| Preface |
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xxvi | |
| Section 1 Basic Economic Concepts |
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1 | (34) |
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Thinking Like An Economist |
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1 | (1) |
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Module 1 The Study of Economics |
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2 | (8) |
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Individual Choice: The Core of Economics |
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2 | (6) |
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2 | (1) |
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Opportunity Cost: The Real Cost of Something Is What You Must Give Up to Get It |
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3 | (2) |
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Economics In Action: Got a Penny? |
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4 | (1) |
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Microeconomics versus Macroeconomics |
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5 | (1) |
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Positive versus Normative Economics |
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6 | (1) |
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When and Why Economists Disagree |
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7 | (5) |
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Economics In Action: When Economists Agree |
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8 | (1) |
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8 | (2) |
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Module 2 Models and the Circular Flow |
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10 | (5) |
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Models Take Flight in Economics |
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10 | (2) |
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Economics In Action: The Model That Ate the Economy |
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11 | (1) |
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The Circular-Flow Diagram |
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12 | (2) |
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One Person's Spending Is Another Person's Income |
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13 | (1) |
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14 | (1) |
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Module 3 The Production Possibility Frontier Model |
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15 | (7) |
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Trade-offs: The Production Possibility Frontier |
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15 | (5) |
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17 | (1) |
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18 | (1) |
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19 | (1) |
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20 | (2) |
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Module 4 Comparative Advantage and Trade |
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22 | (8) |
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22 | (1) |
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Comparative Advantage and Gains from Trade |
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23 | (4) |
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Economics In Action: Rich Nation, Poor Nation |
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26 | (1) |
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Comparative Advantage and International Trade, in Reality |
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27 | (1) |
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27 | (2) |
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Business Case: Efficiency, Opportunity Cost, and the Logic of Lean Production at Boeing |
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29 | (1) |
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30 | (5) |
| Section 2 Supply and Demand |
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35 | (36) |
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35 | (1) |
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36 | (11) |
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Supply and Demand: A Model of a Competitive Market |
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36 | (1) |
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37 | (8) |
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The Demand Schedule and the Demand Curve |
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37 | (1) |
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Shifts of the Demand Curve |
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38 | (2) |
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Understanding Shifts of the Demand Curve |
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40 | (7) |
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Economics In Action: Beating the Traffic |
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45 | (1) |
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45 | (2) |
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Module 6 Supply and Equilibrium |
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47 | (13) |
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47 | (7) |
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The Supply Schedule and the Supply Curve |
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47 | (1) |
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Shifts of the Supply Curve |
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48 | (2) |
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Understanding Shifts of the Supply Curve |
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50 | (4) |
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Economics In Action: Only Creatures Small and Pampered |
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54 | (1) |
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Supply, Demand, and Equilibrium |
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54 | (4) |
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Finding the Equilibrium Price and Quantity |
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55 | (1) |
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Why Do All Sales and Purchases in a Market Take Place at the Same Price? |
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56 | (1) |
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Why Does the Market Price Fall if It Is Above the Equilibrium Price? |
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56 | (1) |
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Why Does the Market Price Rise if It Is Below the Equilibrium Price? |
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56 | (2) |
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Using Equilibrium to Describe Markets |
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58 | (1) |
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58 | (2) |
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Module 7 Changes in Equilibrium |
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60 | (6) |
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Changes in Supply and Demand |
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60 | (4) |
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What Happens When the Demand Curve Shifts |
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60 | (1) |
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What Happens When the Supply Curve Shifts |
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61 | (1) |
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Simultaneous Shifts of Supply and Demand Curves |
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62 | (10) |
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Economics In Action: The Rice Run of 2008 |
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64 | (1) |
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64 | (2) |
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Business Case: The Chicago Board of Trade |
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66 | (1) |
