BOOK
Economics: Principles, Applications, and Tools, Global Edition
Arthur O'Sullivan | Steven Sheffrin | Stephen Perez
(2017)
Additional Information
Book Details
Abstract
For courses in the Principles of Economics
Introduces Students to the Basic Concepts of Economics with Timely, Engaging Stories and Applications
Students enter their first economics course hoping to gain a better understanding of the world around them, but often leave with their questions unanswered. Economics: Principles, Applications, and Tools is built upon the author’s philosophy of using basic concepts of economics to explain a wide variety of timely, engaging, real-world economic applications.
The Ninth Edition incorporates updated figures and data, while also emphasizing current topics of interest—including the severe economic downturn of recent years and the latest developments in economic thinking. It also includes newly refined Learning Objectives that introduce the concepts explored in each chapter, along with new applications and chapter-opening stories related to the most up-to-date developments in both macroeconomics and microeconomics.
MyEconLab® not included. Students, if MyEconLab is a recommended/mandatory component of the course, please ask your instructor for the correct ISBN and course ID. MyEconLab should only be purchased when required by an instructor. Instructors, contact your Pearson representative for more information.
MyEconLab is an online homework, tutorial, and assessment program designed to work with this text to engage students and improve results. Within its structured environment, students practice what they learn, test their understanding, and pursue a personalized study plan that helps them better absorb course material and understand difficult concepts.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover\r | Cover | ||
| Title Page | 1 | ||
| Copyright Page | 2 | ||
| About the Authors | 3 | ||
| Contents | 4 | ||
| Preface | 20 | ||
| PART 1 Introduction and Key Principles | 32 | ||
| 1 Introduction: What Is Economics? | 32 | ||
| What Is Economics? | 33 | ||
| Positive versus Normative Analysis | 34 | ||
| The Three Key Economic Questions: What, How, and Who? | 35 | ||
| Economic Models | 35 | ||
| Economic Analysis and Modern Problems | 36 | ||
| Economic View of Traffic Congestion | 36 | ||
| Economic View of Poverty in Africa | 36 | ||
| Economic View of the Current World Recession | 37 | ||
| The Economic Way of Thinking | 37 | ||
| Use Assumptions to Simplify | 38 | ||
| Isolate Variables—Ceteris Paribus | 38 | ||
| Think at the Margin | 38 | ||
| Rational People Respond to Incentives | 39 | ||
| APPLICATION 1 Incentives to Buy Hybrid Vehicles | 39 | ||
| Example: London Addresses Its Congestion Problem | 40 | ||
| APPLICATION 2 Housing Prices in Cuba | 40 | ||
| Preview of Coming Attractions: Macroeconomics | 41 | ||
| Using Macroeconomics to Understand Why Economies Grow | 41 | ||
| Using Macroeconomics to Understand Economic Fluctuations | 41 | ||
| Using Macroeconomics to Make Informed Business Decisions | 42 | ||
| Preview of Coming Attractions: Microeconomics | 42 | ||
| Using Microeconomics to Understand Markets and Predict Changes | 42 | ||
| Using Microeconomics to Make Personal and Managerial Decisions | 42 | ||
| Using Microeconomics to Evaluate Public Policies | 43 | ||
| SUMMARY | 43 | ||
| KEY TERMS | 43 | ||
| EXERCISES | 44 | ||
| APPENDIX: Using Graphs and Percentages | 45 | ||
| USING GRAPHS | 45 | ||
| COMPUTING PERCENTAGE CHANGES AND USING EQUATIONS | 53 | ||
| APPLICATION 3 The Perils of Percentages | 54 | ||
| 2 The Key Principles of Economics | 57 | ||
| The Principle of Opportunity Cost | 58 | ||
| The Cost of College | 58 | ||
| The Cost of Military Spending | 59 | ||
| Opportunity Cost and the Production Possibilities Curve | 59 | ||
| APPLICATION 1 Don’t Forget the Costs of Time and Invested Funds | 61 | ||
| The Marginal Principle | 62 | ||
| How Many Movie Sequels? | 62 | ||
| Renting College Facilities | 63 | ||
| Automobile Emissions Standards | 64 | ||
| Driving Speed and Safety | 64 | ||
| APPLICATION 2 How Fast to Sail? | 65 | ||
| The Principle of Voluntary Exchange | 65 | ||
| Exchange and Markets | 65 | ||
| Online Games and Market Exchange | 66 | ||
| APPLICATION 3 Rory McIlroy and Weed-Wacking | 66 | ||
| The Principle of Diminishing Returns | 67 | ||
| APPLICATION 4 Fertilizer and Crop Yields | 68 | ||
| The Real-Nominal Principle | 68 | ||
| The Design of Public Programs | 69 | ||
| The Value of the Minimum Wage | 69 | ||
| APPLICATION 5 Repaying Student Loans | 70 | ||
| SUMMARY | 70 | ||
| KEY TERMS | 71 | ||
| EXERCISES | 71 | ||
| ECONOMIC EXPERIMENT | 75 | ||
| 3 Exchange and Markets | 76 | ||
| Comparative Advantage and Exchange | 77 | ||
| Specialization and the Gains from Trade | 77 | ||
| Comparative Advantage versus Absolute Advantage | 79 | ||
| The Division of Labor and Exchange | 79 | ||
| Comparative Advantage and International Trade | 80 | ||
| Outsourcing | 80 | ||
| APPLICATION 1 Absolute Disadvantage and Comparative Advantage in Latvia | 81 | ||
| Markets | 82 | ||
| Virtues of Markets | 82 | ||
| The Role of Entrepreneurs | 83 | ||
| Example of the Emergence of Markets: POW Camps | 84 | ||
