Test Bank For Economics Principles and Policy 12th Edition By William J. Baumol

Part 1: Getting Acquainted with Economics

Ch 1: What Is Economics?

Ch 1: Contents

Ch 1: Introduction

1-1: Ideas for Beyond the Final Exam

1-2: Inside the Economist’s Tool Kit

Ch 1: Summary

Ch 1: Key Terms

Ch 1: Discussion Questions

Appendix: Using Graphs: A Review

Ch 2: The Economy: Myth and Reality

Ch 2: Contents

Ch 2: Introduction

2-1: The American Economy: A Thumbnail Sketch

2-2: The Inputs: Labor and Capital

2-3: The Outputs: What Does America Produce?

2-4: The Central Role of Business Firms

2-5: What’s Missing from the Picture? Government

2-6: Conclusion: It’s a Mixed Economy

Ch 2: Summary

Ch 2: Key Terms

Ch 2: Discussion Questions

Ch 3: The Fundamental Economic Problem: Scarcity and Choice

Ch 3: Contents

Ch 3: Introduction

3-1: Scarcity, Choice, and Opportunity Cost

3-2: Scarcity and Choice for a Single Firm

3-3: Scarcity and Choice for the Entire Society

3-4: The Concept of Efficiency

3-5: The Three Coordination Tasks of Any Economy

3-6: Task 1. How the Market Fosters Efficient Resource Allocation

3-7: Task 2. Market Exchange and Deciding How Much of Each Good to Produce

3-8: Task 3. How to Distribute the Economy’s Outputs Among Consumers

Ch 3: Summary

Ch 3: Key Terms

Ch 3: Test Yourself

Ch 3: Discussion Questions

Ch 4: Supply and Demand: An Initial Look

Ch 4: Contents

Ch 4: Introduction

4-1: The Invisible Hand

4-2: Demand and Quantity Demanded

4-3: Supply and Quantity Supplied

4-4: Supply and Demand Equilibrium

4-5: Effects of Demand Shifts on Supply-Demand Equilibrium

4-6: Supply Shifts and Supply-Demand Equilibrium

4-7: Battling the Invisible Hand: The Market Fights Back

4-8: A Simple but Powerful Lesson

Ch 4: Summary

Ch 4: Key Terms

Ch 4: Test Yourself

Ch 4: Discussion Questions

Part 2: The Building Blocks of Demand and Supply

Ch 5: Consumer Choice: Individual and Market Demand

Ch 5: Contents

Ch 5: Introduction

5-1: Scarcity and Demand

5-2: Utility: A Tool to Analyze Purchase Decisions

5-3: Behavioral Economics: Are Economic Decisions Really Made “Rationally”?

5-4: Consumer Choice as a Trade-Off: Opportunity Cost

5-5: From Individual Demand Curves to Market Demand Curves

Ch 5: Summary

Ch 5: Key Terms

Ch 5: Test Yourself

Ch 5: Discussion Questions

Appendix: Analyzing Consumer Choice Graphically: Indifference Curve Analysis

Ch 6: Demand and Elasticity

Ch 6: Contents

Ch 6: Introduction

6-1: Elasticity: The Measure of Responsiveness

6-2: Price Elasticity of Demand: Its Effect on Total Revenue and Total Expenditure

6-3: What Determines Demand Elasticity?

6-4: Elasticity as a General Concept

6-5: The Time Period of the Demand Curve and Economic Decision Making

6-6: Real-World Application: Polaroid Versus Kodak

6-7: In Conclusion

Ch 6: Summary

Ch 6: Key Terms

Ch 6: Test Yourself

Ch 6: Discussion Questions

Appendix: How Can We Find a Legitimate Demand Curve from Historical Statistics?

Ch 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

Ch 7: Contents

Ch 7: Introduction

7-1: Short-Run versus Long-Run Costs: What Makes an Input Variable?

