Principles of Economics chapters Principles of Principles of Microeconomics Macroeconomics

Principles of Economics chapters Principles of Principles of Microeconomics Macroeconomics chapters chapters 1. Ten Principles of Economics 1 1 2. Thinking Like an Economist 2 2 3. Interdependence and the Gains from Trade 3 3 4. The Market Forces of Supply and Demand 4 4 5. Elasticity and Applications 5 5 6. Supply, Demand, and Government Policies 6 6 7. Consumers, Producers and the Efficiency of Markets 7 7 8. Application: The Costs of Taxation 8 8 9. Application: International Trade 9 9 10. Externalities 10 -- 11. Goods and Common Resources 11 -- 12. The Tax System 12 -- 13. The Costs of Production 13 -- 14. The Competitive Firm 14 -- 15. Monopoly 15 -- 16. Oligopoly 16 -- 17. Monopolistic Competition 17 -- 18. The Markets for the Factors of Production 18 -- 19. Earnings and Discrimination 19 -- 20. The Distribution of Income 20 -- 21. The Theory of Consumer Choice 21 -- 22. Measuring a Nation's Wealth -- 10 23. Measuring the Cost of Living -- 11 24. Production and Growth -- 12 25. Financial Markets: Saving, Investment, -- 13 and Interest Rates -- 26. Unemployment -- 14 27. The Monetary System -- 15 28. Inflation: Its Causes and Costs -- 16 29. Open-Economy Macroeconomics: Basic Concepts -- 17 30. A Macroeconomic Theory of the Open Economy -- 18 31. Aggregate Demand and Aggregate Supply -- 19 32. Monetary and Fiscal Policy Determinants of -- 20 Aggregate Demand 33. The Short-Run Tradeoff between Inflation -- 21 andunemployment 34. Five Debates over Macroeconomic Policy -- 22

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Price of Haircut $8 $7 $6 $5 $4 $3 $2 $1 Sally D Phil A Geraldo C B Oprah 1 2 3 4 Quantity of Haircuts 42)/ "D:BA :!":0"D A B 4%&' 99 49 ) "%&'! 9 * Price Supply A Demand Q 2 Q 1 Quantity 7-9

Price Supply B Demand Q 1 Q 3 Quantity @ %&'$4 :;; 9 Price of Medical Procedure $100 $20 Supply Demand Q 1 Q 2 Quantity of Medical Procedures 4:!; 9 ":;; *+ *+ 99 * 7-10

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Price of Fire Extinguishers Supply (social cost) Social value Demand Q market Q optimum Quantity of Fire Extinguishers,!))'!!!!$!$ 0)!$!! $!! ' /.+'!)$!! '++')! $$$!"!!2! " 5,'''!! $ # '! '!- '$2$ $# $) 10-3

Supply Price of Studded Snow Tires Demand Social value Q optimum Q market Quantity of Studded Snow Tires /''! "$!!3' $# $'" $# $!) Price of Studded Snow Tires Supply Demand Social value Q optimum Q market Quantity of Studded Snow Tires 6 2$ 10-4

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Supply Net Foreign Investment Real Interest Rate r 1 Real Interest Rate Demand Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 2 E 1 Supply D 2 D 1 Quantity of Dollars ) $"* " "'#(& " " """ +$ """ """ 30/18-2

Supply Net Foreign Investment Real Interest Rate r 2 r 1 Real Interest Rate D 1 D 2 Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 2 E 1 S 2 S 1 Quantity of Dollars Demand!,,," "-,",",." %/01" 0101" "'#(&# 30/18-3

Supply Real Exchange Rate E 2 E 1 Quantity of Dollars # %01" '#(&) 01"" " 2 D 1 D 2 S 1 S 2 Net Foreign Investment Real Interest Rate r 1 r 2 Real Interest Rate Demand Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 1 E 2 S 1 S 2 30/18-4 Quantity of Dollars Demand

) %" '#(&3" " S 1 S 2 Net Foreign Investment Real Interest Rate r 1 r 2 Real Interest Rate Demand Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 1 E 2 S 1 S 2 Quantity of Dollars Demand 30/18-5

