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Macroeconomics,TenthEdition
WilliamBoyes,MichaelMelvin
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ToMelissa,Katie,andLindsey–W.B. ToBettina,Jason,Jeremy,Anna,andSonia–M.M.
BRIEFCONTENTS Prefacexx
CHAPTER1
TheWealthofNations:Ownership andEconomicFreedom1
1-1Ownership3
1-1aAnecdotesaboutOwnership3
1-1bPrivatePropertyRights3
1-1cTitletoProperty7
1-2EconomicFreedom9
1-2aIndexofEconomicFreedom9
1-2bEconomicFreedomandStandardsofLiving10
Summary11
KeyTerms12
Exercises12
APPENDIXTOCHAPTER1 WorkingwithGraphs15
1-1ReadingandConstructingGraphs15
1-1aConstructingaGraphfromaTable15
1-1bInterpretingPointsonaGraph16
1-1bShiftsofCurves17
Summary18
Exercises18
EconomicallySpeaking: Billionairesurgedtousetheirinfluence beyondthegrave13
CHAPTER2 ScarcityandOpportunityCosts19
2-1Scarcity,OpportunityCosts,andVoluntary Trade20
2-1aOpportunityCost20
2-1bTrade-Offs20
2-1cTheProductionPossibilitiesCurve21 PointsInsidetheProductionPossibilitiesCurve22 PointsOutsidetheProductionPossibilitiesCurve23 ShiftsoftheProductionPossibilitiesCurve23
2-2OutputandResources24
2-2aResourcesandIncome24
2-2bTheValueofResources25
2-3VoluntaryTradeandExchange27
2-3aGainsfromTrade27
2-3bSpecializeWhereOpportunityCostsAreLowest27 2-4AllocationSystems28
2-4aFairness28
2-4bIncentives29
2-4cTheMarketProcess:Arbitrage30 Summary32 KeyTerms33 Exercises33
EconomicInsight: ATrickyQuestiononOpportunity Costs21
EconomicallySpeaking: QueuesHitAbujaasFuelScarcity Spreads35
CHAPTER3 TheMarketandPriceSystem37
3-1TheMarketSystem39
3-1aProfitandtheAllocationofResources39
3-1bCreativeDestruction40
3-1cTheDeterminationofIncome41
3-2MarketsandMoney42
3-2aBarterandMoneyExchanges42
3-3Demand42
3-3aTheLawofDemand43
3-3bTheDemandSchedule44
3-3cTheDemandCurve45
3-3dFromIndividualDemandCurvestoaMarketCurve45
3-3eChangesinDemandandChangesinQuantity Demanded46 Income47 Tastes48 PricesofRelatedGoodsandServices49 Expectations49 NumberofBuyers49
3-4Supply49
3-4aTheLawofSupply50
3-4bTheSupplyScheduleandSupplyCurve50
3-4cFromIndividualSupplyCurvestotheMarket Supply50
3-4dChangesinSupplyandChangesinQuantity Supplied51
PricesofResources51
TechnologyandProductivity51
ExpectationsofSuppliers54
NumberofSuppliers54
PricesofRelatedGoodsorServices54
3-5Equilibrium:PuttingDemandandSupply Together55
3-5aDeterminationofEquilibrium55
3-5bChangesintheEquilibriumPrice:DemandShifts57
3-5cChangesintheEquilibriumPrice:SupplyShifts58
Summary59
KeyTerms60
Exercises60
EconomicallySpeaking: Capitalismneedstoberestrained62
CHAPTER4
4-1ThePrivateSector66
4-1aHouseholds66
4-1bBusinessFirms67
4-1cTheInternationalSector68
4-2ThePublicSector73
4-2aGrowthofGovernment73
4-2bGovernmentSpending74
4-3InteractionAmongSectorsandEconomies76
4-3aHouseholdsandBusinesses76
4-3bGovernment77
4-3cTheInternationalSector77
4-3dMacroeconomics77
Summary78
KeyTerms79
Exercises79
EconomicInsight: TheSuccessfulEntrepreneur70
EconomicallySpeaking: 2014EconomicReportofthePresident, pp.29–30,Chapter180
GDPasExpenditures88
GDPasIncome89
5-1bOtherMeasuresofOutputandIncome91
GrossNationalProduct91
NetNationalProduct91
NationalIncome91
PersonalIncome92
DisposablePersonalIncome93
5-2NominalandRealMeasures93
5-2aNominalandRealGDP93
5-2bPriceIndexes95
BaseYear96
TypesofPriceIndexes96
5-3FlowsofIncomeandExpenditures98
Summary99
KeyTerms99
Exercises100
EconomicInsight: TheConsumerPriceIndex97
EconomicallySpeaking: HidingintheShadows:TheGrowthofthe UndergroundEconomy101
CHAPTER6 AnIntroductiontotheForeign ExchangeMarketandtheBalanceof Payments103
6-1TheForeignExchangeMarket104
6-1aExchangeRates104
6-1bExchangeRateChangesandInternationalTrade108
6-2TheBalanceofPayments109
6-2aAccountingforInternationalTransactions109
6-2bBalanceofPaymentsAccounts110
6-2cTheCurrentAccountandtheFinancialAccount111
Summary113
KeyTerms114
Exercises114
GlobalBusinessInsight: ActiveTradingAroundtheWorld107
GlobalBusinessInsight: TheEuro108
EconomicallySpeaking: FrenchCrossChanneltobuyChanelin London115
CHAPTER7
5-1MeasuresofOutputandIncome84
5-1aGrossDomesticProduct84
MarketValue85
FinalGoodsandServices86
ProducedinaYear87
GDPasOutput88
UnemploymentandInflation117
7-1BusinessCycles118
7-1aDefinitions118
7-1bHistoricalRecord120
7-1cIndicators121
7-2Unemployment123
7-2aDefinitionandMeasurement123
7-2bInterpretingtheUnemploymentRate124
7-2cTypesofUnemployment125
7-2dCostsofUnemployment126
7-2eTheRecordofUnemployment128
7-3Inflation132
7-3aAbsoluteversusRelativePriceChanges132
7-3bEffectsofInflation133
7-3cTypesofInflation136
7-3dTheInflationaryRecord137 Summary139
KeyTerms140 Exercises140
GlobalBusinessInsight: HighUnemploymentinEurope131
EconomicallySpeaking: OlderWorkersandtheRecession142
CHAPTER8 MacroeconomicEquilibrium: AggregateDemandandSupply145
8-1AggregateDemand,AggregateSupply, andBusinessCycles146
8-1aAggregateDemandandBusinessCycles147
8-1bAggregateSupplyandBusinessCycles147
8-1cALookAhead149
8-2FactorsthatInfluenceAggregateDemand149
