run Tradeoff between Inflation and Unemployment
- 17-1 The Phillips Curve
- 17-1a Origins of the Phillips Curve
- 17-1b Aggregate Demand, Aggregate Supply, and the Phillips Curve
- 17-2 Shifts in the Phillips Curve: The Role of Expectations
- 17-2a The Long-Run Phillips Curve
- 17-2b The Meaning of “Natural”
- 17-2c Reconciling Theory and Evidence
- 17-2d The Short-Run Phillips Curve
- 17-2e The Natural Experiment for the Natural-Rate Hypothesis
- 17-3 Shifts in the Phillips Curve: the Role of Supply Shocks
- 17-4 The Cost of Reducing Inflation
- 17-4a The Sacrifice Ratio
- 17-4b Rational Expectations and the Possibility of Costless Disinflation
- FYI: Measuring Expectations of Inflation
- 17-4c Disinflation in the 1980s
- 17-4d The Zero-Inflation Target
- In the News: How to Keep Expected Inflation Low
- 17-4e Anchored Expectations
- 17-4f The 2008–09 Recession
- 17-5 Looking Ahead
- 17-6 Conclusion
- Summary
- Key Concepts
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- PART 8 FINAL THOUGHTS
- CHAPTER 18 Five Debates over Macroeconomic Policy
- 18-1 Should Monetary and Fiscal Policymakers Try to Stabilize the Economy?
- 18-1a Pro: Policymakers Should Try to Stabilize the Economy
- 18-1b Con: Policymakers Should Not Try to Stabilize the Economy
- 18-2 Should Monetary Policy Be Made by an Independent Central Bank?
- 18-2a Pro: Monetary Policy Should Be Made by an Independent Central Bank
- 18-2b Con: Monetary Policy Should Not Be Made by an Independent Central Bank
- 18-3 Should the Central Bank Aim for Zero Inflation?
- 18-3a Pro: The Central Bank Should Aim for Zero Inflation
- 18-3b Con: The Central Bank Should Not Aim for Zero Inflation
- FYI: Price-Level Targeting
- 18-4 Should Governments Balance Their Budgets?
- 18-4a Pro: Governments Should Balance Their Budgets
- 18-4b Con: Governments Should Not Balance Their Budgets
- FYI: Progress on Debt Reduction?
- 18-5 Should the Tax Laws Be Reformed to Encourage Saving?
- 18-5a Pro: The Tax Laws Should Be Reformed to Encourage Saving
- 18-5b Con: The Tax Laws Should Not Be Reformed to Encourage Saving
- 18-6 Conclusion
- Summary
- Questions for Review
- Quick Check Multiple Choice
- Problems and Applications
- Glossary
- Index