| APPLICATION 2 The Market for Meteorites | 84 | ||
| Market Failure and the Role of Government | 85 | ||
| Government Enforces the Rules of Exchange | 85 | ||
| Government Can Reduce Economic Uncertainty | 86 | ||
| APPLICATION 3 Property Rights and Urban Slums | 87 | ||
| SUMMARY | 87 | ||
| KEY TERMS | 87 | ||
| EXERCISES 88 | 88 | ||
| 4 Demand, Supply, and Market Equilibrium | 91 | ||
| The Demand Curve | 92 | ||
| The Individual Demand Curve and the Law of Demand | 92 | ||
| From Individual Demand to Market Demand | 94 | ||
| APPLICATION 1 The Law of Demand for Young Smokers | 95 | ||
| The Supply Curve | 95 | ||
| The Individual Supply Curve and the Law of Supply | 96 | ||
| Why Is the Individual Supply Curve Positively Sloped? | 97 | ||
| From Individual Supply to Market Supply | 98 | ||
| Why Is the Market Supply Curve Positively Sloped? | 99 | ||
| APPLICATION 2 Law of Supply and Woolympics | 100 | ||
| Market Equilibrium: Bringing Demand and Supply Together | 100 | ||
| Excess Demand Causes the Price to Rise | 100 | ||
| Excess Supply Causes the Price to Drop | 101 | ||
| APPLICATION 3 Shrinking Wine Lakes | 102 | ||
| Market Effects of Changes in Demand | 102 | ||
| Change in Quantity Demanded versus Change in Demand | 102 | ||
| Increases in Demand Shift the Demand Curve | 103 | ||
| Decreases in Demand Shift the Demand Curve | 105 | ||
| A Decrease in Demand Decreases the Equilibrium Price | 106 | ||
| APPLICATION 4 Chinese Demand and Pecan Prices | 106 | ||
| Market Effects of Changes in Supply | 107 | ||
| Change in Quantity Supplied versus Change in Supply | 107 | ||
| Increases in Supply Shift the Supply Curve | 107 | ||
| An Increase in Supply Decreases the Equilibrium Price | 109 | ||
| Decreases in Supply Shift the Supply Curve | 110 | ||
| A Decrease in Supply Increases the Equilibrium Price | 110 | ||
| Simultaneous Changes in Demand and Supply | 111 | ||
| APPLICATION 5 The Harmattan and the Price of Chocolate | 113 | ||
| Predicting and Explaining Market Changes | 113 | ||
| APPLICATION 6 Why Lower Drug Prices? | 114 | ||
| SUMMARY | 114 | ||
| KEY TERMS | 115 | ||
| EXERCISES | 115 | ||
| ECONOMIC EXPERIMENT | 119 | ||
| PART 2 The Basic Concepts in Macroeconomics | 120 | ||
| 5 Measuring a Nation’s Production and Income | 120 | ||
| The “Flip” Sides of Macroeconomic Activity: Production and Income | 121 | ||
| The Circular Flow of Production and Income | 122 | ||
| APPLICATION 1 Using Value Added to Measure the True Size of Walmart | 123 | ||
| The Production Approach: Measuring a Nation’s Macroeconomic Activity Using Gross Domestic Product | 123 | ||
| The Components of GDP | 125 | ||
| Putting It All Together: The GDP Equation | 128 | ||
| APPLICATION 2 Comparing Recoveries From Recessions | 129 | ||
| The Income Approach: Measuring a Nation’s Macroeconomic Activity Using National Income | 129 | ||
| Measuring National Income | 129 | ||
| Measuring National Income through Value Added | 130 | ||
| An Expanded Circular Flow | 131 | ||
| APPLICATION 3 The Links Between Self-Reported Happiness and GDP | 132 | ||
| A Closer Examination of Nominal and Real GDP | 132 | ||
| Measuring Real versus Nominal GDP | 133 | ||
| How to Use the GDP Deflator | 134 | ||
| Fluctuations in GDP | 135 | ||
| GDP as a Measure of Welfare | 137 | ||
| Shortcomings of GDP as a Measure of Welfare | 137 | ||
| SUMMARY | 138 | ||
| KEY TERMS | 139 | ||
| EXERCISES | 139 | ||
| 6 Unemployment and Inflation | 143 | ||
| Examining Unemployment | 144 | ||
| How Is Unemployment Defined and Measured? | 144 | ||
| Alternative Measures of Unemployment and Why They Are Important | 146 | ||
| Who Are the Unemployed? | 147 | ||
| APPLICATION 1 Declining Labor Force Participation | 148 | ||
| Categories of Unemployment | 149 | ||
| Types of Unemployment: Cyclical, Frictional, and Structural | 149 | ||
| The Natural Rate of Unemployment | 150 | ||
| APPLICATION 2 Less Unemployment Insurance, More Employment? | 151 | ||
| The Costs of Unemployment | 151 | ||
| APPLICATION 3 Social Norms, Unemployment, And Perceived Happiness | 152 | ||
| The Consumer Price Index and the Cost of Living | 153 | ||
| The CPI versus the Chain Index for GDP | 154 | ||
| APPLICATION 4 The Introduction of Cell Phones and the Bias in the CPI | 155 | ||
| Problems in Measuring Changes in Prices | 155 | ||
| Inflation | 155 | ||
| Historical U.S. Inflation Rates | 156 | ||
| The Perils of Deflation | 157 | ||
| The Costs of Inflation | 158 | ||
| Anticipated Inflation | 158 | ||
| Unanticipated Inflation | 158 | ||
| SUMMARY | 159 | ||
| KEY TERMS | 160 | ||
| EXERCISES | 160 | ||
| PART 3 The Economy in the Long Run | 163 | ||
| 7 The Economy at Full Employment | 163 | ||
| Wage and Price Flexibility and Full Employment | 164 | ||
| The Production Function | 164 | ||
| Wages and the Demand and Supply for Labor | 167 | ||
| Labor Market Equilibrium | 168 | ||
| Changes in Demand and Supply | 168 | ||
| APPLICATION 1 The Black Death and Living Standards in Old England | 169 | ||
| Labor Market Equilibrium and Full Employment | 170 | ||
| Using the Full-Employment Model | 171 | ||
| Taxes and Potential Output | 171 | ||
| Real Business Cycle Theory | 172 | ||
| APPLICATION 2 Do European Soccer Stars Change Clubs to Reduce Their Tax-es? | 174 | ||
