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TABLE OF CONTENTS
Preface xvi
About the Authors xx
Part 1 Getting Acquainted with Economics 1

Chapter 1 What Is Economics? 3
1-1 IDEAS FOR BEYOND THE FINAL EXAM 3
1-1a Idea 1: How Much Does It Really Cost? 4
1-1b Idea 2: Attempts to Repeal the Laws of Supply and Demand—The Market
Strikes Back 4
1-1c Idea 3: The Surprising Principle of Comparative Advantage 5
1-1d Idea 4: Trade Is a Win–Win Situation 5
1-1e Idea 5: Government Policies Can Limit Economic Fluctuations—But Don’t
Always Succeed 5
1-1f Idea 6: The Short-Run Trade-Off between Inflation and Unemployment 6
1-1g Idea 7: Productivity Growth Is (Almost) Everything in the Long Run 6
1-1h Epilogue 6
1-2 INSIDE THE ECONOMIST’S TOOL KIT 7
1-2a Economics as a Discipline 7
1-2b The Need for Abstraction 7
1-2c The Role of Economic Theory 9
1-2d What Is an Economic Model? 10
1-2e Reasons for Disagreements: Imperfect Information and
Value Judgments 11
Summary 12
Key Terms 12
Discussion Questions 12
APPENDIX Using Graphs: A Review 12

Graphs Used in Economic Analysis 13
Two-Variable Diagrams 13
The Definition and Measurement of Slope 14
Rays through the Origin and 45° Lines 16
Squeezing Three Dimensions into Two: Contour Maps 17
Summary 18
Key Terms 18
Test Yourself 19
Chapter 2 The Economy: Myth and Reality 21

2-1 THE AMERICAN ECONOMY: A THUMBNAIL SKETCH 21
2-1a A Private-Enterprise Economy 23
2-1b A Relatively “Closed” Economy 23
2-1c A Growing Economy … 24
2-1d But with Bumps along the Growth Path 24
2-2 THE INPUTS: LABOR AND CAPITAL 26
2-2a The American Workforce: Who Is in It? 27
2-2b The American Workforce: What Does It Do? 28
v
vi Table of Contents
2-2c The American Workforce: What Does It Earn? 29

2-2d Capital and Its Earnings 30
2-3 THE OUTPUTS: WHAT DOES AMERICA PRODUCE? 30
2-4 THE CENTRAL ROLE OF BUSINESS FIRMS 31
2-5 WHAT’S MISSING FROM THE PICTURE? GOVERNMENT 32
2-5a The Government as Referee 33
2-5b The Government as Business Regulator 33
2-5c Government Expenditures 34
2-5d Taxes in America 34
2-5e The Government as Redistributor 35
2-6 CONCLUSION: IT’S A MIXED ECONOMY 36
Summary 36
Key Terms 36
Chapter 3 The Fundamental Economic Problem: Scarcity and Choice 39

ISSUE: What to Do about the Budget Deficit? 39
3-1 SCARCITY, CHOICE, AND OPPORTUNITY COST 40
3-1a Opportunity Cost and Money Cost 41
3-1b Optimal Choice: Not Just Any Choice 42
3-2 SCARCITY AND CHOICE FOR A SINGLE FIRM 42
3-2a The Production Possibilities Frontier 43
3-2b The Principle of Increasing Costs 44
3-3 SCARCITY AND CHOICE FOR THE ENTIRE SOCIETY 45
3-3a Scarcity and Choice Elsewhere in the Economy 45
ISSUE REVISITED: Coping with the Budget Deficit 46
3-4 THE CONCEPT OF EFFICIENCY 46
3-5 THE THREE COORDINATION TASKS OF ANY ECONOMY 47
3-6 TASK 1. HOW THE MARKET FOSTERS EFFICIENT RESOURCE ALLOCATION 48
3-6a The Wonders of the Division of Labor 48
3-6b The Amazing Principle of Comparative Advantage 48
3-7 TASK 2. MARKET EXCHANGE AND DECIDING HOW MUCH OF EACH GOOD
TO PRODUCE 49
3-8 TASK 3. HOW TO DISTRIBUTE THE ECONOMY’S OUTPUTS AMONG
CONSUMERS 50
Summary 52
Key Terms 52
Test Yourself 53
Chapter 4 Supply and Demand: An Initial Look 55

PUZZLE: What Happened to Oil Prices? 55
4-1 THE INVISIBLE HAND 56
4-2 DEMAND AND QUANTITY DEMANDED 56
4-2a The Demand Schedule 57
4-2b The Demand Curve 58
4-2c Shifts of the Demand Curve 58
4-3 SUPPLY AND QUANTITY SUPPLIED 61
4-3a The Supply Schedule and the Supply Curve 61
4-3b Shifts of the Supply Curve 62
4-4 SUPPLY AND DEMAND EQUILIBRIUM 64
4-4a The Law of Supply and Demand 66
4-5 EFFECTS OF DEMAND SHIFTS ON SUPPLY-DEMAND EQUILIBRIUM 66
Table of Contents vii
4-6 SUPPLY SHIFTS AND SUPPLY-DEMAND EQUILIBRIUM 67

PUZZLE RESOLVED: Those Leaping Oil Prices 68
4-6a Application: Who Really Pays That Tax? 69
4-7 BATTLING THE INVISIBLE HAND: THE MARKET FIGHTS BACK 70
4-7a Restraining the Market Mechanism: Price Ceilings 71
POLICY DEBATE Economic Aspects of the War on Drugs 71
4-7b Case Study: Rent Controls in New York City 72
4-7c Restraining the Market Mechanism: Price Floors 73
4-7d Case Study: Farm Price Supports and the Case of Sugar Prices 74
4-7e A Can of Worms 74
4-8 A SIMPLE BUT POWERFUL LESSON 76
Summary 76
Key Terms 76
Test Yourself 77
Part 2 The Macroeconomy: Aggregate Supply and Demand 79

Chapter 5 An Introduction to Macroeconomics 81
ISSUE: How Did the Housing Bust Lead to the Great Recession? 81
5-1 DRAWING A LINE BETWEEN MACROECONOMICS AND MICROECONOMICS 82
5-1a Aggregation and Macroeconomics 82
5-1b The Foundations of Aggregation 82
5-1c The Line of Demarcation Revisited 83
5-2 SUPPLY AND DEMAND IN MACROECONOMICS 83
5-2a A Quick Review 83
5-2b Moving to Macroeconomic Aggregates 84
5-2c Inflation 84
5-2d Recession and Unemployment 84
5-2e Economic Growth 85
5-3 GROSS DOMESTIC PRODUCT 85
5-3a Money as the Measuring Rod: Real versus Nominal GDP 86
5-3b What Gets Counted in GDP? 86
5-3c Limitations of the GDP: What GDP Is Not 87
5-4 THE ECONOMY ON A ROLLER COASTER 89
5-4a Growth, but with Fluctuations 89
5-4b Inflation and Deflation 90
5-4c The Great Depression 91
5-4d From World War II to 1973 93
5-4e The Great Stagflation, 1973–1980 93
5-4f Reaganomics and Its Aftermath 94
5-4g Clintonomics: Deficit Reduction and the “New Economy” 94
5-4h Tax Cuts and the Bush Economy 95
5-4i Obamanomics and the Great Recession 95
ISSUE REVISITED: How Did the Housing Bust Lead to the Great Recession? 96
5-5 THE PROBLEM OF MACROECONOMIC STABILIZATION: A SNEAK PREVIEW 96
5-5a Combating Unemployment 96
5-5b Combating Inflation 97
5-5c Does It Really Work? 97
Summary 98
Key Terms 99
Test Yourself 99
viii Table of Contents
Chapter 6 The Goals of Macroeconomic Policy 101

