Principals of Macroeconomics 2e

Principles of Macroeconomics 2e covers the scope and sequence of most introductory economics courses. The text includes many current examples, which are handled in a politically equitable way. The outcome is a balanced approach to the theory and application of economics concepts. The second edition has been thoroughly revised to increase clarity, update data and current event impacts, and incorporate the feedback from many reviewers and adopters.

Changes made in Principles of Macroeconomics 2e are described in the preface and the transition guide to help instructors transition to the second edition. 

Senior Contributing Authors

Steven A. Greenlaw, University of Mary Washington
David Shapiro, Pennsylvania State University


Contributing Authors

Eric Dodge, Hanover College
Cynthia Gamez, University of Texas at El Paso
Andres Jauregui, Columbus State University
Diane Keenan, Cerritos College
Dan MacDonald, California State University, San Bernadino
Amyaz Moledina, The College of Wooster
Craig Richardson, Winston-Salem State University
Ralph Sonenshine, American University

Chapter 1 Welcome to Economics!
• Introduction
• 1.1 What Is Economics, and Why Is It Important?
• 1.2 Microeconomics and Macroeconomics
• 1.3 How Economists Use Theories and Models to Understand Economic Issues
• 1.4 How To Organize Economies: An Overview of Economic Systems
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions

Chapter 2 Choice in a World of Scarcity
• Introduction to Choice in a World of Scarcity
• 2.1 How Individuals Make Choices Based on Their Budget Constraint
• 2.2 The Production Possibilities Frontier and Social Choices
• 2.3 Confronting Objections to the Economic Approach
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 3 Demand and Supply
• Introduction to Demand and Supply
• 3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services
• 3.2 Shifts in Demand and Supply for Goods and Services
• 3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
• 3.4 Price Ceilings and Price Floors
• 3.5 Demand, Supply, and Efficiency
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 4 Labor and Financial Markets
• Introduction to Labor and Financial Markets
• 4.1 Demand and Supply at Work in Labor Markets
• 4.2 Demand and Supply in Financial Markets
• 4.3 The Market System as an Efficient Mechanism for Information
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 5 Elasticity
• Introduction to Elasticity
• 5.1 Price Elasticity of Demand and Price Elasticity of Supply
• 5.2 Polar Cases of Elasticity and Constant Elasticity
• 5.3 Elasticity and Pricing
• 5.4 Elasticity in Areas Other Than Price
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 6 The Macroeconomic Perspective
• Introduction to the Macroeconomic Perspective
• 6.1 Measuring the Size of the Economy: Gross Domestic Product
• 6.2 Adjusting Nominal Values to Real Values
• 6.3 Tracking Real GDP over Time
• 6.4 Comparing GDP among Countries
• 6.5 How Well GDP Measures the Well-Being of Society
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 7 Economic Growth
• Introduction to Economic Growth
• 7.1 The Relatively Recent Arrival of Economic Growth
• 7.2 Labor Productivity and Economic Growth
• 7.3 Components of Economic Growth
• 7.4 Economic Convergence
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 8 Unemployment
• Introduction to Unemployment
• 8.1 How Economists Define and Compute Unemployment Rate
• 8.2 Patterns of Unemployment
• 8.3 What Causes Changes in Unemployment over the Short Run
• 8.4 What Causes Changes in Unemployment over the Long Run
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 9 Inflation
• Introduction to Inflation
• 9.1 Tracking Inflation
• 9.2 How to Measure Changes in the Cost of Living
• 9.3 How the U.S. and Other Countries Experience Inflation
• 9.4 The Confusion Over Inflation
• 9.5 Indexing and Its Limitations
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 10 The International Trade and Capital Flows
• Introduction to the International Trade and Capital Flows
• 10.1 Measuring Trade Balances
• 10.2 Trade Balances in Historical and International Context
• 10.3 Trade Balances and Flows of Financial Capital
• 10.4 The National Saving and Investment Identity
• 10.5 The Pros and Cons of Trade Deficits and Surpluses
• 10.6 The Difference between Level of Trade and the Trade Balance
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 11 The Aggregate Demand/Aggregate Supply Model
• Introduction to the Aggregate Supply–Aggregate Demand Model
• 11.1 Macroeconomic Perspectives on Demand and Supply
• 11.2 Building a Model of Aggregate Demand and Aggregate Supply
• 11.3 Shifts in Aggregate Supply
• 11.4 Shifts in Aggregate Demand
• 11.5 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation
• 11.6 Keynes’ Law and Say’s Law in the AD/AS Model
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 12 The Keynesian Perspective
• Introduction to the Keynesian Perspective
• 12.1 Aggregate Demand in Keynesian Analysis
• 12.2 The Building Blocks of Keynesian Analysis
• 12.3 The Phillips Curve
• 12.4 The Keynesian Perspective on Market Forces
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions

Chapter 13 The Neoclassical Perspective
• Introduction to the Neoclassical Perspective
• 13.1 The Building Blocks of Neoclassical Analysis
• 13.2 The Policy Implications of the Neoclassical Perspective
• 13.3 Balancing Keynesian and Neoclassical Models
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 14 Money and Banking
• Introduction to Money and Banking
• 14.1 Defining Money by Its Functions
• 14.2 Measuring Money: Currency, M1, and M2
• 14.3 The Role of Banks
• 14.4 How Banks Create Money
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 15 Monetary Policy and Bank Regulation
• Introduction to Monetary Policy and Bank Regulation
• 15.1 The Federal Reserve Banking System and Central Banks
• 15.2 Bank Regulation
• 15.3 How a Central Bank Executes Monetary Policy
• 15.4 Monetary Policy and Economic Outcomes
• 15.5 Pitfalls for Monetary Policy
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 16 Exchange Rates and International Capital Flows
• Introduction to Exchange Rates and International Capital Flows
• 16.1 How the Foreign Exchange Market Works
• 16.2 Demand and Supply Shifts in Foreign Exchange Markets
• 16.3 Macroeconomic Effects of Exchange Rates
• 16.4 Exchange Rate Policies
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 17 Government Budgets and Fiscal Policy
• Introduction to Government Budgets and Fiscal Policy
• 17.1 Government Spending
• 17.2 Taxation
• 17.3 Federal Deficits and the National Debt
• 17.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation
• 17.5 Automatic Stabilizers
• 17.6 Practical Problems with Discretionary Fiscal Policy
• 17.7 The Question of a Balanced Budget
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 18 The Impacts of Government Borrowing
• Introduction to the Impacts of Government Borrowing
• 18.1 How Government Borrowing Affects Investment and the Trade Balance
• 18.2 Fiscal Policy and the Trade Balance
• 18.3 How Government Borrowing Affects Private Saving
• 18.4 Fiscal Policy, Investment, and Economic Growth
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 19 Macroeconomic Policy Around the World
• Introduction to Macroeconomic Policy around the World
• 19.1 The Diversity of Countries and Economies across the World
• 19.2 Improving Countries’ Standards of Living
• 19.3 Causes of Unemployment around the World
• 19.4 Causes of Inflation in Various Countries and Regions
• 19.5 Balance of Trade Concerns
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 20 International Trade
• Introduction to International Trade
• 20.1 Absolute and Comparative Advantage
• 20.2 What Happens When a Country Has an Absolute Advantage in All Goods
• 20.3 Intra-industry Trade between Similar Economies
• 20.4 The Benefits of Reducing Barriers to International Trade
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems

Chapter 21 Globalization and Protectionism
• Introduction to Globalization and Protectionism
• 21.1 Protectionism: An Indirect Subsidy from Consumers to Producers
• 21.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions
• 21.3 Arguments in Support of Restricting Imports
• 21.4 How Governments Enact Trade Policy: Globally, Regionally, and Nationally
• 21.5 The Tradeoffs of Trade Policy
• Key Terms
• Key Concepts and Summary
• Self-Check Questions
• Review Questions
• Critical Thinking Questions
• Problems