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67 | (4) |
| Section 3 Elasticity and the Law of Demand |
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71 | (30) |
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More Precious than a Flu Shot |
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71 | (1) |
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Module 8 Income Effects, Substitution Effects, and Elasticity |
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72 | (8) |
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Explaining the Law of Demand |
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72 | (2) |
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72 | (1) |
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73 | (1) |
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Economics In Action: Giffen Goods |
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74 | (1) |
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Defining and Measuring Elasticity |
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74 | (4) |
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Calculating the Price Elasticity of Demand |
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75 | (1) |
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An Alternative Way to Calculate Elasticities: The Midpoint Method |
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76 | (4) |
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Economics In Action: Estimating Elasticities |
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77 | (1) |
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78 | (2) |
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Module 9 Interpreting Price Elasticity of Demand |
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80 | (9) |
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A Closer Look at the Price Elasticity of Demand |
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80 | (7) |
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80 | (5) |
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Price Elasticity Along the Demand Curve |
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85 | (1) |
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What Factors Determine the Price Elasticity of Demand? |
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86 | (3) |
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Economics In Action: Responding to Your Tuition Bill |
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87 | (1) |
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87 | (2) |
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Module 10 Other Elasticities |
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89 | (8) |
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89 | (2) |
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The Cross-Price Elasticity of Demand |
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89 | (1) |
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The Income Elasticity of Demand |
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90 | (1) |
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Economics In Action: Will China Save the U.S. Farming Sector? |
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91 | (1) |
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The Price Elasticity of Supply |
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91 | (3) |
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Measuring the Price Elasticity of Supply |
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92 | (1) |
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What Factors Determine the Price Elasticity of Supply? |
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92 | (2) |
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94 | (1) |
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95 | (1) |
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Busines Case: The Airline Industry: Fly Less, Charge More |
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96 | (1) |
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97 | (4) |
| Section 4 Market Efficiency |
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101 | (26) |
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101 | (1) |
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Module 11 Consumer and Producer Surplus |
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102 | (12) |
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Consumer Surplus and the Demand Curve |
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102 | (6) |
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Willingness to Pay and the Demand Curve |
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102 | (2) |
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Willingness to Pay and the Consumer Surplus |
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104 | (2) |
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How Changing Prices Affect Consumer Surplus |
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106 | (2) |
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Economics In Action: A Matter of Life and Death |
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108 | (1) |
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Producer Surplus and the Supply Curve |
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108 | (4) |
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Cost and Producer Surplus |
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108 | (3) |
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How Changing Prices Affect Producer Surplus |
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111 | (1) |
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112 | (2) |
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Module 12 Efficiency and Markets |
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114 | (8) |
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Consumer Surplus, Producer Surplus, and Efficiency |
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114 | (5) |
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114 | (1) |
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The Efficiency of Markets |
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115 | (3) |
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118 | (1) |
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119 | (2) |
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Why Markets Typically Work So Well |
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119 | (1) |
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Why Markets Can Sometimes Get It Wrong |
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120 | (1) |
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121 | (1) |
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Business Case: StubHub Shows Up the Boss |
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122 | (1) |
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123 | (4) |
| Section 5 Government Policy and Taxes |
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127 | (38) |
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Big City, Not-So-Bright Ideas |
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127 | (1) |
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Module 13 Price Controls (Ceilings and Floors) |
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128 | (12) |
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Why Governments Control Prices |
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128 | (1) |
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129 | (9) |
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129 | (2) |
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How a Price Ceiling Causes Inefficiency |
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131 | (2) |
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So Why Are There Price Ceilings? |
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133 | (1) |
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Economics In Action: Hunger and Price Controls in Venezuela |
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133 | (1) |
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134 | (2) |
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Economics In Action: Price Floors and School Lunches |
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135 | (1) |