7-2: Production, Input Choice, and Cost with One Variable Input

7-3: Multiple Input Decisions: The Choice of Optimal Input Combinations

7-4: Cost and Its Dependence on Output

7-5: Economies of Scale

Ch 7: Summary

Ch 7: Key Terms

Ch 7: Test Yourself

Ch 7: Discussion Question

Appendix: Production Indifference Curves

Ch 8: Output, Price, and Profit: The Importance of Marginal Analysis

Ch 8: Contents

Ch 8: Introduction

8-1: Price and Quantity: One Decision, Not Two

8-2: Total Profit: Keep Your Eye on the Goal

8-3: Economic Profit and Optimal Decision Making

8-4: Marginal Analysis and Maximization of Total Profit

8-5: Generalization: The Logic of Marginal Analysis and Maximization

8-6: Conclusion: The Fundamental Role of Marginal Analysis

8-7: The Theory and Reality: A Word of Caution

Ch 8: Summary

Ch 8: Key Terms

Ch 8: Test Yourself

Ch 8: Discussion Question

Appendix: The Relationships among Total, Average, and Marginal Data

Ch 9: Securities, Business Finance, and the Economy: The Tail That Wags the Dog?

Ch 9: Contents

Ch 9: Introduction

9-1: Corporations and Their Unique Characteristics

9-2: Stock Exchanges and Their Functions

9-3: Speculation

9-4: Betting on Securities: Risks to the Entire Economy

Ch 9: Summary

Ch 9: Key Terms

Ch 9: Test Yourself

Ch 9: Discussion Questions

Appendix: Buying Stocks and Bonds

Part 3: Markets and the Price System

Ch 10: The Firm and the Industry Under Perfect Competition

Ch 10: Contents

Ch 10: Introduction

10-1: Perfect Competition Defined

10-2: The Perfectly Competitive Firm

10-3: The Perfectly Competitive Industry

10-4: Perfect Competition and Economic Efficiency

Ch 10: Summary

Ch 10: Key Terms

Ch 10: Test Yourself

Ch 10: Discussion Questions

Ch 11: Monopoly

Ch 11: Contents

Ch 11: Introduction

11-1: Monopoly Defined

11-2: The Monopolist’s Supply Decision

11-3: Can Anything Good Be Said About Monopoly?

11-4: Price Discrimination Under Monopoly

Ch 11: Summary

Ch 11: Key Terms

Ch 11: Test Yourself

Ch 11: Discussion Questions

Ch 12: Between Competition and Monopoly

Ch 12: Contents

Ch 12: Introduction

12-1: Monopolistic Competition

12-2: Oligopoly

12-3: Monopolistic Competition, Oligopoly, and Public Welfare

12-4: A Glance Backward: Comparing the Four Market Forms

Ch 12: Summary

Ch 12: Key Terms

Ch 12: Test Yourself

Ch 12: Discussion Questions

Ch 13: Limiting Market Power: Regulation and Antitrust

Ch 13: Contents

Ch 13: Introduction

13-1: The Public Interest Issue: Monopoly Power versus Mere Size

13-2: Antitrust Laws and Policies

13-3: Measuring Market Power: Concentration

13-4: A Crucial Problem for Antitrust: The Resemblance of Monopolization and Vigorous Competition

13-5: Anticompetitive Practices and Antitrust

13-6: Use of Antitrust Laws to Prevent Competition

13-7: What Is Regulation?

13-8: Some Objectives of Regulation

13-9: Two Key Issues That Face Regulators

13-10: The Pros and Cons of “Bigness”

13-11: Deregulation

13-12: Concluding Observations

Ch 13: Summary

Ch 13: Key Terms

Ch 13: Discussion Questions

Part 4: The Virtues and Limitations of Markets

Ch 14: The Case for Free Markets: The Price System

Ch 14: Contents

Ch 14: Introduction

14-1: Efficient Resource Allocation and Pricing

14-2: Scarcity and the Need to Coordinate Economic Decisions

14-3: How Perfect Competition Achieves Efficiency: A Graphic Analysis

14-4: How Perfect Competition Achieves Optimal Output: Marginal Analysis

14-5: Toward Assessment of the Price Mechanism

Ch 14: Summary

Ch 14: Key Terms

Ch 14: Test Yourself

Ch 14: Discussion Questions

Ch 15: The Shortcomings of Free Markets

Ch 15: Contents

Ch 15: Introduction

15-1: What Does the Market Do Poorly?

