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Principles of Economics, 6th Edition by Jeff Holt Introduction: A Brief History of U.S. Economic Growth 1. From Jamestown to the Present 2. Initial Struggles 3. Economic Growth in Colonial America 4. Sources and History of Increases in Per Capita Output 5. Improvements in the Standard of Living 6. Future Economic Growth 7. Appendix: Book Review – “The Progress Paradox” 8. Appendix: 35 Largest National Economies 9. Appendix: Be Careful What You Think You Know; True/False Test 10. Study Guide for Introduction Chapter 11. Chapter Summary 12. Questions for Introduction Chapter 13. Answers for Introduction Chapter 14. Answers for True/False Test Chapter 1 Scarcity and Choices 1. The Basic Economic Problem – Scarcity 2. Human Wants Are Unlimited 3. Resources Are Limited 4. Economics 5. Basic Goal in Dealing with Scarcity 6. Categories of Resources 7. Rational Person Assumption 8. Resource Owner Motivation 9. The Invisible Hand 10. Opportunity Cost 11. Rationing 12. Marginal Benefits and Marginal Costs 13. Thinking Like an Economist 14. Macroeconomics versus Microeconomics 15. Graphs 16. Direct Relationship 17. Inverse Relationship 18. Slope 19. Appendix: Book Review – “Robinson Crusoe” 20. Appendix: Rational Person Assumption 21. Appendix: Book Review – “Predictably Irrational” 22. Appendix: Think Like an Economist – Rational Robbers 23. Study Guide for Chapter 1 24. Chapter Summary 25. Questions for Chapter 1 26. Answers for Chapter 1 27. Answer to Think Like an Economist Table of Contents Chapter 2 Trade and Economic Systems 1. Self-sufficiency or Trade 2. Comparative Advantage 3. Mutually Beneficial Trade 4. Consumer’s Surplus and Producer’s Surplus 5. Externalities 6. The Production Possibilities Frontier 7. Law of Increasing Opportunity Cost 8. Economic Efficiency and Inefficiency 9. Economic Growth 10. Economic Systems 11. Capitalist Vision 12. Socialist Vision 13. Three Economic Questions 14. What to Produce 15. How to Produce 16. For Whom to Produce 17. Appendix: A Movement along a Curve versus a Shift in a Curve 18. Appendix: Book Review – “Capitalism and Freedom” 19. Appendix: Think Like an Economist – Economic Systems and Individual Freedom 20. Study Guide for Chapter 2 21. Chapter Summary 22. Questions for Chapter 2 23. Answers for Chapter 2 24. Answers to Think Like an Economist Chapter 3 Demand, Supply, and Equilibrium 1. Demand 2. Law of Demand 3. Substitution Effect 4. Income Effect 5. Demand Schedule and Demand Curve 6. Determinants of Demand 7. Change in Demand versus Change in Quantity Demanded 8. Supply 9. Law of Supply 10. Determinant of Supply 11. Change in Supply versus Change in Quantity Supplied 12. Equilibrium: Putting Demand and Supply Together 13. Moving from Disequilibrium to Equilibrium 14. Free Markets and Economic Efficiency I 15. Free Markets and Economic Efficiency II FOR REVIEW ONLY - NOT FOR DISTRIBUTION Contents - 1 Table of Contents
16. A Change in Equilibrium Price and Quantity 17. Price Controls 18. A Price Ceiling 19. A Price Floor 20. Price Controls and Economic Inefficiency 21. Appendix: Markets are Both Impersonal and Personal 21. Study Guide for Chapter 3 22. Chapter Summary 23. Questions for Chapter 3 24. Answers for Chapter 3 Chapter 4 Inflation and Unemployment 1. Three Macroeconomic Goals 2. Inflation 3. The Price Level, Money, and Production 4. Consumer Price Index 5. Consumer Price Index Table 6. Computing the Rate of Inflation 7. Adjusting Nominal Values to Real Values 8. Unemployment 9. Full Employment 10. Measuring Unemployment 11. Types of Unemployment 12. Frictional Unemployment 13. Structural Unemployment 14. Natural Unemployment Rate 15. Cyclical Unemployment 16. Economic Growth and Job Destruction 17. Appendix: Female Labor Force Participation 18. Appendix: Recent U.S. History in Achieving the Three Macroeconomic Goals 19. Appendix: High Unemployment after the Great Recession 20. Appendix: High Unemployment in France 21. Appendix: Think Like an Economist – Unemployment Policies 22. Study Guide for Chapter 4 23. Chapter Summary 24. Questions for Chapter 4 25. Answers for Chapter 4 26. Answer to Think Like an Economist Chapter 5 Measuring Total Output: GDP 1. Gross Domestic Product 2. Market Value 3. What is Excluded in Computing GDP 4. Two Measures of Total Output; GDP and National Income 5. Total Expenditures and GDP 6. Resource Payments and National Income 7. Per Capita Output 8. Per Capita Personal Income – 2013 9. Real GDP 10. The Business Cycle 11. Appendix: Flaws in GDP as a Measure of Standard of Living 12. Appendix: The Three Macroeconomic Goals and the U.S. Economy 13. Appendix: Historical Data on Nominal and Real GDP 14. Appendix: Circular Flow Diagram 15. Study Guide for Chapter 5 16. Chapter Summary 17. Questions for Chapter 5 18. Answers for Chapter 5 Chapter 6 The Aggregate Market 1. Aggregate Demand 2. Shifts in the Aggregate Demand Curve 3. Factors Affecting TE 4. Aggregate Supply 5. Shifts in the SRAS Curve 6. Factors Affecting Overall Costs of Production 7. Short-Run Equilibrium: Putting AD and SRAS Together 8. Changes in AD and SRAS 9. Appendix: Why Increasing SRAS Has Not Led to a Lower Price Level 10. Appendix: Why the Aggregate Demand Curve Slopes Downward 11. Appendix: Why the Short-Run Aggregate Supply Curve Slopes Upward 12. Study Guide for Chapter 6 13. Chapter Summary 14. Questions for Chapter 6 15. Answers for Chapter 6 Chapter 7 Classical Economic Theory 1. Adam Smith 2. The Ideal Quantity of Total Output 3. The Self-Regulating Economy 4. Marx’s Criticism of Classical Theory 5. Say’s Law, Savings, and Flexible Interest Rates 6. Say’s Law and Flexible Wages and Prices 7. Natural Real GDP 8. A Recessionary Gap 9. An Inflationary Gap 10. Long-Run Equilibrium 11. Automatically Closing a Recessionary Gap 12. Automatically Closing an Inflationary Gap 13. Long-Run Aggregate Supply 14. Laissez-faire 15. Appendix: The Stock Market Crash of 1929, the Smoot-Hawley Tariff, and the Great Depression FOR REVIEW ONLY - NOT FOR DISTRIBUTION Table of Contents Contents - 2