8-2aConsumption149
8-2bInvestment150
8-2cGovernmentSpending150
8-2dNetExports150
8-2eAggregateExpenditures151
8-3TheAggregateDemandCurve151
8-3aWhytheAggregateDemandCurveSlopes Downward151
TheWealthEffect152
TheInterestRateEffect152
TheInternationalTradeEffect153
TheSumofthePrice-LevelEffects153
8-3bChangesinAggregateDemand:Nonprice Determinants154 Expectations155
ForeignIncomeandPriceLevels156
GovernmentPolicy157
8-4AggregateSupply158
8-4aWhytheAggregateSupplyCurveSlopesUpward158
8-4bShort-RunversusLong-RunAggregateSupply158 Short-RunAggregateSupplyCurve159 Long-RunAggregateSupplyCurve159
8-4cChangesinAggregateSupply:Nonprice Determinants161
ResourcePrices161 Technology162 Expectations162
EconomicGrowth:Long-RunAggregateSupplyShifts163
8-5AggregateDemandandSupplyEquilibrium165
8-5aShort-RunEquilibrium165
8-5bLong-RunEquilibrium166 Summary167
KeyTerms168 Exercises168
EconomicInsight: HowLackofInformationintheShortRun AffectsWagesintheLongRun161
GlobalBusinessInsight: OilandAggregateSupply164
EconomicallySpeaking: TheConferenceBoard Consumer ConfidenceIndex IncreasesAgain170
CHAPTER9 AggregateExpenditures173 9-1ConsumptionandSaving175
9-1aSavingandSavings175
9-1bTheConsumptionandSavingFunctions175
9-1cMarginalPropensitytoConsumeandSave178
9-1dAveragePropensitytoConsumeandSave180
9-1eDeterminantsofConsumption182 DisposableIncome182
Wealth183 Expectations183 Demographics185
9-2Investment186
9-2aAutonomousInvestment186
9-2bDeterminantsofInvestment186 TheInterestRate187 ProfitExpectations188 OtherDeterminantsofInvestment188
9-2cVolatility190
9-3GovernmentSpending191
9-4NetExports191
9-4aExports192
9-4bImports192
9-4cTheNetExportFunction193
9-5TheAggregateExpendituresFunction194
9-5aAggregateExpendituresTableandFunction194 9-5bTheNextStep194
Summary196
KeyTerms196
Exercises197
EconomicInsight: PermanentIncome,LifeCycles,and Consumption185
EconomicallySpeaking: 2012TradeGapis$539.5Billion198
APPENDIXTOCHAPTER9
10-1EquilibriumIncomeandExpenditures204
10-1aExpendituresandIncome204 10-1bLeakagesandInjections207
10-2ChangesinEquilibriumIncomeand Expenditures210
10-2aTheSpendingMultiplier210
10-2bTheSpendingMultiplierandEquilibrium212 10-2cReal-WorldComplications215 ForeignRepercussionsofDomesticImports215 MultiplierEstimates217
10-3AggregateExpendituresandAggregate Demand217
10-3aAggregateExpendituresandChangingPrice Levels218
10-3bDerivingtheAggregateDemandCurve218
10-3cAFixed-Price AD-AS Model220
Summary221
KeyTerms221
Exercises221
EconomicInsight: JohnMaynardKeynes205
EconomicInsight: TheParadoxofThrift208
EconomicallySpeaking: NAFTAat20:OverviewandTrade Effects223
APPENDIXTOCHAPTER10
11-1FiscalPolicyandAggregateDemand229
11-1aShiftingtheAggregateDemandCurve229 11-1bMultiplierEffects229
11-1cGovernmentSpendingFinancedbyTaxIncreases231 11-1dGovernmentSpendingFinancedbyBorrowing233 11-1eCrowdingOut233
11-2FiscalPolicyintheUnitedStates234 11-2aTheHistoricalRecord234 11-2bDeficitsandtheNationalDebt238 Deficits,InterestRates,andInvestment239 DeficitsandInternationalTrade239 InterestPaymentsontheNationalDebt240 11-2cAutomaticStabilizers240
11-3FiscalPolicyinDifferentCountries242 11-3aGovernmentSpending242 11-3bTaxation243 Summary246 KeyTerms246 Exercises246
EconomicInsight: Supply-SideEconomicsandtheLaffer Curve232
EconomicInsight: TheTaxpayer’sFederalGovernment CreditCardStatement236
GlobalBusinessInsight: Value-AddedTax245
EconomicallySpeaking: AgreementReached ONEUROPACT:EUPRESIDENT248
12-1WhatIsMoney?254
12-1aFunctionsofMoney254 MediumofExchange254 UnitofAccount255 StoreofValue255 StandardofDeferredPayment255 12-1bTheU.S.MoneySupply255
M1MoneySupply256
M2MoneySupply257 12-1cGlobalMoney258 InternationalReserveCurrencies259
12-2Banking260 12-2aFinancialIntermediaries261
12-2bU.S.Banking261 CurrentStructure261
BankFailures262
12-2cInternationalBanking264
EurocurrencyMarket264 InternationalBankingFacilities264
12-2dInformalFinancialMarketsinDeveloping Countries265
12-3BanksandtheMoneySupply266
12-3aDepositsandLoans266
12-3bDepositExpansionMultiplier269
Summary270
KeyTerms271
Exercises271
GlobalBusinessInsight: IslamicBanking262
EconomicallySpeaking: InternationalDemand fortheDollar273
CHAPTER13 MonetaryPolicy277
13-1TheFederalReserveSystem278
13-1aStructureoftheFed278 BoardofGovernors278 DistrictBanks278 TheFederalOpenMarketCommittee279
13-1bFunctionsoftheFed280 BankingServicesandSupervision280 ControllingtheMoneySupply280
13-2ImplementingMonetaryPolicy282
13-2aPolicyGoals282 IntermediateTargets282 InflationTargeting284
13-2bOperatingProcedures285 ToolsofMonetaryPolicy287 FOMCDirectives291
13-2cForeignExchangeMarketIntervention291 MechanicsofIntervention292 EffectsofIntervention293
13-3MonetaryPolicyandEquilibriumIncome294
13-3aMoneyDemand294 TheMoneyDemandFunction295 TheMoneySupplyFunction297
EquilibriumintheMoneyMarket297
13-3bMoneyandEquilibriumIncome298
Summary300
KeyTerms301
Exercises301
EconomicInsight: What’sona20-DollarBill?281
GlobalBusinessInsight: TheEuropean CentralBank285
