Ebook Survey of economics (6th edition): Part 1
Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (3.96 MB, 244 trang )
The University of North Carolina at Charlotte
9201 University City Boulevard
Charlotte, NC 28223-0001
Dear Student:
As a principle of economics instructor for over 25 years, I know from first hand experience
that many students are apprehensive about taking economics. In fact, I still recall vividly
that, as a freshman about to take my first economics course, I had only the vaguest idea of
what this subject was about. To my delight, my freshman principles of economics course
opened my eyes to a new way of thinking. And my years of teaching this powerful reasoning process inspired me to write a text that conveyed my excitement about economics to
students. I thought that a text that truly did this would have to do two things very well: (1)
it would deliver the material in a way that was not boring for students, and (2) it would
provide a pedagogical frame work that assisted the student in understanding and remembering the concepts presented. With these two objectives in mind, here’s a picture of how
I put this book together to help you get the most out of your first economics course:
• My writing style is intended to be engaging, clear, and straightforward. As I was
writing the text, I viewed myself explaining the concepts to a student in my office. As
a result, there is a conversational tone to the text. To avoid boredom, the text uses
a fast-paced, action-packed approach that explains all essential concepts without
becoming an encyclopedia.
• Recognizing that today’s student lives in a world of visual experiences and sound
bites, I combine a very active reading experience with lots of visual reinforcement
and integrated hands-on application analysis, practice, and review. The pedagogical
system I have built for you in this book is structured to maximize your comprehension and retention of the material, and if you use the book’s features effectively, they
should prepare you very well for tests.
In short, my instructional package is designed to provide you with every thing you
need for success in this course. I have worked hard to make my book the most studentfriendly principles of economics text on the market. Please read through the preface, which
takes you on a tour of the special pedagogical features and ancillary materials that have
been created to help you maximize your learning experience with this textbook. If I can
help you in your endeavor, contact me through the “Talk to the Author” feature on the
book’s Web site at />Best Wishes,
Irvin B. Tucker
6e
Survey
of
Economics
Irvin B. Tucker
University of North Carolina Charlotte
Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States
Survey of Economics, Sixth Edition
Irvin B. Tucker
Editorial Director: Jack W. Calhoun
Editor-in-Chief: Alex von Rosenberg
Senior Acquisitions Editor: Steven Scoble
Developmental Editor:
Michael Guendelsberger
© 2009, 2006 South-Western, a part of Cengage Learning
ALL RIGHTS RESERVED. No part of this work covered by the copyright herein
may be reproduced, transmitted, stored or used in any form or by any means
graphic, electronic, or mechanical, including but not limited to photocopying,
recording, scanning, digitizing, taping, Web distribution, information networks,
or information storage and retrieval systems, except as permitted under Section
107 or 108 of the 1976 United States Copyright Act, without the prior written
permission of the publisher.
Editorial Assistant: Laura Cothran
Marketing Communications Manager:
Sarah Greber
Senior Marketing Manager: John Carey
Marketing Coordinator: Suellen Ruttkay
Content Project Manager:
For product information and technology assistance, contact us at
Cengage Learning Academic Resource Center, 1-800-423-0563
For permission to use material from this text or product,
submit all requests online at www.cengage.com/permissions
Further permissions questions can be emailed to
Jacquelyn K Featherly
Technology Project Manager:
Deepak Kumar
Technology Production Analyst:
Adam Grafa
Senior Manufacturing Coordinator:
Sandee Milewski
ExamView® and ExamView Pro® are registered trademarks of FSCreations, Inc.
Windows is a registered trademark of the Microsoft Corporation used herein
under license. Macintosh and Power Macintosh are registered trademarks of
Apple Computer, Inc. used herein under license.
© 2008 Cengage Learning. All Rights Reserved.
Cengage Learning WebTutor™ is a trademark of Cengage Learning.
Production House/Compositor:
Pre-Press PMG
Printer: Quebecor World
Senior Art Director: Michelle Kunkler
Cover and Internal Designer:
Beckmeyer Design
Library of Congress Control Number: 2007942370
Student Edition ISBN 13: 978-0-324-57961-1
Student Edition ISBN 10: 0-324-57961-6
Instructor’s Edition ISBN 13: 978-0-324-58662-6
Instructor’s Edition ISBN 10: 0-324-58662-0
International Student Edition ISBN 13: 978-0-324-58391-5
International Student Edition ISBN 10: 0-324-58391-5
Cover/Internal Illustrations:
© ImageZoo Media, Inc.
South-Western Cengage Learning
5191 Natorp Boulevard
Mason, OH 45040
USA
Cengage Learning products are represented in Canada by
Nelson Education, Ltd.