15-2: Efficient Resource Allocation: A Review

15-3: Externalities: Getting the Prices Wrong

15-4: Provision of Public Goods

15-5: Allocation of Resources Between Present and Future

15-6: Some Other Sources of Market Failure

15-7: Market Failure and Government Failure

15-8: The Cost Disease of Some Vital Services: Invitation to Government Failure

15-9: The Market System on Balance

15-10: Epilogue: The Unforgiving Market, Its Gift of Abundance, and Its Dangerous Friends

Ch 15: Summary

Ch 15: Key Terms

Ch 15: Test Yourself

Ch 15: Discussion Questions

Ch 16: Externalities, the Environment, and Natural Resources

Ch 16: Contents

Ch 16: Introduction

16-1: The Economics of Environmental Protection

16-2: Review—Externalities: A Critical Shortcoming of the Market Mechanism

16-3: Basic Approaches to Environmental Policy

16-4: Two Cheers for the Market

16-5: The Economics of Natural Resources

16-6: Economic Analysis: The Free Market and Pricing of Depletable Natural Resources

16-7: Actual Resource Prices in the Twentieth Century

Ch 16: Summary

Ch 16: Key Terms

Ch 16: Test Yourself

Ch 16: Discussion Questions

Ch 17: Taxation and Resource Allocation

Ch 17: Contents

Ch 17: Introduction

17-1: The Level and Types of Taxation

17-2: The Federal Tax System

17-3: The State and Local Tax System

17-4: The Concept of Equity in Taxation

17-5: The Concept of Efficiency in Taxation

17-6: Shifting the Tax Burden: Tax Incidence

17-7: When Taxation Can Improve Efficiency

17-8: Equity, Efficiency, and the Optimal Tax

Ch 17: Summary

Ch 17: Key Terms

Ch 17: Test Yourself

Ch 17: Discussion Questions

Part 5: The Distribution of Income

Ch 18: Pricing the Factors of Production

Ch 18: Contents

Ch 18: Introduction

18-1: The Principle of Marginal Productivity

18-2: Inputs and Their Derived Demand Curves

18-3: Investment, Capital, and Interest

18-4: The Determination of Rent

18-5: Payments to Business Owners: Are Profits Too High or Too Low?

18-6: Criticisms of Marginal Productivity Theory

Ch 18: Summary

Ch 18: Key Terms

Ch 18: Test Yourself

Ch 18: Discussion Questions

Appendix: Discounting and Present Value

Ch 19: Labor and Entrepreneurship: The Human Inputs

Ch 19: Contents

Ch 19: Introduction

19-1: The Markets for Labor

19-2: Wage Determination in Competitive Markets

19-3: The Supply of Labor

19-4: Why Do Wages Differ?

19-5: Unions and Collective Bargaining

19-6: The Entrepreneur: The Other Human Input

19-7: The Market Economy’s Incredible Growth Record

19-8: Sources of Free-Market Innovation: The Role of the Entrepreneur

19-9: Entrepreneurship and Growth

19-10: Institutions and the Supply of Innovative Entrepreneurship

Ch 19: Summary

Ch 19: Key Terms

Ch 19: Test Yourself

Ch 19: Discussion Questions

Ch 20: Poverty, Inequality, and Discrimination

Ch 20: Contents

Ch 20: Introduction

20-1: The Facts: Poverty

20-2: The Facts: Inequality

20-3: Some Reasons for Unequal Incomes

20-4: The Facts: Discrimination

20-5: The Trade-Off between Equality and Efficiency

20-6: Policies to Combat Poverty

20-7: Other Policies to Combat Inequality

20-8: Policies to Combat Discrimination

20-9: A Look Back

Ch 20: Summary

Ch 20: Key Terms

Ch 20: Test Yourself

Ch 20: Discussion Questions

Appendix: The Economic Theory of Discrimination

Part 6: U.S. Economic Leadership

Ch 21: Is U.S. Economic Leadership Threatened?