EconomicallySpeaking: TheBankofEnglandDuringthe FinancialCrisis303
CHAPTER14 MacroeconomicPolicy:Tradeoffs, Expectations,Credibility,andSources ofBusinessCycles307
14-1ThePhillipsCurve308
14-1aAnInflation-UnemploymentTradeoff?309 14-1bShort-RunversusLong-RunTradeoffs309 IntheShortRun311 IntheLongRun311
14-2TheRoleofExpectations313
14-2aExpectedversusUnexpectedInflation314 WageExpectationsandUnemployment314 InventoryFluctuationsandUnemployment316 WageContractsandUnemployment316
14-2bFormingExpectations318 AdaptiveExpectations318 RationalExpectations319
14-3CredibilityandTimeInconsistency319
14-3aThePolicymaker’sProblem320 14-3bCredibility321
14-4SourcesofBusinessCycles322
14-4aThePoliticalBusinessCycle322 14-4bRealBusinessCycles324 14-4cOutputVolatility326 BetterInventoryManagement326 ChangesinFinancialMarkets327 ImprovedMacroeconomicPolicy327 GoodLuck327
14-5TheLinkbetweenMonetaryandFiscal Policies328
14-5aTheGovernmentBudgetConstraint328 14-5bMonetaryReforms329 Summary331 KeyTerms331 Exercises332
EconomicInsight: TheNaturalRateofUnemployment313
EconomicInsight: WhyWagesDon’tFallDuringRecessions318
EconomicallySpeaking: SemiannualMonetaryPolicyReporttothe Congress333
CHAPTER15
MacroeconomicViewpoints:New Keynesian,Monetarist,andNew Classical337
15-1KeynesianEconomics338
15-1aTheKeynesianModel338 15-1bThePolicymakers’Role339
15-2MonetaristEconomics340
15-2aTheMonetaristModel340 15-2bThePolicymakers’Role341
15-3WhatIsNewClassicalEconomics?342
15-3aTheNewClassicalModel343 15-3bThePolicymakers’Role344
15-4ComparisonandInfluence345 Summary347
KeyTerms347 Exercises348
EconomicInsight: MiltonFriedman341
EconomicallySpeaking: TheGhostsofChristmasPastHaunt Economists349
CHAPTER16
EconomicGrowth351
16-1DefiningEconomicGrowth352
16-1aRealGDP352 CompoundGrowth352 TheRuleof72353
16-1bPerCapitaRealGDP355
16-1cTheProblemswithDefinitionsofGrowth356
16-2TheDeterminantsofGrowth356
16-2aLabor357
16-2bCapital359 16-2cLand359 16-2dTechnology359
16-3Productivity361
16-3aProductivityandEconomicGrowth361 16-3bDeterminantsofProductivity362 LaborQuality362 TechnologicalInnovation363 OtherFactors365
16-3cGrowthandDevelopment366
Summary367
KeyTerms367
Exercises367
EconomicInsight: TechnologicalAdvance:TheChangeinthePrice ofLight360
EconomicallySpeaking: RidingaSurgeofTechnology369
CHAPTER17 DevelopmentEconomics371 17-1TheDevelopingWorld372 17-1aMeasuringPoverty373 17-1bBasicHumanNeeds374
17-2ObstaclestoGrowth375 17-2aPoliticalObstacles375 LackofAdministrativeSkills375 PoliticalInstabilityandRisk375 Corruption376 GoodEconomicsasBadPolitics376 17-2bSocialObstacles377 LackofEntrepreneurs377 RapidPopulationGrowth379
17-3DevelopmentStrategies380 17-3aInward-OrientedStrategies380 17-3bOutward-OrientedStrategies381 17-3cComparingStrategies382
17-4ForeignInvestmentandAid383 17-4aForeignSavingsFlows383 17-4bBenefitsofForeignInvestment384 NewJobs384 TechnologyTransfer385 ForeignExchangeEarnings385 17-4cForeignAid385 Summary386 KeyTerms387 Exercises387
GlobalBusinessInsight: EconomicDevelopmentinthe Americas378
EconomicallySpeaking: DoesInternationalFoodAidHarmthe Poor?388
CHAPTER18 Globalization391 18-1TheMeaningofGlobalization392 18-1aGlobalizationIsNeitherNewnorWidespread392 18-1bTheRoleofTechnologicalChange393 18-1cMeasuringGlobalization393 18-2GlobalizationControversy394 18-2aArgumentsAgainstGlobalization395
“Fair,”Not“Free,”Trade395 InternationalOrganizationsServeOnlytheInterestsof Corporations395
GlobalizationOccursattheCostofEnvironmental Quality395
GlobalizationEncouragesHarmfulLabor Practices396
18-2bArgumentsinFavorofGlobalization396 FreeTradeHelpsDevelopingCountries396 InternationalOrganizationsRepresentGovernmentsand People397
TheConnectionbetweenGlobalizationandEnvironmental HarmIsWeak397
DoesGlobalizationEncourageHarmfulLabor Practices?398
18-3Globalization,EconomicGrowth,and Incomes399
18-4FinancialCrisesandGlobalization400
18-4aCrisesofthe1990s400
18-4bExchangeRatesandFinancialCrises401
18-4cWhatCausedtheCrises?403
18-4dTheGlobalFinancialCrisisof2007–2008405 Summary407 KeyTerms407 Exercises407
GlobalBusinessInsight: TheWorldTradeOrganization396 EconomicallySpeaking: ReshapingtheGlobalEconomy409
CHAPTER19 WorldTradeEquilibrium413 19-1AnOverviewofWorldTrade414
19-1aTheDirectionofTrade414
19-1bWhatGoodsAreTraded?415
19-2AnExampleofInternationalTrade Equilibrium417
19-2aComparativeAdvantage417 19-2bTermsofTrade419
19-2cExportSupplyandImportDemand420
19-2dTheWorldEquilibriumPriceandQuantity Traded422
19-3SourcesofComparativeAdvantage423
19-3aProductivityDifferences423
19-3bFactorAbundance424
19-3cOtherTheoriesofComparativeAdvantage424 HumanSkills424 ProductLifeCycles425
Preferences425
Summary427
KeyTerms427
Exercises428
GlobalBusinessInsight: TheDutchDisease420
EconomicallySpeaking: LetterToSenateMajorityLeaderHarry Reid429
CHAPTER20
InternationalTradeRestrictions433
20-1ArgumentsforProtection434