3 %+01 "" " '#(&4 Supply Net Foreign Investment Real Interest Rate r 1 Real Interest Rate Demand Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 1 E 2 Supply D 2 D 1 Quantity of Dollars 1"+ "+ %+01 " 30/18-6

4 % " " 1"+ "+ " 5 6'" &" '#(&5 Supply Net Foreign Investment Real Interest Rate r 1 Real Interest Rate Demand Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 2 E 1 Supply D 2 D 1 Quantity of Dollars + 30/18-7

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Supply NFI 2 Real Interest Rate r 2 r 1 Real Interest Rate NFI 1 D 1 D 2 Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 1 E 2 S 1 S 2 Quantity of Dollars Demand ( $01 " "01 / 1" "$ 01" 01 6:"/ "'#(&( $+" 30/18-9

%""/ / 1/""/ Supply NFI 1 Real Interest Rate r 1 r 2 Real Interest Rate NFI 2 D 2 D 1 Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 2 E 1 S 2 S 1 Demand Quantity of Canadian Dollars $,01"01 "" '#(&01" +01-."01 $" 30/18-10

Supply NFI 2 Real Interest Rate r 2 r 1 Real Interest Rate NFI 1 D 1 D 2 Quantity of Loanable Funds Net Foreign Investment Real Exchange Rate E 1 E 2 S 1 S 2 Quantity of Dollars Demand # + 6" " + $ "/ / " " $01" 01/01 $"01 30/18-11

Long-run aggregate supply Price Level Short-run aggregate supply Quantity of Output Aggregate demand 2!"#$ %& '(& #)' &&$*#$ '(& #+' &&$*#$&,-,-&.,-.' (& #/'.&&$!' & &!!! &&&01). "#$! 31/19-1

!(& *#$+% % &!!3 &(& *#$ +%.& &!3 &(& 4 &&# $#& $ #. $ #!%& $.#&.&$#5 %$ &&!(!-56-6167 &&61 &6 ( &8 && -56- &!% Long-run aggregate supply A SRAS1 SRAS2 Price Level B C AD1 Quantity of Output AD2 31/19-2

9 &&!&' % &&! &!&. &3 # $& &&&& (!6 &&&-56- -56- (! & -56-6(! 6 &!% Long-run aggregate supply SRAS2 SRAS1 Price Level B A Aggregate demand Quantity of Output :!!! &&&!#'.&!($ )%!/& %&' 1!&!!& &)&&!! 3%&! &2 && 31/19-3

Long-run aggregate supply Short-run aggregate supply Price Level Aggregate demand Quantity of Output! 8%';& 01)!&! <-&01)!01) 2!&!2.<= 7!>!>: >! 7,-. &!&! 7,67%.! '&&!' #? & &&%!! (!!%!!&& $ 7: &! 7 &@ % 31/19-4

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6+%!&8 &!3 &! & (%.#$# +%$#+% $3 A 4-56-(!6&& :&%% &-56-'(! Long-run aggregate supply SRAS1 Price Level A B SRAS2 Aggregate demand Quantity of Output C :&! &!.% :& ' &'%! 96-56-7 &&-56-(! : &:6-56- 31/19-6

:.&& 6 Long-run aggregate supply SRAS2 Price Level B A SRAS1 Aggregate demand Quantity of Output D )%%!% & & E :& & && A(!&6 Long-run aggregate supply Price Level B A Short-run aggregate supply AD 1 AD 2 Quantity of Output 31/19-7

! :& &&&!&>! C!&& (!&6 Long-run aggregate supply SRAS2 Price Level B A SRAS1 Aggregate demand Quantity of Output :&!&!>>&&!!& %&!!!& :&&&& D(!&6 Long-run aggregate supply Price Level A B Short-run aggregate supply AD 2 AD 1 Quantity of Output 31/19-8

:&&!!&! E!6 61-56- (! )? : &61 F )? (&!! <%< %&! 8 & < 3<3 & -56-(! )? (&!&)'&&+'&& /'.&&!&&! %& Long-run aggregate supply SRAS 2 C SRAS 1 Price Level P 3 P 2 P 1 A B AD2 AD1 Y 1 Y 2 Quantity of Output :&!!&'!!!!!&! 31/19-9