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How a Price Floor Causes Inefficiency |
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136 | (1) |
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So Why Are There Price Floors? |
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137 | (1) |
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138 | (2) |
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Module 14 Quantity Controls (Quotas) |
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140 | (6) |
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140 | (5) |
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How Quantity Controls Work |
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141 | (3) |
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The Costs of Quantity Controls |
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144 | (3) |
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Economics In Action: The Clams of the Jersey Shore |
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144 | (1) |
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145 | (1) |
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146 | (13) |
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Equity, Efficiency, and Taxes |
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146 | (1) |
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The Effects of Taxes on Total Surplus |
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147 | (6) |
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The Effect of an Excise Tax on Quantities and Prices |
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147 | (3) |
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Price Elasticities and Tax Incidence |
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150 | (3) |
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Economics In Action: Who Pays the FICA? |
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152 | (1) |
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The Benefits and Costs of Taxation |
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153 | (4) |
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The Revenue from an Excise Tax |
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153 | (1) |
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154 | (3) |
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157 | (2) |
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Business Case: Medallion Financial: Cruising Right Along |
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159 | (1) |
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160 | (5) |
| Section 6 International Trade |
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165 | (26) |
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Car Parts and Sucking Sounds |
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165 | (1) |
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Module 16 Gains from Trade |
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166 | (9) |
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Comparative Advantage and International Trade |
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166 | (7) |
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Production Possibilities and Comparative Advantage, Revisited |
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167 | (2) |
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The Gains from International Trade |
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169 | (1) |
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Comparative Advantage versus Absolute Advantage |
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170 | (1) |
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Sources of Comparative Advantage |
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171 | (4) |
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Economics In Action: Skill and Comparative Advantage |
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172 | (1) |
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173 | (2) |
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Module 17 Supply, Demand, and International Trade |
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175 | (11) |
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Imports, Exports, and Wages |
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175 | (5) |
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175 | (2) |
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177 | (1) |
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International Trade and Wages |
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178 | (2) |
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The Effects of Trade Protection |
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180 | (2) |
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180 | (2) |
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The Effects of an Import Quota |
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182 | (1) |
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Challenges to Globalization |
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182 | (3) |
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Globalization and Inequality |
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183 | (1) |
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183 | (9) |
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Economics In Action: Beefing Up Exports |
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184 | (1) |
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185 | (1) |
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Business Case: Li & Fung: From Guangzhou to You |
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186 | (1) |
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187 | (4) |
| Section 7 Economics and Decision Making |
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191 | (38) |
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191 | (1) |
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Module 18 Making Decisions |
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192 | (12) |
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Costs, Benefits, and Profits |
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192 | (3) |
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Explicit versus Implicit Costs |
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192 | (1) |
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Accounting Profit versus Economic Profit |
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193 | (1) |
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Making "Either-Or" Decisions |
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194 | (1) |
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Making "How Much" Decisions: The Role of Marginal Analysis |
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195 | (6) |
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196 | (1) |
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197 | (1) |
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198 | (6) |
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Economics In Action: The Cost of a Life |
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201 | (1) |
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201 | (1) |
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202 | (2) |
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Module 19 Behavioral Economics |
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204 | (6) |
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How People Make Economic Choices |
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204 | (4) |
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205 | (1) |
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Irrationality: An Economist's View |
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205 | (2) |
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Rational Models for Irrational People? |
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207 | (3) |
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Economics In Action: "The Jingle Mail Blues" |
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208 | (1) |
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208 | (2) |
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Module 20 Maximizing Utility |