20-1aCreationofDomesticJobs434 20-1bCreationofa“LevelPlayingField”436 20-1cGovernmentRevenueCreation437 20-1dNationalDefense438
20-1eInfantIndustries438 20-1fStrategicTradePolicy438
20-2ToolsofCommercialPolicy439
20-2aTariffs440
20-2bQuotas441
20-2cOtherBarrierstoTrade443 ExportSubsidies443 GovernmentProcurement443 HealthandSafetyStandards444
20-3PreferentialTradeAgreements444
20-3aFreeTradeAreasandCustomsUnions445
20-3bTradeCreationandDiversion446 Summary447
KeyTerms448
Exercises448
GlobalBusinessInsight: Smoot-HawleyTariff440
EconomicallySpeaking: USDAAnnouncesSugarTariffRate QuotasforFiscalYear2014450
CHAPTER21 ExchangeRatesandFinancialLinks betweenCountries453
21-1PastandCurrentExchange-Rate Arrangements454
21-1aTheGoldStandard454
21-1bTheBrettonWoodsSystem454
21-1cTheInternationalMonetaryFundandtheWorld Bank455
21-1dTheTransitionYears455
21-1eToday456
21-2FixedorFloatingExchangeRates460
21-2aEquilibriumintheForeignExchangeMarket460 21-2bAdjustmentMechanismsunderFixedandFlexible ExchangeRates462
21-2cConstraintsonEconomicPolicy464
21-3PricesandExchangeRates465
21-3aAppreciationandDepreciation465
21-3bPurchasingPowerParity466
21-4InterestRatesandExchangeRates467
21-4aTheDomesticCurrencyReturnfromForeign Bonds467
21-4bInterestRateParity469 Summary470 KeyTerms470 Exercises471
GlobalBusinessInsight: TheIMFandtheWorldBank456 EconomicallySpeaking: FrequentlyAskedQuestions: EuEnlargementandEconomicandMonetaryUnion (EMU)472
SUGGESTEDOUTLINES FORONE-TERMCOURSES* 1.TheWealthofNations: OwnershipandEconomic Freedom
2.ScarcityandOpportunityCosts
3.MarketsandthePriceSystem
4.TheAggregateEconomy
5.NationalIncomeAccounting
6.AnIntroductiontotheForeign ExchangeMarketandthe BalanceofPayments
7.UnemploymentandInflation
8.MacroeconomicEquilibrium: AggregateDemandandSupply
9.AggregateExpenditures
10.IncomeandExpenditures Equilibrium
11.FiscalPolicy
12.MoneyandBanking
13.MonetaryPolicy
14.MacroeconomicPolicy: Tradeoffs,Expectations, Credibility,andSourcesof BusinessCycles
15.MacroeconomicViewpoints:New Keynesian,Monetarist,andNew Classical
16.EconomicGrowth
17.DevelopmentEconomics
18.Globalization
34.WorldTradeEquilibrium
35.InternationalTradeRestrictions
36.ExchangeRatesandfinancial LinksbetweenCountries
1.TheWealthofNations: OwnershipandEconomic Freedom
2.ScarcityandOpportunityCosts
3.MarketsandthePriceSystem
20.Elasticity:DemandandSupply
21.Demand:ConsumerChoice
22.Supply:TheCostsofDoing Business
23.ProfitMaximization
24.PerfectCompetition
25.Monopoly
26.MonopolisticCompetitionand Oligopoly
27.MarketsandGovernment
28.AntitrustandRegulation
29.ResourceMarkets
30.TheLaborMarket
31.TheCapitalMarket
32.TheLandMarketandNatural Resources
33.CurrentIssues:Income,Income Distribution,Poverty,and GovernmentPolicy
34.WorldTradeEquilibrium
35.InternationalTradeRestrictions
1.TheWealthofNations: OwnershipandEconomic Freedom
2.ScarcityandOpportunityCosts
3.MarketsandthePriceSystem
4.TheAggregateEconomy
5.NationalIncomeAccounting
6.AnIntroductiontotheForeign ExchangeMarketandthe BalanceofPayments
7.UnemploymentandInflation
8.MacroeconomicEquilibrium: AggregateDemandandSupply
11.FiscalPolicy
12.MoneyandBanking
13.MonetaryPolicy
19.UsingEconomicstoUnderstand theWorldAroundYou
20.Elasticity:DemandandSupply 21.Demand:ConsumerChoice
22.Supply:TheCostsofDoing Business
28.ProfitMaximization
29.ResourceMarkets
33.CurrentIssues:Income,Income Distribution,Poverty,and GovernmentPolicy
34.WorldTradeEquilibrium
*Chapternumbersrepresent Economics,10thed. For Macroeconomics,10thed., and Microeconomics,10thed., seetheconversionchartintheBriefContentssection.
PREFACE Inthefirsteditionof Macroeconomics, weintegratedaglobalperspectivewithtraditional economicprinciplestogivestudentsaframeworktounderstandthegloballydevelopingeconomicworld.Eventssincethenhavemadethisapproachevenmoreimperative.Inthe 1990s,theSovietUniondisintegratedandnewlyindependentnationsemerged.Muchof LatinAmericawasturningtowardfreemarketsandawayfromgovernmentcontrols.Butby 2005,severalofthesenationswereturningback—awayfromfreemarkets.HugoChavez andEvoMoraleswereguidingVenezuelaandBoliviaawayfromfreemarketsandtoward government-runandcontrolledeconomies.VladimirPutinwasdrivingRussiatowardmore governmentcontrol.Othereventsweremakingtheworldseemverysmall:NorthKoreawas testingnuclearweapons,Somaliawasembroiledinacivilwar,terrorismwasprevalentin nationsaroundtheworld,andmuchofAfricaremainedmiredinpoverty.In2007,the interconnectednessofnationswasonceagainhighlightedwhentheworldfellintoadeep recessioncreatedbythehousingcollapseintheUnitedStates.Wheneconomicgrowth returnedinthesummerof2009,itwasslowandunemploymentremainedhigh.In2011the EuropeanUnionandtheeurozonefacedseverechallengesasGreece,Portugal,Spain,Italy, andIrelandhaddebtburdensthatwerehistoricallyhigh.In2014,RussiainvadedUkraine andcivilwarpermeatedSyriaandmuchofthemiddleEast,aswellasseveralregionsof Africa.TheUnitedStateshadappliedtariffstosomeChinesegoodsandsanctionsonRussia. Theybothretaliatedwiththeirowntariffsandembargos.
