MACRO_GN_Book.indb 1MACRO_GN_Book.indb 16/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved.Product Manager & Lead Editor: Kelsey Gamel Editors: Caitlin Coleman, Caitlin Edahl Assistant Editor: Wright Bailey Creative Services Manager: Trudy Gove Designer: Joel Travis Cover Design: Patrick Thompson Composition & Answer Key Assistance: Quant Systems India Pvt. Ltd. Content Support & Solutions Manager: Laura Brown Content Operations Manager: Robert Alexander A division of Quant Systems, Inc. 546 Long Point Road Mount Pleasant, SC 29464 Copyright © 2021 by Hawkes Learning / Quant Systems, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written consent of the publisher. Printed in the United States of America 10 9 8 7 6 5 4 3 2 11 ISBN: 978-1-64277-351-4 AIE ISBN: 978-1-64277-352-1 MACRO_GN_Book.indb 2MACRO_GN_Book.indb 26/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved.Table of Contents Chapter 0 Math Review 0.1 Addition and Subtraction ...........................................................1 0.2 Multiplication and Division ..........................................................6 0.3 Order of Operations............................................................... .9 0.4 Algebraic Expressions ............................................................ 12 0.5 Basics of Percent ............................................................... . 17 0.6 Linear Equations............................................................... .. 22 0.7 Graphing ............................................................... ........ 26 0.8 Calculating Area ............................................................... .. 43 Chapter 1 Welcome to Economics! 1.1 What Is Economics, and Why Is It Important? ........................................ 45 1.2 Economic Theories, Models, and Systems ........................................... 51 Chapter 2 Choice in a World of Scarcity 2.1 How Individuals Make Choices Based on Their Budget Constraint ...................... 57 2.2 The Production Possibilities Frontier and Social Choices............................... 64 2.3 Confronting Objections to the Economic Approach ................................... 71 Chapter 3 Demand and Supply 3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services ................... 75 3.2 Shifts in Demand and Supply for Goods and Services ................................. 87 3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process ..................... 99 3.4 Price Ceilings and Price Floors .................................................... 110 3.5 Demand, Supply, and Efficiency ................................................... 117 iiiPreface MACRO_GN_Book.indb 3MACRO_GN_Book.indb 36/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved.Chapter 4 Labor and Financial Markets 4.1 Demand and Supply at Work in Labor Markets...................................... 125 4.2 Demand and Supply in Financial Markets .......................................... 135 4.3 The Market System as an Efficient Mechanism for Information ........................ 143 Chapter 5 Elasticity 5.1 Price Elasticity of Demand and Price Elasticity of Supply .............................. 149 5.2 Polar Cases of Elasticity and Constant Elasticity ..................................... 155 5.3 Elasticity and Pricing ............................................................ 160 5.4 Elasticity in Areas Other Than Price................................................ 168 Chapter 6 The Macroeconomic Perspective 6.1 Measuring the Size of the Economy: Gross Domestic Product . . . . . . . . . . . . . . . . . . . . . . . . . 173 6.2 Adjusting Nominal Values to Real Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 6.3 Comparing GDP among Countries................................................. 190 6.4 How Well GDP Measures the Well-Being of Society .................................. 194 Chapter 7 Economic Growth 7.1 The Relatively Recent Arrival of Economic Growth ................................... 199 7.2 Labor Productivity and Economic Growth .......................................... 204 7.3 Components of Economic Growth................................................. 211 7.4 Economic Convergence .......................................................... 216 Chapter 8 Unemployment 8.1 How Economists Define and Compute Unemployment Rate .......................... 221 8.2 Patterns of Unemployment ...................................................... 228 8.3 What Causes Changes in Unemployment over the Short Run ......................... 232 8.4 What Causes Changes in Unemployment over the Long Run .......................... 237 ivTable of Contents MACRO_GN_Book.indb 4MACRO_GN_Book.indb 46/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved.Chapter 9 Inflation 9.1 Tracking Inflation ............................................................... 245 9.2 How to Measure Changes in the Cost of Living ...................................... 250 9.3 How the U.S. and Other Countries Experience Inflation .............................. 257 9.4 The Confusion over Inflation ..................................................... 262 9.5 Indexing and Its Limitations ...................................................... 269 Chapter 10 The International Trade and Capital Flows 10.1 Measuring Trade Balances ....................................................... 275 10.2 Trade Balances and Flows of Financial Capital ...................................... 282 10.3 The National Saving and Investment Identity ....................................... 287 10.4 The Pros and Cons of Trade Deficits and Surpluses .................................. 291 10.5 The Difference between Level of Trade and the Trade Balance ........................ 294 Chapter 11 The Aggregate Demand/Aggregate Supply Model 11.1 Building a Model of Aggregate Demand and Aggregate Supply . . . . . . . . . . . . . . . . . . . . . . . . 297 11.2 Shifts in Aggregate Supply........................................................ 