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210 | (12) |
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Utility: It's All About Getting Satisfaction |
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210 | (2) |
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210 | (2) |
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The Principle of Diminishing Marginal Utility |
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212 | (1) |
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Budgets and Optimal Consumption |
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212 | (4) |
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Budget Constraints and Budget Lines |
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212 | (2) |
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The Optimal Consumption Bundle |
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214 | (2) |
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Spending the Marginal Dollar |
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216 | (4) |
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Marginal Utility per Dollar |
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216 | (2) |
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218 | (12) |
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Economics In Action: Buying Your Way Out of Temptation |
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219 | (1) |
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220 | (2) |
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Business Case: Citi Puts Card Holders "inControl" |
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222 | (1) |
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223 | (6) |
| Section 8 Production and Costs |
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229 | (30) |
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229 | (1) |
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Module 21 The Production Function |
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230 | (7) |
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230 | (5) |
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230 | (9) |
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Economics In Action: The Mythical Man-Month |
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234 | (1) |
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235 | (2) |
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237 | (11) |
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From the Production Function to Cost Curves |
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237 | (2) |
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Two Key Concepts: Marginal Cost and Average Cost |
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239 | (7) |
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239 | (2) |
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241 | (3) |
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Minimum Average Total Cost |
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244 | (1) |
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Economics In Action: Don't Put Out the Welcome Mat |
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245 | (1) |
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Does the Marginal Cost Curve Always Slope Upward? |
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245 | (1) |
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246 | (2) |
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Module 23 Long-Run Costs and Economies of Scale |
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248 | (6) |
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Short-Run versus Long-Run Costs |
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248 | (4) |
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251 | (10) |
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Economics In Action: There's No Busin Like fill"tk Snow Business |
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252 | (1) |
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Summing Up Costs: The Short and Long of It |
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252 | (1) |
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253 | (1) |
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Business Case: Kiva Systems' Robots versus Humans: The Challenge of Holiday Order Fulfillment |
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254 | (1) |
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255 | (4) |
| Section 9 Market Structure and Perfect Competition |
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259 | (42) |
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Doing What Comes Naturally |
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259 | (1) |
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Module 24 Introduction to Market Structure |
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260 | (10) |
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Types of Market Structure |
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260 | (1) |
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261 | (2) |
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Defining Perfect Competition |
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261 | (1) |
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Two Necessary Conditions for Perfect Competition |
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262 | (1) |
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Economics In Action: What's a Standardized Product? |
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263 | (1) |
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263 | (1) |
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263 | (3) |
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264 | (1) |
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264 | (2) |
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266 | (1) |
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Is It an Oligopoly or Not? |
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266 | (1) |
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267 | (2) |
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Defining Monopolistic Competition |
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268 | (1) |
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269 | (1) |
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Module 25 Perfect Competition |
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270 | (7) |
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270 | (5) |
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Using Marginal Analysis to Choose the Profit-Maximizing Quantity of Output |
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271 | (2) |
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When Is Production Profitable? |
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273 | (2) |
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275 | (2) |
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Module 26 Graphing Perfect Competition |
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277 | (9) |
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Interpreting Perfect Competition Graphs |
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277 | (6) |
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The Short-Run Production Decision |
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279 | (1) |
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280 | (2) |
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282 | (4) |
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Economics In Action: Prices Are Up...but So Are Costs |
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283 | (1) |
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Summing Up: The Perfectly Competitive Firm's Profitability and Production Conditions |
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283 | (1) |
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284 | (2) |
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Module 27 Long-Run Outcomes in Perfect Competition |
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286 | (9) |
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The Industry Supply Curve |
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286 | (7) |
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The Short-Run Industry Supply Curve |