6-1 THE GOAL OF ECONOMIC GROWTH 102
ISSUE: Is Faster Growth Always Better? 103
6-2 THE CAPACITY TO PRODUCE: POTENTIAL GDP AND THE PRODUCTION FUNCTION 104
6-3 THE GROWTH RATE OF POTENTIAL GDP 105
ISSUE REVISITED: Is Faster Growth Always Better? 106
6-4 THE GOAL OF LOW UNEMPLOYMENT 107
6-5 THE HUMAN COSTS OF HIGH UNEMPLOYMENT 108
6-6 COUNTING THE UNEMPLOYED: THE OFFICIAL STATISTICS 110
6-7 TYPES OF UNEMPLOYMENT 110
POLICY DEBATE Does the Minimum Wage Cause Unemployment? 111
6-8 HOW MUCH EMPLOYMENT IS “FULL EMPLOYMENT”? 111
6-9 UNEMPLOYMENT INSURANCE: THE INVALUABLE CUSHION 112
6-10 THE GOAL OF LOW INFLATION 113
6-10a Inflation and Real Wages 113
6-10b The Importance of Relative Prices 115
6-11 INFLATION AS A REDISTRIBUTOR OF INCOME AND WEALTH 115
6-12 REAL VERSUS NOMINAL INTEREST RATES 116
6-13 INFLATION DISTORTS MEASUREMENTS 117
6-13a Confusing Real and Nominal Interest Rates 117
6-13b The Malfunctioning Tax System 117
6-14 OTHER COSTS OF INFLATION 118
6-15 THE COSTS OF LOW VERSUS HIGH INFLATION 119
6-16 LOW INFLATION DOES NOT NECESSARILY LEAD TO HIGH INFLATION 120
Summary 121
Key Terms 121
Test Yourself 122
APPENDIX How Statisticians Measure Inflation 122

Index Numbers for Inflation 122
The Consumer Price Index 123
Using a Price Index to “Deflate” Monetary Figures 124
Using a Price Index to Measure Inflation 124
The GDP Deflator 124
Summary 125
Key Term 125
Test Yourself 125
Chapter 7 Economic Growth: Theory and Policy 127

PUZZLE: Why Does College Education Keep Getting More Expensive? 128
7-1 THE THREE PILLARS OF PRODUCTIVITY GROWTH 128
7-1a Capital 128
7-1b Technology 129
7-1c Labor Quality: Education and Training 129
7-2 LEVELS, GROWTH RATES, AND THE CONVERGENCE HYPOTHESIS 130
7-3 GROWTH POLICY: ENCOURAGING CAPITAL FORMATION 132
7-4 GROWTH POLICY: IMPROVING EDUCATION AND TRAINING 135
7-5 GROWTH POLICY: SPURRING TECHNOLOGICAL CHANGE 136
7-6 THE PRODUCTIVITY SLOWDOWN AND SPEED-UP IN THE UNITED STATES 137
7-6a The Productivity Slowdown, 1973–1995 138
7-6b The Productivity Speed-Up 1995–2010 139
PUZZLE RESOLVED: Why the Relative Price of College Tuition Keeps Rising 140
7-7 GROWTH IN THE DEVELOPING COUNTRIES 141
7-7a The Three Pillars Revisited 141
7-7b Some Special Problems of Developing Countries 142
Table of Contents ix
7-8 FROM THE LONG RUN TO THE SHORT RUN 143

Summary 143
Key Terms 144
Test Yourself 144
Chapter 8 Aggregate Demand and the Powerful Consumer 147

ISSUE: Demand Management and the Ornery Consumer 147
8-1 AGGREGATE DEMAND, DOMESTIC PRODUCT, AND NATIONAL INCOME 148
8-2 THE CIRCULAR FLOW OF SPENDING, PRODUCTION, AND INCOME 149
8-3 CONSUMER SPENDING AND INCOME: THE IMPORTANT RELATIONSHIP 151
8-4 THE CONSUMPTION FUNCTION AND THE MARGINAL PROPENSITY TO CONSUME 154
8-5 FACTORS THAT SHIFT THE CONSUMPTION FUNCTION 155
POLICY DEBATE Using the Tax Code to Spur Saving 157
ISSUE REVISITED: Why Temporary Tax Cuts Have Only Modest Effects on Spending 157
8-6 THE EXTREME VARIABILITY OF INVESTMENT 158
8-7 THE DETERMINANTS OF NET EXPORTS 159
8-7a National Incomes 159
8-7b Relative Prices and Exchange Rates 160
8-8 HOW PREDICTABLE IS AGGREGATE DEMAND? 160
Summary 161
Key Terms 161
Test Yourself 161
APPENDIX National Income Accounting 162

Defining GDP: Exceptions to the Rules 162
GDP as the Sum of Final Goods and Services 163
GDP as the Sum of All Factor Payments 164
GDP as the Sum of Values Added 165
Summary 167
Key Terms 167
Test Yourself 167
Chapter 9 Demand-Side Equilibrium: Unemployment or Inflation? 169

ISSUE: Why Does the Market Permit High Unemployment? 169
9-1 THE MEANING OF EQUILIBRIUM GDP 170
9-2 THE MECHANICS OF INCOME DETERMINATION 171
9-3 THE AGGREGATE DEMAND CURVE 174
9-4 DEMAND-SIDE EQUILIBRIUM AND FULL EMPLOYMENT 176
9-5 THE COORDINATION OF SAVING AND INVESTMENT 178
9-6 CHANGES ON THE DEMAND SIDE: MULTIPLIER ANALYSIS 179
9-6a The Magic of the Multiplier 179
9-6b Demystifying the Multiplier: How It Works 181
9-6c Algebraic Statement of the Multiplier 182
9-7 THE MULTIPLIER IS A GENERAL CONCEPT 183
9-8 THE MULTIPLIER AND THE AGGREGATE DEMAND CURVE 185
Summary 186
Key Terms 186
Test Yourself 187
APPENDIX A The Simple Algebra of Income Determination and the Multiplier 188
Test Yourself 189
x Table of Contents
APPENDIX B The Multiplier with Variable Imports 190

Summary 192
Test Yourself 192
Chapter 10 Bringing in the Supply Side: Unemployment and Inflation? 193

PUZZLE: What Causes Stagflation? 193
10-1 THE AGGREGATE SUPPLY CURVE 194
10-1a Why the Aggregate Supply Curve Slopes Upward 194
10-1b Shifts of the Aggregate Supply Curve 195
10-2 EQUILIBRIUM OF AGGREGATE DEMAND AND SUPPLY 197
10-3 INFLATION AND THE MULTIPLIER 198
10-4 RECESSIONARY AND INFLATIONARY GAPS REVISITED 199
10-5 ADJUSTING TO A RECESSIONARY GAP: DEFLATION OR UNEMPLOYMENT? 201
10-5a Why Nominal Wages and Prices Won’t Fall (Easily) 201
10-5b Does the Economy Have a Self-Correcting Mechanism? 203
10-5c An Example from Recent History: Deflation Worries in the United States 203
10-6 ADJUSTING TO AN INFLATIONARY GAP: INFLATION 203
10-6a Demand Inflation and Stagflation 204
10-6b A U.S. Example 205
10-7 STAGFLATION FROM A SUPPLY SHOCK 206
10-8 APPLYING THE MODEL TO A GROWING ECONOMY 206
10-8a Demand-Side Fluctuations 208
10-8b Supply-Side Fluctuations 209
PUZZLE RESOLVED: Explaining Stagflation 210
10-9 A ROLE FOR STABILIZATION POLICY 210
Summary 211
Key Terms 211
Test Yourself 211
Part 3 Fiscal and Monetary Policy 213