Studentsandinstructorshaveembracedtheideathattheeconomiesofcountriesare interrelatedandthatthisshouldbemadeclearinthestudyofeconomics. Economics gives studentsthetoolstheyneedtomakeconnectionsbetweentheeconomicprinciplesthey learnandthenow-globalworldtheylivein.
Inthisedition,wecontinuetorefineandimprovethetextasateachingandlearning instrumentwhileexpandingitsinternationalbasebyupdatingandaddingexamplesrelated toglobaleconomics.
ChangesintheTenthEdition Thetentheditionof Macroeconomics hasbeenthoroughlyupdatedandrefinedtakinginto accounttheeventsof2008-2014.
RevisedIntroductoryChapters Theintroductorychaptershavebeenreducedfrom5to4.Anemphasisonwhatleadstothe wealthofnationsoccursinchapters1and2.Thisplacescurrenteventsandeconomicdevelopmentsinperspective.Isthiseconomyorothereconomiescarryingoutthecorrectactions toenhancethewealthandwell-beingofitcitizens?
RevisedMacroeconomicCoverage Thefocusofthisneweditionhasbeentoensurethattheinformationanddiscussionfaithfully representthelatestthinkingofeconomistsonimportantmacroeconomicphenomena.Tothis end,manysmalladditionsandrevisionsappearthroughout.Largerchangesofnoteinclude: manyapplicationstotherecentfinancialcrisisandassociatedrecessionappearthroughoutthe macrosection;Alldata-relatedtablesandfiguresareupdatedtobeascurrentaspossibleat
thetimeofpublication.Thebigissuesarethesameastheyhavebeenforyears,buteconomic policieshavechangedwiththetimes.Forinstance,wenowdiscusscentralbank forwardguidance,theideathatcentralbankscanhavebeneficialeffectsontheeconomybycommittingto followpoliciesforastatedperiodoftime.Forinstance,theFederalReservehasrepeatedly statedthatinterestrateswillstaylowforaprolongedtimeinordertoconvincepeopletotake risksfundedwithlow-interestrateloans.Manyapplicationstotherecentfinancialcrisisand associatedrecessionappearthroughoutthemacrosection.Inchapter11,potentialsolutionsto thedebtcrisisintheeurozoneareaddressed;Chapter13nowincludesadiscussionofarecent FederalReservepolicymakingmeetingwhereinflationworriesweredeemphasizedandavoidingslowergrowthandrecessionwereprimaryconcerns;Chapter14containsanewexample ofthehyperinflationinZimbabwe—theworstinrecenttimes;Chapter16hasanewexample ofcross-countrydifferencesinbroadbandusagetoillustratedifferencesinlevelsofdevelopment;Chapter35(20inmacrotext)hasanewexampleofU.S.sugarquotastoillustratewhy U.S.sugarpricesarehigherthantherest-of-the-world;andChapter36(21inmacrotext)uses thecrisisintheeurozoneasalessoninhowacurrencyunionrequiresharmoniousmacropoliciesamongmembercountriestosurvive.
ThemacroeconomicchaptershaveallbeenupdatedandmanyoftheEconomically Speakingboxesandcommentarieshavebeenrevisedorreplacedwithmorecurrentexamplesofeconomicactivityaroundtheworld.
SuccessfulFeaturesRetainedfromtheNinthEdition Inadditiontotheconsiderableupdatingandrevisingwe’vedoneforthetenthedition,there areseveralfeaturespreservedfromthepreviouseditionthatinstructorshavefoundvaluable.
EnhancedStudentRelevance Withallofthedemandsontoday’sstudents,it’snowonderthattheyresistspendingtime onasubjectunlesstheyseehowthematerialrelatestothemandhowtheywillbenefitfrom masteringit.Weincorporatefeaturesthroughoutthetextthatshoweconomicsastherelevantandnecessarysubjectweknowittobe.
Real-WorldExamples Studentsarerarelyintriguedbyunknownmanufacturersorservice companies.Ourtexttalksaboutpeopleandfirms thatstudentsrecognize.Wedescribebusiness decisionsmadebyMcDonald’sandWal-Mart,andbythelocalvideostoreorcafe.Wediscuss standardsoflivingaroundtheworld,comparingthepovertyofsub-SaharanAfricatothe wealthoftheindustrialnations.Wediscusspoliciesappliedtoreal-worldeconomicissues.We talkaboutpolitical,environmental,andothersocialissues.Theseexamplesgrabstudents’interest.Reviewershaverepeatedlypraisedtheuseofnovelexamplestoconveyeconomicconcepts.
EconomicInsightBoxes Thesebriefboxesusecontemporarymaterialfromcurrent periodicalsandjournalstoillustrateorextendthediscussioninthechapter.Byreserving interestingbutmoretechnicalsidelightsforboxes,welessenthelikelihoodthatstudentswill beconfusedordistractedbyissuesthatarenotcriticaltounderstandingthechapter.By includingexcerptsfromarticles,wehelpstudentsmovefromtheorytoreal-worldexamples. Andbyincludingplentyofcontemporaryissues,weguaranteethatstudentswillseehoweconomicsrelatestotheirownlives.
EconomicallySpeakingBoxes Theobjectiveoftheprinciplescourseistoteachstudentshowtotranslatetotherealworldthepredictionsthatcomeoutofeconomicmodels, andtotranslatereal-worldeventsintoaneconomicmodelinordertoanalyzeandunderstandwhatliesbehindtheevents.TheEconomicallySpeakingboxespresentstudentswith
examplesofthiskindofanalysis.Studentsreadanarticleattheendofeachchapter.The commentarythatfollowsshowshowthefactsandeventsinthearticletranslateintoaspecificeconomicmodeloridea,therebydemonstratingtherelevanceofthetheory.Nearly two-thirdsofthearticlesandcommentariesarenewtothetenthedition,andcoversuch currenteventsasU.S.tradewithChina,measuresofconsumerconfidenceandwhatinformationtheyconvey,theFederalReserveChair’stestimonybeforeCongress,illegalimmigration,redistributionofwealth,highgasolineprices,theimpactofthegovernment’sbailoutof largecompanies,thetrueeffectsof“fairtrade”coffee,dramaticimprovementinthelivesof hundredsofmillionsofpeopleoverthepasttwentyyears.
GlobalBusinessInsightBoxes Theseboxeslinkbusinesseventsanddevelopments aroundtheworldtotheeconomicconceptsdiscussedinthemaintextofthechapters. Topicsincludesuchbasicmicro-andmacroeconomicissuesasglobalcompetition,resource pricing,andforeignexchange.
