Macroeconomics, 14th edition By Andrew B. Abel
Email: Richard@qwconsultancy.com
Table of Contents
Preface Perspective Flexibility Part 1 Chapter 1 Chapter 2 Chapter 3 Part 2 Chapter 4 Chapter 5 Part 3 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Part 4 Chapter 10 Chapter 11 Chapter 12 Part 5 Chapter 13 Chapter 14 Chapter 15
MyLab Economics How to Assemble Your Course
iii vii ix
Introduction What is Economics? The Economic Problem Demand and Supply
1 9 21
Monitoring Macroeconomic Performance Measuring the Value of Production: GDP Monitoring Jobs and Inflation
35 47
Macroeconomic Trends Economic Growth Finance, Saving, and Investment Money, the Price Level, and Inflation The Exchange Rate and the Balance of Payments
57 67 77 89
Macroeconomic Fluctuations Aggregate Supply and Aggregate Demand Expenditure Multipliers The Business Cycle, Inflation, and Deflation
101 113 123
Macroeconomic Policy Fiscal Policy Monetary Policy International Trade Policy
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135 145 155
P r e f a c e
Introduction At no time in history has teaching the principles of economics been either more challenging or more important. Your decision to adopt the fourteenth edition of my textbook brings to your task a set of teaching and learning tools that are unmatched in their clarity, relevance, and currency. It is my hope that with the help of these tools, you will enable your students to become as excited about economics as you are. Whether you’re teaching the principles course for the first time or are an experienced teacher at this level, I hope you will find this manual helpful. Each chapter in the manual consists of five parts: 1. The Big Picture: This part provides a discussion of “Where we are going” and “Where we have been.” In other words it helps you fit this particular chapter into the context of what has come before and what will come later. This Big Picture information can help you provide the Big Picture to your students. 2. New in the Fourteenth Edition: Both the major and the minor changes in this thirteenth edition of the textbook are described in this section. The changes noted are especially those that might affect your lecture, so if you are an experienced Parkin user, glance at these to see what’s different in this edition of the textbook. 3. Lecture Notes: We have created a set of ready-to-use lecture notes for each chapter. You will be able to glance over these notes before class, take them into class, and deliver from them your polished lecture. These notes have been heavily revised from the last edition to reflect all the latest changes. These notes provide: • Concise (bullet point) statements of all the key material • Tables and figures that differ from those in the book so that you can use new examples in your lectures • Key terms in bold print and the definitions from the textbook so that you can be sure that you don’t confuse your students by defining a term differently than the book • Highlighted boxes with teaching suggestions that reinforce a key concept, provide an additional anecdote, or suggest how to handle a difficult idea 4. Additional Problems: We present some additional problems that reflect the problems in the textbook. Some of these problems are carried over from the previous edition’s Solutions Manual; others are new for this edition. Solutions for all the additional problems are provided. 5. Additional Discussion Questions: Additional discussion questions have been created for each chapter. Some of these questions are suitable for essay exams; others, more open-ended, are probably best used for classroom discussion. All of them are designed to make your students think and use the material you have been teaching them. Do not forget that the answers and solutions to all the Review Quizzes and the Problems at the end of each chapter are provided in a separate book, the Solutions Manual. The Solutions Manual has both the questions from the textbook and complete answers all in one handy source. You can use these answers .
iv
PREFACE
and solutions to help you grade problems you have assigned to the students or else you can copy them and hand them out directly to the students.
The Electronic Classroom The next Perspective features a special essay designed to assist your teaching in another way by discussing MyEconLab, an incredibly powerful Internet site that is a source of “one-stop shopping” for both your students and you. This essay can help you see all that is available to you—and your students!— on MyEconLab.
Acknowledgments Teaching the principles of economics is a “work in progress.” As new insights are uncovered, as new knowledge emerges, the principles of economics course changes and evolves. So, too, are Parkin’s Microeconomics and Macroeconomics always changing and evolving to remain the best books available for you and your students’ use. Undoubtedly, there remains room for improvement in the text and (says Mark) in this manual. Any corrections, suggestions, or comments that you have will be greatly appreciated. Send your comments on this manual to Mark (markrush@ufl.edu) and your comments on the text to me (michael.parkin@uwo.ca). Michael Parkin University of Western Ontario
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P e r s p e c t i v e
MYLAB ECONOMICS
It’s About Time What if you could spend less time grading, and more time teaching? And what if, at the same time, you could strengthen the incentives for your students to do their homework and come to class better prepared? With MyLab Economics, what sounds like a free lunch is now an achievable goal! MyLab Economics is a turn-key, online solution for your economics course. Using a new and powerful graphing tool and question bank, students can self-test and generate a study plan, and instructors can assign homework and capture grades. With a tight, everything-in-one-place organization around the new testing tool, questions include true-false, multiple choice, fill-ins, numerical, and complete the graph. Many of the questions are generated algorithmically, a feature that rewards understanding and penalizes rote learning. Previous users of The Economics Place and Economics in Action will find MyLab Economics an exciting and powerful resource. Practice tests for each section of the textbook enable students to test their ability and identify the areas in which they need further work. Based on a student’s performance on a practice test, a personalized study plan shows where further study is needed. Once students have received their study plan, additional practice exercises, keyed to the textbook, provide extensive practice and link directly to the eText with animated graphs, an electronic tutorial, and other resources. Users of MyLab Economics will revel in the powerful graphing tool integrated into both the practice tests and practice exercises. This tool enables students to manipulate graphs and see how the concepts, numbers, and graphs are connected. Questions that use the graphing tool (like all other questions) can be submitted and graded online. MyLab Economics saves your students time because it identifies what they have not yet mastered and creates a Personalized Study Plan. This study plan consists of a series of additional practice exercises. Using tutorial instruction launched directly from practice exercises, students can follow step-by-step solutions and tutorials that promote self-discovery. With an abundant collection of interactive resources, students will come to class better prepared. MyLab Economics saves instructors time in answering questions, tracking performance, and giving practice tests. Instructors can customize the practice tests or leave students to use the supplied pre-built tests. Additional MyLab Economics tools include: • eText •
Animated figures
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Electronic tutorials
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Glossary
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Glossary Flashcards
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Office Hours
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Daily Economics in the News updates and archives
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Links to the most useful economic data and information sources on the Internet .