Chapter 11 Managing Aggregate Demand: Fiscal Policy 215
ISSUE: The Great Debate over Fiscal Stimulus 215
11-1 INCOME TAXES AND THE CONSUMPTION SCHEDULE 216
11-2 THE MULTIPLIER REVISITED 217
11-2a The Tax Multiplier 217
11-2b Income Taxes and the Multiplier 217
11-2c Automatic Stabilizers 218
11-2d Government Transfer Payments 219
ISSUE REVISITED: The Stimulus Debate in 2009–2010 219
11-3 PLANNING EXPANSIONARY FISCAL POLICY 220
11-4 PLANNING CONTRACTIONARY FISCAL POLICY 221
11-5 THE CHOICE BETWEEN SPENDING POLICY AND TAX POLICY 221
ISSUE REDUX: Democrats versus Republicans on Stimulus 222
11-6 SOME HARSH REALITIES 222
11-7 THE IDEA BEHIND SUPPLY-SIDE TAX CUTS 223
11-7a Some Flies in the Ointment 224
ISSUE: The Partisan Debate Once More 225
11-7b Toward an Assessment of Supply-Side Economics 226
Summary 227
Key Terms 227
Test Yourself 227
Table of Contents xi
APPENDIX A Graphical Treatment of Taxes and Fiscal Policy 228

Multipliers for Tax Policy 230
Summary 231
Key Terms 231
Test Yourself 231
APPENDIX B Algebraic Treatment of Taxes and Fiscal Policy 232

Test Yourself 233
Chapter 12 Money and the Banking System 235

ISSUE: Why Are Banks So Heavily Regulated? 235
12-1 THE NATURE OF MONEY 236
12-1a Barter versus Monetary Exchange 237
12-1b The Conceptual Definition of Money 238
12-1c What Serves as Money? 238
12-2 HOW THE QUANTITY OF MONEY IS MEASURED 240
12-2a M1 241
12-2b M2 241
12-2c Other Definitions of the Money Supply 241
12-3 THE BANKING SYSTEM 242
12-3a How Banking Began 242
12-3b Principles of Bank Management: Profits versus Safety 243
12-3c Bank Regulation 245
12-3d Deposit Insurance 245
12-3e Bank Supervision 245
12-3f Reserve Requirements 245
12-4 SYSTEMIC RISK AND THE “TOO BIG TO FAIL” DOCTRINE 246
12-5 THE ORIGINS OF THE MONEY SUPPLY 247
12-5a How Bankers Keep Books 247
12-6 BANKS AND MONEY CREATION 248
12-6a The Limits to Money Creation by a Single Bank 248
12-6b Multiple Money Creation by a Series of Banks 249
12-6c The Process in Reverse: Multiple Contractions
of the Money Supply 252
12-7 WHY THE MONEY-CREATION FORMULA IS OVERSIMPLIFIED 253
12-8 THE NEED FOR MONETARY POLICY 254
Summary 256
Key Terms 256
Test Yourself 257
Chapter 13 Monetary Policy: Conventional and Unconventional 259

ISSUE: Why Resort to “Unconventional” Monetary Policies? 259
13-1 MONEY AND INCOME: THE IMPORTANT DIFFERENCE 260
13-2 AMERICA’S CENTRAL BANK: THE FEDERAL RESERVE SYSTEM 260
13-2a Origins and Structure 261
13-2b Central Bank Independence 261
13-3 IMPLEMENTING MONETARY POLICY IN NORMAL TIMES: OPEN-MARKET
OPERATIONS 263
13-3a The Market for Bank Reserves 263
13-3b The Mechanics of an Open-Market Operation 264
13-3c Open-Market Operations, Bond Prices, and Interest Rates 266
13-3d Which Interest Rate? 266
xii Table of Contents
13-4 OTHER INSTRUMENTS OF MONETARY POLICY 268

13-4a Lending to Banks 268
13-4b Changing Reserve Requirements 270
13-4c Quantitative Easing 270
13-5 HOW MONETARY POLICY WORKS IN NORMAL TIMES 271
13-5a Investment and Interest Rates 272
13-5b Monetary Policy and Total Expenditure 272
13-6 MONEY AND THE PRICE LEVEL 273
13-7 APPLICATION: WHY THE AGGREGATE DEMAND CURVE SLOPES DOWNWARD 274
13-8 UNCONVENTIONAL MONETARY POLICIES 275
13-9 FROM FINANCIAL DISTRESS TO RECESSION 275
13-10 FROM MODELS TO POLICY DEBATES 276
Summary 276
Key Terms 277
Test Yourself 277
Chapter 14 The Financial Crisis and the Great Recession 279

ISSUE: Did the Fiscal Stimulus Work? 279
14-1 ROOTS OF THE CRISIS 280
14-2 LEVERAGE, PROFITS, AND RISK 281
14-3 THE HOUSE PRICE BUBBLE AND THE SUBPRIME MORTGAGE CRISIS 282
14-4 FROM THE HOUSING BUBBLE TO THE FINANCIAL CRISIS 284
14-5 FROM THE FINANCIAL CRISIS TO THE GREAT RECESSION 287
14-6 HITTING BOTTOM AND RECOVERING 291
ISSUE REVISITED: Did the Fiscal Stimulus Work? 291
14-7 LESSONS FROM THE FINANCIAL CRISIS 292
Summary 292
Key Terms 293
Test Yourself 293
Chapter 15 The Debate over Monetary and Fiscal Policy 295

ISSUE: Should We Forsake Stabilization Policy? 295
15-1 VELOCITY AND THE QUANTITY THEORY OF MONEY 296
15-1a Some Determinants of Velocity 298
15-1b Monetarism: The Quantity Theory Modernized 298
POLICY DEBATE Does Money Growth Always Cause Inflation? 299
15-2 DEBATE: SHOULD THE FED USE UNCONVENTIONAL MONETARY POLICIES? 299
15-3 DEBATE: SHOULD POLICY MAKERS FIGHT ASSET PRICE BUBBLES? 302
15-4 DEBATE: SHOULD WE RELY ON FISCAL OR MONETARY POLICY? 303
15-5 DEBATE: THE SHAPE OF THE AGGREGATE SUPPLY CURVE 305
15-6 DEBATE: SHOULD THE GOVERNMENT INTERVENE AT ALL? 307
15-6a Lags and the Rules-versus-Discretion Debate 308
15-7 DIMENSIONS OF THE RULES-VERSUS-DISCRETION DEBATE 308
15-7a How Fast Does the Economy’s Self-Correcting Mechanism Work? 309
15-7b How Long Are the Lags in Stabilization Policy? 309
15-7c How Accurate Are Economic Forecasts? 309
15-7d The Size of Government 309
15-7e Uncertainties Caused by Government Policy 310
15-7f A Political Business Cycle? 310
ISSUE REVISITED: What Should Be Done? 312
Summary 312
Key Terms 313
Test Yourself 313
Table of Contents xiii
Chapter 16 Budget Deficits in the Short and Long Run 315

ISSUE: Is the Federal Government Budget Deficit Too Large? 315
16-1 SHOULD THE BUDGET ALWAYS BE BALANCED? THE SHORT RUN 316
16-2 THE IMPORTANCE OF THE POLICY MIX 317
16-2a The Multiplier Formula Revisited 318
16-2b The Government Budget and Investment 318
16-3 DEFICITS AND DEBT: TERMINOLOGY AND FACTS 320
16-3a Some Facts about the National Debt 320
16-4 INTERPRETING THE BUDGET DEFICIT OR SURPLUS 322
16-4a The Structural Deficit or Surplus 322
16-4b On-Budget versus Off-Budget Surpluses 324
16-4c Conclusion: What Happened to the Deficit? 324
16-5 WHY IS THE NATIONAL DEBT CONSIDERED A BURDEN? 325
16-6 BUDGET DEFICITS AND INFLATION 326
16-6a The Monetization Issue 327
16-7 DEBT, INTEREST RATES, AND CROWDING OUT 328
16-7a The Bottom Line 329
16-8 THE MAIN BURDEN OF THE NATIONAL DEBT: SLOWER GROWTH 330
ISSUE REVISITED: Is the Budget Deficit Still Too Large? 331
16-9 THE ECONOMICS AND POLITICS OF THE U.S. BUDGET DEFICIT 332
Summary 333
Key Terms 334
Test Yourself 334
Chapter 17 The Trade-Off between Inflation and Unemployment 335