For your course and learning solutions, visit academic.cengage.com
Purchase any of our products at your local college store or at our
preferred online store www.ichapters.com
Printed in the United States of America
1 2 3 4 5 6 7 11 10 09 08 07
ABOUT THE AUTHOR
Irvin B. Tucker
Irvin B. Tucker has more than 30 years of experience teaching introductory economics at
the University of North Carolina Charlotte and the University of South Carolina. He
earned his B.S. in economics at N.C. State University and his M.A. and Ph.D. in economics
from the University of South Carolina. Dr. Tucker is former director of the Center for Economic Education at the University of North Carolina Charlotte and is a longtime member
of the National Council on Economic Education. He is recognized for his ability to relate
basic principles to economic issues and public policy. His work has received national
recognition by being awarded the Meritorious Levy Award for Excellence in Private
Enterprise Education, the Federation of Independent Business Award for Postsecondary
Educator of the Year in Entrepreneurship and Economic Education, and the Freedom
Foundation,s George Washington Medal for Excellence in Economic Education. In addition, his research has been published in numerous professional journal articles on a wide
range of topics, including industrial organization, entrepreneurship, and economics of education. Dr. Tucker is also the author of the highly successful Economics for Today, fifth
edition, a text for the two-semester principles of economics courses, published by SouthWestern Publishing. Also, Dr. Tucker has coauthored, with professors Allan Layton and
Tim Robins of Queensland University of Technology, a one-semester edition of Economics
for Today for Australia, New Zealand, and Southeast Asia, published by Nelson/Cengage
Learning.
iii
BRIEF CONTENTS
PART 1
INTRODUCTION TO ECONOMICS
Chapter 1
Chapter 2
PART 2
1
Introducing the Economic Way of Thinking
2
Appendix 1: Applying Graphs to Economics
17
Production Possibilities, Opportunity Cost,
and Economic Growth
26
THE MICROECONOMY
42
Chapter 3
Market Demand and Supply
44
Chapter 4
Markets in Action
70
Appendix 4: Applying Supply and Demand Analysis
to Health Care
91
Chapter 5
Price Elasticity of Demand
94
Chapter 6
Production Costs
108
Chapter 7
Perfect Competition
127
Chapter 8
Monopoly
147
Chapter 9
Monopolistic Competition and Oligopoly
171
Chapter 10
Labor Markets and Income Distribution
190
PART 3
THE MACROECONOMY AND FISCAL POLICY
217
Chapter 11
Gross Domestic Product
218
Chapter 12
Business Cycles and Unemployment
237
Chapter 13
Inflation
259
Chapter 14
Aggregate Demand and Supply
277
Appendix 14: The Self-Correcting Aggregate Demand
and Supply Model
300
Chapter 15
Fiscal Policy
312
Chapter 16
The Public Sector
330
Chapter 17
Federal Deficits, Surpluses, and the National Debt
351
PART 4
MONEY, BANKING, AND MONETARY POLICY
371
Chapter 18
Money and the Federal Reserve System
372
Chapter 19
Money Creation
389
Chapter 20
Monetary Policy
408
Appendix 20: Policy Disputes Using the Self-Correcting
Aggregate Demand and Supply Model
429
PART 5
THE INTERNATIONAL ECONOMY
435
Chapter 21
International Trade and Finance
436
Chapter 22
Economies in Transition
465
Chapter 23
Growth and the Less-Developed Countries
483
Appendix A: Answers to Odd-Numbered Study Questions
and Problems
502
Appendix B: Answers to Practice Quizzes
515
Glossary
517
Index
May not be copied, scanned, or duplicated, in whole or in part.
525
CONTENTS
About the Author
iii
Preface
xvii
PART 1
1
INTRODUCTION TO ECONOMICS
1
Chapter 1
Introducing the Economic Way of Thinking
2
The Problem of Scarcity
3
Scarce Resources and Production
Economics: The Study of Scarcity and Choice
3
5
The Methodology of Economics
5
CHECKPOINT:
Hazards of the Economic Way of Thinking
7
7
CHECKPOINT:
8
Can You Prove There Is No Trillion-Dollar Person?
Should Nebraska State Join a Big-Time Athletic Conference?
ECONOMICS IN PRACTICE:
Mops and Brooms, the Boston Snow Index, the Super Bowl,
and other Economic Indicators
9
Why Do Economists Disagree?
9
ECONOMICS IN PRACTICE:
11
12
Does Raising the Minimum Wage Help the Working Poor?
Careers in Economics
Summary
14
14
Study Questions and Problems
14
Checkpoint Answers
15
16
Key Concepts
Practice Quiz
Appendix 1
Applying Graphs to Economics
17
A Direct Relationship
17
An Inverse Relationship
The Slope of a Straight Line
18
20
A Three-Variable Relationship in One Graph
20
A Helpful Study Hint for Using Graphs
22
23
Key Concepts
Study Questions and Problems
23
24
Practice Quiz
24
Summary
v
vi
CONTENTS
Chapter 2
Production Possibilities, Opportunity Cost, and Economic Growth
Three Fundamental Economic Questions
Opportunity Cost
26
27
27
The Production Possibilities Curve
28
29
The Law of Increasing Opportunity Costs
31
Sources of Economic Growth
32
35
Marginal Analysis
ECONOMICS IN PRACTICE:
CHECKPOINT:
FedEx Wasn’t an Overnight Success
What Does a War on Terrorism Really Mean?
Present Investment and the Future Production Possibilities Curve
35
35
Key Concepts
36
38
Summary
38
Study Questions and Problems
Checkpoint Answer
39
40
Practice Quiz
41
INTERNATIONAL ECONOMICS: When
Japan Stumbles, Where Is It on the Curve?