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286 | (1) |
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The Long-Run Industry Supply Curve |
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287 | (5) |
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Economics In Action: Baling In, Bailing Out |
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290 | (2) |
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The Cost of Production and Efficiency in Long-Run Equilibrium |
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292 | (1) |
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293 | (2) |
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Business Case: The Find Finds the Cheapest Price |
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295 | (1) |
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296 | (5) |
| Section 10 Monopoly |
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301 | (28) |
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Everybody Must Get Stones |
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301 | (1) |
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Module 28 Monopoly in Practice |
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302 | (9) |
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The Monopolist's Demand Curve and Marginal Revenue |
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302 | (4) |
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The Monopolist's Profit-Maximizing Output and Price |
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306 | (1) |
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Monopoly versus Perfect Competition |
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306 | (1) |
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Monopoly: The General Picture |
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307 | (2) |
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Economics In Action: Shocked by the High Price of Electricity |
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308 | (1) |
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309 | (2) |
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Module 29 Monopoly and Public Policy |
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311 | (6) |
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Welfare Effects of Monopoly |
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311 | (1) |
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312 | (1) |
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Dealing with a Natural Monopoly |
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313 | (3) |
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313 | (1) |
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313 | (2) |
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Must Monopoly Be Controlled? |
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315 | (16) |
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Economics In Action: Chained by Your Cable |
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315 | (1) |
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316 | (1) |
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Module 30 Price Discrimination |
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317 | (7) |
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Price Discrimination Defined |
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317 | (1) |
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The Logic of Price Discrimination |
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318 | (1) |
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Price Discrimination and Elasticity |
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319 | (1) |
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Perfect Price Discrimination |
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320 | (3) |
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Economics In Action: Sales, Factory Outlets, and Ghost Cities |
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322 | (1) |
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323 | (1) |
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Business Case: Newly Emerging Markets: A Diamond Monopolist's Best Friend |
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324 | (1) |
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325 | (4) |
| Section 11 Imperfect Competition |
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329 | (42) |
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Illegal and Legal Practices |
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329 | (1) |
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330 | (5) |
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Interdependence and Oligopoly |
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330 | (1) |
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331 | (3) |
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331 | (1) |
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Collusion and Competition |
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332 | (3) |
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Economics In Action: Bitter Chocolate? |
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333 | (1) |
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334 | (1) |
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335 | (8) |
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335 | (6) |
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335 | (4) |
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Economics In Action: Prisoners of the Arms Race |
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338 | (1) |
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Overcoming the Prisoners' Dilemma: Repeated Interaction and Tacit Collusion |
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339 | (2) |
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341 | (2) |
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Module 33 Oligopoly in Practice |
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343 | (6) |
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343 | (1) |
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Tacit Collusion and Price Wars |
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344 | (2) |
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Economics In Action: The Price Wars of Christmas |
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346 | (1) |
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Product Differentiation and Price Leadership |
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346 | (1) |
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How Important Is Oligopoly? |
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347 | (1) |
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348 | (1) |
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Module 34 Monopolistic Competition |
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349 | (9) |
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Understanding Monopolistic Competition |
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349 | (5) |
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Monopolistic Competition in the Short Run |
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350 | (1) |
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Monopolistic Competition in the Long Run |
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351 | (3) |
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Economics In Action: The Housing Bust and the Demise of the 6% Commission |
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353 | (1) |
|
Monopolistic Competition versus Perfect Competition |
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354 | (2) |
|
Price, Marginal Cost, and Average Total Cost |
|
|
354 | (1) |
|
Is Monopolistic Competition Inefficient? |
|
|
355 | (1) |
|
|
|
356 | (2) |
|
Module 35 Product Differentiation and Advertising |
|
|
358 | (6) |
|
How Firms Differentiate Their Products |
|
|
358 | (2) |
|
Differentiation by Style or Type |
|
|
359 | (1) |
|
Differentiation by Location |
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|
359 | (1) |
|
Differentiation by Quality |
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|
359 | (1) |
|
Economics In Action: Any Color, So Long As It's Black |
|
|
360 | (1) |