AnEffectiveandProvenSystemofTeachingandLearningAids Thistextisdesignedtomaketeachingeasierbyenhancingstudentlearning.Testedpedagogymotivatesstudents,emphasizesclarity,reinforcesrelationships,simplifiesreview,and fosterscriticalthinking.And,aswehavediscoveredfromrevieweranduserfeedback,this pedagogyworks.
In-TextReferencingSystem Sectionsarenumberedforeasyreferenceandtoreinforce hierarchiesofideas.Numberedsectionheadsserveasanoutlineofthechapter,allowing instructorsflexibilityinassigningreadingandmakingiteasyforstudentstofindtopicsto review.Eachiteminthekeytermslistandsummaryattheendofthechapterrefersstudents backtotheappropriatesectionnumber.
FundamentalQuestions Thesequestionshelptoorganizethechapterandhighlight thoseissuesthatarecriticaltounderstanding.Eachfundamentalquestionalsoappearsin themarginnexttotherelatedtextdiscussionand,withbriefanswers,inthechaptersummaries.Afullerdiscussionofandanswertoeachofthesequestionsmaybefoundinthe StudyGuides thatareavailableassupplementstothistext.Thefundamentalquestionsalso serveasoneofseveralcriteriausedtocategorizequestionsinthe TestBanks.
Preview Thismotivatinglead-insetsthestageforthechapter.Muchmoresothanaroad map,ithelpsstudentsidentifyreal-worldissues thatrelatetotheconceptsthatwillbepresented.
Recaps Brieflylistingthemainpointscovered,arecapappearsattheendofeachmajor sectionwithinachapter.Studentsareabletoquicklyreviewwhattheyhavejustreadbefore goingontothenextsection.
Summary Thesummaryattheendofeachchapterisorganizedalongtwodimensions. Theprimaryorganizationaldeviceisthelistoffundamentalquestions.Abriefsynopsisof thediscussionthathelpsstudentstoanswerthosequestionsisarrangedbysectionbelow eachofthequestions.Studentsareencouragedtocreatetheirownlinksamongtopicsas theykeepinmindtheconnectionsbetweenthebigpictureandthedetailsthatmakeitup.
Comments Foundinthetextmargins,thesecommentshighlightespeciallyimportant concepts,pointoutcommonmistakes,andwarnstudentsofcommonpitfalls.Theyalert studentstopartsofthediscussionthattheyshouldreadwithparticularcare.
KeyTerms Keytermsappearinboldtypeinthetext.Theyalsoappearwiththeirdefinitioninthemarginandarelistedattheendofthechapterforeasyreview.Allkeytermsare includedintheGlossaryattheendofthetext.
FriendlyAppearance Economicscanbeintimidating;thisiswhywe’vetriedtokeep Economics10thedition lookingfriendlyandinviting.Theone-columndesignandamplewhitespaceinthistextprovide anaccessiblebackdrop.Morethan300figuresrelyonwell-developedpedagogyandconsistentuseofcolortoreinforceunderstanding.Strikingcolorswerechosentoenhancereadabilityandprovidevisualinterest.Specificcurveswereassignedspecificcolors,andfamiliesof curveswereassignedrelatedcolors.
Annotationsontheartpointoutareasofparticularconcernorimportance.Students canseeexactlywhichpartofagraphillustratesashortageorasurplus,achangeinconsumption,oraconsumersurplus.Tablesthatprovidedatafromwhichgraphsareplotted arepairedwiththeirgraphs.Whereappropriate,colorisusedtoshowcorrelationsbetween theartandthetable,andcaptionsclearlyexplainwhatisshowninthefiguresandlinkthem tothetextdiscussion.
Thecolorphotographsnotonlyprovidevisualimages,butmakethetextappealing.These vibrantphotostellstoriesaswellasillustrateconcepts,andlengthycaptionsexplainwhatisin thephotos,againdrawingconnectionsbetweentheimagesandthetextdiscussion.
ThoroughlyInternationalCoverage Studentsunderstandthattheyliveinaglobaleconomy;theycanhardlyshop,watchthe news,orreadanewspaperwithoutstumblinguponthisbasicfact.Internationalexamples arepresentedineverychapterbutarenotmerelyaddedon,asisthecasewithmanyother texts.ByintroducinginternationaleffectsondemandandsupplyinChapter3andthen describinginanontechnicalmannerthebasicsoftheforeignexchangemarketandthebalanceofpaymentsinChapter6,weareabletoincorporatetheinternationalsectorintothe economicmodelsandapplicationswhereverappropriatethereafter.Becausetheinternationalcontentisincorporatedfromthebeginning,studentsdevelopafarmorerealistic pictureofthenationaleconomy;asaresult,theydon’thavetoaltertheirthinkingtoallow forinternationalfactorslateron.Thethreechaptersthatfocusoninternationaltopicsatthe endofthetextallowthoseinstructorswhodesiretodelvemuchmoredeeplyintointernationalissuestodoso.
Theglobalapplicabilityofeconomicsisemphasizedby usingtraditionaleconomic conceptstoexplaininternationaleconomiceventsandusinginternationaleventstoillustrate economicconceptsthathavetraditionallybeenillustratedwithdomesticexamples. Instructors neednotknowtheinternationalinstitutionsinordertointroduceinternational examples,sincethetopicsthroughwhichtheyareaddressedarefamiliar;forexample,price ceilings,pricediscrimination,expendituresonresources,marginalproductivitytheory,and others.
Uniquelyinternationalelementsofthemacroeconomiccoverageinthetextinclude:
• Thetreatmentoftheinternationalsectorasaneconomicparticipantandtheinclusion ofnetexportsasearlyasChapter4
• Theearlydescriptionoftheforeignexchangemarketandthebalanceofpaymentsin Chapter6
• Internationalelementsinthedevelopmentofaggregatedemandandsupply
• Anentirechapterdevotedtoglobalization
Uniquelyinternationalelementsofthemicroeconomiccoverageinthetextinclude:
• Thetreatmentoftheinternationalsectorasaneconomicparticipantandtheinclusion ofnetexportsasearlyasChapter4
• Extensiveanalysesoftheeffectsoftradebarriers,tariffs,andquotas
• Anexaminationofstrategictrade
• Anexaminationofdumpingasaspecialcaseofpricediscrimination
• Theidentificationofproblemsfacedbymultinationalfirms
• Acomparisonofbehavior,results,andinstitutionsamongnationswithrespecttoconsumption,production,firmsize,governmentpoliciestowardbusiness,labormarkets, healthcare,incomedistribution,environmentalpolicy,andotherissues
• Economicfreedomaroundtheworld
• Freedomandhumandevelopment,thatis,thewealthofnations
• Importanceofprivatepropertyrightsandruleoflaw
ModernMacroeconomicOrganizationandContent Macroeconomicsischangingandtextbooksmustreflectthatchange.Webeginwiththe basics:GDP,unemployment,andinflation.Thesearetheongoingconcernsofanyeconomy, fortheyhaveasignificantinfluenceonhowpeoplefeel.Thesearetheissuesthatdon’tgo away.Inadditiontothesecoretopicsisaneasy-to-understand,descriptiveintroductionto theforeignexchangemarketandthebalanceofpayments.Weprovideacriticalalternative forthoseinstructorswhobelievethatitisnolongerreasonabletorelegatethismaterialto thefinalchapters,wherecoveragemayberushed.