PART 2
THE MICROECONOMY
42
Chapter 3
Market Demand and Supply
44
The Law of Demand
45
The Distinction Between Changes in Quantity Demanded and Changes in Demand
47
Nonprice Determinants of Demand
48
52
CHECKPOINT:
Can Gasoline Become an Exception to the Law of Demand?
The Law of Supply
CHECKPOINT:
Can the Law of Supply Be Repealed?
52
54
Nonprice Determinants of Supply
54
55
ECONOMICS IN PRACTICE:
58
The Distinction Between Changes in Quantity Supplied and Changes in Supply
PC Prices: How Low Can They Go?
A Market Supply and Demand Analysis
INTERNATIONAL ECONOMICS: The
Market Approach to Organ Shortages
59
63
Key Concepts
64
65
Summary
65
Study Questions and Problems
66
CHECKPOINT:
Can the Price System Eliminate Scarcity?
2
vii
CONTENTS
67
68
Checkpoint Answers
Practice Quiz
Chapter 4
Markets in Action
70
Changes in Market Equilibrium
CHECKPOINT:
Why the Higher Price for Lower Cholesterol?
Can the Laws of Supply and Demand Be Repealed?
ECONOMICS IN PRACTICE:
Who Turned Out the Lights in California?
ECONOMICS IN PRACTICE: Rigging
CHECKPOINT:
the Market for Milk
Is There Price Fixing at the Ticket Window?
Market Failure
ECONOMICS IN PRACTICE:
CHECKPOINT:
Can Vouchers Fix Our Schools?
Should There Be a War on Drugs?
71
72
73
75
79
80
80
85
86
Key Concepts
87
Summary
87
88
Study Questions and Problems
89
90
Checkpoint Answers
Practice Quiz
Appendix 4
Applying Supply and Demand Analysis to Health Care
91
Shifts in the Demand for Health Care
91
92
Shifts in the Supply of Health Care
93
The Impact of Health Insurance
Chapter 5
Price Elasticity of Demand
94
Price Elasticity of Demand
95
Price Elasticity of Demand Variations along a Demand Curve
99
101
CHECKPOINT:
Will Fliers Flock to Low Summer Fares?
Determinants of Price Elasticity of Demand
ECONOMICS IN PRACTICE:
CHECKPOINT:
Cigarette Smoking Price Elasticity of Demand
Can Trade Sanctions Affect Elasticity of Demand for Cars?
Key Concepts
Summary
102
103
103
105
105
Checkpoint Answers
106
106
Practice Quiz
107
Study Questions and Problems
viii
CONTENTS
Chapter 6
Production Costs
108
Costs and Profit
CHECKPOINT:
Should the Professor Go or Stay?
109
110
Short-Run Cost Formulas
111
113
Long-Run Production Costs
116
Different Scales of Production
118
120
Short-Run Production Costs
ECONOMICS IN PRACTICE:
Invasion of the Monster Movie Theaters
Summary
122
122
Study Questions and Problems
123
Checkpoint Answer
125
125
Key Concepts
Practice Quiz
Chapter 7
Perfect Competition
127
Perfect Competition
128
Short-Run Profit Maximization for a Perfectly Competitive Firm
130
134
Short-Run Loss Minimization for a Perfectly Competitive Firm
Short-Run Supply Curves Under Perfect Competition
134
134
Long-Run Supply Curves Under Perfect Competition
138
CHECKPOINT:
140
141
CHECKPOINT:
Should Motels Offer Rooms at the Beach for Only $50 a Night?
Are You in Business for the Long Run?
ECONOMICS IN PRACTICE:
Gators Snapping Up Profits
142
142
Key Concepts
Summary
Checkpoint Answers
143
144
Practice Quiz
145
Study Questions and Problems
Chapter 8
Monopoly
147
148
The Monopoly Market Structure
INTERNATIONAL ECONOMICS: Monopolies
Around the World
Price and Output Decisions for a Monopolist
149
151
ix
CONTENTS
Price Discrimination
158
158
CHECKPOINT:
160
ECONOMICS IN PRACTICE:
The Standard Oil Monopoly
Why Don’t Adults Pay More for Popcorn at the Movies?
Comparing Monopoly and Perfect Competition
The Case Against and for Monopoly
ECONOMICS IN PRACTICE:
New York Taxicabs: Where Have All the Fare Flags Gone?
Key Concepts
160
162
164
165
Study Questions and Problems
165
167
Checkpoint Answer
169
Practice Quiz
169
Summary
Chapter 9
Monopolistic Competition and Oligopoly
171
The Monopolistic Competition Market Structure
172
Price and Output Decisions for a Monopolistically Competitive Firm
173
175
ECONOMICS IN PRACTICE:
The Advertising Game
Comparing Monopolistic Competition and Perfect Competition
The Oligopoly Market Structure
Price and Output Decisions for an Oligopolist
INTERNATIONAL ECONOMICS: Major
Cartels in Global Markets
175
178
178
181
An Evaluation of Oligopoly
182
ECONOMICS IN PRACTICE:
183
183
CHECKPOINT:
An Economist Goes to the Final Four
Which Model Fits the Cereal Aisle?