Ch 21: Contents

Ch 21: Introduction

21-1: Productivity Growth

21-2: Entrepreneurship

21-3: Innovation

21-4: The Budget Deficit and Public Debt

21-5: The Trade Deficit

21-6: Health Care

21-7: Education

21-8: Poverty and Inequality

21-9: Conclusions: Mixed Prospects for Future U.S. Growth

Ch 21: Summary

Ch 21: Key Terms

Ch 21: Test Yourself

Ch 21: Discussion Questions

Part 7: The Macroeconomy: Aggregate Supply and Demand

Ch 22: An Introduction to Macroeconomics

Ch 22: Contents

Ch 22: Introduction

22-1: Drawing a Line Between Macroeconomics and Microeconomics

22-2: Supply and Demand in Macroeconomics

22-3: Gross Domestic Product

22-4: The Economy on a Roller Coaster

22-5: The Problem of Macroeconomic Stabilization: A Sneak Preview

Ch 22: Summary

Ch 22: Key Terms

Ch 22: Test Yourself

Ch 22: Discussion Questions

Ch 23: The Goals of Macroeconomic Policy

Ch 23: Contents

Ch 23: Introduction

23-1: The Goal of Economic Growth

23-2: The Capacity to Produce: Potential GDP and the Production Function

23-3: The Growth Rate of Potential GDP

23-4: The Goal of Low Unemployment

23-5: The Human Costs of High Unemployment

23-6: Counting the Unemployed: The Official Statistics

23-7: Types of Unemployment

23-8: How Much Employment Is “Full Employment”?

23-9: Unemployment Insurance: The Invaluable Cushion

23-10: The Goal of Low Inflation

23-11: Inflation as a Redistributor of Income and Wealth

23-12: Real versus Nominal Interest Rates

23-13: Inflation Distorts Measurements

23-14: Other Costs of Inflation

23-15: The Costs of Low versus High Inflation

23-16: Low Inflation Does Not Necessarily Lead to High Inflation

Ch 23: Summary

Ch 23: Key Terms

Ch 23: Test Yourself

Ch 23: Discussion Questions

Appendix: How Statisticians Measure Inflation

Ch 24 : Economic Growth: Theory and Policy

Ch 24: Contents

Ch 24: Introduction

24-1: The Three Pillars of Productivity Growth

24-2: Levels, Growth Rates, and the Convergence Hypothesis

24-3: Growth Policy: Encouraging Capital Formation

24-4: Growth Policy: Improving Education and Training

24-5: Growth Policy: Spurring Technological Change

24-6: -The Productivity Slowdown and Speed-Up in the United States

24-7: Growth in the Developing Countries

24-8: From the Long Run to the Short Run

Ch 24: Summary

Ch 24: Key Terms

Ch 24: Test Yourself

Ch 24: Discussion Questions

Ch 25: Aggregate Demand and the Powerful Consumer

Ch 25: Contents

Ch 25: Introduction

25-1: Aggregate Demand, Domestic Product, and National Income

25-2: The Circular Flow of Spending, Production, and Income

25-3: Consumer Spending and Income: The Important Relationship

25-4: The Consumption Function and the Marginal Propensity to Consume

25-5: Factors That Shift the Consumption Function

25-6: The Extreme Variability of Investment

25-7: The Determinants of Net Exports

25-8: How Predictable Is Aggregate Demand?

Ch 25: Summary

Ch 25: Key Terms

Ch 25: Test Yourself

Ch 25: Discussion Questions

Appendix: National Income Accounting

Ch 26: Demand-Side Equilibrium: Unemployment or Inflation?

