Table of contents for Economics : principles, problems, and policies / Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn.

Bibliographic record and links to related information available from the Library of Congress catalog.

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Counter
Contents
List of Key Graphs 00
Preface 00
Contributors 00
PART ONE
Introduction to Economics and the Economy 00
To the Student 00
Chapter 1
Limits, Alternatives, and Choices 00
The Economic Perpective 00
Scarcity and Choice / Purposeful Behavior / Marginal Analysis: Benefits and 
Costs
Consider This: Free for All? 00
Consider This: Fast-Food Lines 00
Theories, Principles, and Models 00
Microeconomics and Macroeconomics 00
Microeconomics / Macroeconomics / Positive and Normative Economics
Individuals? Economizing Problem 00
Limited Income / Unlimited Wants / A Budget Line / Attainable and Unattainable
Combinations
Consider This: Did Gates, Winfrey, and Rodriguez Make Bad Choices? 00
Society?s Economizing Problem 00
Scarce Resources / Resource Categories
Production Possibilities Model 00
Production Possibilities Table / Production Possibilities Curve / Law of 
Increasing
Opportunity Costs / Optimal Allocation
Consider This: The Economics of War 00
Unemployment, Growth, and the Future 00
A Growing Economy / Present Choices and Future Possibilities / A Qualification:
International Trade
Last Word: Pitfalls to Sound Economic Reasoning 00
Chapter 1 Appendix: Graphs and Their Meaning 00
Chapter 2
The Market System and the Circular Flow 00
Economic Systems 00
The Command System / The Market System
Characteristics of the Market System 00
Private Property / Freedom of Enterprise and Choice / Self-Interest / 
Competition /
Markets and Prices / Technology and Capital Goods / Specialization / Use of 
Money
Five Fundamental Questions 00
What Will Be Produced? / How Will the Goods and Services Be Produced? / Who Will
Get the Output? / How Will the System Accommodate Change? / How Will the System
Promote Progress?
Consider This: McHits and McMisses 00
The ?Invisible Hand? 00
The Demise of the Command Systems 00
The Coordination Problem / The Incentive Problem
Consider This: The Two Koreas 00
The Circular Flow Model 00
Resource Market / Product Market
Last Word: Shuffling the Deck 00
Chapter 3
Demand, Supply, and Market Equilibrium 00
Markets 00
Demand 00
Law of Demand / The Demand Curve / Market Demand / Change in Demand / Changes
in Quantity Demanded
Supply 00
Law of Supply / The Supply Curve / Market Supply / Determinants of Supply / 
Changes in
Supply / Changes in Quantity Supplied
Market Equilibrium
Equilibrium Price and Quantity / Rationing Function of Prices / Efficient 
Allocation /
Changes in Supply, Demand, and Equilibrium
Consider This: Ticket Scalping: A Bum Rap! 00
Consider This: Salsa and Coffee Beans 00
Application: Government-Set Prices 00
Price Ceilings on Gasoline / Rent Controls / Price Floors on Wheat
Last Word: A Legal Market for Human Organs? 00
Chapter 3 Appendix: Additional Examples of Supply and Demand 00
Chapter 4
The U.S. Economy: Private and Public Sectors 00
Households as Income Receivers 00
The Functional Distribution of Income / The Personal Distribution of Income
Households as Spenders 00
Personal Taxes / Personal Saving / Personal Consumption Expenditures
The Business Population 00
Legal Forms of Businesses 00
Advantages of Corporations / The Principal-Agent Problem
Consider This: Unprincipled Agents 00
The Public Sector: Government?s Role 00
Providing the Legal Structure / Maintaining Competition / Redistributing Income 
/
Reallocating Resources / Promoting Stability / Government?s Role: A 
Qualification
Consider This: Street Entertainers 00
The Circular Flow Revisited 00
Government Finance 00
Government Purchases and Transfers
Federal Finance 00
Federal Expenditures / Federal Tax Revenues
State and Local Finance 00
State Finances / Local Finances
Last Word: Financing Social Security 00
Chapter 5
The United States in the Global Economy 00
International Linkages 00
The United States and World Trade 00
Volume and Pattern / Rapid Trade Growth / Participants in International Trade
Specialization and Comparative Advantage 00
Comparative Advantage: Production Possibilities Analysis
Consider This: A CPA and House Painter 00
The Foreign Exchange Market 00
Dollar-Yen Market / Changing Rates: Depreciation and Appreciation
Government and Trade 00
Trade Impediments and Subsidies / Why Government Trade Interventions? / Costs to
Society
Consider This: Buy American? 00
Multilateral Trade Agreements and Free-Trade Zones 00
Reciprocal Trade Agreements Act / General Agreement on Tariffs and Trade / World