Key Concepts
184
185
Summary
185
Study Questions and Problems
Checkpoint Answer
186
187
Practice Quiz
187
Review of the Four Market Structures
Chapter 10
Labor Markets and Income Distribution
190
The Labor Market Under Perfect Competition
191
Labor Unions: Employer Power
195
198
Union Membership Around the World
Equality Versus Efficiency
200
201
Poverty
202
The Distribution of Income
x
CONTENTS
205
207
Antipoverty Programs
Discrimination
ECONOMICS IN PRACTICE:
Pulling on the Strings of the Welfare Safety Net
208
ECONOMICS IN PRACTICE:
Is a Librarian Worth the Same Wage as an Electrician?
210
211
CHECKPOINT:
Should the Law Protect Women?
212
212
Key Concepts
Summary
Checkpoint Answer
213
213
Practice Quiz
214
Study Questions and Problems
PART 3
THE MACROECONOMY AND FISCAL POLICY
217
Chapter 11
Gross Domestic Product
218
Measuring GDP
219
220
CHECKPOINT:
224
Gross Domestic Product
How Much Does Mario Add to GDP?
GDP in Other Countries
GDP Shortcomings
Other National Income Accounts
ECONOMICS IN PRACTICE:
Is GDP a False Beacon Steering us into the Rocks?
Changing Nominal GDP to Real GDP
CHECKPOINT:
Is the Economy Up or Down?
224
224
226
227
230
232
Key Concepts
233
Summary
233
234
Study Questions and Problems
235
235
Checkpoint Answers
Practice Quiz
Chapter 12
Business Cycles and Unemployment
237
The Business-Cycle Roller Coaster
238
240
CHECKPOINT:
Where Are We on the Business-Cycle Roller Coaster?
Total Spending and the Business Cycle
ECONOMICS IN PRACTICE:
Does a Stock Market Crash Cause Recession?
243
244
Unemployment
245
Types of Unemployment
247
3
xi
CONTENTS
The Goal of Full Employment
249
251
CHECKPOINT:
251
ECONOMICS IN PRACTICE:
Is It a Robot’s World?
What Kind of Unemployment Did the Invention of the Wheel Cause?
255
255
Key Concepts
Summary
Checkpoint Answers
256
256
Practice Quiz
257
Study Questions and Problems
Chapter 13
Inflation
259
Meaning and Measurement of Inflation
260
CHECKPOINT:
263
264
The College Education Price Index
ECONOMICS IN PRACTICE:
How Much More Does It Cost to Laugh?
267
Consequences of Inflation
Demand-Pull and Cost-Push Inflation
INTERNATIONAL ECONOMICS: When
269
the Inflation Rate Is 116,000 Percent,
Prices Change by the Hour
Inflation in Other Countries
Key Concepts
270
271
274
Study Questions and Problems
274
274
Checkpoint Answer
275
Practice Quiz
275
Summary
Chapter 14
Aggregate Demand and Supply
277
The Aggregate Demand Curve
278
Reasons for the Aggregate Demand Curve’s Shape
279
280
Nonprice-Level Determinants of Aggregate Demand
The Aggregate Supply Curve
Three Ranges of the Aggregate Supply Curve
281
285
Nonprice-Level Determinants of Aggregate Supply
287
289
Cost-Push and Demand-Pull Inflation Revisited
291
ECONOMICS IN PRACTICE:
293
294
Changes in the AD–AS Macroeconomic Equilibrium
Was John Maynard Keynes Right?
Increase in Both Aggregate Demand and Aggregate Supply Curves
CHECKPOINT:
Would the Greenhouse Effect Cause Inflation, Unemployment, or Both?
Key Concepts
294
296
xii
CONTENTS
Study Questions and Problems
296
297
Checkpoint Answer
298
Practice Quiz
298
Summary
Appendix 14
The Self-Correcting Aggregate Demand and Supply Model
300
Why the Short-Run Aggregate Supply Curve Is Upward Sloping
300
Why the Long-Run Aggregate Supply Curve Is Vertical
301
Equilibrium in the Self-Correcting AD–AS Model
302
The Impact of an Increase in Aggregate Demand
302
305
The Impact of a Decrease in Aggregate Demand
Increase in the Aggregate Demand and Long-Run Aggregate Supply Curves
306
307
Key Concepts
309
Summary
Study Questions and Problems
309
309
Practice Quiz
310
Changes in Potential Real GDP
Chapter 15
Fiscal Policy
312
Discretionary Fiscal Policy
313
CHECKPOINT:
319
319
Walking the Balanced Budget Tightrope
Automatic Stabilizers
Supply-Side Fiscal Policy
ECONOMICS IN PRACTICE:
The Laffer Curve
321
323
Summary
326
326
Study Questions and Problems
327
Checkpoint Answer
328
328
Key Concepts
Practice Quiz
Chapter 16
The Public Sector
330
Government Size and Growth
Financing Government Budgets
The Art of Taxation
ECONOMICS IN PRACTICE:
Public Choice Theory
Is It Time to Trash the 1040s?
331
334
336
342
343
xiii
CONTENTS
Key Concepts
346
347
Summary
347
Study Questions and Problems
Checkpoint Answer
348
349
Practice Quiz
349
CHECKPOINT:
What Does Public Choice Say about a Budget Deficit?