ISSUE: Is the Trade-Off between Inflation and Unemployment a Relic of the Past? 335
17-1 DEMAND-SIDE INFLATION VERSUS SUPPLY-SIDE INFLATION: A REVIEW 336
17-2 ORIGINS OF THE PHILLIPS CURVE 337
17-3 SUPPLY-SIDE INFLATION AND THE COLLAPSE OF THE PHILLIPS CURVE 339
17-3a Explaining the Fabulous 1990s 339
ISSUE REVISITED: Why Inflation and Unemployment Both Declined 340
17-4 WHAT THE PHILLIPS CURVE IS NOT 340
17-5 FIGHTING UNEMPLOYMENT WITH FISCAL AND MONETARY POLICY 342
17-6 WHAT SHOULD BE DONE? 343
17-6a The Costs of Inflation and Unemployment 343
17-6b The Slope of the Short-Run Phillips Curve 343
17-6c The Efficiency of the Economy’s Self-Correcting Mechanism 343
17-7 INFLATIONARY EXPECTATIONS AND THE PHILLIPS CURVE 344
17-8 THE THEORY OF RATIONAL EXPECTATIONS 346
17-8a What Are Rational Expectations? 346
17-8b Rational Expectations and the Trade-Off 347
17-8c An Evaluation 348
17-9 WHY ECONOMISTS (AND POLITICIANS) DISAGREE 348
17-10 THE DILEMMA OF DEMAND MANAGEMENT 349
17-11 ATTEMPTS TO REDUCE THE NATURAL RATE OF UNEMPLOYMENT 349
Summary 351
Key Terms 352
Test Yourself 352
xiv Table of Contents
Part 4 The United States in the World Economy 355

Chapter 18 International Trade and Comparative Advantage 357
ISSUE: How Can Americans Compete with “Cheap Foreign Labor”? 357
18-1 WHY TRADE? 358
18-1a Mutual Gains from Trade 359
18-2 INTERNATIONAL VERSUS INTRANATIONAL TRADE 360
18-2a Political Factors in International Trade 360
18-2b The Many Currencies Involved in International Trade 360
18-2c Impediments to Mobility of Labor and Capital 360
18-3 THE LAW OF COMPARATIVE ADVANTAGE 361
18-4 THE ARITHMETIC OF COMPARATIVE ADVANTAGE 361
18-4a The Graphics of Comparative Advantage 362
18-4b Must Specialization Be Complete? 365
ISSUE REVISITED: Comparative Advantage Exposes the “Cheap Foreign Labor” Fallacy 365
18-5 TARIFFS, QUOTAS, AND OTHER INTERFERENCES WITH TRADE 366
18-5a Tariffs versus Quotas 367
18-6 WHY INHIBIT TRADE? 368
18-6a Gaining a Price Advantage for Domestic Firms 368
18-6b Protecting Particular Industries 368
18-6c National Defense and Other Noneconomic Considerations 369
18-6d The Infant-Industry Argument 370
18-6e Strategic Trade Policy 370
18-7 CAN CHEAP IMPORTS HURT A COUNTRY? 371
ISSUE RESOLVED: Last Look at the “Cheap Foreign Labor” Argument 372
Summary 373
Key Terms 374
Test Yourself 374
APPENDIX Supply, Demand, and Pricing in World Trade 375

How Tariffs and Quotas Work 376
Summary 377
Test Yourself 377
Chapter 19 The International Monetary System: Order or Disorder? 379

PUZZLE: Has the Value of the Dollar Really Sagged? 379
19-1 WHAT ARE EXCHANGE RATES? 380
19-2 EXCHANGE RATE DETERMINATION IN A FREE MARKET 381
19-2a Interest Rates and Exchange Rates: The Short Run 383
19-2b Economic Activity and Exchange Rates: The Medium Run 384
19-2c The Purchasing-Power Parity Theory: The Long Run 385
19-2d Market Determination of Exchange Rates: Summary 387
19-3 WHEN GOVERNMENTS FIX EXCHANGE RATES: THE BALANCE OF PAYMENTS 387
19-4 A BIT OF HISTORY: THE GOLD STANDARD AND THE BRETTON WOODS SYSTEM 389
19-4a The Classical Gold Standard 389
19-4b The Bretton Woods System 389
19-5 ADJUSTMENT MECHANISMS UNDER FIXED EXCHANGE RATES 390
19-6 WHY TRY TO FIX EXCHANGE RATES? 391
19-7 THE CURRENT “NONSYSTEM” 392
19-7a The Role of the IMF 392
19-7b The Volatile Dollar 393
19-7c The Birth and Adolescence of the Euro 394
PUZZLE RESOLVED: Why the Dollar Rose, Then Fell, Then Rose? 395
Table of Contents xv
Summary 395
Key Terms 396
Test Yourself 396
Chapter 20 Exchange Rates and the Macroeconomy 399