Trade Organization / The European Union / North American Free Trade Agreement
Trade-Related Issues 00
Trade Adjustment Assistance / Offshoring of Jobs
Global Competition 00
Last Word: Fair-Trade Products 00
PART TWO
Microeconomics of Product Markets 00
Chapter 6
Elasticity, Consumer Surplus, and Producer Surplus 00
Price Elasticity of Demand 00
The Price-Elasticity Coefficient and Formula / Interpretations of Ed / The 
Total-Revenue
Test / Price Elasticity and the Total-Revenue Curve / Determinants of Price 
Elasticity of
Demand / Applications of Price Elasticity of Demand
Consider This: A Bit of a Stretch 00
Price Elasticity of Supply 00
Price Elasticity of supply: The Market Period / Price Elasticity of Supply: The 
Short Run /
Price Elasticity of Supply: The Long Run / Applications of Price Elasticity of 
Supply
Cross Elasticity and Income Elasticity of Demand 00
Cross Elasticity of Demand / Income Elasticity of Demand
Consumer and Producer Surplus 00
Consumer Surplus / Producer Surplus / Efficiency Revisited / Efficiency Losses 
(or
Deadweight Losses)
Last Word: Elasticity and Pricing Power: Why Different Consumers Pay Different 
Prices
00
Chapter 7
Consumer Behavior 00
Law of Diminishing Marginal Utility 00
Terminology / Total Utility and Marginal Utility / Marginal Utility and Demand
Consider This: Vending Machines and Marginal Utility 00
Theory of Consumer Behavior 00
Consumer Choice and Budget Constraint / Utility-Maximizing Rule / Numerical 
Example
/ Algebraic Generalization
Utility Maximization and the Demand Curve 00
Deriving the Demand Schedule and Curve / Income and Substitution Effects
Applications and Extensions 00
iPods / The Diamond-Water Paradox / The Value of Time / Medical Care Purchases /
Cash and Noncash Gifts
Last Word: M&M?s, Final Exams, and Retirement Savings: Insights from Behavioral
Economics 00
Chapter 7 Appendix: Indifference Curve Analysis 00
Chapter 8
The Costs of Production 00
Economic Costs 00
Explicit and Implicit Costs / Normal Profit as a Cost / Economic Profit (or Pure 
Profit)
Short-Run Production Relationships 00
Law of Diminishing Returns
Consider This: Diminishing Returns from Study 00
Short-Run Production Costs 00
Fixed, Variable, and Total Costs / Per-Unit, or Average, Costs / Marginal Cost / 
Shifts of
the Cost Curves
Long-Run Production Costs 00
Firm Size and Costs / The Long-Run Cost Curve / Economies and Diseconomies of 
Scale /
Minimum Efficient Scale and Industry Structure
Applications and Illustrations 00
The Doubling of the Price of Corn / Successful Start-Up Firms / The Verson 
Stamping
Machine / The Daily Newspaper / Aircraft and Concrete Plants
Last Word: Don?t Cry over Sunk Costs 00
Chapter 9
Pure Competition 00
Four Market Models 00
Pure Competition: Characteristics and Occurrence 00
Demand as Seen by a Purely Competitive Seller 00
Perfectly Elastic Demand / Average, Total, and Marginal Revenue
Profit Maximization in the Short Run: Total-Revenue?Total-Cost Approach 00
Profit Maximization in the Short Run: Marginal-Revenue?Marginal-Cost Approach 00
Profit-Maximizing Case / Loss-Minimizing Case / Shutdown Case
Consider This: The Still There Motel 00
Marginal Cost and Short-Run Supply 00
Generalized Depiction / Diminishing Returns, Production Costs, and Product 
Supply /
Changes in Supply / Firm and Industry: Equilibrium Price
Profit Maximization in the Long Run 00
Assumptions / Goal of Our Analysis / Long-Run Equilibrium / Long-Run Supply for 
a
Constant-Cost Industry / Long-Run Supply for an Increasing-Cost Industry / Long-
Run
Supply for a Decreasing-Cost Industry
Pure Competition and Efficiency 00
Productive Efficiency: P = Minimum ATC / Allocative Efficiency: P = MC / Maximum
Consumer and Producer Surplus / Dynamic Adjustments / ?Invisible Hand? Revisited
Last Word: Efficiency Gains from Entry: The Case of Generic Drugs 00
Chapter 10
Pure Monopoly 00
An Introduction to Pure Monopoly 00
Examples of Monopoly / Dual Objectives of the Study of Monopoly
Barriers to Entry 00
Economies of Scale / Legal Barriers to Entry: Patents and Licenses / Ownership 
or
Control of Essential Resources / Pricing and Other Strategic Barriers to Entry
Monopoly Demand 00
Marginal Revenue Is Less Than Price / The Monopolist Is a Price Maker / The 
Monopolist
Sets Prices in the Elastic Region of Demand
Output and Price Determination 00
Cost Data / MR = MC Rule / No Monopoly Supply Curve / Misconceptions Concerning
Monopoly Pricing / Possibility of Losses by Monopolist
Economic Effects of Monopoly 00
Price, Output, and Efficiency / Income Transfer / Cost Complications / 
Assessment and
Policy Options
Price Discrimination 00
Conditions / Examples of Price Discrimination / Graphical Analysis