Page 2 and 3: PRINCIPLES OF ECONOMICS JEFF HOLT S
Page 6 and 7: 16. Study Guide for Chapter 7 17. C
Page 8 and 9: 11. Appendix: Book Review - “The
Page 10 and 11: 20. Appendix: The NCAA Cartel 21. S
Page 12 and 13: Introduction: A Brief History of U.
Page 14 and 15: In the twentieth century, per capit
Page 16 and 17: Appendix: The 35 Largest National E
Page 18 and 19: Multiple Choice: ___ 1. The Jamesto
Page 20 and 21: 2. Describe the economic cost of th
Page 22 and 23: Chapter 1 Scarcity and Choices The
Page 24 and 25: Example 5B: At the end of 1982, the
Page 26 and 27: Example 11: When Cindy quits her jo
Page 28 and 29: consequences may result in failure
Page 30 and 31: An upward sloping curve (as in Exam
Page 32 and 33: In making decisions, humans tend to
Page 34 and 35: 5. ______________________ _________
Page 36 and 37: ___ 13. If the value of one variabl
Page 38 and 39: Y Point X Y A 0 1 B 3 3 C 6 5 D 9 7
Page 40 and 41: Chapter 2 Trade and Economic System
Page 42 and 43: Example 4B: The following quantitie
Page 44 and 45: 1. An increase in the quantity of r
Page 46 and 47: 3. For whom to produce? This is det
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Page 50 and 51: The two primary economic systems ar
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___ 25. According to the book “Ca
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Chapter 3 Demand, Supply, and Equil
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. For inferior goods, income and de
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The same information can be placed
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Not only does a free market elimina
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$7 - 6 - 5 - S 3 S1 S 2 Price 4 - 3
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Example 17: The graph below illustr
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Questions for Chapter 3 Fill-in-the
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___ 12. Assuming a market originall
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$8 - 7 - 6 - 5 - Price 4 - 3 - 2 -
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Chapter 4 Inflation and Unemploymen
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Computing the Rate of Inflation The
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Full Employment Though unemployment
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3. Cyclical unemployment - due to d
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During the Great Depression, the ec
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Appendix: Think Like an Economist -
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Answer questions 8. and 9. based on
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___ 25. The extension of unemployme
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Chapter 5 Measuring Total Output: G
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5. Leisure. Leisure time is by defi
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The U.S. is a high per capita GDP c
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Example 17: In “An International
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The simple circular flow diagram be
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___ 3. Which of the following would
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2. Explain what nonproduction trans
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Chapter 6 The Aggregate Market The
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Example 2C: Assume the same facts a
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Example 5B: The price of crude oil
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Price Level Real GDP SRAS AD 2 AD 1
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Appendix: Why the Aggregate Demand
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___ 3. DEF Company can invest in ne
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2. List and explain the two factors
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Chapter 7 Classical Economic Theory
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Notice that the investment demand c
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Long-Run Equilibrium If Real GDP is
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Example 6B: When the economy is in
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Laissez-faire If the economy is sel
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___ 5. According to Say’s Law: a.
