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PRENTICE HALL ECONOMICS Pays (Uo S UN /IN) STEVEN MUSHEEERIN PRENTICE HALL Ete Ay. Be iort i Arthur O'Sullivan « Steven M. Sheffrin About the Authors Arthur O'Sullivan, Ph.D Arthur O'Sullivan is a profesor of economics at Lewis and Clark College in Portland, Oregon. After rccving his BS. degree in economics at the University of ‘Oregon he spent two years in che Peace Corps, working with city planners in the Philippines, He recived his Pi.D, degree in economics fom Princeton University in 1981 and has taught at the University of California, Davis, and Oregon State University. He recently sccepted an endowed profeswrship at Lewis and Clark allege, where he teaches microeconomics and urban Steven M. Sheffrin, Ph.D Steven M. Shetfrin is dean of the division of social sciences and professor of economics at che University ff California, Davis, He received his B.A. from Wesleyan University and Ph.D. in economics from the Massichusets Institute of Technology. He has been visiting professor at Princeton University, Oxford Universi, and the London School of Economics and served as financial economist with the Office of Tax Analysis oF the United States Department of the “Treasury: Professor Shettin sche author of nomerous bbooks and articles in the fells of macroeconomics, public fnanee, and international economics ‘The Wall Stret Journal Classroom Edition is a supplemental educational program published since 1991 by Dow Jones and Compan, publisher of ‘The Wall Street Journal, The program is designed to improve the economic and business literacy of America’s secondary-school students. The centerpiece of the rogram sa full-color student newspaper, published monthly from September to May. Regular features focus on busines, economies, careers, entrepreneurship, rechnology, personal finance, and global interdependence. Anticles are drawn dleitly from the pages ofthe daily Wall Stree Journal ‘THE WALL STREET JOURNAL. xi SSS aed i raed eed faci: Ta pico pee by inp ad emi eal ‘Sse phere pean am soya annonce Fran mantcrom chomping deporte Frosting pesca ee and Remorse ewe Poe Hans ena of Rao Eat I Kerosene valent fama Panes en eee ee eeraceeeen Fastener of eer ca fer Hall saosin Cy UN AULAU a ES ‘Academic Consultants Jean Caldwell, Professor Emeritus Department of Fsonomics University of Central Oklahoma Edmond, Oklahoma Adhip Chaudhuri Deparment of Economies Georgetown Univesity ‘Washington, D.C, W. Michael Cox. Senior Vice President and (Chief Economist Federal Reserve Bank of Dallas Dallas, Texas Suzanne Allen Gulledge ‘Associate Director ‘School of Education University of North Carolina ‘Chapel Hl, North Carolina Douglas Kinnear Department of Economics Colorada State University Fort Collins, Colorado Bonnie’T. Meszaros Center for Economic Education ‘and Entrepreneurship University of Delaware "Newark, Delaware avid Ramsour President, Texas Council on Economie Education Houston, Texas Robert Smith Director of Special Projects ‘Texas Council on Economic Faueation Houston, Texas Patricia D. Taylor Senior Inszuctor Colorade State University Fort Collins, Colorado Teacher Reviewers John Beacom Redwood High School Visalia, California Linda Tate Hudson CCenteal High School Magnet Career Academy lle, Kentucky Dan Richardson East Troy Community Schools East Troy, Wisconsin Stuart Rabin Bellmore-Mesrick C.HS.D. Bellmore, New York Denny Schillings Homewood Flossmoor High Schoo! Flossmoos Iinois Content Area