Consider This: Price Discrimination at the Ballpark 00
Regulated Monopoly 00
Socially Optimal Price: P = MC / Fair-Return Price: P = ATC / Dilemma of 
Regulation
Last Word: De Beers? Diamonds: Are Monopolies Forever? 00
Chapter 11
Monopolistic Competition and Oligopoly 00
Monopolistic Competition 00
Relatively Large Number of Sellers / Differentiated Products / Easy Entry and 
Exit /
Advertising / Monopolistically Competitive Industries
Price and Output in Monopolistic Competition 00
The Firm?s Demand Curve / The Short Run: Profit or Loss / The Long Run: Only a 
Normal
Profit
Monopolistic Competition and Efficiency 00
Neither Productive nor Allocative Efficiency / Excess Capacity
Product Variety 00
Benefits of Product Variety / Further Complexity
Oligopoly 00
A Few Large Producers / Homogeneous or Differentiated Products / Control over 
Price,
but Mutual Interdependence / Entry Barriers / Mergers / Oligopolistic Industries
Oligopoly Behavior: A Game-Theory Overview 00
Mutual Interdependence Revisited / Collusion / Incentive to Cheat
Consider This: Creative Strategic Behavior 00
Three Oligopoly Models 00
Kinked-Demand Theory: Noncollusive Oligopoly / Cartels and Other Collusion / 
Price
Leadership Model
Oligopoly and Advertising 00
Positive Effects of Advertising / Potential Negative Effects of Advertising
Oligopoly and Efficiency 00
Productive and Allocative Efficiency / Qualifications
Last Word: Oligopoly in the Beer Industry 00
Chapter 11 Appendix: Additional Game Theory Applications 00
WEB Chapter 11 www.mcconnell18e.com
Technology, R&D, and Efficiency 00
Invention, Innovation, and Diffusion 00
Invention / Innovation / Diffusion / R&D Expenditures / Modern View of 
Technological
Advance
Role of Entrepreneurs and Other Innovators 00
Forming Start-Ups / Innovating within Existing Firms / Anticipating the Future /
Exploiting University and Government Scientific Research
A Firm?s Optimal Amount of R&D 00
Interest-Rate Cost of Funds / Expected Rate of Return
Increased Profit via Innovation 00
Increased Revenue via Product Innovation / Reduced Cost via Process Innovation
Imitation and R&D Incentives 00
Benefits of Being First
Consider This: Trade Secrets 00
Role of Market Structure 00
Market Structure and Technological Advance / Inverted-U Theory of R&D / Market
Structure and Technological Advance: The Evidence
Technological Advance and Efficiency 00
Productive Efficiency / Allocative Efficiency / Creative Destruction
Last Word: On the Path to the Personal Computer and Internet 00
PART THREE
Microeconomics of Resource Markets 00
Chapter 12
The Demand for Resources 00
Significance of Resource Pricing 00
Marginal Productivity Theory of Resource Demand 00
Resource Demand as a Derived Demand / Marginal Revenue Product / Rule for
Employing Resources: MRP = MRC / MRP as Resource Demand Schedule / Resource
Demand under Imperfect Product Market Competition / Market Demand for a Resource
Consider This: Superstars 00
Determinants of Resource Demand 00
Changes in Product Demand / Changes in Productivity / Changes in the Prices of 
Other
Resources / Occupational Employment Trends
Elasticity of Resource Demand 00
Optimal Combination of Resources 00
The Least-Cost Rule / The Profit-Maximizing Rule / Numerical Illustration
Marginal Productivity Theory of Income Distribution 00
Last Word: Input Substitution: The Case of ATMs 00
Chapter 13
Wage Determination 00
Labor, Wages, and Earnings 00
General Level of Wages 00
Role of Productivity / Real Wages and Productivity / Long-Run Trend of Real 
Wages
A Purely Competitive Labor Market 00
Market Demand for Labor / Market Supply of Labor / Labor Market Equilibrium
Monopsony Model 00
Upward-Sloping Labor Supply to Firm / MRC Higher Than the Wage Rate / 
Equilibrium
Wage and Employment / Examples of Monopsony Power
Three Union Models 00
Demand-Enhancement Model / Exclusive or Craft Union Model / Inclusive or 
Industrial
Union Model / Wage Increases and Unemployment
Bilateral Monopoly Model 00
Indeterminate Outcome of Bilateral Monopoly / Desirability of Bilateral Monopoly
The Minimum-Wage Controversy 00
Case against the Minimum Wage / Case for the Minimum Wage / Evidence and
Conclusions
Wage Differentials 00
Marginal Revenue Productivity / Noncompeting Groups / Compensating Differences /
Market Imperfections
Consider This: My Entire Life 00
Pay for Performance 00
The Principal-Agent Problem Revisited / Addenda: Negative Side Effects of Pay 
for
Performance
Last Word: Are Chief Executive Officers (CEOs) Overpaid? 00
Chapter 13 Appendix: Labor Unions and Their Impacts 00
Chapter 14
Rent, Interest, and Profit 00
Economic Rent 00
Perfectly Inelastic Supply / Equilibrium Rent and Changes in Demand / Land Rent: 
A