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3. On the graph below, draw an aggr
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Chapter 8 Keynesian Economic Theory
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Example 2B: The graph below illustr
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Example 5: Assume that the table be
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Notice on the graph on the previous
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According to Keynesian theory, a ch
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“The General Theory” also inclu
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___ 8. If the consumption function
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3. If the MPC is .667, and investme
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Chapter 9 Fiscal Policy The basic e
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Keynesian Fiscal Policy Theory and
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Example 5A: The federal government
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The Laffer Curve What will happen t
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Appendix: The Importance of Incenti
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___ 4. A decrease in government exp
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2. Explain what automatic stabilize
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Chapter 10 Money, Money Creation, a
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Example 4B: The castaways on Gillig
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Looking at the balance sheet below,
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Demand-side One-shot Inflation Exam
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4. Inflation increases uncertainty
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life; it came into existence not by
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calculated by using the potential d
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___ 12. If the required-reserve rat
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4. Referring to the balance sheet f
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Chapter 11 The Federal Reserve Syst
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5. After Bank X sells the $300,000
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Low Mortgage Interest Rates Mortgag
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Relaxed Standards for Mortgage Loan
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The Bursting of the Housing Bubble
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On February 17, 2009, the federal g
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Fed policies caused short-term inte
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___ 10. The Fed’s most important
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___ 25. In response to the recessio
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Chapter 12 Monetary Policy The basi
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2. A change in aggregate demand (AD
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Monetarist Transmission Mechanism C
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3. Borrowers do not have to seek ou
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Appendix: Book Review - “The Age
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Questions for Chapter 12 Fill-in-th
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___ 16. The primary source of incom
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7. According to Alan Greenspan, wha
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Chapter 13 Taxes, Deficits, and the
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Example 5: In 2015, Taxpayer A had
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of $5 and a quantity of 10 units. T
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The complexity of the tax law also
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the current government spending and
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cut of 1964. The top rate was lower
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___ 6. Federal excise taxes: a. are
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3. How would eliminating the loopho
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Chapter 14 Economic Growth The basi
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2. Labor. Labor can contribute to e
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estricting international trade (e.g
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An improvement in technology (e.g.
