Skip to ContentGo to accessibility pageKeyboard shortcuts menu
OpenStax Logo

Menu
Table of contents
  1. Preface
  2. 1 Welcome to Economics!
    1. Introduction
    2. 1.1 What Is Economics, and Why Is It Important?
    3. 1.2 Microeconomics and Macroeconomics
    4. 1.3 How Economists Use Theories and Models to Understand Economic Issues
    5. 1.4 How To Organize Economies: An Overview of Economic Systems
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
  3. 2 Choice in a World of Scarcity
    1. Introduction to Choice in a World of Scarcity
    2. 2.1 How Individuals Make Choices Based on Their Budget Constraint
    3. 2.2 The Production Possibilities Frontier and Social Choices
    4. 2.3 Confronting Objections to the Economic Approach
    5. Key Terms
    6. Key Concepts and Summary
    7. Self-Check Questions
    8. Review Questions
    9. Critical Thinking Questions
    10. Problems
  4. 3 Demand and Supply
    1. Introduction to Demand and Supply
    2. 3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services
    3. 3.2 Shifts in Demand and Supply for Goods and Services
    4. 3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
    5. 3.4 Price Ceilings and Price Floors
    6. 3.5 Demand, Supply, and Efficiency
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  5. 4 Labor and Financial Markets
    1. Introduction to Labor and Financial Markets
    2. 4.1 Demand and Supply at Work in Labor Markets
    3. 4.2 Demand and Supply in Financial Markets
    4. 4.3 The Market System as an Efficient Mechanism for Information
    5. Key Terms
    6. Key Concepts and Summary
    7. Self-Check Questions
    8. Review Questions
    9. Critical Thinking Questions
    10. Problems
  6. 5 Elasticity
    1. Introduction to Elasticity
    2. 5.1 Price Elasticity of Demand and Price Elasticity of Supply
    3. 5.2 Polar Cases of Elasticity and Constant Elasticity
    4. 5.3 Elasticity and Pricing
    5. 5.4 Elasticity in Areas Other Than Price
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  7. 6 The Macroeconomic Perspective
    1. Introduction to the Macroeconomic Perspective
    2. 6.1 Measuring the Size of the Economy: Gross Domestic Product
    3. 6.2 Adjusting Nominal Values to Real Values
    4. 6.3 Tracking Real GDP over Time
    5. 6.4 Comparing GDP among Countries
    6. 6.5 How Well GDP Measures the Well-Being of Society
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  8. 7 Economic Growth
    1. Introduction to Economic Growth
    2. 7.1 The Relatively Recent Arrival of Economic Growth
    3. 7.2 Labor Productivity and Economic Growth
    4. 7.3 Components of Economic Growth
    5. 7.4 Economic Convergence
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  9. 8 Unemployment
    1. Introduction to Unemployment
    2. 8.1 How Economists Define and Compute Unemployment Rate
    3. 8.2 Patterns of Unemployment
    4. 8.3 What Causes Changes in Unemployment over the Short Run
    5. 8.4 What Causes Changes in Unemployment over the Long Run
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  10. 9 Inflation
    1. Introduction to Inflation
    2. 9.1 Tracking Inflation
    3. 9.2 How to Measure Changes in the Cost of Living
    4. 9.3 How the U.S. and Other Countries Experience Inflation
    5. 9.4 The Confusion Over Inflation
    6. 9.5 Indexing and Its Limitations
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  11. 10 The International Trade and Capital Flows
    1. Introduction to the International Trade and Capital Flows
    2. 10.1 Measuring Trade Balances
    3. 10.2 Trade Balances in Historical and International Context
    4. 10.3 Trade Balances and Flows of Financial Capital
    5. 10.4 The National Saving and Investment Identity
    6. 10.5 The Pros and Cons of Trade Deficits and Surpluses
    7. 10.6 The Difference between Level of Trade and the Trade Balance
    8. Key Terms
    9. Key Concepts and Summary
    10. Self-Check Questions
    11. Review Questions
    12. Critical Thinking Questions
    13. Problems
  12. 11 The Aggregate Demand/Aggregate Supply Model
    1. Introduction to the Aggregate Supply–Aggregate Demand Model
    2. 11.1 Macroeconomic Perspectives on Demand and Supply
    3. 11.2 Building a Model of Aggregate Demand and Aggregate Supply
    4. 11.3 Shifts in Aggregate Supply
    5. 11.4 Shifts in Aggregate Demand
    6. 11.5 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation
    7. 11.6 Keynes’ Law and Say’s Law in the AD/AS Model
    8. Key Terms
    9. Key Concepts and Summary
    10. Self-Check Questions
    11. Review Questions
    12. Critical Thinking Questions
    13. Problems
  13. 12 The Keynesian Perspective
    1. Introduction to the Keynesian Perspective
    2. 12.1 Aggregate Demand in Keynesian Analysis
    3. 12.2 The Building Blocks of Keynesian Analysis