Surplus Payment / Application: A Single Tax on Land / Productivity Differences 
and Rent
Differences / Alternative Uses of Land
Interest 00
Loanable Funds Theory of Interest / Extending the Model / Time-Value of Money /
Range of Interest Rates / Pure Rate of Interest / Role of the Interest Rate / 
Application:
Usury Laws
Consider This: That Is Interest 00
Economic Profit 00
Role of the Entrepreneur / Sources of Economic Profit / Functions of Profit
Income Shares 00
Last Word: Determining the Price of Credit 00
Chapter 15
Natural Resource and Energy Economics 00
Resource Supplies: Doom or Boom? 00
Population Growth / Resource Consumption per Person
Consider This: Can Governments Raise Birthrates? 00
Energy Economics 00
Efficient Energy Use / Running Out of Energy?
Consider This: Turning Entrails (and Nearly Anything Else) into Oil 00
Natural Resource Economics 00
Using Present Values to Evaluate Future Possibilities 00
Nonrenewable Resources 00
Present Use versus Future Use / Incomplete Property Rights Lead to Excessive 
Present
Use / Applications
Renewable Resources 00
Forest Management / Optimal Forest Harvesting / Optimal Fisheries Management /
Policies to Limit Catch Sizes
Last Word: Is Economic Growth Bad for the Environment? 00
PART FOUR
Microeconomics of Government 00
Chapter 16
Public Goods, Externalities, and Information Asymmetries 00
Public Goods 00
Private Goods Characteristics / Public Goods Characteristics / Optimal Quantity 
of a
Public Good / Demand for Public Goods / Comparing MB and MC / Cost-Benefit 
Analysis
Consider This: Art for Art?s Sake 00
Externalities 00
Negative Externalities / Positive Externalities / Individual Bargaining: Coase 
Theorem /
Liability Rules and Lawsuits / Government Intervention / A Market-Based Approach 
to
Negative Externalities / Society?s Optimal Amount of Externality Reduction / 
Climate
Change
Information Failures 00
Inadequate Buyer Information about Sellers / Inadequate Seller Information about
Buyers / Qualification
Consider This: ?Lemons? 00
Last Word: Lojack: A Case of Positive Externalities 00
Chapter 17
Public Choice Theory and the Economics of Taxation 00
Revealing Preferences through Majority Voting 00
Inefficient Voting Outcomes / Paradox of Voting / Median-Voter Model
Government Failure 00
Special Interests and Rent Seeking / Clear Benefits, Hidden Costs / Limited and 
Bundled
Choice / Bureaucracy and Inefficiency / Imperfect Institutions
Apportioning the Tax Burden 00
Benefits Received versus Ability to Pay / Progressive, Proportional, and 
Regressive Taxes
Tax Incidence and Efficiency Loss 00
Elasticity and Tax Incidence / Efficiency Loss of a Tax / Probable Incidence of 
U.S. Taxes /
The U.S. Tax Structure
Last Word: ?Government Failure? in the News 00
PART FIVE
Microeconomic Issues and Policies 00
Chapter 18
Antitrust Policy and Regulation 00
The Antitrust Laws 00
Historical Background / Sherman Act of 1890 / Clayton Act of 1914 / Federal 
Trade
Commission Act of 1914 / Celler-Kefauver Act of 1950
Antitrust Policy: Issues and Impacts 00
Issues of Interpretation / Effectiveness of Antitrust Laws
Consider This: Of Catfish and Art (and Other Things in Common) 00
Industrial Regulation 00
Natural Monopoly / Problems with Industrial Regulation / Legal Cartel Theory
Deregulation 00
Social Regulation 00
Distinguishing Features / The Optimal Level of Social Regulation / Two Reminders
Last Word: United States v. Microsoft 00
Chapter 19
Agriculture: Economics and Policy 00
Economics of Agriculture 00
The Short Run: Price and Income Instability / The Long Run: A Declining Industry 
/ Farm-
Household Income
Consider This: Risky Business 00
Economics of Farm Policy 00
Rationale for Farm Subsidies / Background: The Parity Concept / Economics of 
Price
Supports / Reduction of Surpluses
Consider This: Putting Corn in Your Gas Tank 00
Criticisms and Politics 00
Criticisms of the Parity Concept / Criticisms of the Price-Support System / The 
Politics of
Farm Policy
Recent Farm Policies 00
Freedom to Farm Act of 1996 / The Farm Act of 2008
Last Word: The Sugar Program: A Sweet Deal 00
Chapter 20
Income Inequality, Poverty, and Discrimination 00
Facts about Income Inequality 00
Distribution by Income Category / Distribution by Quintiles (Fifths) / The 
Lorenz Curve
and Gini Ratio / Income Mobility: The Time Dimension / Effect of Government
Redistribution
Causes of Income Inequality 00
Ability / Education and Training / Discrimination / Preferences and Risks / 
Unequal
Distribution of Wealth / Market Power / Luck, Connections, and Misfortune
Income Inequality over Time 00
Rising Income Inequality since 1970 / Causes of Growing Inequality
Consider This: Laughing at Shrek 00