Reading Specialist De Lois E. Huffman North Carolina Stare Univesity Raleigh, North Carolina Block Scheduling Consultants, jaron Dragon Nimiez High School Houston, Texas Barbara Slater Steen Assstane Professor James Madison Univesity Harrisonburg, Viginia Internet Reviewer Vincent M. Seeley Geceaville High School Greenville, New York Personal Finance Handbook Revis Rosella Bannister JumpStart Coalition foe Personal Financial Literacy ‘Washington, D.C. John B. Clove, Professor Emeritus Economies and Business Dept Stace University of New York at Oneonta Onconta, New York Curriculum and ‘Assessment Specialist Jan Moberley Dallas, Texas Program Advisors Michal Howden Social Studies Consultant Zionsville, Indiana Joe Wieczorek ‘Social Studies Consultant Baltimore, Maryland Unit 1 Introduction to Economics. © whats Econom 2 onan Coe — cooper arse — Chapt Chapter @) Economic Systems. ‘esieingte Tre Ezononie Gare 2 Trefre Mae, a 3 Cental Planned Ecnonies tase Sua Masi Oss a 4 oder Econom. a ‘Chap Assessment Chapter @) American Free Enterpri Bente offre enters 2 Pramotng Gow od Stab 13 Providing Pic Gane. ae 4 Providing Satay Net ‘Caan Study: Govorament nde inrsate Highway Sytem. Chapter 3 Assssnent TRUS Deanne Conse Isus: Heal Cot Introducing Microeconomics: Unit 2 How Markets Work. Chapter @) Demand. ® Undersancing Demand 2 Shite oft Domand Ci veneer 3 Easy of Donan ‘eae Suay Ihe Matos «Person an Enraprneur?. cooperate chapter © Supph Unda Soy ane Sy Ave Basel Poers Pi To Mh? Choptr 5 Asessnet » gal Unit 3 Prices. 1 Combining Supp and Demand 1 2 Changes in Marke Euitrium 13 3 Tho ae of Prices. 198 ase Stuy Government and the Marka for Mile 1s Chapter 6 Assessment. Market Structures. . 1 Perfect Carpettion 2 Monopoy '3 Monopole Compeition end inal, 4 Rogultion and Doroguianan (Case Study: Regulating Coble Television. — Chapter 7 Assessment a TERY SEER (i su Energy Dependence 0 Business and Labor. Business Orgar 1 Sole Proprietoships 2 Parmareioe 13 Corporations, Merges, ad Mulinationas 196 4 omer Organizations. 2 (ose Study Business 60d Eien 26 Chapter Assessment. 26 Labor. 1 Labor Markt Tends 2 Lar and wages 28 3 Organized Later = Sieg za Case Study The Patorzon Sik Sire of 13 za Chapter Assessment 7 Meu aN Minimum Wage 8 Unit 4 Money, Ban! Chaner @ Mone and enki. tre 13 Banking Today a 258 (ese Study Big Banks and Smal. aaa 8 Chapter 10 Assessmont a 266 ‘ENULSTETLIBNY. gear Gunner sss ogotaing Fncil Marka. 208 Financial Markets. Saung and investing 2 Bonds and Other Financial hess m 13 The Stock Make. as ese Stay The Foe of he Dot Come 0 (haptor 1 Asse65MON nen Introducing Macroeconomics: Unit 5 Measuring Economic Performance...298 2 Buses Cres 10 23 Economie Grown 38 ‘ose Study Hon Has Technology Acted Paducwniy 8 Chopter 12 Assessment — ‘8 Chapter @ Economic Challenges. Unemployment. 2 elstion 3 Povey {eae Sway. Unemplommentn» Changing Economy — a ‘hope 18 Assessment 32 "MRRUSERURISY enews Come ies Fasy re cs 288 Unit 6 Government and the Economy .. Chapter @ nes and Government Spending. 2 feel tela ws ad Sd ms i ba eae caper avormen Chapter @ Fiscal Policy. . @: ‘Uncerstanding Racal Polley | 2 Fiscal Poly Optons. 8 13 Busgac Daf and tre Neonal abt a {aso Study: Ii Sci Seeuriy Sunuive? on ag Chapter 15 Assess en conned ‘URQSILEP Desarne Conor Issues: Iiteme 09 nnn cnn 2 Chapter @ The Federal Reserve and Monetary Pal {efoto a 3 honey Pee Tens 4 Monetary Paley ond Macroccanonie Stbiation

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