Ch 26: Contents

Ch 26: Introduction

26-1: The Meaning of Equilibrium GDP

26-2: The Mechanics of Income Determination

26-3: The Aggregate Demand Curve

26-4: Demand-Side Equilibrium and Full Employment

26-5: The Coordination of Saving and Investment

26-6: Changes on the Demand Side: Multiplier Analysis

26-7: The Multiplier Is a General Concept

26-8: The Multiplier and the Aggregate Demand Curve

Ch 26: Summary

Ch 26: Key Terms

Ch 26: Test Yourself

Ch 26: Discussion Questions

Appendix A: The Simple Algebra of Income Determination and the Multiplier

Appendix B: The Multiplier with Variable Imports

Ch 27: Bringing in the Supply Side: Unemployment and Inflation?

Ch 27: Contents

Ch 27: Introduction

27-1: The Aggregate Supply Curve

27-2: Equilibrium of Aggregate Demand and Supply

27-3: Inflation and the Multiplier

27-4: Recessionary and Inflationary Gaps Revisited

27-5: Adjusting to a Recessionary Gap: Deflation or Unemployment?

27-6: Adjusting to an Inflationary Gap: Inflation

27-7: Stagflation from a Supply Shock

27-8: Applying the Model to a Growing Economy

27-9: A Role for Stabilization Policy

Ch 27: Summary

Ch 27: Key Terms

Ch 27: Test Yourself

Ch 27: Discussion Questions

Part 8: Fiscal and Monetarypolicy

Ch 28: Managing Aggregate Demand: Fiscal Policy

Ch 28: Contents

Ch 28: Introduction

28-1: Income Taxes and the Consumption Schedule

28-2: The Multiplier Revisited

28-3: Planning Expansionary Fiscal Policy

28-4: Planning Contractionary Fiscal Policy

28-5: The Choice between Spending Policy and Tax Policy

28-6: Some Harsh Realities

28-7: The Idea Behind Supply-Side Tax Cuts

Ch 28: Summary

Ch 28: Key Terms

Ch 28: Test Yourself

Ch 28: Discussion Questions

Appendix A: Graphical Treatment of Taxes and Fiscal Policy

Appendix B: Algebraic Treatment of Taxes and Fiscal Policy

Ch 29: Money and the Banking System

Ch 29: Contents

Ch 29: Introduction

29-1: The Nature of Money

29-2: How the Quantity of Money Is Measured

29-3: The Banking System

29-4: Systemic Risk and the “Too Big to Fail” Doctrine

29-5: The Origins of the Money Supply

29-6: Banks and Money Creation

29-7: Why the Money-Creation Formula Is Oversimplified

29-8: The Need for Monetary Policy

Ch 29: Summary

Ch 29: Key Terms

Ch 29: Test Yourself

Ch 29: Discussion Questions

Ch 30: Monetary Policy: Conventional and Unconventional

Ch 30: Contents

Ch 30: Introduction

30-1: Money and Income: The Important Difference

30-2: America’s Central Bank: The Federal Reserve System

30-3: Implementing Monetary Policy in Normal Times: Open-Market Operations

30-4: Other Instruments of Monetary Policy

30-5: How Monetary Policy Works in Normal Times

30-6: Money and the Price Level

30-7: Application: Why the Aggregate Demand Curve Slopes Downward

30-8: Unconventional Monetary Policies

30-9: From Financial Distress to Recession

30-10: From Models to Policy Debates

Ch 30: Summary

Ch 30: Key Terms

Ch 30: Test Yourself

Ch 30: Discussion Questions

Ch 31: The Financial Crisis and the Great Recession

Ch 31: Contents

Ch 31: Introduction

31-1: Roots of the Crisis

31-2: Leverage, Profits, and Risk

31-3: The House Price Bubble and the Subprime Mortgage Crisis

31-4: From the Housing Bubble to the Financial Crisis

31-5: From the Financial Crisis to the Great Recession

31-6: Hitting Bottom and Recovering

31-7: Lessons from the Financial Crisis

Ch 31: Summary

Ch 31: Key Terms

Ch 31: Test Yourself

Ch 31: Discussion Questions

Ch 32: The Debate over Monetary and Fiscal Policy

Ch 32: Contents

Ch 32: Introduction

32-1: Velocity and the Quantity Theory of Money

32-2: Debate: Should the Fed Use Unconventional Monetary Policies?