Equality versus Efficiency 00
The Case for Equality: Maximizing Total Utility / The Case for Inequality: 
Incentives and
Efficiency / The Equality-Efficiency Trade-off
Consider This: Slicing the Pizza 00
The Economics of Poverty 00
Definition of Poverty / Incidence of Poverty / Poverty Trends / Measurement 
Issues
The U.S. Income-Maintenance System 00
Social Insurance Programs / Public Assistance Programs
Discrimination 00
Economic Analysis of Discrimination 00
Taste-for-Discrimination Model / Statistical Discrimination / Occupational 
Segregation:
The Crowding Model / Cost to Society as Well as to Individuals
Last Word: U.S. Family Wealth and Its Distribution 00
Chapter 21
Health Care 00
The Health Care Industry 00
Twin Problems: Costs and Access 00
High and Rising Health Care Costs 00
Health Care Spending / Quality of Care: Are We Healthier? / Economic 
Implications of
Rising Costs / Too Much Spending?
Limited Access 00
Why the Rapid Rise in Costs? 00
Peculiarities of the Health Care Market / The Increasing Demand for Health Care 
/ Role
of Health Insurance / Supply Factors in Rising Health Care Prices / Relative 
Importance
Consider This: Cancer Fight Goes Nuclear 00
Reform of the Health Care System 00
Universal Access / Cost Containment: Altering Incentives / Recent Laws and 
Proposals
Last Word: Mandatory Health Insurance: Play to Stay 00
Chapter 22
Immigration 00
Number of Immigrants 00
Legal Immigrants / Illegal Immigrants
The Decision to Migrate 00
Earnings Opportunities / Moving Costs / Factors Affecting Costs and Benefits
Economic Effects of Immigration 00
Personal Gains / Impacts on Wage Rates, Efficiency, and Output / Income Shares /
Complications and Modifications / Fiscal Impacts / Research Findings
Consider This: Stars and Stripes 00
The Illegal Immigration Debate 00
Employment Effects / Wage Effects / Price Effects / Fiscal Impacts on Local and 
State
Governments / Other Concerns
Optimal Immigration 00
Last Word: Immigration Reform: The Beaten Path to the Current Stalemate 00
PART SIX
GDP, Growth, and Instability 00
Chapter 23
An Introduction to Macroeconomics 00
Performance and Policy 00
The Miracle of Modern Economic Growth 00
Savings, Investment, and Choosing between Present and Future Consumption / Banks
and Other Financial Institutions
Uncertainty, Expectations, and Shocks 00
Demand Shocks and Flexible Prices / Demand Shocks and Sticky Prices
How Sticky Are Prices? 00
Categorizing Macroeconomic Models Using Price Stickiness 00
Last Word: Will Better Inventory Management Mean Fewer Recessions? 00
Chapter 24
Measuring Domestic Output and National Income 00
Assessing the Economy?s Performance 00
Gross Domestic Product 00
A Monetary Measure / Avoiding Multiple Counting / GDP Excludes Nonproduction
Transactions / Two Ways of Looking at GDP: Spending and Income
The Expenditures Approach 00
Personal Consumption Expenditures (C) / Gross Private Domestic Investment (Ig) /
Government Purchases (G) / Net Exports (Xn) / Putting It All Together: GDP = C + 
Ig + G +
Xn
Consider This: Stock Answers about Flows 00
The Income Approach 00
Compensation of Employees / Rents / Interest / Proprietors? Income / Corporate 
Profits
/ Taxes on Production and Imports / From National Income to GDP
Other National Accounts 00
Net Domestic Product / National Income / Personal Income / Disposable Income / 
The
Circular Flow Revisited
Nominal GDP versus Real GDP 00
Adjustment Process in a One-Product Economy / An Alternative Method / Real-World
Considerations and Data
Shortcomings of GDP 00
Nonmarket Activities / Leisure / Improved Product Quality / The Underground 
Economy
/ GDP and the Environment / Composition and Distribution of Output / Noneconomic
Sources of Well-Being
Last Word: Magical Mystery Tour 00
Chapter 25
Economic Growth 00
Economic Growth 00
Growth as a Goal / Arithmetic of Growth / Growth in the United States
Modern Economic Growth 00
The Uneven Distribution of Growth / Catching Up Is Possible
Consider This: Economic Growth Rates Matter! 00
Institutional Structures That Promote Growth 00
Consider This: <<titl to come>> 00
Ingredients of Growth 00
Supply Factors / Demand Factor / Efficiency Factor
Production Possibilities Analysis 00
Growth and Production Possibilities / Labor and Productivity
Accounting for Growth 00
Labor Inputs versus Labor Productivity / Technological Advance / Quantity of 
Capital /
Education and Training / Economies of Scale and Resource Allocation
Consider This: Women, the Labor Force, and Economic Growth 00
The Recent Productivity Acceleration 00
Reasons for the Productivity Acceleration / Implication: More Rapid Economic 
Growth /
Skepticism about Permanence / What Can We Conclude?
