Economics

Chapter 32: A macroeconomic theory of the open economy

To understand the factors that determine a country’s trade balance and how government policies can affect it, we need a macroeconomic theory that explains how an open economy works. The preceding chapter introduced some of the key macroeconomic variables that describe an economy’s relationship with other economies, including net exports, net capital outflow, and the […]

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Chapter 29: The Banking System

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Chapter 25: Production and Growth

When you travel around the world, you see tremendous variation in the standard of living. The average income in a rich country, such as the United States, Japan, or Germany, is more than ten times the average income in a poor country, such as India, Indonesia, or Nigeria. These large differences in income are reflected […]

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Chapter 14: Firm’s behavior

  If your local gas station raised its price for gasoline by 20 percent, it would see a large drop in the amount of gasoline it sold. Its customers would quickly switch to buying their gasoline at other gas stations. By contrast, if your local water company raised the price of water by 20 percent, […]

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Chapter 13: Production and costs

The economy is made up of thousands of firms that produce the goods and services you enjoy every day: General Motors produces automobiles, General Electric produces lightbulbs, and General Mills produces breakfast cereals. Some firms, such as these three, are large; they employ thousands of workers and have thousands of stockholders who share in the […]

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Chapter 6: Market Equilibrium and Government Policy

Economists have two roles. As scientists, they develop and test theories to explain the world around them. As policy advisers, they use their theories to help change the world for the better. The focus of the preceding two chapters has been scientific. We have seen how supply and demand determine the price of a good and the […]

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