ISSUE: Is a Rising Currency Value a Blessing? 399
20-1 INTERNATIONAL TRADE, EXCHANGE RATES, AND AGGREGATE DEMAND 400
20-1a Relative Prices, Exports, and Imports 400
20-1b The Effects of Changes in Exchange Rates 401
20-2 AGGREGATE SUPPLY IN AN OPEN ECONOMY 402
20-3 THE MACROECONOMIC EFFECTS OF EXCHANGE RATES 402
20-3a Interest Rates and International Capital Flows 403
20-4 FISCAL AND MONETARY POLICIES IN AN OPEN ECONOMY 404
20-4a Fiscal Policy Revisited 404
20-4b Monetary Policy Revisited 406
20-5 INTERNATIONAL ASPECTS OF DEFICIT REDUCTION 406
20-5a The Loose Link between the Budget Deficit and the Trade Deficit 407
20-6 SHOULD WE WORRY ABOUT THE TRADE DEFICIT? 408
20-7 ON CURING THE TRADE DEFICIT 408
20-7a Change the Mix of Fiscal and Monetary Policy 408
20-7b More Rapid Economic Growth Abroad 409
20-7c Raise Domestic Saving or Reduce Domestic Investment 409
20-7d Protectionism 410
20-8 CONCLUSION: NO NATION IS AN ISLAND 410
ISSUE REVISITED: Is a Rising Currency Value a Blessing? 411
Summary 411
Key Terms 412
Test Yourself 412
APPENDIX: Answers to Odd-Numbered Test Yourself Questions 413
Glossary 427
Index 435
PREFACE
I
t can be argued that, from the point of view of the general welfare, there are two topics
of primary importance in economics. One is the analysis of recessions and depres-
sions, with the unemployment and general impoverishment they bring. The second
is economic growth and rising productivity, which, in the long run, is the way to reduce
poverty in our country and throughout the world.
In earlier editions of this book, before the problems stemming from the recent, ter-
rible worldwide economic crisis claimed the spotlight, the new materials that we added
focused more on the growth issue. We discussed, for example, the microeconomic roles
of innovation and entrepreneurship, offering far more material on these issues than any
other textbook in the field.
Then, for two editions, the biggest changes came in the macroeconomic portions of
the book, especially the parts relevant to understanding the financial crisis and the Great
Recession of 2007–2009. Those changes remain in this thirteenth edition—including the
abandonment, almost unique among principles books, of pretending that there is only
one interest rate (“the interest rate”). Instead, we explain and discuss the implications of
having many different interest rates, based on differential risk.
As usual, this revision includes literally hundreds of small changes to improve clarity
of exposition and especially to update the text material—both for relevant advances in
economics and for recent events, particularly the aftermath of the Great Recession—which
continues to play out day by day.
NOTE TO THE STUDENT
May we offer a suggestion for success in your economics course? Unlike some of the other
subjects you may be studying, economics is cumulative: Each week’s lesson builds on
what you have learned prior to that. You will save yourself a lot of frustration—and a lot
of work—by keeping up on a week-to-week basis.
To assist you in doing so, we provide a chapter summary, a list of important terms and
concepts, a selection of questions to help you review the contents of each chapter, as well
as the answers to odd-numbered Test Yourself questions. Making use of these learning
aids will help you to master the material in your economics course. For additional assis-
tance, we have prepared student supplements to help in the reinforcement of the concepts
in this book and provide opportunities for practice and feedback.
The following list indicates the ancillary materials and learning tools that have been
designed specifically to be helpful to you. If you believe any of these resources could
benefit you in your course of study, you may want to discuss them with your instructor.
Further information on these resources is available at www.cengagebrain.com.
To access additional course materials and companion resources, please visit
www.cengagebrain.com. At the CengageBrain.com home page, search for the ISBN of
your title (from the back cover of your book) using the search box at the top of the page.
This will take you to the product page where free companion resources can be found.
We hope our book is helpful to you in your study of economics and welcome your com-
ments or suggestions for improving student experience with economics. Please write to
us in care of Baumol and Blinder, Editor for Economics, Cengage Learning, 5191 Natorp
Boulevard, Mason, Ohio, 45040, or through the book’s website at www.cengagebrain.com.
xvi
Preface xvii
MindTap
MindTap is a personalized teaching experience with relevant assignments that guide
students to analyze, apply, and improve thinking, allowing you to measure skills and
outcomes with ease.
• Personalized Teaching: Becomes yours with a Learning Path that is built with key
student objectives. Control what students see and when they see it. Use it as-is
or match to your syllabus exactly—hide, rearrange, add, and create your own
content.
• Guide Students: A unique learning path of relevant readings, multimedia, and
activities that move students up the learning taxonomy from basic knowledge
and comprehension to analysis and application.
• Promote Better Outcomes: Empower instructors and motivate students with ana-
lytics and reports that provide a snapshot of class progress, time in course, and
engagement and completion rates.
Aplia
Aplia saves instructors valuable time they would otherwise spend on routine grading
while giving students an easy way to stay on top of coursework with regularly scheduled
assignments. Currently, Aplia supports college-level courses and has been used by more
than 1,000,000 students at over 1,300 institutions. Aplia’s economics students use interac-
tive chapter assignments, tutorials, news analyses, and experiments to make economics
relevant and engaging. Math and graphing tutorials help students overcome deficiencies
in these crucial areas. Economics articles from top news sources challenge students to
connect current events to course concepts.
End of Chapter and traditional homework problem sets allow students to work through
the economic concepts they have learned in each chapter. Students can choose to "Grade It
Now” on a homework problem and will receive instant feedback whether an answer is cor-
rect or incorrect. Students can then choose to complete another problem to test themselves
on the same concept with randomization. Aplia End of Chapter will also be mobile enabled.
IN GRATITUDE
Finally, we are pleased to acknowledge our mounting indebtedness to the many people
who have generously helped us in our efforts through the history of this book. We often
have needed assistance in dealing with some of the many subjects that an introductory
textbook must cover. Our friends and colleagues Dean Alderucci, New York University;
Rebecca Blank, University of Michigan; Gregory Chow, Princeton University; Avinash Dixit,
Princeton University; Susan Feiner, University of Southern Maine; Claudia Goldin, Harvard
University; Ronald Grieson, University of California, Santa Cruz; Daniel Hamermesh,
University of Texas; Yuzo Honda, Osaka University; Peter Kenen, Princeton University; Melvin
Krauss, Stanford University; Herbert Levine, University of Pennsylvania; Burton Malkiel,
Princeton University; Edwin Mills, Northwestern University; Janusz Ordover, New York
University; David H. Reiley Jr., University of Arizona; Uwe Reinhardt, Princeton University;
Harvey Rosen, Princeton University; Joseph Seneca, Rutgers University; William Silber, New
York University; Laura Tyson, University of California, Berkeley; Martin Weitzman, Harvard
University; and Lawrence White, New York University have all given generously of their
knowledge in particular areas over the course of 13 editions. We have learned much from
them and have shamelessly relied on their help.
xviii Preface
Economists and students at colleges and universities other than ours offered numerous
useful suggestions for improvements, many of which we have been incorporated into this
thirteenth edition. We wish to thank the following for their insightful reviews:
Marco Airaudo, Drexel University Lyndon Goodridge, University of New

Rahsan Akbulut, California State Hampshire
University–Fullerton Kimberly Goudy, Central Ohio Technical
Onur Akmehmet, Tufts University College
Steven Antler, Roosevelt University John Gregor, Washington & Jefferson College
Muhammad Anwar, Framingham State Richard Grossman, Wesleyan University
& University of Massachusetts–Lowell Patrycja Grzelonska, Yeshiva University
Mohsen Bahmani-Oskooee, University of Homan Hajiran, Wheeling Jesuit University
Wisconsin–Milwaukee William Hart, Miami University
Jeffrey Baird, The Ohio State University Martha Hensley, University of Kansas
Damyana Bakardzhieva, George Peng Huang, Ripon College
Washington University Amy Ickowitz, Clark University
James Bang, Virginia Military Institute Christos Ioannou, University of
Nimfa Bemis, University of Southern Southampton
California Brian Kench, The University of Tampa
Charles Braymen, Kansas State University Kil-Joong Kim, Austin Peay State
Morgan Bridge, Mesa State College University
Raymonda Burgman, DePauw University Sharmila King, University of the Pacific
Scott Carson, University of Texas–Permian Dave Kingsley, University of
Basin Massachusetts–Lowell
Aspi Contractor, De Anza College Richard Kramer, New England College
Jim Couch, University of North Alabama Ganesh Krishnan, Metropolitan State
Elizabeth Crowell, University of University
Michigan–Dearborn Michael Kuryla, Broome Community
Christopher Dabbs, Wallace Community College–SUNY
College Selma Gary Langer, Roosevelt University
Norm Dalsted, Colorado State University June Lapidus, Roosevelt University
David Danning, University of Massachusetts Frederic Lerner, New York University
Maria Davis, Indian River State College Zhen Li, Albion College
Pierangelo De Pace, Pomona College Tony Lima, California State University–
Juan J. DelaCruz, Lehman College–CUNY East Bay
& FIT–SUNY Christine Loucks, Boise State University
Mine Aysen Doyran, Lehman College–CUNY Angelo Luciano, Columbia College–Chicago
Kevin Egan, University of Toledo David Lui, East Los Angeles College
Mona El Shazly, Columbia College Kristina Lybecker, Colorado College
Mahmoud Elamin, University of Minnesota Brian Lynch, Lake Land College
Layton Franko, Queens College Leah Marcal, California State University,
Denise Froning, Community College of Northridge
Aurora Cynthia Mayo, J. Sargeant Reynolds
Shailendra Gajanan, University of Community College
Pittsburgh John Mukum Mbaku, Weber State University
Claudia Garcia, Santa Monica College Erika McGrath, California State University
Alex Gialanella, Iona College Monterey Bay
Dan Giedeman, Grand Valley State Alice Melkumian, Western Illinois
University University
Chris Gingrich, Eastern Mennonite Carrie Meyer, George Mason University
University Ida Mirzaie, The Ohio State University
Tuncer Gocmen, Shepherd University Rashida Mohd Rowther, Northern Virginia
Ann Goldman, San Francisco State Community College
University Stephen Mullin, Drexel University
Barbara Good, Ursuline College David Murphy, Boston College
Preface xix
Kevin Neuman, University of Wisconsin– Cliff Rochlin, Loyola Marymount