Is Growth Desirable and Sustainable? 00
The Antigrowth View / In Defense of Economic Growth
Last Word: Economic Growth in China 00
Chapter 26
Business Cycles, Unemployment, and Inflation 00
The Business Cycle 00
Phases of the Business Cycle / Causation: A First Glance / Cyclical Impact: 
Durables and
Nondurables
Unemployment 00
Measurement of Unemployment / Types of Unemployment / Definition of Full
Employment / Economic Cost of Unemployment / Noneconomic Costs / International
Comparisons
Consider This: Why Is the Unemployment Rate in Europe So High? 00
Inflation 00
Meaning of Inflation / Measurement of Inflation / Facts of Inflation / Types of 
Inflation /
Complexities
Consider This: Clipping Coins 00
Redistribution Effects of Inflation 00
Who Is Hurt by Inflation? / Who Is Unaffected or Helped by Inflation? / 
Anticipated
Inflation / Other Redistribution Issues
Does Inflation Affect Output?
Cost-Push Inflation and Real Output / Demand-Pull Inflation and Real Output /
Hyperinflation
Last Word: The Stock Market and the Economy 00
PART SEVEN
Macroeconomic Models and Fiscal Policy 00
Chapter 27
Basic Macroeconomic Relationships 00
The Income-Consumption and Income-Saving Relationships 00
The Consumption Schedule / The Saving Schedule / Average and Marginal 
Propensities /
Nonincome Determinants of Consumption and Saving / Other Important 
Considerations
Consider This: What Wealth Effect? 00
The Interest-Rate?Investment Relationship 00
Expected Rate of Return / The Real Interest Rate / Investment Demand Curve / 
Shifts of
the Investment Demand Curve / Instability of Investment
The Multiplier Effect 00
Rationale / The Multiplier and the Marginal Propensities / How Large Is the 
Actual
Multiplier Effect?
Last Word: Squaring the Economic Circle 00
Chapter 28
The Aggregate Expenditures Model 00
Assumptions and Simplifications 00
Consumption and Investment Schedules 00
Equilibrium GDP: C + Ig = GDP 00
Tabular Analysis / Graphical Analysis
Other Features of Equilibrium GDP 00
Saving Equals Planned Investment / No Unplanned Changes in Inventories
Changes in Equilibrium GDP and the Multiplier 00
Adding International Trade 00
Net Exports and Aggregate Expenditures / The Net Export Schedule / Net Exports 
and
Equilibrium GDP / International Economic Linkages
Adding the Public Sector 00
Government Purchases and Equilibrium GDP / Taxation and Equilibrium GDP
Equilibrium versus Full-Employment GDP 00
Recessionary Expenditure Gap / Inflationary Expenditure Gap / Application: The 
U.S.
Recession of 2001 / Application: Full-Employment Output, with Large Negative Net
Exports
Last Word: Say?s Law, the Great Depression, and Keynes 00
Chapter 29
Aggregate Demand and Aggregate Supply 00
Aggregate Demand 00
Aggregate Demand Curve
Changes in Aggregate Demand 00
Consumer Spending / Investment Spending / Government Spending / Net Export
Spending
Aggregate Supply 00
Aggregate Supply in the Immediate Short Run / Aggregate Supply in the Short Run 
/
Aggregate Supply in the Long Run / Focusing on the Short Run
Changes in Aggregate Supply 00
Input Prices / Productivity / Legal-Institutional Environment
Equilibrium and Changes in Equilibrium 00
Increases in AD: Demand-Pull Inflation / Decreases in AD: Recession and Cyclical
Unemployment / Decreases in AS: Cost-Push Inflation / Increases in AS: Full 
Employment
with Price-Level Stability
Consider This: Ratchet Effect 00
Last Word: Has the Impact of Oil Prices Diminished? 00
Chapter 29 Appendix: The Relationship of the Aggregate Demand Curve to the 
Aggregate
Expenditures Model 00
Chapter 30
Fiscal Policy, Deficits, and Debt 00
Fiscal Policy and the AD-AS Model 00
Expansionary Fiscal Policy / Contractionary Fiscal Policy / Policy Options: G or 
T?