| APPLICATION 3 Government Policies and Savings Rates | 175 | ||
| Dividing Output among Competing Demands for GDP at Full Employment | 175 | ||
| International Comparisons | 176 | ||
| Crowding Out in a Closed Economy | 176 | ||
| Crowding Out in an Open Economy | 178 | ||
| Crowding In | 178 | ||
| SUMMARY | 179 | ||
| KEY TERMS | 179 | ||
| EXERCISES | 179 | ||
| 8 Why Do Economies Grow? | 183 | ||
| Economic Growth Rates | 184 | ||
| Measuring Economic Growth | 185 | ||
| Comparing the Growth Rates of Various Countries | 186 | ||
| Are Poor Countries Catching Up? | 187 | ||
| APPLICATION 1 Global Warming, Rich Countries, and Poor Countries | 188 | ||
| APPLICATION 2 Behavioral Incentives in Development | 189 | ||
| Capital Deepening | 189 | ||
| Saving and Investment | 190 | ||
| How Do Population Growth, Government, and Trade Affect Capital Deepening? | 191 | ||
| The Key Role of Technological Progress | 193 | ||
| How Do We Measure Technological Progress? | 193 | ||
| Using Growth Accounting | 194 | ||
| APPLICATION 3 Sources of Growth in China and India | 195 | ||
| APPLICATION 4 The End of Growth? | 196 | ||
| What Causes Technological Progress? | 196 | ||
| Research and Development Funding | 196 | ||
| Monopolies That Spur Innovation | 197 | ||
| The Scale of the Market | 197 | ||
| Induced Innovations | 198 | ||
| Education, Human Capital, and the Accumulation of Knowledge | 198 | ||
| New Growth Theory | 199 | ||
| APPLICATION 5 The Role of Political Factors in Economic Growth | 199 | ||
| APPLICATION 6 Culture, Evolution, and Economic Growth | 200 | ||
| A Key Governmental Role: Providing the Correct Incentives and Property Rights | 200 | ||
| APPLICATION 7 Lack of Property Rights Hinders Growth In Peru | 201 | ||
| SUMMARY | 202 | ||
| KEY TERMS | 202 | ||
| EXERCISES 203 | 203 | ||
| APPENDIX: A Model of Capital Deepening | 206 | ||
| PART 4 Economic Fluctuations and Fiscal Policy | 211 | ||
| 9 Aggregate Demand and Aggregate Supply | 211 | ||
| Sticky Prices and Their Macroeconomic Consequences | 212 | ||
| Flexible and Sticky Prices | 212 | ||
| How Demand Determines Output in the Short Run | 213 | ||
| APPLICATION 1 Measuring Price Stickiness in Consumer Markets | 214 | ||
| Understanding Aggregate Demand | 214 | ||
| What Is the Aggregate Demand Curve? | 214 | ||
| The Components of Aggregate Demand | 215 | ||
| Why the Aggregate Demand Curve Slopes Downward | 215 | ||
| Shifts in the Aggregate Demand Curve | 216 | ||
| How the Multiplier Makes the Shift Bigger | 217 | ||
| APPLICATION 2 Two Approaches to Determining the Causes of Reces-sions | 221 | ||
| Understanding Aggregate Supply | 221 | ||
| The Long-Run Aggregate Supply Curve | 221 | ||
| The Short-Run Aggregate Supply Curve | 223 | ||
| Supply Shocks | 224 | ||
| APPLICATION 3 Oil Price Declines and the U.S. Economy | 225 | ||
| From the Short Run to the Long Run | 226 | ||
| SUMMARY | 228 | ||
| KEY TERMS | 228 | ||
| EXERCISES | 228 | ||
| 10 Fiscal Policy | 231 | ||
| The Role of Fiscal Policy | 232 | ||
| Fiscal Policy and Aggregate Demand | 232 | ||
| The Fiscal Multiplier | 233 | ||
| The Limits to Stabilization Policy | 234 | ||
| APPLICATION 1 Increasing Life Expectancy and Aging Populations Spur Costs of Entitlement Programs | 236 | ||
| The Federal Budget | 237 | ||
| Federal Spending | 237 | ||
| Federal Revenues | 238 | ||
| The Federal Deficit and Fiscal Policy | 240 | ||
| Automatic Stabilizers | 240 | ||
| Are Deficits Bad? | 241 | ||
| APPLICATION 2 The Confucius Curve? | 242 | ||
| Fiscal Policy in U.S. History | 242 | ||
| The Depression Era | 242 | ||
| The Kennedy Administration | 242 | ||
| The Vietnam War Era | 243 | ||
| The Reagan Administration | 244 | ||
| The Clinton and George W. Bush Administrations | 244 | ||
| APPLICATION 3 How Effective was the 2009 Stimulus? | 245 | ||
| SUMMARY | 246 | ||
| KEY TERMS | 247 | ||
| EXERCISES | 247 | ||
| 11 The Income-Expenditure Model | 249 | ||
| A Simple Income-Expenditure Model | 250 | ||
| Equilibrium Output | 250 | ||
| Adjusting to Equilibrium Output | 251 | ||
| The Consumption Function | 253 | ||
| Consumer Spending and Income | 253 | ||
| Changes in the Consumption Function | 254 | ||
| APPLICATION 1 Falling Home Prices, the Wealth Effect, and Decreased Con-sumer Spending | 255 | ||
| Equilibrium Output and the Consumption Function | 256 | ||
| Saving and Investment | 257 | ||
| Understanding the Multiplier | 258 | ||
| APPLICATION 2 Multipliers in Good Times and Bad | 260 | ||
| Government Spending and Taxation | 260 | ||
| Fiscal Multipliers | 260 | ||
| Using Fiscal Multipliers | 262 | ||
| Understanding Automatic Stabilizers | 264 | ||
| APPLICATION 3 The Broken Window Fallacy and Keynesian Economics | 265 | ||
| Exports and Imports | 267 | ||
| APPLICATION 4 The Locomotive Effect: How Foreign Demand Affects a Coun-try’s Output | 269 | ||
| The Income-Expenditure Model and the Aggregate Demand Curve | 270 | ||
| SUMMARY | 272 | ||
| KEY TERMS | 272 | ||
| EXERCISES | 272 | ||
| ECONOMIC EXPERIMENT | 275 | ||
| APPENDIX: Formulas for Equilibrium Income and the Multiplier | 276 | ||
| 12 Investment and Financial Markets | 280 | ||
| An Investment: A Plunge into the Unknown | 281 | ||