32-3: Debate: Should Policy Makers Fight Asset Price Bubbles?

32-4: Debate: Should We Rely on Fiscal or Monetary Policy?

32-5: Debate: The Shape of the Aggregate Supply Curve

32-6: Debate: Should the Government Intervene at All?

32-7: Dimensions of the Rules-versus-Discretion Debate

Ch 32: Summary

Ch 32: Key Terms

Ch 32: Test Yourself

Ch 32: Discussion Questions

Ch 33: Budget Deficits in the Short and Long Run

Ch 33: Contents

Ch 33: Introduction

33-1: Should the Budget Always be Balanced? The Short Run

33-2: The Importance of the Policy Mix

33-3: Teficits and Debt: Terminology and Facts

33-4: Interpreting the Budget Deficit or Surplus

33-5: Why Is the National Debt Considered a Burden?

33-6: Budget Deficits and Inflation

33-7: Debt, Interest Rates, and Crowding Out

33-8: The Main Burden of the National Debt: Slower Growth

33-9: The Economics and Politics of the U.S. Budget Deficit

Ch 33: Summary

Ch 33: Key Terms

Ch 33: Test Yourself

Ch 33: Discussion Questions

Ch 34: The Trade-Off between Inflation and Unemployment

Ch 34: Contents

Ch 34: Introduction

34-1: Demand-Side Inflation versus Supply-Side Inflation: A Review

34-2: Origins of the Phillips Curve

34-3: Supply-Side Inflation and the Collapse of the Phillips Curve

34-4: What the Phillips Curve Is Not

34-5: Fighting Unemployment with Fiscal and Monetary Policy

34-6: What Should be Done?

34-7: Inflationary Expectations and the Phillips Curve

34-8: The Theory of Rational Expectations

34-9: Why Economists (and Politicians) Disagree

34-10: The Dilemma of Demand Management

34-11: Attempts to Reduce the Natural Rate of Unemployment

Ch 34: Summary

Ch 34: Key Terms

Ch 34: Test Yourself

Ch 34: Discussion Questions

Part 9: The United States in the World Economy

Ch 35: International Trade and Comparative Advantage

Ch 35: Contents

Ch 35: Introduction

35-1: Why Trade

35-2: International versus Intranational Trade

35-3: The Law of Comparative Advantage

35-4: The Arithmetic of Comparative Advantage

35-5: Tariffs, Quotas, and Other Interferences with Trade

35-6: Why Inhibit Trade?

35-7: Can Cheap Imports Hurt a Country?

Ch 35: Summary

Ch 35: Key Terms

Ch 35: Test Yourself

Ch 35: Discussion Questions

Appendix: Supply, Demand, and Pricing in World Trade

Ch 36: The International Monetary System: Order or Disorder?

Ch 36: Contents

Ch 36: Introduction

36-1: What Are Exchange Rates?

36-2: Exchange Rate Determination in a Free Market

36-3: When Governments Fix Exchange Rates: The Balance of Payments

36-4: A Bit of History: The Gold Standard and the Bretton Woods System

36-5: Adjustment Mechanisms Under Fixed Exchange Rates

36-6: Why Try to Fix Exchange Rates?

36-7: The Current “Nonsystem”

Ch 36: Summary

Ch 36: Key Terms

Ch 36: Test Yourself

Ch 36: Discussion Questions

Ch 37: Exchange Rates and the Macroeconomy

Ch 37: Contents

Ch 37: Introduction

37-1: International Trade, Exchange Rates, and Aggregate Demand

37-2: Aggregate Supply in an Open Economy

37-3: The Macroeconomic Effects of Exchange Rates

37-4: Fiscal and Monetary Policies in an Open Economy

37-5: Ternational Aspects of Deficit Reduction

37-6: Should We Worry About the Trade Deficit?

37-7: On Curing the Trade Deficit

37-8: Conclusion: No Nation Is an Island

Ch 37: Summary

Ch 37: Key Terms

Ch 37: Test Yourself

Ch 37: Discussion Questions

Appendix: Answers to Odd-Numbered Test Yourself Questions