Built-In Stability 00
Automatic or Built-In Stabilizers
Evaluating Fiscal Policy 00
Standardized Budget / Recent U.S. Fiscal Policy / Budget Deficits and 
Projections / Social
Security Considerations
Problems, Criticisms, and Complications 00
Problems of Timing / Political Considerations / Future Policy Reversals / 
Offsetting State
and Local Finance / Crowding-Out Effect / Current Thinking on Fiscal Policy
The Public Debt 00
Ownership / Debt and GDP / International Comparisons / Interest Charges
False Concerns 00
Bankruptcy / Burdening Future Generations
Substantive Issues 00
Income Distribution / Incentives / Foreign-Owned Public Debt / Crowding-Out 
Effect
Revisited
Last Word: The Leading Indicators 00
PART EIGHT
Money, Banking, and Monetary Policy 00
Chapter 31
Money and Banking 00
The Functions of Money 00
The Components of the Money Supply 00
Money Definition M1 / Money Definition M2
Consider This: Are Credit Cards Money? 00
What ?Backs? the Money Supply 00
Money as Debt / Value of Money / Money and Prices / Stabilizing Money?s 
Purchasing
Power
The Federal Reserve and the Banking System 00
Historical Background / Board of Governors / The 12 Federal Reserve Banks / FOMC 
/
Commercial Banks and Thrifts / Fed Functions and the Money Supply / Federal 
Reserve
Independence
Recent Developments in Money and Banking 00
The Relative Decline of Banks and Thrifts / Consolidation among Banks and 
Thrifts /
Convergence of Services Provided by Financial Institutions / Globalization of 
Financial
Markets / Electronic Payments
Last Word: The Global Greenback 00
Chapter 32
Money Creation 00
The Fractional Reserve System 00
Illustrating the Idea: The Goldsmiths / Significant Characteristics of 
Fractional Reserve
Banking
A Single Commercial Bank 00
Transaction: Creating a Bank / Transaction 2: Acquiring Property and Equipment /
Transaction 3: Accepting Deposits / Transaction 4: Depositing Reserves in a 
Federal
Reserve Bank / Transaction 5: Clearing a Check Drawn against the Bank
Money-Creating Transactions of a Commercial Bank 00
Transaction 6: Granting a Loan / Transaction 7: Buying Government Securities / 
Profits,
Liquidity, and the Federal Funds Market
The Banking System: Multiple-Deposit Expansion 00
The Banking System?s Lending Potential / The Monetary Multiplier / 
Reversibility: The
Multiple Destruction of Money
Last Word: The Bank Panics of 1930 to 1933 00
Chapter 33
Interest Rates and Monetary Policy 00
Interest Rates 00
The Demand for Money / The Equilibrium Interest Rate / Interest Rates and Bond 
Prices
The Consolidated Balance Sheet of the Federal Reserve Banks 00
Assets / Liabilities
Tools of Monetary Policy 00
Open-Market Operations / The Reserve Ratio / The Discount Rate / Term Auction
Facility / Relative Importance
Targeting the Federal Funds Rate 00
Expansionary Monetary Policy / Restrictive Monetary Policy / The Taylor Rule
Consider This: The Fed as a Sponge 00
Monetary Policy, Real GDP, and the Price Level 00
Cause-Effect Chain / Effects of an Expansionary Monetary Policy
Monetary Policy: Evaluation and Issues 00
Recent U.S. Monetary Policy / Problems and Complications / ?Artful Management? 
pr
?Inflation Targeting??