Chapter 17
Federal Deficits, Surpluses, and the National Debt
351
The Federal Budget Balancing Act
352
Why Worry Over the National Debt?
356
359
ECONOMICS IN PRACTICE:
CHECKPOINT:
The Great Federal Budget Surplus Debate
What’s Behind the National Debt?
ECONOMICS IN PRACTICE:
How Real Is Uncle Sam’s Debt?
360
365
Key Concepts
367
Summary
367
368
Study Questions and Problems
369
369
Checkpoint Answer
Practice Quiz
PART 4
4
MONEY, BANKING, AND MONETARY POLICY
371
Chapter 18
Money and the Federal Reserve System
373
What Makes Money Money?
INTERNATIONAL ECONOMICS: Fixed
372
Assets, or: Why a Loan in Yap Is Hard
375
to Roll Over
Are Debit Cards Money?
375
Other Desirable Properties of Money
What Stands Behind Our Money?
375
376
The Three Money Supply Definitions
376
History of Money in the Colonies
378
379
CHECKPOINT:
The Federal Reserve System
What a Federal Reserve Bank Does
The U.S. Banking Revolution
382
383
Key Concepts
384
386
Summary
386
ECONOMICS IN PRACTICE:
The Wreck of Lincoln Savings and Loan
xiv
CONTENTS
Checkpoint Answer
387
387
Practice Quiz
388
Study Questions and Problems
Chapter 19
Money Creation
389
Money Creation Begins
390
How a Single Bank Creates Money
390
394
Multiplier Expansion of Money by the Banking System
How Monetary Policy Creates Money
CHECKPOINT:
Who Has More Dollar Creation Power?
396
399
Monetary Policy Shortcomings
400
402
Key Concepts
404
Summary
404
405
ECONOMICS IN PRACTICE:
How Does the FOMC Really Work?
Study Questions and Problems
405
406
Checkpoint Answer
Practice Quiz
Chapter 20
Monetary Policy
408
The Keynesian View of the Role of Money
CHECKPOINT:
409
What Does the Money Supply Look Like When the Fed
Targets an Interest Rate?
414
The Monetarist View of the Role of Money
415
420
CHECKPOINT:
A Horse of Which Color?
ECONOMICS IN PRACTICE: Monetary
Policy during the Great Depression
Key Concepts
422
425
Study Questions and Problems
425
426
Checkpoint Answers
427
Practice Quiz
427
Summary
Appendix 20
Policy Disputes Using the Self-Correcting Aggregate
Demand and Supply Model
429
The Classical versus Keynesian Views of Expansionary Policy
429
Classical versus Keynesian Views of Contractionary Policy
430
Summary
432
432
Practice Quiz
xv
CONTENTS
PART 5
5
THE INTERNATIONAL ECONOMY
435
Chapter 21
International Trade and Finance
436
Why Nations Need Trade
437
Comparative and Absolute Advantage
440
441
CHECKPOINT:
Do Nations with an Advantage Always Trade?
441
Free Trade Versus Protectionism
Arguments for Protection
INTERNATIONAL ECONOMICS: World
Trade Slips on Banana Peel
443
444
445
446
Free Trade Agreements
The Balance of Payments
Birth of the Euro
448
CHECKPOINT:
450
450
Should Everyone Keep a Balance of Payments?
Exchange Rates
INTERNATIONAL ECONOMICS: Return
to the Gold Standard?
Key Concepts
454
460
Study Questions and Problems
460
461
Checkpoint Answers
462
Practice Quiz
463
Summary
Chapter 22
Economies in Transition
465
466
Basic Types of Economic Systems
INTERNATIONAL ECONOMICS: Choosing
an Economic System on Another Planet
The “ISMS”
CHECKPOINT:
To Plan or Not to Plan—That Is the Question
Comparing Economic Systems
Economies in Transition
INTERNATIONAL ECONOMICS: China’s
Quest for Free Market Reform
471
472
475
476
476
478
Key Concepts
480
Summary
480
480
Study Questions and Problems
Checkpoint Answer
Practice Quiz
481
481
xvi
CONTENTS
Chapter 23
Growth and the Less-Developed Countries
Comparing Developed and Less-Developed Countries
Economic Growth and Development around the World
CHECKPOINT:
Does Rapid Growth Mean a Country is Catching Up?
INTERNATIONAL ECONOMICS: Hong
Kong: A Leaping Pacific Rim Tiger
483
484
487
490
492
The Helping Hand of Advanced Countries
494
CHECKPOINT:
497
498
Is the Minimum Wage an Antipoverty Solution for Poor Countries?
Key Concepts
Study Questions and Problems
498
498
Checkpoint Answers
499
Practice Quiz
500
Summary
Appendix A: Answers to Odd-Numbered Study Questions and Problems
502
Appendix B: Answers to Practice Quizzes
515
Glossary
517
Index
525
PREFACE
Text with a Mission
The purpose of Survey of Economics, Sixth Edition, is to teach, in an engaging style, the basic operations of the U.S. economy to students who will take a one-term economics course.
Rather than taking an encyclopedic approach to economic concepts, Survey of Economics
focuses on the most important tool in economics—supply and demand analysis—and
applies it to clearly explain real-world economic issues.