Stevens Point University
Eric Nilsson, California State University– Juliette Roddy, University of Michigan
San Bernardino Dearborn
David O’Hara, Metropolitan State University Duane Rosa, West Texas A&M University
Maria Pia Olivero, Drexel University Matthew Rousu, Susquehanna University
Martha Olney, University of California Neil Sheflin, Rutgers New Brunswick
Berkeley Ian Shepherd, Abilene Christian University
Wafa Orman, University of Alabama– Robert Shoffner, Central Piedmont
Huntsville Community College
Samir Ouanes, Metro State University Gary Smith, Pomona College
Orgul Ozturk, University of South Carolina Paul Sommers, Seattle University
Mercy Palamuleni, Kansas State University Blake Sorem, Pierce College
Claudia Parliament, University of Minnesota Michael Steinberger, Pomona College
Peter Pasqualino, Fulton–Montgomery Josh Stillwagon, University of New
Community College Hampshire
Andrew Pearlman, Bard College Carolyn Stumph, Indiana University–
Ragan Petrie, George Mason University Purdue University Fort Wayne
Barbara Phipps, University of Kansas Eric Taylor, Central Piedmont Community
James Polito, Marian University College
Jennie Popp, University of Arkansas Erdal Tekin, Georgia State University
Gregrory Price, Morehouse College Mike Urbancic, University of California
Michael Rabbitt, Johnson County Berkeley
Community College Kristin Van Gaasbeck, California State
Geetha Rajaram, Whittier College University–Sacramento
Taghi Ramin, William Paterson University Abu Wahid, Tennessee State University
Kolleen Rask, College of the Holy Cross Janice Weaver, Drake University
Artatrana Ratha, St. Cloud State University Cathy Whiting, Willamette University
Jim Rathwell, Tri-County Technical College Chiou-nan Yeh Yeh, Alabama State
Wendy Rayack, Wesleyan University University
Michael Roberts, North Carolina State Ali Zadeh, Susquehanna University
University Madeline Zavodny, Agnes Scott College
Malcolm Robinson, Thomas More College Xinfu Zhu, Inver Hills Community College
Obviously, the book you hold in your hands was not produced by us alone. In revising
the thirteenth edition, a special role was played by Baumol’s in-office editor, Anne Noyes
Saini, who skillfully edited, researched, and refreshed data and information throughout
the book. It is probably true that Baumol could not have done it without her.
We also appreciate the contribution of the staff at Cengage Learning, including
Michael Worls, Product Manager; Michael Parthenakis, Senior Product Manager; John
Carey, Senior Marketing Manager; Jennifer E. Thomas, Product Development Manager;
Leah G. Wuchnick, Associate Content Developer; Colleen A. Farmer, Senior Content
Project Manager; Sarah Blasco, Media Developer; Michelle Kunkler, Senior Art Director;
Jennifer Nonenmacher, Intellectual Property Analyst; and Kevin Kluck, Manufacturing
Planner. It was a pleasure to work with them, and we appreciate their understanding
of our approaches, our goals, and our idiosyncrasies. We also thank our intelligent and
delightful assistants at Princeton University and New York University, Kathleen Hurley
and Janeece Roderick Lewis, who struggled successfully with the myriad of tasks
involved in completing the manuscript.
And, finally, we must acknowledge—with joy—our continuing debt to our wives,
Hilda Baumol and Madeline Blinder. They have now suffered through 13 editions and the
inescapable neglect and distraction the preparation of each new edition imposes. Their
tolerance and understanding have been no minor contribution to the project.
William J. Baumol
Alan S. Blinder
ABOUT THE AUTHORS
William J. Baumol
William J. Baumol was born in New York City and received his BSS at the College of the City of
New York and his Ph.D. at the University of London.
He is the Harold Price Professor of Entrepreneurship Emeritus at New York University,
where he taught a course in introductory microeconomics, and the Joseph Douglas Green, 1895,
Professor of Economics Emeritus and Senior Economist at Princeton University. He has been
a frequent consultant to the management of major firms in a wide variety of industries in the
United States and other countries as well as to a number of governmental agencies. In several
fields, including the telecommunications and electric utility industries, current regulatory policy
is influenced by his explicit recommendations. Among his many contributions to economics are
research on the theory of the firm, the contestability of markets, the economics of the arts and
other services—the “cost disease of the services” is often referred to as “Baumol’s disease”—
and economic growth, entrepreneurship, and innovation. In addition to economics, he taught a
course in wood sculpture at Princeton for about 20 years and is an accomplished painter (you
may view some of his paintings at http://pages.stern.nyu.edu/~wbaumol).
Professor Baumol has been president of the American Economic Association and three other
professional societies. He is an elected member of the National Academy of Sciences, created by
the U.S. Congress, and of the American Philosophical Society, founded by Benjamin Franklin.
He is also on the board of trustees of the National Council on Economic Education and is the
recipient of 11 honorary degrees.
Baumol is the author of hundreds of journal and newspaper articles and more than 45 books,
including Global Trade and Conflicting National Interests (2000); The Free-Market Innovation Machine
(2002); Good Capitalism, Bad Capitalism (2007); The Microtheory of Innovative Entrepreneurship
(2010); and The Cost Disease (2012). His writings have been translated into more than a dozen
languages.
Alan S. Blinder
Alan S. Blinder was born in New York City and attended Princeton University, where one of
his teachers was William Baumol. After earning a master’s degree at the London School of
Economics and a Ph.D. at MIT, Blinder returned to Princeton, where he has taught since 1971,
including teaching introductory macroeconomics since 1977. He is currently the Gordon S.
Rentschler Memorial Professor of Economics and Public Affairs.
In January 1993, Blinder went to Washington as part of President Bill Clinton’s first Council
of Economic Advisers. Then, from June 1994 through January 1996, he served as vice chairman
of the Federal Reserve Board. He thus played some role in formulating both fiscal and monetary
policies, two topics discussed extensively in this book. He has also advised several presidential
campaigns and numerous politicians.
Blinder has consulted for a number of the world’s largest financial institutions, testified dozens
of times before congressional committees, and been involved in several entrepreneurial start-ups.
For many years, he has written newspaper and magazine articles on economic policy, including
regular columns for the Boston Globe, BusinessWeek, and The New York Times. Currently, he has a
regular monthly column in The Wall Street Journal. Blinder also appears frequently on PBS, CNBC,
Bloomberg TV, Fox Business, and elsewhere. His recent book on the financial crisis (After the
Music Stopped, Penguin, 2013) garnered many accolades and was a New York Times best-seller.
xx
About the Authors xxi
Blinder has served as president of the Eastern Economic Association and vice presi-
dent of the American Economic Association, which elected him a Distinguished Fellow
in 2011. He has won numerous awards, including the Council for Economic Education’s
Visionary Award. He is a member of the American Philosophical Society, the American
Academy of Arts and Sciences, the American Academy of Political and Social Science,
and the Council on Foreign Relations.
Blinder and his wife have two grown sons, two grandsons, and live in Princeton,
where he doesn’t play tennis as often as he should.
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[Inhoud]
REGISTER.
A, Aa, 122
Aafje, Aafke, Ava, Aba, 205, 231, 232
Aai, Ari, 211
Aalbert, 253
Aaldert, 253
Aalk, 185
Aalse, Aalsen, 214, 216
Aalsma, 240
Aalst, 74, 76, 78, 79
Aalt, 165
Aaltje (Aeltsje), 132, 185, 201, 217, 227, 232, 248, 250, 251
Aan, 191, 232
Aardappeldoggen van Wagenborgen, 55
Aardappelkappers van Aksel, 67
Aardappels van Nieuw-Bokswoud, 63
Aardenburg, Ardenburch, 77
Aart, Arend, Art, Aan, Arnold, 191, 232
Aartswoud, 63
Aaye (Aeye), 217, 248, 250, 251
Abbe, Abbo, 212, 213, 216, 229, 253