Consider This: Pushing on a String 00
The ?Big Picture? 00
Last Word: The Mortgage Debt Crisis: The Fed Responds 00
Chapter 34
Financial Economics 00
Financial Investment 00
Present Value 00
Compound Interest / The Present Value Model / Applications
Some Popular Investments 00
Stocks / Bonds / Mutual Funds / Calculating Investment Returns / Asset Pricies 
and
Rates of Return
Arbitrage 00
Risk 00
Diversification / Comparing Risky Investments / Relationship of Risk and Average
Expected Rates of Return / The Risk-Free Rate of Return
The Security Market Line 00
Consider This: Does Ethical Investing Increase Returns? 00
An Increase in the Risk-Free Rate 00
Last Word: Why Do Index Funds Beat Actively Managed Funds? 00
PART NINE
Extensions and Issues 00
Chapter 35
Extending the Analysis of Aggregate Supply 00
From Short Run to Long Run 00
Short-Run Aggregate Supply / Long-Run Aggregate Supply / Long-Run Equilibrium in 
the
AD-AS Model
Applying the Extended AD-AS Model 00
Demand-Pull Inflation in the Extended AD-AS Model / Cost-Push Inflation in the
Extended AD-AS Model / Recession and the Extended AD-AS Model / Ongoing 
Inflation
in the Extended AD-AS Model
The Inflation-Unemployment Relationship 00
The Phillips Curve / Aggregate Supply Shocks and the Phillips Curve
The Long-Run Phillips Curve 00
Short-Run Phillips Curve / Long-Run Vertical Phillips Curve / Disinflation
Taxation and Aggregate Supply 00
Taxes and Incentives to Work / Incentives to Save and Invest / The Laffer Curve 
/
Criticisms of the Laffer Curve / Rebuttal and Evaluation
Consider This: Sherwood Forest 00
Last Word: Tax Cuts for Whom? A Supply-Side Anecdote 00
Chapter 36
Current Issues in Macro Theory and Policy 00
What Causes Macro Instability? 00
Mainstream View / Monetarist View / Real-Business-Cycle View / Coordination 
Failures
Does the Economy ?Self-Correct?? 00
New Classical View of Self-Correction / Mainstream View of Self-Correction
Rules or Discretion? 00
In Support of Policy Rules / In Defense of Discretionary Stabilization Policy / 
Increased
Macro Stability
Consider This: On the Road Again 00
Summary of Alternative Views 00
Last Word: The Taylor Rule: Could a Robot Replace Ben Bernanke? 00
PART TEN
International Economics 00
Chapter 37
International Trade 00
Some Key Facts 00
The Economic Basis for Trade 00
Comparative Advantage: Graphical Analysis 00
Two Isolated Nations / Specializing Based on Comparative Advantage / Terms of 
Trade /
Gains from Trade / Trade with Increasing Costs / The Case for Free Trade
Supply and Demand Analysis of Exports and Imports 00
Supply and Demand in the United States / Supply and Demand in Canada / 
Equilibrium
World Price, Exports, and Imports
Trade Barriers 00
Economic Impact of Tariffs / Economic Impact of Quotas / Net Costs of Tariffs 
and
Quotas
The Case for Protection: A Critical Review 00
Military Self-Sufficiency Argument / Diversification-for-Stability Argument / 
Infant
Industry Argument / Protection-against-Dumping Argument / Increased Domestic
Employment Argument / Cheap Foreign Labor Argument
Consider This: Shooting Yourself in the Foot 00
The World Trade Organization 00
Last Word: The WRO Protests 00
Chapter 38
The Balance of Payments, Exchange Rates, and Trade Deficits 00
International Financial Transactions 00
The Balance of Payments 00
Current Account / Capital and Financial Account / Why the Balance of Payments
Balances / Payments, Deficits, and Surpluses
Flexible Exchange Rates 00
Depreciation and Appreciation / Determinants of Exchange Rates / Flexible Rates 
and
the Balance of Payments / Disadvantages of Flexible Exchange Rates
Consider This: The Big Mac Index 00
Fixed Exchange Rates 00
Use of Reserves / Trade Policies / Exchange Controls and Rationing / Domestic
Macroeconomic Adjustments
The Current Exchange Rate System: The Managed Float 00
Recent U.S. Trade Deficits 00
Causes of the Trade Deficits / Implications of U.S. Trade Deficits
Last Word: Speculation in Currency Markets 00
WEB Supplement 38 www.mcconnell18e.com
Previous International Exchange-Rate Systems 00
The Gold Standard: Fixed Exchange Rates 00
Gold Flows / Domestic Macroeconomic Adjustments / Collapse of the Gold Standard
The Bretton Woods System 00
IMF and Pegged Exchange Rates / Fundamental Imbalances: Adjusting the Peg / 
Demise
of the Bretton Woods System
WEB Chapter 39 www.mcconnell18e.com
The Economics of Developing Countries 00
The Rich and the Poor 00
Classifications / Comparisons / Growth, Decline, and Income Gaps / The Human 
Realities
of Poverty
Obstacles to Economic Development 00
Natural Resources / Human Resources / Capital Accumulation / Technological 
Advance /
Sociocultural and Institutional Factors
The Vicious Circle 00
The Role of Government 00
A Positive Role / Public Sector Problems
The Role of Advanced Nations 00
Expanding Trade / Foreign Aid: Public Loans and Grants / Flows of Private 
Capital
Where from Here? 00
DVC Policies for Promoting Growth / IAC Policies for Fostering DVC Growth
Last Word: Famine in Africa 00
Glossary G-1
Index IND-1

Library of Congress Subject Headings for this publication:

Economics.