|
Controversies About Product Differentiation |
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|
360 | (3) |
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361 | (1) |
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362 | (1) |
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363 | (1) |
|
Business Case: Virgin Atlantic Blows the Whistle...or Blows It? |
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364 | (1) |
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365 | (6) |
| Section 12 Market Failure and the Role of Government |
|
371 | (52) |
|
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371 | (1) |
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|
372 | (7) |
|
Externalities: An Overview |
|
|
372 | (1) |
|
The Economics of Pollution |
|
|
372 | (4) |
|
Costs and Benefits of Pollution |
|
|
373 | (1) |
|
Pollution: An External Cost |
|
|
374 | (2) |
|
Economics In Action: Talking, Texting, and Driving |
|
|
375 | (1) |
|
The Inefficiency of Excess Pollution |
|
|
376 | (1) |
|
Private Solutions to Externalities |
|
|
376 | (1) |
|
|
|
377 | (2) |
|
Module 37 Externalities and Public Policy |
|
|
379 | (10) |
|
Policies Toward Pollution |
|
|
379 | (5) |
|
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|
379 | (1) |
|
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380 | (2) |
|
Tradable Emissions Permits |
|
|
382 | (2) |
|
Economics In Action: Cap and Trade |
|
|
384 | (1) |
|
|
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384 | (2) |
|
Preserved Farmland: An External Benefit |
|
|
385 | (1) |
|
Positive Externalities in the Modern Economy |
|
|
386 | (1) |
|
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|
386 | (1) |
|
|
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387 | (2) |
|
Module 38 Public Goods and Common Resources |
|
|
389 | (11) |
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|
389 | (3) |
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389 | (1) |
|
Why Markets Can Supply Only Private Goods Efficiently |
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390 | (2) |
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392 | (3) |
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392 | (1) |
|
How Much of a Public Good Should Be Provided? |
|
|
393 | (2) |
|
Economics In Action: Voting as a Public Good |
|
|
395 | (1) |
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395 | (2) |
|
|
|
395 | (1) |
|
The Efficient Use and Maintenance of a Common Resource |
|
|
396 | (1) |
|
Artificially Scarce Goods |
|
|
397 | (1) |
|
|
|
398 | (2) |
|
Module 39 The Economics of the Welfare State |
|
|
400 | (15) |
|
Poverty, Inequality, and Public Policy |
|
|
400 | (8) |
|
The Logic of the Welfare State |
|
|
400 | (1) |
|
|
|
401 | (3) |
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404 | (2) |
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406 | (2) |
|
Economics In Action: Long-Term Trends in Income Inequality in the United States |
|
|
406 | (2) |
|
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|
408 | (2) |
|
|
|
408 | (1) |
|
Social Security and Unemployment Insurance |
|
|
409 | (1) |
|
The Effects of the Welfare State on Poverty and Inequality |
|
|
409 | (1) |
|
Health Care in the United States |
|
|
410 | (2) |
|
The Need for Health Insurance |
|
|
411 | (1) |
|
|
|
411 | (1) |
|
The Debate over the Welfare State |
|
|
412 | (1) |
|
Problems with the Welfare State |
|
|
412 | (1) |
|
The Politics of the Welfare State |
|
|
413 | (1) |
|
|
|
413 | (2) |
|
Business Case: A Tale of Two Research Clusters |
|
|
415 | (1) |
|
|
|
415 | (8) |
| Section 13 Factor Markets and the Distribution of Income |
|
423 | (30) |
|
|
|
423 | (1) |
|
|
|
424 | (8) |
|
The Economy's Factors of Production |
|
|
424 | (2) |
|
The Factors of Production |
|
|
424 | (1) |
|
Why Factor Prices Matter: The Allocation of Resources |
|
|
424 | (1) |
|
Factor Incomes and the Distribution of Income |
|
|
425 | (1) |
|
Economics In Action: The Factor Distribution of Income in the United States |
|
|
425 | (1) |
|
Marginal Productivity and Factor Demand |
|
|
426 | (5) |
|
Value of the Marginal Product |
|
|
426 | (1) |
|
Value of the Marginal Product and Factor Demand |
|
|
426 | (3) |
|
Shifts of the Factor Demand Curve |
|
|
429 | (2) |
|
|
|
431 | (1) |
|
Module 41 Marginal Productivity Theory |
|
|
432 | (8) |
|
The Marginal Productivity Theory of Income Distribution |
|
|
432 | (2) |
|
Economics In Action: Help Wanted! |
|
|
433 | (1) |
|
Is the Marginal Productivity Theory of Income Distribution Really True? |
|
|
434 | (4) |
|
Wage Disparities in Practice |
|
|
434 | (1) |
|
Marginal Productivity and Wage Inequality |
|
|
434 | (2) |
|
|
|
436 | (1) |
|
|
|
437 | (1) |
|
|
|
437 | (1) |
|
So Does Marginal Productivity Theory Work? |
|
|
438 | (1) |
|
|
|
438 | (2) |
|
Module 42 The Market for Labor |
|
|
440 | (8) |
|
|
|
440 | (3) |
|
|
|
440 | (1) |
|
|
|
441 | (2) |
|
Shifts of the Labor Supply Curve |
|
|
443 | (1) |
|
Economics In Action: The Overworked American? |
|
|
444 | (1) |
|
Equilibrium in the Labor Market |
|
|
444 | (3) |
|
When the Product Market Is Not Perfectly Competitive |
|
|
444 | (2) |
|
When the Labor Market Is Not Perfectly Competitive |
|
|
446 | (1) |
|
|
|
447 | (1) |
|
Business Case: Alta Gracia: Can Fair Trade Work? |
|
|
448 | (1) |
|
|
|
449 | (4) |
| Section 14 Additional Topics in Microeconomics |
|
453 | (14) |
|
Module 43 The Cost-Minimizing Input Combination |
|
|
454 | (5) |
|
Alternative Input Combinations |
|
|
454 | (1) |
|
Substitutes and Complements in Factor Markets |
|
|
455 | (1) |
|
Determining the Optimal Input Mix |
|
|
455 | (2) |
|
|
|
455 | (1) |
|
The Cost-Minimization Rule |
|
|
456 | (1) |
|
|
|
457 | (2) |
|
Module 44 The Economics of Information |
|
|
459 | (5) |
|
Private Information: What You Don't Know Can Hurt You |
|
|
459 | (1) |
|
Adverse Selection: The Economics of Lemons |
|
|
460 | (1) |
|
|
|
461 | (2) |
|
|
|
463 | (1) |
|
|
|
464 | (3) |
| Section 15 Macroeconomic Measurement |
|
467 | (36) |
|
|
|
467 | (1) |
|
Module 45 Introduction to Macroeconomics |
|
|
468 | (9) |
|
|
|
469 | (3) |
|
|
|
469 | (2) |
|
Economics In Action: Defining Recessions and Expansions |
|
|
470 | (1) |
|
Taming the Business Cycle |
|
|
471 | (6) |
|
Economics In Action: Comparing Recessions |
|
|
471 | (1) |
|
|
|
472 | (1) |
|
|
|
473 | (1) |
|
|
|
474 | (2) |
|
|
|
476 | (1) |
|
Module 46 The Circular-Flow Diagram and the National Accounts |
|
|
477 | (6) |
|
|
|
477 | (1) |
|
The Circular-Flow Diagram |
|
|
477 | (5) |
|
The Simple Circular-Flow Diagram |
|
|
478 | (1) |
|
The Expanded Circular-Flow Diagram |
|
|
479 | (4) |
|
Economics In Action: Creating the National Accounts |
|
|
481 | (1) |
|
|
|
482 | (1) |
|
Module 47 Gross Domestic Product (GDP) |
|
|
483 | (7) |
|
Gross Domestic Product Defined |
|
|
483 | (3) |
|
|
|
483 | (3) |
|
|
|
486 | (2) |
|
GDP: What's In and What's Out? |
|
|
487 | (3) |
|
Economics In Action: Our Imputed Lives |
|
|
488 | (1) |
|
|
|
488 | (2) |
|
Module 48 Interpreting Real Gross Domestic Product |
|
|
490 | (6) |
|
|
|
490 | (1) |
|
Real GDP: A Measure of Aggregate Output |
|
|
490 | (4) |
|
|
|
491 | (1) |
|
Economics In Action: Miracle in Venezuela? |
|
|
492 | (1) |
|
What Real GDP Doesn't Measure |
|
|
492 | (12) |
|
Economics In Action: GDP and the Meaning of Life |
|
|
493 | (1) |
|
|
|
494 | (2) |
|
Business Case: Getting a Jump on GDP |
|
|
496 | (1) |
|
|
|
497 | (6) |
| Section 16 Unemployment and Inflation |
|
503 | (40) |
|
|
|
503 | (1) |
|
Module 49 Defining Unemployment |
|
|
504 | (8) |
|
|
|
504 | (6) |
|
Defining and Measuring Unemployment |
|
|
504 | (1) |
|
The Significance of the Unemployment Rate |
|
|
505 | (2) |
|
|
|
507 | (5) |
|
Economics In Action: Failure to Launch |
|
|
509 | (1) |
|
|
|
510 | (2) |
|
Module 50 Categories of Unemployment |
|
|
512 | (9) |
|
Job Creation and Job Destruction |
|
|
512 | (5) |
|
|
|
513 | (1) |
|
|
|
514 | (3) |
|
The Natural Rate of Unemployment |
|
|
517 | (3) |
|
Changes in the Natural Rate of Unemployment |
|
|
517 | (4) |
|
Economics In Action: Natural Unemployment Around the OECD |
|
|
519 | (1) |
|
|
|
520 | (1) |
|
Module 51 The Costs of Inflation |
|
|
521 | (8) |
|
|
|
521 | (2) |
|
The Level of Prices Doesn't Matter ... |
|
|
521 | (1) |
|
...But the Rate of Change of Prices Does |
|
|
522 | (1) |
|
The Economic Costs of High Inflation |
|
|
523 | (2) |
|
Economics In Action: Israel's Experience with Inflation |