Every effort has been made to make Survey of Economics the most “student-friendly”
text on the market. This text was written because so many others expose students to a confusing array of economic analyses that force students to simply memorize in order to pass
the course. Instead, Survey of Economics presents a straightforward and unbiased approach
that effectively teaches the application of basic economic principles. After reading this text,
the student should be able to say “now that economics stuff in the news makes sense.”
How It Fits Together
The text presents the core principles of microeconomics, macroeconomics, and international economics. The first 10 chapters introduce the logic of economic analysis and
develop the core of microeconomic analysis. Here students learn the role of demand and
supply in determining prices in competitive versus monopolistic markets. This part of the
book explores such issues as minimum wage laws, rent control, and pollution. The next 10
chapters develop the macroeconomics part of the text. Using the modern, yet simple, aggregate demand and aggregate supply model, the text explains measurement of and
changes in the price level, national output, and employment in the economy. The study of
macroeconomics also includes how the supply of money and the demand for money influence the economy. Finally, the text concludes with three chapters devoted entirely to international issues. For example, students will learn how the supply of and demand for currencies
determine exchange rates and what the complications of a strong or a weak dollar are.
Text Flexibility
Survey of Economics is easily adapted to an instructor’s preference for the sequencing of
microeconomics and macroeconomics topics. The text can be used in a macroeconomicmicroeconomic sequence by teaching the first four chapters and then Parts 3, 4, and 2.
Also, some instructors prefer to teach Chapter 22, “Economies in Transition,” after Chapter 1. Instructors should note the appendices on the self-correcting aggregate demand and
supply model that follow Chapter 14, “Aggregate Demand and Supply,” and Chapter 20,
“Monetary Policy.” This approach allows instructors to decide whether to cover this
model. An alternative placement for Chapter 21, “International Trade and Finance,” is
also possible. Some instructors say they prefer to emphasize international economics by
placing it before the macroeconomic material in Parts 3 and 4. Other instructors believe
that students should learn both the microeconomic and macroeconomic material before
tackling Chapter 21. Also, a customized text might meet your needs. If so, contact your
South-Western/Cengage Learning sales representative for information.
How Not to Study Economics
To some students, studying economics is a little frightening because many chapters are full
of graphs. Students often make the mistake of preparing for tests by trying to memorize the
xvii
xviii
P R E FA C E
lines of graphs. When their graded tests are returned, the students using this strategy will
probably exclaim, “What happened?” The answer to this query is that the students should
have learned the economic concepts first, then they would understand the graphs as illustrations of these underlying concepts. Stated simply, superficial cramming for economics
quizzes does not work.
For students who are anxious about using graphs, the appendix to Chapter 1 provides
a brief review of graphical analysis. In addition, The Graphing Workshop and the Study
Guide contain step-by-step features on how to interpret graphs.
New to the Sixth Edition
The basic layout of the sixth edition remains the same. The following are major changes:
• Graphs added to summaries of nonprice determinants of demand and supply exhibits in
Chapter 3.
• In Chapter 4, the discussion of market failure has been expanded by adding an exhibit
using demand and supply curves to explain the impact of competitors rigging the personal computer market.
• An exhibit has been added to the chapter on federal deficits, surpluses, and the national
debt showing federal deficits and surpluses as a percentage of GDP over recent years.
• Exhibits were added to the chapter on international trade and finance showing the U.S. average tariff rate over time and countries with the largest trade deficits with the United States.
• Over 200 new questions were added to the test bank.
Motivational Pedagogical Features
Survey of Economics strives to motivate and advance the boundaries of pedagogy with the
following features:
Part Openers
Each part begins with a statement of the overall mission of the chapters in the part. In addition, there is a nutshell introduction of each chapter in relation to the part’s learning
objective.
Chapter Previews
Each chapter begins with a preview designed to pique the student’s interest and reinforce
how the chapter fits into the overall scheme of the book. Each preview appeals to the student’s “Sherlock Holmes” impulses by posing several economics puzzles that can be solved
by understanding the material presented in the chapter.
Margin Definitions
Key concepts introduced in the chapter are highlighted in bold type and then defined in the
text and again in the margins. This feature therefore serves as a quick reference.
Conclusion Statements
Throughout the chapters, highlighted conclusion statements of key concepts appear at the
ends of sections and tie together the material just presented. Students will be able to see
P R E FA C E
quickly if they have understood the main points of the section. A summary of these conclusion statements is provided at the end of each chapter.
Economics in Practice
Each chapter includes boxed inserts that provide the acid test of “relevance to everyday
life.” This feature gives the student an opportunity to encounter timely, real-world
extensions of economic theory. For example, students read about Fred Smith as he writes
an economics term paper explaining his plan to create FedEx. To ensure that the student
wastes no time figuring out which concepts apply to the article, applicable concepts are
listed after each title. Many of these boxed features include quotes from newspaper articles
over a period of years demonstrating that economics concepts remain relevant over time.
International Economics
Today’s economic environment is global. Survey of Economics carefully integrates international topics throughout the text and presents the material using a highly readable and accessible approach designed for students with no training in international economics. All
sections of the text that present international economics are identified by a special global
icon in the text margin and in the International Economics boxes. In addition, the final
three chapters of the book are devoted entirely to international economics.