Armedwiththesebasics,studentsarereadytodelveintotherichnessofmacroeconomicthought.Macromodelsandapproacheshaveevolvedovertheyears,andtheycontinuetoinviteexcitingtheoreticalandpolicydebates.Themajorityoftheinstructorswe askedvoicedfrustrationwiththechallengeofpullingthisrichandvariedmaterialtogether inclass,andstressedthatacoherentpictureoftheaggregatedemandandsupplymodelwas critical.Wehavestructuredthemacroportiontoallowformanyteachingpreferenceswhile ensuringacleardelineationoftheaggregatedemand/aggregatesupply (AD/AS) model.
Tohelpinstructorssuccessfullypresentasinglecoherentmodel,wepresentaggregate demandandaggregatesupplyfirstinChapter8,immediatelyfollowingthechapteroninflationandunemployment.Thissequenceallowsforasmoothtransitionfrombusinesscycle fluctuationsto AD/AS. TheKeynesianincomeandexpendituresmodelispresentedinfullin Chapters9and10asthefixed-priceversionofthe AD/AS model(withahorizontalaggregatesupplycurve).Thosewhowanttousethe AD/AS modelexclusivelywillhavenoproblemmovingfromtheChapter8presentationtothefiscalpolicymaterialinChapter11.The policychaptersrelyonthe AD/AS modelforanalysis.
Themacroeconomicpolicychaptersbeginwithathoroughpresentationoffiscalpolicy, moneyandbanking,andmonetarypolicy,withinternationalelementsincluded.Chapter14 coverscontemporarypolicyissues,andvariousschoolsofthoughtaretreatedinChapter15, whenstudentsarereadytoappreciatethedifferencesbetweenandcanbenefitfromadiscussionofthenewKeynesianandnewclassicalmodelsaswellastheirprecursors.
PartFive,“ProductMarkets,”bringstogethertheconceptsandissuespresentedinthe coremacrochapterstoexplainhoweconomiesgrowandwhatfactorsencourageordiscouragegrowth.Mostoftheworld’spopulationliveinpoorcountries.Growthanddevelopment arecriticaltothosepeople.Thematerialinthesechaptersalsoaddressesissuesofimportancetoindustrialcountries,suchasthedeterminantsofproductivitygrowthandthebenefitsandcostsofglobalization.
PartEight,“IssuesinInternationalTradeandFinance,”providesathoroughdiscussionof worldtrade,internationaltraderestrictions,andexchangeratesandlinksbetweencountries.
ACompleteTeachingandLearningPackage Intoday’smarketnobookiscompletewithoutafullcomplementofancillaries.Those instructorswhofacehugelectureclassesfindgoodPowerPointslidesandalargevarietyof
reliabletestquestionstobecriticalinstructionaltools.Thosewhoteachonlineindistanceor hybridcoursesneedreliablecoursemanagementsystemswithbuilt-inassignmentsand resourcematerials.Otherinstructorswantplentyofoptionsavailabletotheirstudentsfor review,application,andremediation.AlloftheseneedsareaddressedintheBoyesandMelvinsupplementspackage.Andtofosterthedevelopmentofconsistentteachingandstudy strategies,theancillariespickuppedagogicalfeaturesofthetext—suchasthefundamental questions—whereverappropriate.
ASupplementsPackageDesignedforSuccess Toaccessadditionalcoursematerialfor Boyes/Melvin10e visitwww.cengagebrain.com.At theCengageBrain.comhomepage,searchfortheISBNofyourbookusingthesearchboxat thetopofthepage.Thiswilltakeyoutotheproductpagewheretheseresourcescanbe found.Foradditionalinformation,contactyourCengagesalesrepresentative.
InstructorOnlineResources TheBoyesandMelvintentheditionprovidesarichstoreofteachingresourcesforinstructorsonlineattheInstructorsCompanionsite.Instructorswillneedtosignupatthesitefor ausernameandpasswordtogetontothepassword-protectedpartsofthesite.Thissite includesavarietyofsupportmaterialstohelpyouorganize,plan,anddeliveryourlectures; assignandgradehomework;andstayup-to-datewithcurrenteconomicsnews.Hereyou’ll findathoroughlyupdatedsetofmultimediaPowerPointslidescoveringkeypointsineach chapter,withgraphs,charts,andphotos.YouwillalsofindIM,Testbankinpdfandother downloadableteachingandlearningresources.
Instructor’sManual(IM) PatriciaDianeNipperhasproducedamanualthatwillstreamlinepreparationforbothnew andexperiencedfaculty.Preliminarysectionscoverclassadministration,alternativesyllabi, andanintroductiontotheuseofcooperativelearninginteachingtheprinciplesofeconomics.
The IM alsocontainsadetailedchapter-by-chapterreviewofallthechangesmadein thetenthedition.ThisTransitionGuideshouldhelpinstructorsmoreeasilymovefromthe useofthenintheditiontothisnewedition.
Eachchapterofthe IM containsanoverviewthatdescribesthecontentanduniquefeaturesofthechapterandtheobjectivesthatstudentswillneedtomasterinordertosucceed withlaterchapters;thechapter’sfundamentalquestionsandkeyterms;alectureoutline withteachingstrategies—generaltechniquesandguidelines,essaytopics,andotherhintsto enlivenclasses;opportunitiesfordiscussion;answerstoeveryend-of-chapterexercise.
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• Cross-compatiblecapability.Importandexportcontentintoothersystems.
StudentResources MindTap MindTapengagesandempowersstudentstoproducetheirbestwork–consistently.By seamlesslyintegratingcoursematerialwithvideos,activities,games,apps,andmuchmore, MindTapcreatesauniquelearningpaththatfostersincreasedcomprehensionand efficiency.
• MindTapdeliversreal-worldrelevancewithactivitiesandassignmentsthathelpstudentsbuildcriticalthinkingandanalyticskillsthatwilltransfertoothercoursesand theirprofessionallives.