    4. 12.3 The Phillips Curve
    5. 12.4 The Keynesian Perspective on Market Forces
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
  14. 13 The Neoclassical Perspective
    1. Introduction to the Neoclassical Perspective
    2. 13.1 The Building Blocks of Neoclassical Analysis
    3. 13.2 The Policy Implications of the Neoclassical Perspective
    4. 13.3 Balancing Keynesian and Neoclassical Models
    5. Key Terms
    6. Key Concepts and Summary
    7. Self-Check Questions
    8. Review Questions
    9. Critical Thinking Questions
    10. Problems
  15. 14 Money and Banking
    1. Introduction to Money and Banking
    2. 14.1 Defining Money by Its Functions
    3. 14.2 Measuring Money: Currency, M1, and M2
    4. 14.3 The Role of Banks
    5. 14.4 How Banks Create Money
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  16. 15 Monetary Policy and Bank Regulation
    1. Introduction to Monetary Policy and Bank Regulation
    2. 15.1 The Federal Reserve Banking System and Central Banks
    3. 15.2 Bank Regulation
    4. 15.3 How a Central Bank Executes Monetary Policy
    5. 15.4 Monetary Policy and Economic Outcomes
    6. 15.5 Pitfalls for Monetary Policy
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  17. 16 Exchange Rates and International Capital Flows
    1. Introduction to Exchange Rates and International Capital Flows
    2. 16.1 How the Foreign Exchange Market Works
    3. 16.2 Demand and Supply Shifts in Foreign Exchange Markets
    4. 16.3 Macroeconomic Effects of Exchange Rates
    5. 16.4 Exchange Rate Policies
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  18. 17 Government Budgets and Fiscal Policy
    1. Introduction to Government Budgets and Fiscal Policy
    2. 17.1 Government Spending
    3. 17.2 Taxation
    4. 17.3 Federal Deficits and the National Debt
    5. 17.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation
    6. 17.5 Automatic Stabilizers
    7. 17.6 Practical Problems with Discretionary Fiscal Policy
    8. 17.7 The Question of a Balanced Budget
    9. Key Terms
    10. Key Concepts and Summary
    11. Self-Check Questions
    12. Review Questions
    13. Critical Thinking Questions
    14. Problems
  19. 18 The Impacts of Government Borrowing
    1. Introduction to the Impacts of Government Borrowing
    2. 18.1 How Government Borrowing Affects Investment and the Trade Balance
    3. 18.2 Fiscal Policy and the Trade Balance
    4. 18.3 How Government Borrowing Affects Private Saving
    5. 18.4 Fiscal Policy, Investment, and Economic Growth
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  20. 19 Macroeconomic Policy Around the World
    1. Introduction to Macroeconomic Policy around the World
    2. 19.1 The Diversity of Countries and Economies across the World
    3. 19.2 Improving Countries’ Standards of Living
    4. 19.3 Causes of Unemployment around the World
    5. 19.4 Causes of Inflation in Various Countries and Regions
    6. 19.5 Balance of Trade Concerns
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  21. 20 International Trade
    1. Introduction to International Trade
    2. 20.1 Absolute and Comparative Advantage
    3. 20.2 What Happens When a Country Has an Absolute Advantage in All Goods
    4. 20.3 Intra-industry Trade between Similar Economies
    5. 20.4 The Benefits of Reducing Barriers to International Trade
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  22. 21 Globalization and Protectionism
    1. Introduction to Globalization and Protectionism
    2. 21.1 Protectionism: An Indirect Subsidy from Consumers to Producers
    3. 21.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions
    4. 21.3 Arguments in Support of Restricting Imports
    5. 21.4 How Governments Enact Trade Policy: Globally, Regionally, and Nationally
    6. 21.5 The Tradeoffs of Trade Policy
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  23. A | The Use of Mathematics in Principles of Economics
  24. B | The Expenditure-Output Model
  25. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
    17. Chapter 17
    18. Chapter 18
    19. Chapter 19
    20. Chapter 20
    21. Chapter 21
  26. References
  27. Index
A
A.W. Phillips 12.3 The Phillips Curve
adjustable-rate mortgage (ARM) 9.5 Indexing and Its Limitations
adverse selection of wage cuts argument 8.3 What Causes Changes in Unemployment over the Short Run
aggregate demand/aggregate supply (AD/AS) Introduction to Money and Banking
aggregate expenditure function Appendix B The Expenditure-Output Model
aggregate expenditure line Appendix B The Expenditure-Output Model
aggregate expenditure schedule Appendix B The Expenditure-Output Model
Alexander Gerschenkron 7.4 Economic Convergence
American Recovery and Reinvestment Act of 2009 12.2 The Building Blocks of Keynesian Analysis
Asian Financial Crisis 19.5 Balance of Trade Concerns