Analyze the Issue
This feature follows each Economics in Practice and International Economics feature and
asks specific questions that require students to test their knowledge of how the material in
the boxed insert is relevant to the applicable concept. To allow these questions to be used
in classroom discussions or homework assignments, answers are provided in the Instructor’s Manual rather than the text.
Checkpoint
Watch for these! Who said learning economics can’t be fun? This feature is a unique approach to generating interest and critical thinking. These questions spark students to check
their progress by asking challenging economics puzzles in game-like style. Students enjoy
thinking through and answering the questions, and then checking the answers at the end of
the chapter. Students who answer correctly earn the satisfaction of knowing they have
mastered the concepts.
Illustrations
Attractive large graphical presentations with grid lines and real-world numbers are essential
for any successful economics textbook. Each exhibit has been carefully analyzed to ensure
that the key concepts being represented stand out clearly. Brief descriptions are included with
graphs to provide guidance for students as they study the graph. When actual data are used,
the Web site reference is provided so that students can easily locate the data source.
Causation Chains
This will be one of your favorites. The highly successful causation chains are included under many graphs throughout the text. This pedagogical device helps students visualize
complex economic relationships in terms of simple box diagrams that illustrate how one
change causes another change. The Animated Causation Chains Game on the EconCentral
Web site makes it fun to learn. Arrange the blocks correctly and hear the cheers.
xix
xx
P R E FA C E
Key Concepts
Key concepts introduced in the chapter are listed at the end of each chapter and on the
Tucker Web site ( As a study aid, you can
use the key concepts as flashcards to test your knowledge. First state the definition and
then click on the term to check for correctness.
Visual Summaries
Each chapter ends with a brief point-by-point summary of the key concepts. Many of these
summarized points include miniaturized versions of the important graphs and causation
chains that illustrate many of the key concepts. These are intended to serve as visual reminders for students as they finish the chapters and are also useful in reviewing and studying for quizzes and exams.
Study Questions and Problems
The end-of-chapter questions and problems offer a variety of levels ranging from straightforward recall to deeply thought-provoking applications. The answers to odd questions
and problems are in the back of the text. This feature gives students immediate feedback
without requiring the instructor to check their work.
End-of-Chapter Practice Quizzes
A great help before quizzes. Many instructors test students using multiple-choice questions.
For this reason, the final section of each chapter provides the type of multiple-choice
questions given in the instructor’s Test Bank. The answers to all of these questions are
given in the back of the text. In addition, students may visit the Tucker Web site (http://
academic.cengage.com/economics/tucker) and then click the tutorial to obtain a visual explanation of each correct answer and a reference to page numbers in the text that explain
the answer. Here students can actually see the graphs shift as arrows point to key changes
in prices, output, and other key variables.
Online Exercises
These exercises are designed to spark students’ excitement about researching on the Internet by asking them to access economic data and then answer questions related to the
content of the chapter. All Internet exercises are on the Tucker Web site (http://academic.
cengage.com/economics/tucker) with direct links to the addresses so that students will not
have the tedious and error-prone task of entering long Web site addresses.
Internet Links
Visit the Tucker Web site, and find upto-date links pertaining to relevant topics in the subject matter. These addresses provide
students with access to specific content and real-world application. There’s no need to type
in the links; they’re a mere click away!
A Supplements Package Designed for Success
To learn more about the supplements for Survey of Economics, visit the Tucker Web site,
For additional information, contact your
South-Western/Cengage Learning sales representative.
P R E FA C E
Instructor Resources
Instructor’s Manual
This manual, prepared by Douglas Copeland of Johnson County Community College, provides valuable course assistance to instructors. It includes chapter outlines, instructional
objectives, critical thinking/group discussion questions, hints for effective teaching, answers to the Analyze the Issue questions, answers to even-numbered questions and problems, and summary quizzes with answers. Instructor’s Manual ISBN: 032458508X.
Test Bank
Prepared by the text author to match the text, the Test Bank includes more than 4,000
multiple-choice, true-false, and short essay questions. The questions are arranged by the
order presented in the chapter and are grouped with concept headings that make it easy to
select questions. Most questions have been thoroughly tested in the classroom by the author
and are classified by topic and degree of difficulty. Test Bank ISBN: 0324585683.
ExamView
ExamView Computerized Testing Software contains all of the questions in the printed Test
Bank. ExamView is an easy-to-use test creation software compatible with both Microsoft
Windows and Apple Macintosh. Instructors can add or edit questions, instructions, and
answers; select questions by previewing them on the screen; or you can select them randomly or by number. Instructors can also create and administer quizzes online, whether
over the Internet, a local area network (LAN), or a wide area network (WAN). The Examview Testing Software is available on the Instructor’s Resource CD.