• MindTaphelpsstudentsstayorganizedandefficientwithasingledestinationthat reflectswhat’simportanttotheinstructor,alongwiththetoolsstudentsneedtomaster thecontent.
• MindTapempowersandmotivatesstudentswithinformationthatshowswherethey standatalltimes–bothindividuallyandcomparedtothehighestperformersinclass.
• Relevantreadings,multimedia,andactivitiesaredesignedtotakestudentsupthelevels oflearning,frombasicknowledgetoanalysisandapplication.
• PersonalizedteachingbecomesyoursthroughaLearningPathbuiltwithkeystudent objectivesandyoursyllabusinmind.Controlwhatstudentsseeandwhentheyseeit.
• Analyticsandreportsprovideasnapshotofclassprogress,timeincourse,engagement andcompletionrates.
• BBCvideoswithassessmentasthechapteractivator;
• MediaeReaderrichinConceptClipsvideos;Graphing-at-a-GlanceVideoswithassessment;EconomicallySpeakingwithassessment;Nowyoutryitwithassessment;
• Multiplegamesforstudentengagement;
• GlobalEconomicWatch
• Apliagenerichomeworkandmathandgraphingtutorials.
• Endofchapterhomework;
ApliaOnlineLearningPlatform • Foundedin2000byeconomistandprofessorPaulRomerinanefforttoimprovehis owneconomicscoursesatStanford,Apliaistheleadingonlinelearningplatformfor economics.
• Apliaprovidesarichonlineexperiencethatgetsstudentsinvolvedandgivesinstructors thetoolsandsupporttheyneed.
• Apliasavesinstructorsvaluabletimetheywouldotherwisespendonroutinegrading whilegivingstudentsaneasywaytostayontopofcourseworkwithregularlyscheduled assignments.
• Currently,Apliasupportscollege-levelcoursesandhasbeenusedbymorethan 1,000,000studentsatover1,300institutions.
• Aplia’seconomicsstudentsuseinteractivechapterassignments,tutorials,newsanalyses, andexperimentstomakeeconomicsrelevantandengaging.
• Mathandgraphingtutorialshelpstudentsovercomedeficienciesinthesecrucialareas.
• Economicsarticlesfromtopnewssourceschallengestudentstoconnectcurrentevents tocourseconcepts.
• TraditionalApliaHomeworkProblemSetsallowstudentstoworkthroughtheeconomicconceptstheyhavelearnedineachchapter.
• Studentscanchooseto“GradeitNow”onahomeworkproblemandwillreceiveinstant feedbackifanansweriscorrectorincorrect.Thestudentcanthenchoosetocomplete anotherproblemtotestthemselvesonthesameconceptwithrandomization.
TheintegratedApliacoursesofferedforBoyesandMelvinincludeMathandGraphing review/tutorials,newsanalyses,andonlinehomeworkassignmentscorrelatedtotherelevant BoyesandMelvintext.Inaddition,adigitalversionofthetext-mediaeReaderislinkedto theApliacoursetomakeiteasyforstudentstoaccessthetextwhencompletingassignments.MediaeReaderinApliaisrichinConceptClipsvideoswithassessment;Graphingat-a-GlanceVideoswithassessment;EconomicallySpeakingwithassessment;Nowyoutry itwithassessment;
InstructorsshouldconsulttheirSouth-Western/CengageLearningsalesrepresentative formoreinformationonhowtouseApliawiththistext.
Acknowledgments Writingatextofthisscopeisachallengethatrequirestheexpertiseandeffortsofmany. Wearegratefultoourfriendsandcolleagueswhohavesogenerouslygiventheirtime,creativity,andinsighttohelpuscreateatextthatbestmeetstheneedsoftoday’sstudents.
We’despeciallyliketothankthemanyreviewersof Macroeconomics listedonthefollowingpageswhoweighedinonkeyissuesthroughoutthedevelopmentofeachedition. Theircommentshaveprovedinvaluableinrevisingthistext.Unsolicitedfeedbackfromcurrentusershasalsobeengreatlyappreciated.
WewouldalsoliketothankPatriciaDianeNipperofSouthsideVirginiaCommunity Collegeforherworkonthetenthandpreviouseditionsofthe Instructor’sResourceManua1. CarolaConcesofUCBerkeleyprovidedexcellentresearchassistanceinrevisingearliereditionsandJohnMondragonofUCBerkeleyforthiscurrentedition.
WewanttothankthemanypeopleatSouth-Western/CengageLearningwhodevoted countlesshourstomakingthistextthebestitcouldbe,includingMichaelParthenakis, ProductManager;AnitaVerma,ContentandMediaDeveloper;ColleenFarmer,Senior ContentProjectManager;MaryUmbarger,ProductAssistant;andChrisWalz,Marketing Coordinator,whoputallthepiecesofthepuzzletogetherandbroughttheircreativetalent tothistext.WealsothankJohnCareyforhisskillfulmarketing.ThankstoRajachitraof Cenveoforthecopyeditingofthemanuscript.
Finally,wewishtothankourfamiliesandfriends.Theinspirationtheyprovided throughtheconceptionanddevelopmentofthisbookcannotbemeasuredbutcertainlywas essential.
OurstudentsatArizonaStateUniversitycontinuetohelpusimprovethetextthrough eachedition;theirmanyquestionshavegivenusinvaluableinsightintohowbesttopresent thisintriguingsubject.Itisourhopethatthistextbookwillbringaclearunderstanding ofeconomicthoughttomanyotherstudentsaswell.Wewelcomeanyfeedbackfor improvements.
W.B.M.M.
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CHAPTER1 TheWealthofNations: OwnershipandEconomic Freedom 1. Whyaresomecountriesrich whileothersaredirtpoor?
2. Whatareprivate propertyrights?
3. Whatiseconomicfreedom?
Preview Thedifferencesinwealthfromonenationtoanotherarereallystaggering.Amapshowingeachnation’sincomeappearsinFigure1.Thecountriesshadedindarkblueonthe maparetherichest,followedbylighterblue,turquoise,andsoontothoseshadedin red,thepoorestnations.ApersoninMalawimayhavelessthan$1adaytoliveon, whiletheaveragepersonintheUnitedStateshasmorethan$40,000peryear. Theincomedisparityhasnotalwaysexisted.In1800itwouldhavebeenhardto knowwhetheryouwerelivinginLatinAmerica,NorthAmerica,orEurope;standardsof livingwerenotverydifferent.By1900,adifferentialbetweenwealthyandpoornations wasbeingcreated,andtodaythedifferencesarehuge.