Abbe Ferwer, 268
Abbeke, 216
Abe, Abo, 212, 221, 229, 253
van den Abeele, 184
Abele, 221, 229
Abele Jeltez, 258
Abke, 253
Abraham, 203
Achlum, 37
van Acker, 134
Acxele, Aksel, 77
Ada, 231
Adaloald, 164
Adaloltiswilare, 164
Adalric, Adelric, 165, 201
Adam Albertz, 258
Adam Scomaker, 266
Adde, Addo, 212, 229
Ade, Ado, 229
Adel, 101, 219, 220, 249
Adela, 132, 219, 220, 232
Adelaart, Adelhart, Athalhard, 188

Adelaïde, 119
Adelbald, Albad, Albet, 201
Adelberchta, Elbrich, 233
Adelbert, 151
Adelbertha, Albertina, 185
Adelbrecht, 100, 101, 149, 151, 165, 168, 200, 212, 249, 253
Adelbric, 201
Adelburg, 201
Adeldag, 201
Adèle, 131, 219
Adelolf, Adellof, Adelwolf, 200
Adelen, 219
Adelgar, 232, 233
Adelgarde, 201
Adelgonda, 201
Adelharda, 168, 201
Adelhart, 151, 165, 168, 174, 232, 253
Adelhelm, 161
Adelwald, 160, 164, 165
Adelwin, 151
Adetschwil, 164
Adger, Aldgar, 200

Adololdeshusen, 165
Adriaan, 211
Adriaenssens, 146
Adser, 200
Aebbe, 278
Aecht Jonckfrouw, 264
Aeff, 262
Aeff Willems, 264
Aefje, Aefke, Aefken, (Aafje, Aafke), 132, 205
Aef wedue, 264
Aelbert, 101
Aelbert Lemken Ruelkens dochter, 185
Aelbrecht, 145, 253
Aeldert (Aaldert), Adelhart, 200
Aeldrik (Aaldrik), Adelrik, 200
Aelmoed (Aalmoed), Adelmod, 201
Aelse, Aelsen (Aalse, Aalsen), 214, 216
Aelthie Metzler, 267
Aeltsje (Aaltje), Aelheyt, Adelheid, 201, 217, 248, 250, 251 [294]
Aelwyn (Aalwijn), Adelwin, 200
Aepke, 273
Aerland (Aarland), 201

Aernout (Aarnout), Arnold, Arnwald, 134, 145, 149, 191
Aesga Syckaz, 273
Aesge, Easge, 273
Aesge Aesgesz, 258
Aesge Molner, 268
Aetse (Aatse), 214
Aeye (Aaye), 248, 250, 251
Age, Ago, 212, 116, 229
Agele, 216
Agge, Aggo, 132, 212, 229
Agilhart, 233
Agneessens, 185
Agnes, 228
Ahlshausen, 164
Aike, Aico, 229
Ailke, Ailco, 229
Aise, Aiso, 229, 214
Aite, 214, 215
Aitse, 214
Ajuinen van Aalst, 74
Akersloot, 63
Akke, 217, 226, 250, 251

Akkerghem, 74
Akkrum, 36, 42
Aksel, Axel, 67, 77, 78
Al, All, 151
Alaert, Alairt, 146, 188
Aland, Eland, 202
Alaric, 167
Alart, Adelhart, 132, 174
Alaswinde, 167
Alawic, 167
Albarda, Alberda, 235
Albert, Adelbrecht, 100, 101, 131, 145, 149, 150, 151, 165, 168, 200, 202, 235,
249, 253
Albert Pouwels, 258
Albert Smidt, 267
Albert Wilkis, 258
Albrecht, 145, 149, 253
Aldburga, 201
Aldeboarn, Oldeboorn, 117
Alderden, 168
Alderding, 168
Alderse, 168
Aldershem, Oldersum, 168

Aldershoff, 168
Aldersma, 168
Aldersma-heerd, 168
Aldersna, 168
Aldert, 168, 188, 200, 203, 253
Alderts, 168
Aldertsje (Aldertje), 168, 203
Aldertsna, 168
Alderwick, 114
Aldgrim, 201
Aldrik, 165
Aldring, Alharding, Adelharding, 168
Aldringa, Alderdinga, Adelhardinga, 168
Aldringa-borg, 168
Aldringham, 168
Aldrington, 168
Aldrink, 168
Ale, Aio, 105, 130, 212, 216, 229
Alef, Alof, 200, 227, 262
Alem, Adelhelm, 161, 201, 202
Alewijn, 101, 151
Aleyt, Aleida, Adelheid, 189

Aleyt Arts Creppendochter, 183, 190
Aleyt Hayes, 264
Aleyt Moerkens, 183, 190
Aleyt van Poelgeest, 190
Aleyt Weefster, 270
Alfert, Alfred, Adelfred, Adelvrede, 200
Alger, Adelgar, 200, 227, 232, 249
Alida, 237
Alincthun, 103, 105, 106, 129, 130
Aling, 216
Alingewolde, 105
Alkama-state, 153
Alke, Alken, 151, 153
Alkema, 153
Alkemade, 154
Alkema-sate, 153
Alken, 153
Alkenrath, 154
Alkesweer, 154
Alkham, 154
Alkington, 105, 154
Alkje, Alkjen, 153

Alkmaar, 6, 63, 94, 154
Alko, Alco, 153
Alkofen, 105, 152
Alkoven, 152
Alla, 151
Allaert, 146, 150, 151, 164, 165, 168
Allama, 151
Allana, 152
Allard, Allart, 168, 188
Alle, Allo, 105, 130, 149, 150, 151, 153, 212, 229, 241
Alle Ferwer, 269
Allema, 151
Allema- (Alma-) state, 151
Allen, 152
Allena, 152
Allenbüttel, 152
Allendorf, 152
Allentrop, 152
Allenrode, 152
Allerda, 168
Allerda-sate, 168
Allerding, 168
Allert, Adelhart, 150, 151, 168, 188, 227, 232
Allertje, 168
Allert Kannemaker, 268
Allerts, 168
Allertsma, 168
Allertsoog, 168
Alles, 151
Alleshausen, 152
Alligny, 105
Allincourt, 105
Allinckx, 146, 149, 151
Alling, 153
Allinga, 151
Allingahuizen, 105, 152
Allinga-sate, 105, 151
Allingawier, 105, 130, 151
Allingham, 152
Allinghausen, 105, 153
Allington, 105, 129, 130, 152 [295]
Allink, 149, 150, 151
Allinson, 152
Allinx, 146, 151