asset-liability time mismatch 14.3 The Role of Banks
C
certificates of deposit (CDs) 14.2 Measuring Money: Currency, M1, and M2
coins and currency in circulation 14.2 Measuring Money: Currency, M1, and M2
Commodity-backed currencies 14.1 Defining Money by Its Functions
consumer confidence 11.4 Shifts in Aggregate Demand
corporate income tax 17.2 Taxation
cost-of-living adjustments (COLAs) 9.5 Indexing and Its Limitations
credit union 14.3 The Role of Banks
cross-price elasticity of demand 5.4 Elasticity in Areas Other Than Price
current account balance 10.1 Measuring Trade Balances
D
demand and supply diagram 3.5 Demand, Supply, and Efficiency
deposit insurance 15.2 Bank Regulation
depository institutions 14.3 The Role of Banks
direct investment 16.4 Exchange Rate Policies
disruptive market change 21.5 The Tradeoffs of Trade Policy
double coincidence of wants 14.1 Defining Money by Its Functions
E
estate and gift tax 17.2 Taxation
excise tax 17.2 Taxation
expenditure-output model Appendix B The Expenditure-Output Model
exports of goods and services as a percentage of GDP 10.2 Trade Balances in Historical and International Context
F
Federal Deposit Insurance Corporation (FDIC) 15.2 Bank Regulation
Federal Open Market Committee (FOMC) 15.3 How a Central Bank Executes Monetary Policy
financial intermediary 14.3 The Role of Banks
floating exchange rate 16.4 Exchange Rate Policies
Foreign direct investment (FDI) 16.1 How the Foreign Exchange Market Works
G
I
income elasticity of demand 5.4 Elasticity in Areas Other Than Price
index number 9.1 Tracking Inflation
individual income tax 17.2 Taxation
inflation targeting 15.5 Pitfalls for Monetary Policy
international capital flows 16.4 Exchange Rate Policies
international financial flows 16.4 Exchange Rate Policies
intertemporal decision making 4.2 Demand and Supply in Financial Markets
L
law of diminishing returns 7.4 Economic Convergence
lender of last resort 15.2 Bank Regulation
M
marginal propensity to consume (MPC) Appendix B The Expenditure-Output Model
marginal propensity to import (MPI) Appendix B The Expenditure-Output Model
marginal propensity to save (MPS) Appendix B The Expenditure-Output Model
marginal tax rates 17.2 Taxation
merchandise trade balance 10.1 Measuring Trade Balances
merged currency 16.4 Exchange Rate Policies
money multiplier formula 14.4 How Banks Create Money
N
National Bureau of Economic Research 19.5 Balance of Trade Concerns
National Bureau of Economic Research (NBER) 6.3 Tracking Real GDP over Time
National Credit Union Administration (NCUA) 15.2 Bank Regulation
national saving and investment identity 10.4 The National Saving and Investment Identity
P
payment system 14.3 The Role of Banks
payroll tax 17.2 Taxation
Per capita GDP 9.1 Tracking Inflation
percentage change 9.1 Tracking Inflation
Pew Research Center for People and the Press 3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
production possibilities frontier (PPF) 2.2 The Production Possibilities Frontier and Social Choices
production possibility frontier (PPF) 20.1 Absolute and Comparative Advantage
progressive tax 17.2 Taxation
proportional tax 17.2 Taxation
R
regressive tax 17.2 Taxation
S
Sebastian Edwards 19.5 Balance of Trade Concerns
Securitization 14.3 The Role of Banks
short run aggregate supply (SRAS) curve 11.2 Building a Model of Aggregate Demand and Aggregate Supply
Social Security Indexing Act of 1972 9.5 Indexing and Its Limitations
special economic zones (SEZ) 7.3 Components of Economic Growth
standard of deferred payment 14.1 Defining Money by Its Functions
standardized employment budget 17.5 Automatic Stabilizers
subprime loans 14.3 The Role of Banks
T
The Land of Funny Money 9.4 The Confusion Over Inflation
the law of increasing opportunity cost 2.2 The Production Possibilities Frontier and Social Choices
Transaction costs 14.3 The Role of Banks
Citation/Attribution

Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Attribution information
  • If you are redistributing all or part of this book in a print format, then you must include on every physical page the following attribution:
    Access for free at https://openstax.org/books/principles-macroeconomics-3e/pages/1-introduction
  • If you are redistributing all or part of this book in a digital format, then you must include on every digital page view the following attribution:
    Access for free at https://openstax.org/books/principles-macroeconomics-3e/pages/1-introduction
Citation information

© Dec 2, 2022 OpenStax. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution License . The OpenStax name, OpenStax logo, OpenStax book covers, OpenStax CNX name, and OpenStax CNX logo are not subject to the Creative Commons license and may not be reproduced without the prior and express written consent of Rice University.