| APPLICATION 1 Energy Price Uncertainty Reduces Investment Spending | 282 | ||
| Evaluating the Future | 283 | ||
| Understanding Present Value | 283 | ||
| Real and Nominal Interest Rates | 285 | ||
| APPLICATION 2 The Value of an Annuity | 286 | ||
| Understanding Investment Decisions | 287 | ||
| Investment and the Stock Market | 288 | ||
| APPLICATION 3 Underwater Homeowners and Debt Forgiveness | 290 | ||
| How Financial Intermediaries Facilitate Investment | 290 | ||
| When Financial Intermediaries Malfunction | 293 | ||
| APPLICATION 4 Securitization: The Good, The Bad, and The Ugly | 294 | ||
| SUMMARY | 295 | ||
| KEY TERMS | 295 | ||
| EXERCISES | 296 | ||
| ECONOMIC EXPERIMENT | 297 | ||
| PART 5 Money, Banking, and Monetary Policy | 299 | ||
| 13 Money and the Banking System | 299 | ||
| What Is Money? | 300 | ||
| Three Properties of Money | 300 | ||
| Measuring Money in the U.S. Economy | 302 | ||
| APPLICATION 1 Cash as a Sign of Trust | 303 | ||
| How Banks Create Money | 304 | ||
| A Bank’s Balance Sheet: Where the Money Comes from and Where It Goes | 304 | ||
| How Banks Create Money | 305 | ||
| How the Money Multiplier Works | 305 | ||
| How the Money Multiplier Works in Reverse | 307 | ||
| APPLICATION 2 The Growth In Excess Reserves | 308 | ||
| A Banker’s Bank: The Federal Reserve | 309 | ||
| Functions of the Federal Reserve | 309 | ||
| The Structure of the Federal Reserve | 309 | ||
| The Independence of the Federal Reserve | 311 | ||
| What the Federal Reserve Does during a Financial Crisis | 311 | ||
| APPLICATION 3 Stress Tests for the Financial System | 312 | ||
| APPLICATION 4 Coping with the Financial Chaos Caused by the Mortgage Crisis | 312 | ||
| SUMMARY | 313 | ||
| KEY TERMS | 314 | ||
| EXERCISES | 314 | ||
| ECONOMIC EXPERIMENT | 316 | ||
| APPENDIX: Formula For Deposit Creation | 318 | ||
| 14 The Federal Reserve and Monetary Policy | 319 | ||
| The Money Market | 320 | ||
| The Demand for Money | 320 | ||
| APPLICATION 1 Quantitative Easing and the Fed’s Balance Sheet | 322 | ||
| How the Federal Reserve Can Change the Money Supply | 323 | ||
| Open Market Operations | 323 | ||
| Other Tools of the Fed | 324 | ||
| APPLICATION 2 Did Fed Policy Cause the Commodity Boom? | 325 | ||
| How Interest Rates Are Determined: Combining the Demand and Supply of Money | 326 | ||
| Interest Rates and Bond Prices | 327 | ||
| APPLICATION 3 The Effectiveness of Committees | 329 | ||
| Interest Rates and How They Change Investment and Output (GDP) | 329 | ||
| Monetary Policy and International Trade | 331 | ||
| Monetary Policy Challenges for the Fed | 333 | ||
| Lags in Monetary Policy | 333 | ||
| Influencing Market Expectations: From the Federal Funds Rate to Interest Rates on Long-Term Bonds | 334 | ||
| SUMMARY | 335 | ||
| KEY TERMS | 335 | ||
| EXERCISES | 336 | ||
| PART 6 INFLATION, UNEMPLOYMENT, AND ECONOMIC POLICY | 338 | ||
| 15 Modern Macroeconomics: From the Short Run to the Long Run | 338 | ||
| Linking the Short Run and the Long Run | 339 | ||
| The Difference between the Short and Long Run | 339 | ||
| Wages and Prices and Their Adjustment over Time | 339 | ||
| APPLICATION 1 Secular Stagnation? | 340 | ||
| How Wage and Price Changes Move the Economy Naturally Back to Full Employment | 341 | ||
| Returning to Full Employment from a Recession | 341 | ||
| Returning to Full Employment from a Boom | 342 | ||
| Economic Policy and the Speed of Adjustment | 343 | ||
| Liquidity Traps or Zero Lower Bound | 344 | ||
| Political Business Cycles | 345 | ||
| APPLICATION 2 Elections, Political Parties, and Voter Expectations | 345 | ||
| The Economics Behind the Adjustment Process | 346 | ||
| The Long-Run Neutrality of Money | 347 | ||
| Crowding Out in the Long Run | 349 | ||
| APPLICATION 3 Increasing Health-Care Expenditures and Crowding Out | 350 | ||
| Classical Economics in Historical Perspective | 351 | ||
| Say’s Law | 351 | ||
| Keynesian and Classical Debates | 352 | ||
| SUMMARY | 352 | ||
| KEY TERMS | 353 | ||
| EXERCISES | 353 | ||
| 16 The Dynamics of Inflation and Unemployment | 356 | ||
| Money Growth, Inflation, and Interest Rates | 357 | ||
| Inflation in a Steady State | 357 | ||
| How Changes in the Growth Rate of Money Affect the Steady State | 358 | ||
| APPLICATION 1 Shifts in the Natural Rate of Unemployment | 359 | ||
| Understanding the Expectations Phillips Curve: The Relationship between Unemployment and Inflation | 360 | ||
| Are the Public’s Expectations about Inflation Rational? | 360 | ||
| U.S. Inflation and Unemployment in the 1980s | 361 | ||
| Shifts in the Natural Rate of Unemployment in the 1990s | 363 | ||
| APPLICATION 2 Estimating the Natural Real Interest Rate | 364 | ||
| How the Credibility of a Nation’s Central Bank Affects Inflation | 364 | ||
| APPLICATION 3 The Ends of Hyperinflations | 366 | ||
| Inflation and the Velocity of Money | 367 | ||
| Hyperinflation | 369 | ||
| How Budget Deficits Lead to Hyperinflation | 370 | ||
| SUMMARY | 371 | ||
| KEY TERMS | 372 | ||
| EXERCISES | 372 | ||
| ECONOMIC EXPERIMENT | 374 | ||
| 17 Macroeconomic Policy Debates | 375 | ||
| Should We Balance the Federal Budget? | 376 | ||
| The Budget in Recent Decades | 376 | ||
| Five Debates about Deficits | 378 | ||