|
|
523 | (2) |
|
Winners and Losers from Inflation |
|
|
525 | (1) |
|
Inflation is Easy; Disinflation is Hard |
|
|
526 | (1) |
|
|
|
527 | (2) |
|
Module 52 Measuring Inflation |
|
|
529 | (7) |
|
The Aggregate Price Level |
|
|
529 | (5) |
|
Market Baskets and Price Indexes |
|
|
529 | (2) |
|
|
|
531 | (1) |
|
|
|
532 | (12) |
|
Economics In Action: Indexing to the CPI |
|
|
533 | (1) |
|
|
|
534 | (2) |
|
Business Case: A Monster Slump |
|
|
536 | (1) |
|
|
|
537 | (6) |
| Section 17 Long-Run Economic Growth |
|
543 | (34) |
|
|
|
543 | (1) |
|
Module 53 Sources of Long-Run Economic Growth |
|
|
544 | (7) |
|
Comparing Economies Across Time and Space |
|
|
544 | (4) |
|
|
|
544 | (2) |
|
|
|
546 | (2) |
|
Economics In Action: India Takes Off |
|
|
547 | (1) |
|
What Are the Sources of Long-Run Growth? |
|
|
548 | (1) |
|
The Crucial Importance of Productivity |
|
|
548 | (1) |
|
Explaining Growth in Productivity |
|
|
548 | (1) |
|
|
|
549 | (2) |
|
Module 54 Productivity and Growth |
|
|
551 | (10) |
|
The Aggregate Production Function |
|
|
551 | (5) |
|
|
|
553 | (2) |
|
Economics In Action: The Information Technology Paradox |
|
|
554 | (1) |
|
What About Natural Resources? |
|
|
555 | (1) |
|
Is World Growth Sustainable? |
|
|
556 | (3) |
|
Economic Growth and the Environment |
|
|
557 | (2) |
|
|
|
559 | (2) |
|
Module 55 Long-Run Growth Policy |
|
|
561 | (10) |
|
|
|
561 | (4) |
|
Explaining Differences in Growth Rates |
|
|
561 | (2) |
|
The Role of Government in Promoting Economic Growth |
|
|
563 | (2) |
|
Economics In Action: The Brazilian Breadbasket |
|
|
565 | (1) |
|
Success, Disappointment, and Failure |
|
|
565 | (5) |
|
|
|
566 | (1) |
|
Latin America's Disappointment |
|
|
567 | (1) |
|
Africa's Troubles and Promise |
|
|
567 | (11) |
|
Economics In Action: Are Economies Converging? |
|
|
568 | (2) |
|
|
|
570 | (1) |
|
Business Case: Big Box Boom |
|
|
571 | (1) |
|
|
|
572 | (5) |
| Section 18 Savings, Investment Spending, and the Financial System |
|
577 | (36) |
|
|
|
577 | (1) |
|
Module 56 Savings and Investment Spending |
|
|
578 | (6) |
|
Matching Up Savings and Investment Spending |
|
|
578 | (5) |
|
The Savings-Investment Spending Identity |
|
|
578 | (6) |
|
Economics In Action: America's Low Savings |
|
|
582 | (1) |
|
|
|
583 | (1) |
|
Module 57 The Market for Loanable Funds |
|
|
584 | (10) |
|
The Role of the Loanable Funds Market |
|
|
584 | (3) |
|
The Demand for Loanable Funds |
|
|
585 | (1) |
|
The Supply of Loanable Funds |
|
|
586 | (1) |
|
The Equilibrium Interest Rate |
|
|
587 | (5) |
|
Shifts of the Demand for Loanable Funds |
|
|
588 | (1) |
|
Shifts of the Supply of Loanable Funds |
|
|
589 | (1) |
|
Inflation and Interest Rates |
|
|
590 | (4) |
|
Economics In Action: Fifty Years of Fluctuations in U.S. Interest Rates |
|
|
591 | (1) |
|
|
|
592 | (2) |
|
Module 58 The Time Value of Money |
|
|
594 | (6) |
|
The Concept of Present Value |
|
|
594 | (3) |
|
Borrowing, Lending, and Interest |
|
|
595 | (1) |
|
|
|
595 | (2) |
|
|
|
597 | (2) |
|
Economics In Action: How Big Is That Jackpot, Anyway? |
|
|
598 | (1) |
|
|
|
599 | (1) |
|
Module 59 The Financial System |
|
|
600 | (9) |
|
Understanding the Financial System |
|
|
600 | (6) |
|
Three Tasks of a Financial System |
|
|
601 | (1) |
|
Types of Financial Assets |
|
|
602 | (2) |
|
|
|
604 | (2) |
|
Financial Fluctuations and Macroeconomic Policy |
|
|
606 | (2) |
|
Economics In Action: The Great American Housing Bubble |
|
|
607 | (1) |
|
|
|
608 | (1) |
|
|
|
609 | (4) |
| Section 19 Income and Expenditure |
|
613 | (32) |
|
|
|
613 | (1) |
|
|
|
614 | (5) |
|
The Multiplier: An Informal Introduction |
|
|
614 | (5) |
|
Economics In Action: The Multiplier and the Great Depression |
|
|
617 | (1) |
|
|
|
617 | (2) |
|
Module 61 Consumption and Investment Spending |
|
|
619 | (11) |
|
|
|
619 | (5) |
|
Current Disposable Income and Consumer Spending |
|
|
619 | (4) |
|
Shifts of the Aggregate Consumption Function |
|
|
623 | (1) |
|
|
|
624 | (4) |
|
The Interest Rate and Investment Spending |
|
|
625 | (1) |
|
Expected Future Real GDP, Production Capacity, and Investment Spending |
|
|
625 | (1) |
|
Inventories and Unplanned Investment Spending |
|
|
626 | (4) |
|
Economics In Action: Interest Rates and the U.S. Housing Boom |
|
|
627 | (1) |
|
|
|
628 | (2) |
|
Module 62 The Income-Expenditure Model |
|
|
630 | (9) |
|
Using the Income-Expenditure Model |
|
|
630 | (8) |
|
Planned Aggregate Spending and Real GDP |
|
|
631 | (1) |
|
Income-Expenditure Equilibrium |
|
|
632 | (2) |
|
The Multiplier Process and Inventory Adjustment |
|
|
634 | (12) |
|
Economics In Action: Inventories and the End of a Recession |
|
|
637 | (1) |
|
|
|
638 | (1) |
|
Business Case: Making It Through in Muskegon |
|
|
639 | (1) |
|
|
|
640 | (5) |
| Section 20 Aggregate Demand and Aggregate Supply |
|
645 | (40) |
|
|
|
645 | (1) |
|
Module 63 Aggregate Demand |
|
|
646 | (10) |
|
The Aggregate Demand Curve |
|
|
646 | (8) |
|
Why Is the Aggregate Demand Curve Downward Sloping? |
|
|
647 | (1) |
|
The Aggregate Demand Curve and the Income-Expenditure Model |
|
|
648 | (2) |
|
Shifts of the Aggregate Demand Curve |
|
|
650 | (6) |
|
Economics In Action: Moving Along the Aggregate Demand Curve, 1979-1980 |
|
|
654 | (1) |
|
|
|
654 | (2) |
|
Module 64 Aggregate Supply |
|
|
656 | (12) |
|
The Aggregate Supply Curve |
|
|
656 | (10) |
|
The Short-Run Aggregate Supply Curve |
|
|
656 | (3) |
|
Shifts of the Short-Run Aggregate Supply Curve |
|
|
659 | (2) |
|
The Long-Run Aggregate Supply Curve |
|
|
661 | (3) |
|
From the Short Run to the Long Run |
|
|
664 | (4) |
|
Economics In Action: Prices and Output During the Great Depression |
|
|
665 | (1) |
|
|
|
666 | (2) |
|
Module 65 The AD-AS Model |
|
|
668 | (11) |
|
Putting the Aggregate Supply Curve and the Aggregate Demand Curve Together |
|
|
668 | (7) |
|
Short-Run Macroeconomic Equilibrium |
|
|
668 | (1) |
|
Shifts of Aggregate Demand: Short-Run Effects |
|
|
669 | (1) |
|
|
|
670 | (2) |
|
Long-Run Macroeconomic Equilibrium |
|
|
672 | (3) |
|
Economics In Action: Supply Shocks versus Demand Shocks in Practice |
|
|
675 | (1) |
|
|
|
675 | (2) |
|
Policy in the Face of Demand Shocks |
|
|
676 | (1) |
|
Responding to Supply Shocks |
|
|
676 | (1) |
|
|
|
677 | (2) |
|
Business Case: United in Pain |
|
|
679 | (1) |
|
|
|
680 | (5) |
| Section 21 Fiscal Policy |
|
685 | (32) |
|
To Stimulate or Not to Stimulate? |
|
|
685 | (1) |
|
Module 66 Fiscal Policy Basics |
|
|
686 | (9) |
|
|
|
686 | (4) |
|
Taxes, Purchases of Goods and Services, Government Transfers, and Borrowing |
|
|
687 | (1) |
|
The Government Budget and Total Spending |
|
|
688 | (1) |
|
Expansionary and Contractionary Fiscal Policy |
|
|
689 | (1) |
|
Can Expansionary Fiscal Policy Actually Work? |
|
|
690 | (3) |
|
A Cautionary Note: Lags in Fiscal Policy |
|
|
692 | (3) |
|
Economics In Action: What Was in the Recovery Act? |
|
|
693 | (1) |
|
|
|
693 | (2) |
|
Module 67 Fiscal Policy and the Multiplier |
|
|
695 | (5) |
|
Multiplier Effects of Fiscal Policy |
|
|
695 | (4) |
|
Multiplier Effects of an Increase in Government Purchases of Goods and Services |
|
|
695 | (1) |
|
Multiplier Effects of Changes in Government Transfers and Taxes |
|
|
696 | (1) |
|
How Taxes Affect the Multiplier |
|
|
697 | (3) |
|
Economics In Action: Multipliers and the Obama Stimulus |
|
|
698 | (1) |
|
|
|
699 | (1) |
|
Module 68 Budget Deficits and Public Debt |
|
|
700 | (11) |
|
|
|
700 | (4) |
|
The Budget Balance as a Measure of Fiscal Policy |
|
|
700 | (1) |
|
The Business Cycle and the Cyclically Adjusted Budget Balance |
|
|
701 | (2) |
|
Should the Budget Be Balanced? |
|
|
703 | (1) |
|
Economics In Action: Europe's Search for a Fiscal Rule |
|
|
704 | (1) |
|
Long-Run Implications of Fiscal Policy |
|
|
704 | (5) |
|
Deficits, Surpluses, and Debt |
|
|
705 | (1) |
|
Problems Posed by Rising Government Debt |
|
|
706 | (1) |
|
Deficits and Debt in Practice |
|
|
707 | (1) |
|
|
|
708 | (1) |
|
|
|
709 | (2) |
|
Business Case: Priming the Pumps |
|
|
711 | (1) |
|
|
|
712 | (5) |
| Section 22 Money, Banking, and the Federal Reserve System |
|
717 | (32) |
|
|
|
717 | (1) |
|
Module 69 Defining and Measuring Money |
|
|
718 | (7) |
|
|
|
718 | (4) |
|
|
|
718 | (1) |
|
|
|
719 | (1) |
|
|
|
720 | (5) |
|
Economics In Action: The History of the Dollar |
|
|
721 | (1) |
|
Measuring the Money Supply |
|
|
722 | (1) |
|
|
|
723 | (2) |
|
Module 70 Banking and Money Creation |