PowerPoint Lecture Slides
This state-of-the-art slide presentation provides instructors with visual support in the classroom for each chapter. The package includes two sets of slides: “Lecture Slides,” which contain vivid highlights of important concepts; and “Exhibit Slides,” which illustrate concepts
from the text. Instructors can edit the PowerPoint presentations or create their own exciting
in-class presentations. These slides are available on the Instructor’s Resource CD as well as for
downloading from the Tucker Web site at ( />
Instructor’s Resource CD-ROM
Get quick access to all instructor ancillaries from your desktop. This easy-to-use CD lets
you review, edit, and copy exactly what you need in the format you want. This supplement
contains the Instructor’s Manual, Test Bank, Examview Testing software, and the PowerPoint presentation slides. IRCD ISBN: 0324585721.
Transparency Acetates
Transparency acetates are available by request. Please contact your South-Western/
Cengage Learning sales representative.
Student Resources
Study Guide
The Study Guide is recommended for each student using the text. It is perhaps the best way
to prepare for quizzes. Too often, study guides are not written by the author, and the
xxi
xxii
P R E FA C E
material does not really fit the text. Not so here. The Study Guide was prepared by the text
author to prepare students before they take tests in class. The Study Guide contains
student-friendly features such as the chapter in a nutshell, key concepts review, learning
objectives, fill-in-the-blank questions, step-by-step interpretation of the graph boxes, multiple-choice questions, true-false questions, and crossword puzzles. ISBN: 0324585691.
The New Tucker EconCentral Web Site
academic.cengage.com/econ/tuckersurvey6e/econcentral features a content-rich, robust set
of multimedia learning tools. These web features have been specifically developed with the
student in mind:
• The Graphing Workshop. The Graphing Workshop is a one-stop learning resource for
help in mastering the language of graphs, which is one of the more difficult aspects of an
economics course. It enables students to explore important economic concepts through a
unique learning system made up of tutorials, interactive drawing tools, and exercises
that teach how to interpret, reproduce, and explain graphs.
• ABC News Video Segments. ABC News video segments bring the “real world” right to
the student. These videos illustrate how economic concepts are applied to students’ daily
lives and aid them in learning the material through relevant, current events.
• Ask the Instructor Video Clips. Via streaming video, difficult concepts are explained and
illustrated. These video clips are extremely helpful review and clarification tools if a student has trouble understanding an in-class lecture or is a visual learner.
• InfoApps. With InfoApps, journals such as Business Week, Fortune, and Forbes are a
mere click away. Students have access to text articles from nearly 4,000 scholarly and
popular sources. The EconNews, EconDebate, and EconData features help deepen understanding of the theoretical concepts through hands-on exploration and analysis of the
latest economic news stories, policy debates, and data.
For Students and Instructors
The Wall Street Journal
The Wall Street Journal is synonymous with the latest word on business, economics, and
public policy. Survey of Economics makes it easy for students to apply economic concepts
to this authoritative publication, and for you to bring the most up-to-date, real world
events into your classroom. For a nominal additional cost, Survey of Economics can be
packaged with a card entitling students to a 15-week subscription to both the print and online versions of The Wall Street Journal. Instructors with at least seven students who activate their subscriptions will automatically receive their own free subscription. Contact
your Cengage South-Western sales representative for package pricing and ordering
information.
TextChoice: Economic Issues and Activities
TextChoice is the home of Cengage Learning’s online digital content. TextChoice
provides the fastest, easiest way for you to create your own learning materials. SouthWestern’s Economic Issues and Activities content database includes a wide variety of
high-interest, current event/policy applications as well as classroom activities that are
designed specifically to enhance introductory economics courses. Choose just one reading,
or many—even add your own material—to create an accompaniment to the textbook that
P R E FA C E
is perfectly customized to your course. Contact your Cengage South-Western sales representative for more information.
Tucker Web Site
The Tucker Web site at provides open access to: PowerPoint chapter review slides, Animated Causation Chains, tutorials for the
text’s end-of-chapter Practice Quizzes, online quizzing, direct links to the Internet Activities
mentioned in the text, updates to the text, the opportunity to communicate with the
author, and other downloadable teaching and learning resources.
Acknowldgements
A deep debt of gratitude is owed to the reviewers for their expert assistance. All comments
and suggestions were carefully evaluated and served to improve the final product. To each
of the reviewers of all five editions, I give my sincerest thanks.
Johnson S. Adari
Texas Tech University
Robert D. Crofts
Salem State College
Frederick M. Arnold
Madison Area Technical College
John P. Dahlquist
College of Alameda
Joe H. Atallah
DeVry Institute of Technology
John David
Stark State College
James Q. Aylsworth
Lakeland Community College
James L. Dietz
California State University–Fullerton
Dan Barazcz
College of DuPage
John W. Dorsey
University of Maryland—College Park
William L. Beatty
Tarleton State University
Robert Drago
University of Wisconsin
Gerald E. Breger
University of South Carolina
Tran H. Dung
Wright State University
Dale Bremmer
Rose-Hulman Institute of Technology
John B. Egger
Towson State University
Deborah Bridges
University of Nebraska—Kearney
Mohamed El-Hodiri
University of Kansas
Roy C. Campbell
Mount Olive College
Carole Endres
Wright State University
James E. Clark
Wichita State University
Marianne Ferber
University of Illinois
Elchanan Cohn
University of South Carolina
Arthur Friedberg
Mohawk Valley Community College
Douglas W. Copeland
Johnson County Community College
Tom Fullerton
University of Texas—El Paso
xxiii