| APPLICATION 1 Creating The U.S. Federal Fiscal System Through Debt Policy | 382 | ||
| Should the Fed Target Both Inflation and Employment? | 382 | ||
| Two Debates about Targeting | 383 | ||
| APPLICATION 2 Would a Policy Rule Have Prevented the Housing Boom? | 385 | ||
| Should We Tax Consumption Rather than Income? | 385 | ||
| Two Debates about Consumption Taxation | 386 | ||
| APPLICATION 3 Is A Vat in Our Future? | 388 | ||
| SUMMARY | 388 | ||
| KEY TERMS | 389 | ||
| EXERCISES | 389 | ||
| PART 7 The International Economy | 391 | ||
| 18 International Trade and Public Policy | 391 | ||
| Benefits from Specialization and Trade | 392 | ||
| Production Possibilities Curve | 392 | ||
| Comparative Advantage and the Terms of Trade | 394 | ||
| The Consumption Possibilities Curve | 394 | ||
| How Free Trade Affects Employment | 395 | ||
| Protectionist Policies | 396 | ||
| Import Bans | 396 | ||
| Quotas and Voluntary Export Restraints | 397 | ||
| Responses to Protectionist Policies | 398 | ||
| APPLICATION 1 The Impact of Tariffs on the Poor | 399 | ||
| What Are the Rationales for Protectionist Policies? | 399 | ||
| To Shield Workers from Foreign Competition | 400 | ||
| To Nurture Infant Industries until They Mature | 400 | ||
| To Help Domestic Firms Establish Monopolies in World Markets | 400 | ||
| APPLICATION 2 Chinese Imports and Local Economies | 401 | ||
| A Brief History of International Tariff and Trade Agreements | 401 | ||
| Recent Policy Debates and Trade Agreements | 402 | ||
| Are Foreign Producers Dumping Their Products? | 402 | ||
| APPLICATION 3 Does Losing in the WTO Really Matter? | 403 | ||
| Do Trade Laws Inhibit Environmental Protection? | 404 | ||
| APPLICATION 4 How American are American Cars? | 405 | ||
| Do Outsourcing and Trade Cause Income Inequality? | 406 | ||
| Why Do People Protest Free Trade? | 407 | ||
| SUMMARY | 407 | ||
| KEY TERMS | 408 | ||
| EXERCISES | 408 | ||
| 19 The World of International Finance | 411 | ||
| How Exchange Rates Are Determined | 412 | ||
| What Are Exchange Rates? | 412 | ||
| How Demand and Supply Determine Exchange Rates | 413 | ||
| Changes in Demand or Supply | 414 | ||
| Real Exchange Rates and Purchasing Power Parity | 416 | ||
| APPLICATION 1 Big Macs in Switzerland | 418 | ||
| The Current Account, the Financial Account, and the Capital Account | 419 | ||
| Rules for Calculating the Current, Financial, and Capital Accounts | 419 | ||
| APPLICATION 2 Tax Havens and Global Imbalances | 422 | ||
| Fixed and Flexible Exchange Rates | 422 | ||
| Fixing the Exchange Rate | 423 | ||
| Fixed versus Flexible Exchange Rates | 424 | ||
| The U.S. Experience with Fixed and Flexible Exchange Rates | 425 | ||
| Exchange Rate Systems Today | 426 | ||
| Managing Financial Crises | 426 | ||
| APPLICATION 3 A Troubled Euro | 427 | ||
| APPLICATION 4 The Argentine Financial Crisis | 429 | ||
| SUMMARY | 429 | ||
| KEY TERMS | 430 | ||
| EXERCISES | 430 | ||
| ECONOMIC EXPERIMENT | 432 | ||
| PART 8 A Closer Look at Demand and Supply | 433 | ||
| 20 Elasticity: A Measure of Responsiveness | 433 | ||
| The Price Elasticity of Demand | 434 | ||
| Computing Percentage Changes and Elasticities | 434 | ||
| Price Elasticity and the Demand Curve | 435 | ||
| Elasticity and the Availability of Substitutes | 437 | ||
| Other Determinants of the Price Elasticity of Demand | 438 | ||
| APPLICATION 1 A Closer Look at the Elasticity of Demand for Gasoline | 439 | ||
| Using Price Elasticity | 440 | ||
| Predicting Changes in Quantity | 440 | ||
| Price Elasticity and Total Revenue | 440 | ||
| Using Elasticity to Predict the Revenue Effects of Price Changes | 442 | ||
| APPLICATION 2 Vanity Plates and the Elasticity of Demand | 443 | ||
| Elasticity and Total Revenue for a Linear Demand Curve | 443 | ||
| Price Elasticity along a Linear Demand Curve | 443 | ||
| APPLICATION 3 Drones and the Lower Half of a Linear Demand Curve | 445 | ||
| Elasticity and Total Revenue for a Linear Demand Curve | 446 | ||
| Other Elasticities of Demand | 446 | ||
| Income Elasticity of Demand | 446 | ||
| Cross-Price Elasticity of Demand | 446 | ||
| APPLICATION 4 I can Find that Elasticity in Four Clicks! | 447 | ||
| The Price Elasticity of Supply | 448 | ||
| What Determines the Price Elasticity of Supply? | 449 | ||
| The Role of Time: Short-Run versus Long-Run Supply Elasticity | 449 | ||
| Extreme Cases: Perfectly Inelastic Supply and Perfectly Elastic Supply | 450 | ||
| APPLICATION 5 The Short-Run and Long-Run Elasticity of Supply of Coffee | 451 | ||
| Predicting Changes in Quantity Supplied | 451 | ||
| Using Elasticities to Predict Changes in Prices | 451 | ||
| The Price Effects of a Change in Demand | 451 | ||
| The Price Effects of a Change in Supply | 453 | ||
| APPLICATION 6 A Broken Pipeline and the Price of Gasoline | 455 | ||
| SUMMARY | 455 | ||
| KEY TERMS | 456 | ||
| EXERCISES | 456 | ||
| 21 Market Efficiency and Government Intervention | 461 | ||
| Consumer Surplus and Producer Surplus | 462 | ||
| The Demand Curve and Consumer Surplus | 463 | ||
| The Supply Curve and Producer Surplus | 464 | ||
| APPLICATION 1 Consumer Surplus of Internet Service | 465 | ||
| Market Equilibrium and Efficiency | 465 | ||
| Total Surplus Is Lower with a Price below the Equilibrium Price | 465 | ||