|
|
725 | (9) |
|
The Monetary Role of Banks |
|
|
725 | (3) |
|
|
|
725 | (1) |
|
|
|
726 | (2) |
|
Economics In Action: It's a Wonderful Banking System |
|
|
727 | (1) |
|
|
|
728 | (1) |
|
Determining the Money Supply |
|
|
728 | (5) |
|
|
|
729 | (1) |
|
Reserves, Bank Deposits, and the Money Multiplier |
|
|
730 | (1) |
|
The Money Multiplier in Reality |
|
|
731 | (2) |
|
|
|
733 | (1) |
|
Module 71 The Federal Reserve System |
|
|
734 | (9) |
|
|
|
734 | (1) |
|
The Evolution of the American Banking System |
|
|
735 | (7) |
|
The Crisis in American Banking at the Turn of the Twentieth Century |
|
|
736 | (1) |
|
Responding to Banking Crises: The Creation of the Federal Reserve |
|
|
737 | (1) |
|
The Savings and Loan Crisis of the 1980s |
|
|
738 | (1) |
|
Back to the Future: The Financial Crisis of 2008 |
|
|
738 | (13) |
|
Economics In Action: Regulation After the 2008 Crisis |
|
|
741 | (1) |
|
|
|
742 | (1) |
|
Business Case: The Perfect Gift: Cash or a Gift Card? |
|
|
743 | (1) |
|
|
|
744 | (5) |
| Section 23 Monetary Policy |
|
749 | (35) |
|
|
|
749 | (1) |
|
Module 72 The Federal Reserve and Monetary Policy |
|
|
750 | (5) |
|
Functions of the Federal Reserve System |
|
|
750 | (1) |
|
How the Fed Conducts Policy |
|
|
751 | (3) |
|
|
|
751 | (1) |
|
|
|
751 | (1) |
|
|
|
752 | (3) |
|
Economics In Action: Who Gets Interest on the Fed's Assets? |
|
|
753 | (1) |
|
|
|
754 | (1) |
|
Module 73 The Money Market |
|
|
755 | (9) |
|
|
|
755 | (5) |
|
The Opportunity Cost of Holding Money |
|
|
755 | (2) |
|
|
|
757 | (1) |
|
Shifts of the Money Demand Curve |
|
|
758 | (2) |
|
Economics In Action: A Yen for Cash |
|
|
760 | (1) |
|
|
|
760 | (2) |
|
The Equilibrium Interest Rate |
|
|
760 | (2) |
|
Two Models of Interest Rates? |
|
|
762 | (1) |
|
|
|
762 | (2) |
|
Module 74 Monetary Policy and the Interest Rate |
|
|
764 | (10) |
|
The Fed, the Money Supply, and the Interest Rate |
|
|
764 | (3) |
|
|
|
766 | (1) |
|
Economics In Action: The Fed Reverses Course |
|
|
767 | (1) |
|
Monetary Policy and Aggregate Demand |
|
|
767 | (5) |
|
Expansionary and Contractionary Monetary Policy |
|
|
767 | (1) |
|
Monetary Policy in Practice |
|
|
768 | (1) |
|
The Taylor Rule Method of Setting Monetary Policy |
|
|
769 | (1) |
|
|
|
770 | (1) |
|
The Zero Lower Bound Problem |
|
|
771 | (3) |
|
Economics In Action: What the Fed Wants, the Fed Gets |
|
|
771 | (1) |
|
|
|
772 | (2) |
|
Module 75 Money, Output, and Prices in the Long Run |
|
|
774 | (6) |
|
Money, Output, and Prices |
|
|
774 | (4) |
|
Short-Run and Long-Run Effects of an Increase in the Money Supply |
|
|
775 | (1) |
|
|
|
776 | (1) |
|
Changes in the Money Supply and the Interest Rate in the Long Run |
|
|
777 | (9) |
|
Economics In Action: International Evidence of Monetary Neutrality |
|
|
778 | (1) |
|
|
|
778 | (2) |
|
Business Case: Bets on Cheap Money |
|
|
780 | (1) |
|
|
|
781 | (3) |
| Section 24 Policy Responses to Unemployment and Inflation |
|
784 | (41) |
|
Bringing a Suitcase to the Bank |
|
|
784 | (2) |
|
Module 76 Inflation, Disinflation, and Deflation |
|
|
786 | (9) |
|
|
|
786 | (5) |
|
The Classical Model of Money and Prices |
|
|
786 | (2) |
|
|
|
788 | (2) |
|
The Logic of Hyperinflation |
|
|
790 | (1) |
|
Economics In Action: What Caused Zimbabwe's Inflation? |
|
|
791 | (1) |
|
Moderate Inflation and Disinflation |
|
|
791 | (3) |
|
The Output Gap and the Unemployment Rate |
|
|
792 | (2) |
|
|
|
794 | (1) |
|
Module 77 The Phillips Curve |
|
|
795 | (12) |
|
Inflation and Unemployment in the Short Run |
|
|
795 | (3) |
|
The Short-Run Phillips Curve |
|
|
795 | (1) |
|
Inflation Expectations and the Short-Run Phillips Curve |
|
|
796 | (2) |
|
Inflation and Unemployment in the Long Run |
|
|
798 | (3) |
|
The Long-Run Phillips Curve |
|
|
798 | (2) |
|
The Natural Rate of Unemployment, Revisited |
|
|
800 | (1) |
|
Economics In Action: The Great Disinflation of the 1980s |
|
|
800 | (1) |
|
The Costs of Disinflation |
|
|
801 | (1) |
|
|
|
801 | (4) |
|
|
|
802 | (1) |
|
Effects of Expected Deflation |
|
|
802 | (5) |
|
Economics In Action: The Deflation Scare of 2010 |
|
|
804 | (1) |
|
|
|
805 | (2) |
|
Module 78 Crises and Consequences |
|
|
807 | (13) |
|
Banking: Benefits and Dangers |
|
|
807 | (1) |
|
|
|
807 | (1) |
|
Shadow Banks and the Re-emergence of Bank Runs |
|
|
808 | (1) |
|
Banking Crises and Financial Panics |
|
|
808 | (3) |
|
Economics In Action: Lights Out at Lehman |
|
|
810 | (1) |
|
The Consequences of Banking Crises |
|
|
811 | (3) |
|
Banking Crises, Recessions, and Recovery |
|
|
811 | (1) |
|
Why Are Banking-Crisis Recessions So Bad? |
|
|
812 | (1) |
|
|
|
813 | (1) |
|
The 2008 Crisis and Its Aftermath |
|
|
814 | (3) |
|
Severe Crisis, Slow Recovery |
|
|
814 | (2) |
|
|
|
816 | (1) |
|
The Stimulus-Austerity Debate |
|
|
816 | (1) |
|
The Lesson of the Post-Crisis Slump |
|
|
817 | (1) |
|
Regulation in the Wake of the Crisis |
|
|
817 | (2) |
|
|
|
819 | (1) |
|
Business Case: Licenses to Print Money |
|
|
820 | (1) |
|
|
|
821 | (4) |
| Section 25 Open-Economy Macroeconomics |
|
825 | (36) |
|
Switzerland Doesn't Want Your Money |
|
|
825 | (1) |
|
Module 79 Capital Flows and the Balance of Payments |
|
|
826 | (10) |
|
The Balance of Payments Accounts |
|
|
826 | (5) |
|
Understanding the Balance of Payments |
|
|
826 | (5) |
|
Economics In Action: GDP, GNP, and the Current Account |
|
|
830 | (1) |
|
Modeling the Financial Account |
|
|
831 | (3) |
|
Underlying Determinants of International Capital Flows |
|
|
833 | (1) |
|
|
|
834 | (1) |
|
|
|
834 | (2) |
|
Module 80 The Foreign Exchange Market |
|
|
836 | (9) |
|
The Role of the Exchange Rate |
|
|
836 | (7) |
|
Understanding Exchange Rates |
|
|
836 | (1) |
|
The Equilibrium Exchange Rate |
|
|
837 | (3) |
|
Inflation and Real Exchange Rates |
|
|
840 | (2) |
|
|
|
842 | (3) |
|
Economics In Action: Burgernomics |
|
|
843 | (1) |
|
|
|
843 | (2) |
|
Module 81 Exchange Rate Policy |
|
|
845 | (6) |
|
|
|
845 | (4) |
|
Fixed and Floating Exchange Rates |
|
|
845 | (1) |
|
How Can an Exchange Rate Be Held Fixed? |
|
|
846 | (1) |
|
The Exchange Rate Regime Dilemma |
|
|
847 | (15) |
|
Economics In Action: China Pegs the Yuan |
|
|
848 | (1) |
|
|
|
849 | (2) |
|
Module 82 Exchange Rates and Macroeconomic Policy |
|
|
851 | (5) |
|
Devaluation and Revaluation of Fixed Exchange Rates |
|
|
852 | (1) |
|
Economics In Action: From Bretton Woods to the Euro |
|
|
852 | (1) |
|
Monetary Policy Under a Floating Exchange Rate Regime |
|
|
853 | (1) |
|
International Business Cycles |
|
|
854 | (1) |
|
|
|
855 | (1) |
|
Business Case: War of the Earthmovers |
|
|
856 | (1) |
|
|
|
857 | (4) |
| Section 26 Macroeconomics: Events and Ideas |
|
861 | |
|
|
|
861 | (1) |
|
Module 83 History and Alternative Views of Macroeconomics |
|
|
862 | (12) |
|
|
|
862 | (1) |
|
Money and the Price Level |
|
|
862 | (1) |
|
|
|
862 | (1) |
|
The Great Depression and the Keynesian Revolution |
|
|
863 | (3) |
|
|
|
863 | (2) |
|
Policy to Fight Recessions |
|
|
865 | (1) |
|
Economics In Action: The End of the Great Depression |
|
|
865 | (1) |
|
Challenges to Keynesian Economics |
|
|
866 | (4) |
|
The Revival of Monetary Policy |
|
|
866 | (1) |
|
|
|
866 | (3) |
|
Inflation and the Natural Rate of Unemployment |
|
|
869 | (1) |
|
The Political Business Cycle |
|
|
869 | (1) |
|
Rational Expectations, Real Business Cycles, and New Classical Macroeconomics |
|
|
870 | (2) |
|
|
|
870 | (1) |
|
|
|
871 | (1) |
|
|
|
872 | (2) |
|
Module 84 The Modern Macroeconomic Consensus |
|
|
874 | (7) |
|
Consensus and Conflict in Modern Macroeconomics |
|
|
874 | (2) |
|
Question 1: Is Expansionary Monetary Policy Helpful in Fighting Recessions? |
|
|
875 | (1) |
|
Question 2: Is Expansionary Fiscal Policy Helpful in Fighting Recessions? |
|
|
875 | (1) |
|
Question 3: Can Monetary and/or Fiscal Policy Reduce Unemployment in the Long Run? |
|
|
875 | (1) |
|
Question 4: Should Fiscal Policy Be Used in a Discretionary Way? |
|
|
876 | (1) |
|
Question 5: Should Monetary Policy Be Used in a Discretionary Way? |
|
|
876 | (1) |
|
|
|
876 | (4) |
|
The Debate over Fiscal Policy |
|
|
877 | (1) |
|
The Debate over Monetary Policy |
|
|
877 | (3) |
|
Economics In Action: An Irish Role Model? |
|
|
878 | (2) |
|
|
|
880 | (1) |
|
|
|
881 | |
| Appendix A Graphs in Economics |
|
A-1 | |
| Appendix B Macroeconomic Data |
|
B-1 | |
| Glossary |
|
G-1 | |
| Solutions to Module Review Questions |
|
S-1 | |
| Index |
|
I-1 | |