Allis, 152
Allison, 152
Allix, 151
Allo, Alloo, 151
Alma, 151, 241
Alma-borg, 152
Alma-heerd, 152
Alman, Adelman, 201
Alma-sate, 151
Almer, Adelmar, 200
Aloyn, 151
Alse, 153, 214
Alsema, 153
Alsing, 153
Alske, 153
Alsma, 153
Alssema, 153
Alsum, 154
Alta, 153
Alt, Alte, 153, 214
Altekana, 153
Altema, 153
Alten, 153
Altena, 153
Altena-sate, 153
Altes, Althes, 153, 154
Altikon, 154
Alting, 153, 154
Altinga, 153
Altingen, 154
Altink, Altinck, 154
Altje, Altjen, Altjo, 151, 153, 216
Alts, 153
Altunga, 153
Alvesmerscene, 120
Alwart, Adelwart, 201
Alwin, Alwijn, 150, 151
Ame, 212
Ameland, 6, 27, 88
Amele, 214
Ameling, 216
Amersfoort, 6, 62
Amke, 215
Amme, 212
Amse, 214
Amsterdam, 5, 7, 63, 65, 88
Anchem Goeswynssoen, 173
den Andel, 56
Andela, 235
Andele, Ando, 214, 221, 232, 235
Anderen, 59
Andreas, 204
Andries, 146, 147, 151
Ane, 212, 227
Angenietje, 228
Anjum, Anningahem, 127
Anne, 127
Annee, 227
Annema, 127
Annezin, 127
Annineshem, 127
Ans, Anso, 224
Anscke Rogdrager, 269
Anske, 223, 232
Anthonius Fyscker, 269
Antwerpen, 5, 72
Apeluiders van IJsselstein, 62
Appegarbe, 128
Appi, 253
Applegarth, 128
Arafrid, 114
Aragis, 114
Ardenburch, Aardenburg, 77
Are, 114
Arema, Aerma, 114
Arend, Arnwald, Arnhold, Aernout, Arnout, 132, 191, 200
Arendonk, 71, 72
Arent Brouwer, 269
Arent Hoedmaker, 268
Ari, Aai, 211
Ariaen, 262
Arien Busschut, 272
Aringzele, 113, 114
Arink, 114
Arkenbout, Archimbald, 167
Armgard, 201
Arnt, Art, 192
Arnt Ebben, 192

Arnt Lysen Lyskenssoen, 186, 192
Arnt wilen Noyen van Doernen, 179
Arohildis, 114
Arolinda, 114
Art den Wize van Asten, 181
Art geheyten Ayen naturlike soen Hermans van Eyndhouts, 192
Art Peters Meeussoen, 177, 192
Art Peter Metten Swagerssoen van Milheze, 177
Art Stamelaert, 180
Art van den Loe Henrics Mettensoens soen, 175, 179
Art van den Paependonk, 181, 192
Art van Gheel wittige soen wilen Maes Shoegen, 187, 192, 194
Arys Glaesmaker, 269
Arum, 8, 35, 37
Ashbourne, 117
Asing, Asinga, 216
Assendelft, 63
Aswyn, 201
Ate, Ato, 229
Ath, Atta, Atsje, 230, 274
Athal, 101, 219, 249
Athala, 219
Athalbercht, 101, 149, 249, 253
Athalbrand, 249
Athalgar, 249
Athalwin, 101
Atse, Atso, 214, 221, 229
Atsje (Atje), 215, 216, 221
Atte, 212, 216, 221, 229
Auck, 274
Auck Mester Syweks, 264
Auck Piers, 264
Audeland, 114
Auderwick, 114
Audringhen, 96, 97, 101
Audrehem, 114, 168
Audreselles, 113, 114
Andruicq, 114, 121, 122
Auke, Auco, Audo, Avo, 214, 215, 220, 229, 232
Aukje, Auda, Ava, [296]217, 220, 225, 227, 228, 232, 250, 251
Au Pauvre, 115, 126
Aurelia, 225, 228
Aurich, Aurik, 5, 57, 58
Avis, 259
Axel, Aksel, 67, 77, 78
Aye, Ayen, 192, 216
Ayen Hermanasoen van Eyndhouts, 174
Ayenwolde, 105
Ayle, 274
Ayold, Ayolt, 200, 227
Azijnzeekers van Temseke, 73
Baard, 34
Baardeghem, 73
Baart, 148
Baartje, Baatje, Berendje, Berendina, Bernharda, 232
Baas, 141
Baasrode, 73
Baayum, 36
de Backer, 140
de Backere, 138, 140
Baeckaert, 144
de Baecker, 134
Baeff, 262
Baerd, Baert 134, 148
Baertsoen, 147, 148
Baetsje (Baatje), 251

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(eBook PDF) Macroeconomics:

Principles and Policy 13th Edition by

Part 1 Getting Acquainted with Economics 1

APPENDIX Using Graphs: A Review 12

Chapter 2 The Economy: Myth and Reality 21

2-2c The American Workforce: What Does It Earn? 29

Chapter 3 The Fundamental Economic Problem: Scarcity and Choice 39

Chapter 4 Supply and Demand: An Initial Look 55

4-6 SUPPLY SHIFTS AND SUPPLY-DEMAND EQUILIBRIUM 67

Part 2 The Macroeconomy: Aggregate Supply and Demand 79

Chapter 6 The Goals of Macroeconomic Policy 101

APPENDIX How Statisticians Measure Inflation 122

Chapter 7 Economic Growth: Theory and Policy 127

7-8 FROM THE LONG RUN TO THE SHORT RUN 143

Chapter 8 Aggregate Demand and the Powerful Consumer 147

APPENDIX National Income Accounting 162

Chapter 9 Demand-Side Equilibrium: Unemployment or Inflation? 169

APPENDIX B The Multiplier with Variable Imports 190

Chapter 10 Bringing in the Supply Side: Unemployment and Inflation? 193

Part 3 Fiscal and Monetary Policy 213

APPENDIX A Graphical Treatment of Taxes and Fiscal Policy 228

APPENDIX B Algebraic Treatment of Taxes and Fiscal Policy 232

Chapter 12 Money and the Banking System 235

Chapter 13 Monetary Policy: Conventional and Unconventional 259

13-4 OTHER INSTRUMENTS OF MONETARY POLICY 268

Chapter 14 The Financial Crisis and the Great Recession 279

Chapter 15 The Debate over Monetary and Fiscal Policy 295

Chapter 16 Budget Deficits in the Short and Long Run 315

Chapter 17 The Trade-Off between Inflation and Unemployment 335

Part 4 The United States in the World Economy 355

APPENDIX Supply, Demand, and Pricing in World Trade 375

Chapter 19 The International Monetary System: Order or Disorder? 379

Chapter 20 Exchange Rates and the Macroeconomy 399

APPENDIX: Answers to Odd-Numbered Test Yourself Questions 413

NOTE TO THE STUDENT

Marco Airaudo, Drexel University Lyndon Goodridge, University of New

Kevin Neuman, University of Wisconsin– Cliff Rochlin, Loyola Marymount

Aafje, Aafke, Ava, Aba, 205, 231, 232

Aai, Ari, 211

Aalse, Aalsen, 214, 216

Aalst, 74, 76, 78, 79

Aan, 191, 232

Aardappeldoggen van Wagenborgen, 55

Aardappelkappers van Aksel, 67

Aardappels van Nieuw-Bokswoud, 63

Aart, Arend, Art, Aan, Arnold, 191, 232

Aaye (Aeye), 217, 248, 250, 251

Abbe, Abbo, 212, 213, 216, 229, 253

Abe, Abo, 212, 221, 229, 253

van den Abeele, 184

Abele, 221, 229

Abele Jeltez, 258

van Acker, 134

Adalric, Adelric, 165, 201

Adam Albertz, 258

Adam Scomaker, 266

Adde, Addo, 212, 229

Ade, Ado, 229

Adel, 101, 219, 220, 249

Adela, 132, 219, 220, 232

Adelaart, Adelhart, Athalhard, 188

Adelbald, Albad, Albet, 201

Adelberchta, Elbrich, 233