&. & 6 &.,-!.!&!,- 6!. 31/19-10

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! " Inflation Rate Unemployment Rate Phillips curve # #$ "" % $" % "&'(% % % " )'(%'(% 33/21-1

Long-run Phillips curve Inflation Rate SRPC 2 SRPC 1 Unemployment Rate "" ""*" & + $ " "% " %, -" % "!% '(% "./ )*"% '(% " " " /")* Long-run Phillips curve Inflation Rate C A B SRPC 1 SRPC 2 Unemployment Rate 33/21-2

!" +% %'(% )% '(% ), Long-run Phillips curve Inflation Rate 5% 3% a d c b SRPC 2 SRPC 1 Unemployment Rate #!% ",0(% '(% ") % 0(% % '(% " )1 LRPC 1 LRPC 2 Inflation Rate 3% SRPC 2 SRPC 1 Unemployment Rate 33/21-3

!% " 2"'(%'(% "" Long-run Phillips curve Inflation Rate SRPC 1 SRPC 2 Unemployment Rate! " % "3! " Long-run Phillips curve Inflation Rate B A Long-run Phillips curve Unemployment Rate 33/21-4

!)% " 4) % '(%'(% Long-run Phillips curve Inflation Rate SRPC 1 SRPC 2 Unemployment Rate 5 6% $"! "!7!7 '(!' "1 % '(% "! 6 % 6 % 33/21-5

Long-run aggregate supply SRAS 1 Long-run Phillips curve Price Level P 1 P 2 P 3 B A C SRAS 2 AD 1 Inflation Rate Π 1 Π 2 Π 3 C A B SRPC 1 AD 2 SRPC 2 Y 2 Y 1 Quantity of Output U 1 U 2 Unemployment Rate $)"!" " '(!' '(!' " % '(%'(%$ " "& % $)" '(!' '(%* " + 81" % Long-run Phillips curve Inflation Rate a b Short-run Phillips curve Unemployment Rate 33/21-6

! " $&)" " " % '(%'(% " 9 )" "$ " " :;:; % ":; % Long-run Phillips curve Inflation Rate a d c e SRPC 2 SRPC 1 Unemployment Rate, $2",," "#'% ",,"& "&' " % '(% 2!"/) 33/21-7

"% '(% " Long-run Phillips curve Inflation Rate SRPC 1 SRPC 2 SRPC 3 5.5% 6% Unemployment Rate 2 $ " "* % 1 $/" $ &/)*" / $)*1&" $"/ )*1&"% 1& 1 3 < % 1&& $ % "/!% 1&"/ 33/21-8

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! " # " "" $ % "& '()*+ '(""& "" " ), '(" " - $!!. """"/01, "20#1 "" 3 4 "")/01", " "20#1 "" "," ","" 34/22-1

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Long-run aggregate supply SRAS 1 SRAS 2 Price Level B A C AD 1 AD 2 Y 2 Y 1 Quantity of Output # * """ " % * "+%-'# ' : : < < ( ( Money supply Long-run aggregate supply Interest Rate r 2 r 1 MD 2 Price Level P 1 P 2 Short-run aggregate supply MD 1 AD 1 Quantity of Money AD 2 Y 2 Y 1 Quantity of Output 34/22-3

*+ ""+%-'%< "+ 9$ 9$ ' : : < < MS 1 MS 2 Long-run aggregate supply Interest Rate r 2 r 3 r 1 MD 2 Price Level Short-run aggregate supply Quantity of Money MD 1 AD 1 AD 3 AD 2 Y 2 Y 3 Y 1 Quantity of Output +! * "+ +, "" *+ " - *,"",,, 34/22-4

> " ",," ",+,"" ", ",""!, ' * +, " """" "". *" &! & "+!& 3 + %-'-+ "'($;( * '(" $;( $" '( +,'( $;( * '( $;( $ '( 34/22-5

Long-run Phillips curve Inflation Rate B C A SRPC 3 SRPC 1 SRPC 2 Unemployment Rate 4 ","" 9 >" ",$$ ", 5 6 ( "" ", * " "" & 34/22-6

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