305 11.3 Shifts in Aggregate Demand ...................................................... 310 11.4 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation ............. 316 11.5 Keynes’ Law and Say’s Law in the AD/AS Model...................................... 322 Chapter 12 The Keynesian Perspective 12.1 Aggregate Demand in Keynesian Analysis .......................................... 329 12.2 The Building Blocks of Keynesian Analysis .......................................... 335 12.3 The Phillips Curve ............................................................... 341 12.4 Keynesian Policy and the Keynesian Perspective on Market Forces .................... 347 Chapter 13 The Neoclassical Perspective 13.1 The Building Blocks of Neoclassical Analysis ........................................ 353 13.2 The Policy Implications of the Neoclassical Perspective............................... 362 13.3 Balancing Keynesian and Neoclassical Models ...................................... 370 vPreface MACRO_GN_Book.indb 5MACRO_GN_Book.indb 56/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved.Chapter 14 Money and Banking 14.1 Defining Money by Its Functions .................................................. 373 14.2 Measuring Money: Currency, M1, and M2 .......................................... 379 14.3 The Role of Banks............................................................... 384 14.4 How Banks Create Money........................................................ 391 Chapter 15 Monetary Policy and Bank Regulation 15.1 The Federal Reserve Banking System and Central Banks ............................. 397 15.2 Bank Regulation ............................................................... . 401 15.3 How a Central Bank Executes Monetary Policy ...................................... 407 15.4 Monetary Policy and Economic Outcomes .......................................... 413 15.5 Pitfalls for Monetary Policy ....................................................... 420 Chapter 16 Exchange Rates and International Capital Flows 16.1 How the Foreign Exchange Market Works .......................................... 429 16.2 Demand and Supply Shifts in Foreign Exchange Markets ............................. 435 16.3 Macroeconomic Effects of Exchange Rates ......................................... 441 16.4 Exchange Rate Policies .......................................................... 446 Chapter 17 Government Budgets and Fiscal Policy 17.1 Government Spending........................................................... 453 17.2 Taxation ............................................................... ........ 458 17.3 Federal Deficits and the National Debt ............................................. 462 17.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation ................... 466 17.5 Automatic Stabilizers ............................................................ 471 17.6 Practical Problems with Discretionary Fiscal Policy................................... 475 17.7 The Question of a Balanced Budget ............................................... 481 viTable of Contents MACRO_GN_Book.indb 6MACRO_GN_Book.indb 66/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved.Chapter 18 The Impacts of Government Borrowing 18.1 How Government Borrowing Affects Investment and the Trade Balance................ 483 18.2 Fiscal Policy and the Trade Balance................................................ 488 18.3 How Government Borrowing Affects Private Saving.................................. 493 18.4 Fiscal Policy, Investment, and Economic Growth..................................... 497 Chapter 19 Macroeconomic Policy Around the World 19.1 The Diversity of Countries and Economies across the World .......................... 503 19.2 Improving Countries’ Standards of Living........................................... 508 19.3 Causes of Unemployment and Inflation around the World............................ 513 19.4 Balance of Trade Concerns ....................................................... 518 Chapter 20 International Trade 20.1 Absolute and Comparative Advantage ............................................. 525 20.2 What Happens When a Country Has an Absolute Advantage in All Goods ............... 534 20.3 Intra-industry Trade between Similar Economies .................................... 542 20.4 The Benefits of Reducing Barriers to International Trade ............................. 548 Chapter 21 Globalization and Protectionism 21.1 Protectionism: An Indirect Subsidy from Consumers to Producers ..................... 551 21.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions............. 560 21.3 Arguments in Support of Restricting Imports ....................................... 564 21.4 Trade Policy ............................................................... ..... 571 Answer Key ............................................................... .... 579 viiPreface MACRO_GN_Book.indb 7MACRO_GN_Book.indb 76/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved. Support If you have questions or comments we can be contacted as follows: 24/7 Chat: chat.hawkeslearning.com Phone: 1-800-426-9538 E-mail: support@hawkeslearning.com Web: support.hawkeslearning.com Our support hours are 8:00 a.m. to 10:00 p.m. (ET), Monday through Friday. Hawkes_Support_Page.indd 1Hawkes_Support_Page.indd 16/10/2020 1:14:09 PM6/10/2020 1:14:09 PM viiiSupport MACRO_GN_Book.indb 8MACRO_GN_Book.indb 86/24/2020 11:58:13 AM6/24/2020 11:58:13 AM © All Rights Reser ved.1 Name: Date: Chapter 0 Math Review Lesson 0.1 Addition and Subtraction OBJECTIVES Add real numbers Subtract real numbers Addition with Real Numbers Rules for Addition with Real Numbers To add two real numbers with like signs, 1. add their absolute values . 2. use the common sign . To add two real numbers with unlike signs, 1. subtract their absolute values (the smaller from the larger). 2. use the sign of the number with the larger absolute value . 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