| Total Surplus Is Lower with a Price above the Equilibrium Price | 467 | ||
| Efficiency and the Invisible Hand | 467 | ||
| Government Intervention in Efficient Markets | 468 | ||
| APPLICATION 2 Rent Control and Mismatches | 468 | ||
| Controlling Prices—Maximum and Minimum Prices | 469 | ||
| Setting Maximum Prices | 469 | ||
| Rent Control | 469 | ||
| APPLICATION 3 Price Controls and the Shrinking Candy Bar | 471 | ||
| Setting Minimum Prices | 471 | ||
| Controlling Quantities—Licensing and Import Restrictions | 471 | ||
| Taxi Medallions | 472 | ||
| Licensing and Market Efficiency | 473 | ||
| Winners and Losers from Licensing | 473 | ||
| Import Restrictions | 473 | ||
| APPLICATION 4 The Cost of Protecting a Lumber Job | 475 | ||
| Who Really Pays Taxes? | 475 | ||
| Tax Shifting: Forward and Backward | 475 | ||
| Tax Shifting and the Price Elasticity of Demand | 476 | ||
| Cigarette Taxes and Tobacco Land | 477 | ||
| The Luxury Boat Tax and Boat Workers | 477 | ||
| Tax Burden and Deadweight Loss | 478 | ||
| APPLICATION 5 Response to a Luxury Tax | 479 | ||
| SUMMARY | 480 | ||
| KEY TERMS | 480 | ||
| EXERCISES | 480 | ||
| ECONOMIC EXPERIMENT | 484 | ||
| 22 Consumer Choice: Utility Theory and Insights from Neuroscience | 485 | ||
| Traditional Consumer Choice: Utility Theory | 486 | ||
| Consumer Constraints: The Budget Line | 486 | ||
| Total and Marginal Utility | 488 | ||
| The Marginal Principle and the Equimarginal Rule | 489 | ||
| Conditions for Utility Maximization | 491 | ||
| APPLICATION 1 Measuring Diminishing Marginal Utility | 493 | ||
| The Law of Demand and the Individual Demand Curve | 493 | ||
| Effect of a Decrease in Price | 493 | ||
| Income and Substitution Effects of a Decrease in Price | 494 | ||
| The Individual Demand Curve | 496 | ||
| The Neuroscience of Consumer Choice | 496 | ||
| APPLICATION 2 A Revenue-Neutral Gasoline Tax | 497 | ||
| The Neuroscience of Benefit Valuation | 497 | ||
| The Neuroscience of Cost Valuation | 498 | ||
| The Wisdom of Gut Feelings | 499 | ||
| Cognition and Choice | 499 | ||
| Predicting Consumer Choice | 500 | ||
| Fuel for Cognition | 501 | ||
| APPLICATION 3 Coke versus Pepsi in the Prefrontal Cortex | 502 | ||
| Consumer Decisions: Insights from Neuroscience | 502 | ||
| Dietary Choice: Donut versus Apple | 502 | ||
| Present Bias: Spending versus Saving | 504 | ||
| Present Bias and Credit Cards | 505 | ||
| Present Bias and Smoking | 506 | ||
| Gambling as a Consumer Good | 506 | ||
| APPLICATION 4 Taxing Cigarettes to Offset Present Bias | 508 | ||
| SUMMARY | 508 | ||
| EXERCISES | 509 | ||
| APPENDIX: Mental Shortcuts and Consumer Puzzles | 513 | ||
| MENTAL ACCOUNTING AND BUNDLING | 513 | ||
| ANCHORING | 514 | ||
| THE DECOY EFFECT | 514 | ||
| THE APPEAL OF PERCENTAGE CHANGES | 515 | ||
| SUMMARY | 516 | ||
| PART 9 Market Structures and Pricing | 517 | ||
| 23 Production Technology and Cost\r | 517 | ||
| Economic Cost and Economic Profit | 518 | ||
| APPLICATION 1 Opportunity Cost and Entrepreneurship | 519 | ||
| A Firm with a Fixed Production Facility: Short-Run Costs | 519 | ||
| Production and Marginal Product | 519 | ||
| Short-Run Total Cost | 521 | ||
| Short-Run Average Costs | 522 | ||
| Short-Run Marginal Cost | 524 | ||
| The Relationship between Marginal Cost and Average Cost | 524 | ||
| APPLICATION 2 The Rising Marginal Cost of Crude Oil | 526 | ||
| Production and Cost in the Long Run | 526 | ||
| Expansion and Replication | 526 | ||
| Reducing Output with Indivisible Inputs | 528 | ||
| Scaling Down and Labor Specialization | 529 | ||
| Economies of Scale | 529 | ||
| Diseconomies of Scale | 529 | ||
| Actual Long-Run Average-Cost Curves | 530 | ||
| Short-Run versus Long-Run Average Cost | 531 | ||
| APPLICATION 3 Indivisible Inputs and the Cost of Fake Killer Whales | 531 | ||
| Examples of Production Cost | 532 | ||
| Scale Economies in Wind Power | 532 | ||
| The Average Cost of a Music Video | 532 | ||
| Solar versus Nuclear: The Crossover | 533 | ||
| SUMMARY | 534 | ||
| KEY TERMS | 534 | ||
| EXERCISES | 535 | ||
| 24 Perfect Competition | 538 | ||
| Preview of the Four Market Structures | 539 | ||
| APPLICATION 1 Wireless Women in Pakistan | 541 | ||
| The Firm’s Short-Run Output Decision | 541 | ||
| The Total Approach: Computing Total Revenue and Total Cost | 542 | ||
| The Marginal Approach | 543 | ||
| Economic Profit and the Break-Even Price | 545 | ||
| APPLICATION 2 The Break-Even Price for Switchgrass, a Feedstock For Biofuel | 545 | ||
| The Firm’s Shut-Down Decision | 546 | ||
| Total Revenue, Variable Cost, and the Shut-Down Decision | 546 | ||
| The Shut-Down Price | 547 | ||
| Fixed Costs and Sunk Costs | 548 | ||
| APPLICATION 3 Straddling the Zinc Cost Curve | 548 | ||
| Short-Run Supply Curves | 549 | ||
| The Firm’s Short-Run Supply Curve | 549 | ||
| The Short-Run Market Supply Curve | 549 | ||
| Market Equilibrium | 550 | ||
| APPLICATION 4 Short-Run Supply Curve for Cargo | 551 | ||
| The Long-Run Supply Curve for an Increasing-Cost Industry | 551 | ||
| Production Cost and Industry Size | 552 | ||
| Drawing the Long-Run Market Supply Curve | 553 | ||
| Examples of Increasing-Cost Industries: Sugar and Apartments | 553 | ||
| APPLICATION 5 Chinese Coffee Growers Obey the Law of Supply | 554 | ||
| Short-Run and Long-Run Effects of Changes in Demand | 554 | ||
| The Short-Run Response to an Increase in Demand | 554 | ||
| The Long-Run Response to an Increase in Demand | 555 | ||
| APPLICATION 6 The Upward Jump and Downward Slide of Blueberry Prices | 556 | ||
| Long-Run Supply for a Constant-Cost Industry | 557 | ||
| Long-Run Supply Curve for a Constant-Cost Industry | 557 | ||
| Hurricane Andrew and the Price of Ice | 557 | ||
| APPLICATION 7 Economic Detective and the Case of Margarine Prices | 558 | ||
| SUMMARY | 559 | ||
| KEY TERMS | 559 | ||
| EXERCISES | 559 | ||
| 25 Monopoly and Price Discrimination | 564 | ||
| The Monopolist’s Output Decision | 565 | ||
| Total Revenue and Marginal Revenue | 566 | ||
| A Formula for Marginal Revenue | 567 | ||
| Using the Marginal Principle | 568 | ||
| APPLICATION 1 Marginal Revenue From a Baseball Fan | 570 | ||
| The Social Cost of Monopoly | 571 | ||
| Deadweight Loss from Monopoly | 571 | ||
| Rent Seeking: Using Resources to Get Monopoly Power | 573 | ||
| Monopoly and Public Policy | 573 | ||
| APPLICATION 2 Rent Seeking for Tribal Casinos | 574 | ||
| Patents and Monopoly Power | 574 | ||
| Incentives for Innovation | 574 | ||
| Trade-Offs from Patents | 575 | ||
| APPLICATION 3 Bribing the Makers of Generic Drugs | 575 | ||
| Price Discrimination | 576 | ||
| Senior Discounts in Restaurants | 577 | ||
| Price Discrimination and the Elasticity of Demand | 578 | ||
| Examples: Movie Admission versus Popcorn, and Hardback versus Paperback Books | 578 | ||
| APPLICATION 4 Why does Movie Popcorn Cost so Much? | 579 | ||
| SUMMARY | 579 | ||
| KEY TERMS | 580 | ||
| EXERCISES | 580 | ||
| ECONOMIC EXPERIMENT | 583 | ||
| 26 Market Entry and Monopolistic Competition | 584 | ||
| The Effects of Market Entry | 585 | ||
| Entry Squeezes Profits from Three Sides | 586 | ||
| Examples of Entry: Car Stereos, Trucking, and Tires | 587 | ||
| APPLICATION 1 Satellite versus Cable | 587 | ||
| Monopolistic Competition | 588 | ||
| When Entry Stops: Long-Run Equilibrium | 588 | ||
| Differentiation by Location | 589 | ||
| APPLICATION 2 Opening a Motel | 590 | ||
| Trade-Offs with Entry and Monopolistic Competition | 591 | ||
| Average Cost and Variety | 591 | ||
| Monopolistic Competition versus Perfect Competition | 591 | ||
| APPLICATION 3 Happy Hour Pricing | 592 | ||
| Advertising for Product Differentiation | 593 | ||
| APPLICATION 4 Picture of Man versus Picture of Woman | 593 | ||
| SUMMARY | 595 | ||
| KEY TERMS | 595 | ||
| EXERCISES | 595 | ||
| ECONOMIC EXPERIMENT | 597 | ||
| 27 Oligopoly and Strategic Behavior | 599 | ||
| Cartel Pricing and the Duopolists’ Dilemma | 601 | ||
| Price Fixing and the Game Tree | 602 | ||
| Equilibrium of the Price-Fixing Game | 604 | ||
| Nash Equilibrium | 605 | ||
| APPLICATION 1 Failure of the Salt Cartel | 606 | ||
| Overcoming the Duopolists’ Dilemma | 606 | ||
| Low-Price Guarantees | 606 | ||
| Repeated Pricing Games with Retaliation for Underpricing | 607 | ||
| Price Fixing and the Law | 609 | ||
| Price Leadership | 609 | ||
| APPLICATION 2 Low-Price Guarantee Increases Tire Prices | 610 | ||
| Simultaneous Decision Making and the Payoff Matrix | 610 | ||
| Simultaneous Price-Fixing Game | 610 | ||
| The Prisoners’ Dilemma | 611 | ||
| APPLICATION 3 Cheating on the Final Exam: The Cheaters’ Dilemma | 612 | ||
| The Insecure Monopolist and Entry Deterrence | 613 | ||
| Entry Deterrence and Limit Pricing | 614 | ||
| Examples: Aluminum and Campus Bookstores | 615 | ||
| Entry Deterrence and Contestable Markets | 616 | ||
| When Is the Passive Approach Better? | 616 | ||
| APPLICATION 4 Microsoft as an Insecure Monopolist | 617 | ||
| The Advertisers’ Dilemma | 617 | ||
| APPLICATION 5 Got Milk? | 619 | ||
| SUMMARY | 620 | ||
| KEY TERMS | 620 | ||
| EXERCISES | 620 | ||
| ECONOMIC EXPERIMENT | 625 | ||
| 28 Controlling Market Power: Antitrust and Regulation | 626 | ||
| Natural Monopoly | 627 | ||
| Picking an Output Level | 627 | ||
| Will a Second Firm Enter? | 628 | ||
| Price Controls for a Natural Monopoly | 629 | ||
| APPLICATION 1 Public versus Private Waterworks | 630 | ||
| APPLICATION 2 Satellite Radio as a Natural Monopoly | 631 | ||
| Antitrust Policy | 631 | ||
| Breaking Up Monopolies | 632 | ||
| Blocking Mergers | 632 | ||
| Merger Remedy for Wonder Bread | 634 | ||
| Regulating Business Practices | 635 | ||
| A Brief History of U.S. Antitrust Policy | 635 | ||
| APPLICATION 3 Merger of Pennzoil and Quaker State | 636 | ||
| APPLICATION 4 Merger of Office Depot and OfficeMax | 636 | ||
| SUMMARY | 637 | ||
| KEY TERMS | 637 | ||
| EXERCISES | 637 | ||
| PART 10 Externalities and Information | 640 | ||
| 29 Imperfect Information: Adverse Selection and Moral Hazard | 640 | ||
| Adverse Selection for Buyers: The Lemons Problem | 641 | ||
| Uninformed Buyers and Knowledgeable Sellers | 641 | ||
| Equilibrium with All Low-Quality Goods | 642 | ||
| A Thin Market: Equilibrium with Some High-Quality Goods | 643 | ||
| APPLICATION 1 Are Baseball Pitchers Like Used Cars? | 645 | ||
| Evidence of the Lemons Problem | 645 | ||
| Responding to the Lemons Problem | 646 | ||
| Buyers Invest in Information | 646 | ||
| Consumer Satisfaction Scores from ValueStar and eBay | 646 | ||
| Guarantees and Lemons Laws | 647 | ||
| APPLICATION 2 Regulation of the California Kiwifruit Market | 647 | ||
| Adverse Selection for Sellers: Insurance | 648 | ||
| Health Insurance | 648 | ||
| Equilibrium with All High-Cost Consumers | 649 | ||
| Responding to Adverse Selection in Insurance: Group Insurance | 650 | ||
| The Uninsured | 650 | ||
| Other Types of Insurance | 651 | ||
| APPLICATION 3 Genetic Discrimination | 651 | ||
| Insurance and Moral Hazard | 652 | ||
| Insurance Companies and Moral Hazard | 652 | ||
| Deposit Insurance for Savings and Loans | 652 | ||
| APPLICATION 4 Car Insurance and Risky Driving | 653 | ||
| The Economics of Consumer Search | 653 | ||
| Search and the Marginal Principle | 654 | ||
| Reservation Prices and Searching Strategy | 655 | ||
| The Effects of Opportunity Cost and Product Prices on Search Effort | 657 | ||
| APPLICATION 5 Income and Consumer Search | 657 | ||
| SUMMARY | 658 | ||
| KEY TERMS | 658 | ||
| EXERCISES | 658 | ||
| ECONOMIC EXPERIMENT | 662 | ||
| 30 Public Goods and Public Choice | 664 | ||
| External Benefits and Public Goods | 666 | ||
| Public Goods and the Free-Rider Problem | 667 | ||
| Overcoming the Free-Rider Problem | 667 | ||
| APPLICATION 1 Clearing Space Debris | 668 | ||
| APPLICATION 2 Global Weather Observation | 668 | ||
| Private Goods with External Benefits | 669 | ||
| External Benefits from Education | 669 | ||
| External Benefits and the Marginal Principle | 669 | ||
| Other Private Goods That Generate External Benefits | 670 | ||
| APPLICATION 3 External Benefits from Lojack | 671 | ||
| APPLICATION 4 The Private and External Benefit of Trees | 671 | ||
| Public Choice and the Median Voter | 671 | ||
| Voting and the Median-Voter Rule | 672 | ||
| The Median Voter and the Median Location | 673 | ||
| Alternative Models of Government: Self-Interest and Special Interests | 674 | ||
| Which Theory Is Correct? | 675 | ||
| APPLICATION 5 The Median Voter in the NBA | 675 | ||
| SUMMARY | 676 | ||
| KEY TERMS | 676 | ||
| EXERCISES | 676 | ||
| ECONOMIC EXPERIMENT | 678 | ||
| 31 External Costs and Environmental Policy | 680 | ||
| The Optimal Level of Pollution | 681 | ||
| Using the Marginal Principle | 681 | ||
| Example: The Optimal Level of Water Pollution | 682 | ||
| Coase Bargaining | 683 | ||
| APPLICATION 1 Reducing Methane Emissions | 684 | ||
| Taxing Pollution | 685 | ||
| A Firm’s Response to a Pollution Tax | 685 | ||
| The Market Effects of a Pollution Tax | 686 | ||
| Example: A Carbon Tax | 687 | ||
| APPLICATION 2 Washing Carbon Out of the Air | 688 | ||
| Traditional Regulation | 689 | ||
| Uniform Abatement with Permits | 689 | ||
| Command and Control | 689 | ||
| Market Effects of Pollution Regulations | 690 | ||
| Lesson from Dear Abby: Options for Pollution Abatement | 690 | ||
| APPLICATION 3 Options for Reducing CO2 Emissions From International Shipping | 691 | ||
| Marketable Pollution Permits | 691 | ||
| Voluntary Exchange and Marketable Permits | 691 | ||
| Supply, Demand, and the Price of Marketable Permits | 692 | ||
| APPLICATION 4 Weather and the Price of Pollution Permits | 694 | ||
| External Costs from Automobiles | 694 | ||
| External Costs from Pollution | 694 | ||
| External Costs from Congestion | 696 | ||
| External Costs from Collisions | 696 | ||
| APPLICATION 5 Young Drivers and Collisions | 697 | ||
| SUMMARY | 697 | ||
| KEY TERMS | 698 | ||
| EXERCISES | 698 | ||
| ECONOMIC EXPERIMENT | 700 | ||
| PART 11 The Labor Market and Income Distribution | 702 | ||
| 32 The Labor Market and the Distribution of Income | 702 | ||
| The Demand for Labor | 703 | ||
| Labor Demand by an Individual Firm in the Short Run | 703 | ||
| Market Demand for Labor in the Short Run | 705 | ||
| Labor Demand in the Long Run | 706 | ||
| Short-Run versus Long-Run Demand | 707 | ||
| APPLICATION 1 Marginal Revenue Product in Major League Baseball | 707 | ||
| The Supply of Labor | 708 | ||
| The Individual Labor-Supply Decision: How Many Hours? | 708 | ||
| An Example of Income and Substitution Effects | 708 | ||
| The Market Supply Curve for Labor | 709 | ||
| APPLICATION 2 Cabbies Respond to an Increase in the Wage | 710 | ||
| Labor Market Equilibrium | 710 | ||
| Changes in Demand and Supply | 710 | ||
| The Market Effects of the Minimum Wage | 711 | ||
| Why Do Wages Differ across Occupations? | 712 | ||
| The Gender Pay Gap | 713 | ||
| Racial Discrimination | 714 | ||
| Why Do College Graduates Earn Higher Wages? | 714 | ||
| Labor Unions and Wages | 715 | ||
| APPLICATION 3 The Beauty Premium | 716 | ||
| The Distribution of Income | 716 | ||
| Income Distribution in 2007 | 716 | ||
| Recent Changes in the Distribution of Income | 717 | ||
| APPLICATION 4 Trade-Offs From Immigration | 718 | ||
| Public Policy and the Distribution of Income | 719 | ||
| Effects of Tax and Transfer Policies on the Distribution of Income | 719 | ||
| Poverty and Public Policy | 720 | ||
| The Earned Income Tax Credit | 721 | ||
| APPLICATION 5 Expanding the EITC | 722 | ||
| SUMMARY | 722 | ||
| KEY TERMS | 723 | ||
| EXERCISES | 723 | ||
| Glossary | 727 | ||
| Photo Credits | 737 | ||
| Index | 739 |