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The table below shows the economic
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will increase both Real GDP and per
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___ 8. Which of the following is co
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___ 26. The opinion that economic g
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Chapter 15 Less Developed Countries
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Example 8: Countries A, B, C, and D
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Obstacles to Economic Development f
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c. Restrictions on international tr
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Appendix: Book Review - “The Powe
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Example 25: In Brazil, about half t
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Study Guide for Chapter 15 Chapter
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___ 13. Among the counterproductive
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4. List four ways that governments
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Chapter 16 International Trade The
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Other Benefits of Free Internationa
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Example 6: The graph below illustra
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competitive disadvantage. But dumpi
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is only 25% as productive as before
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Smith was skeptical of government a
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___ 4. For Country X, what is the o
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___ 18. Frédéric Bastiat’s “P
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4. On the graph below: (1) What is
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Chapter 17 Elasticity We are often
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Example 4A: What is price elasticit
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Example 5A: Gertie’s Gas and Go i
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Example 10A: When the price of Good
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Example 13B: On the graph below, su
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$7 - 6 - 5 - Price 4 - 3 - 2 - 1 -
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In the long run, would the deadweig
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___ 7. The factors that determine w
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3. a. Which price (or prices) from
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Chapter 18 Utility The basic econom
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Nonetheless, society generally assu
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Example 9: Capital City operates a
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Marginal rate of substitution - the
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The diamond-water paradox is the ob
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Complete the table below to answer
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4. The graph below shows indifferen
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Chapter 19 The Firm The basic econo
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than contributing to team productio
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1. Difficulty in raising large amou
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Corporations also use self-financin
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Example 24: A blacksmith who produc
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For financing needs, proprietorship
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___ 13. Corporations: a. are comple
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5. List two things that the absence
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Chapter 20 Production and Costs The
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In Example 5B, Birdwell finds that
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variable cost initially decreases,
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Quantity TC MC AFC AVC ATC 0 240 X
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If the scale of operation is increa
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average total cost. Average fixed c
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___ 11. Concerning the cost curves:
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5. Complete the following cost tabl
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Chapter 21 Perfect Competition The
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Even though a perfect competitor ca
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Example 6C: This example builds on
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At what price will there be neither
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Appendix: Perfect Competition in th
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Multiple Choice: ___ 1. A perfect c
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___ 17. Perfect competition: a. req
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Answers for Chapter 21 Fill-in-the-
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Chapter 22 Monopoly Of the four mar
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3. Exclusive ownership of an essent
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maximizing quantity (4 units) creat
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$22 - 20 - 18 - 16 - 14 - Deadweigh
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2. Negotiating, beginning at a high
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Legal barriers are created by gover
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___ 8. The slope of the demand curv
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Price Quantity 3. List some of the
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Chapter 23 Monopolistic Competition
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For Percomp (the perfect competitor
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Example 7A: The graph below represe
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Example 9: The Organization of the
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Example 12 illustrates the dilemma
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its current price and quantity. The
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___ 14. Game theory: a. is a method
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Answers for Chapter 23 Fill-in-the-
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Chapter 24 Factor Markets The basic
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$ $240 - 200 - 160 - 120 - 80 - 40
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Since producers will attempt to equ
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2. Differences in nonmoney aspects
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were his strikeouts, walks, and hom
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___ 3. To maximize profits, a produ
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___ 19. According to the book, “M
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Multiple Choice: 1. a. 8. c. 15. d.
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Chapter 25 Labor Unions The primary
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The elasticity of demand for union
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Example 4A: Assume that the graph b
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Notice from the graph in Example 6
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Wage Factory A Quantity of Labor S
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As a cartel, a labor union faces a
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___ 10. For a monopsony: a. there i
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3. The graph below represents a lab
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Chapter 26 Interest, Present Value,
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An increase in expected rates of re
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An asset is valuable because we exp
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Example 13B: General Ordnance prove
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Appendix: Present Value Table One f
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___ 4. An increase in expected rate
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Problems: 1. List and explain the t
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Chapter 27 Market Failure The basic
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External Benefit If a market genera
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Example 2: To encourage the consump
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$100 - 90 - 80 - MSC 70 - $ 60 - 50
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A common good is nonexcludable. Non
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___ 5. What government policy would
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4. Based on the information on the
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Chapter 28 Public Choice and Govern
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Candidates and the Median Voter Mod
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Example 8: According to State and F
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Example 10: When Elvis Presley was
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4. Pessimistic bias. This is the te
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___ 5. An elected official will: a.
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2. If a certain policy will yield s
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Chapter 29 Government Regulation of
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underproduction is the amount that
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micromanagement results in business
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market. They may agree with their c
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Questions for Chapter 29 Fill-in-th
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___ 10. The public interest theory
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4. List the four types of costs imp
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Chapter 30 Agriculture and Health C
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weather may cause bumper crops. Bad
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Security and Rural Investment Act o
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Example 12: From 1960 to 2013, the
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1. NHI would provide universal heal
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d. Insurance providers are not allo
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Answer questions 7. through 10. by
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___ 21. If there were no individual
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Chapter 31 Income Distribution and
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Income is more equally distributed
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over a typical career is the accumu
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Ideal Income Redistribution The ide
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Poverty - a family whose income fal
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Appendix: Income Inequality around
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How is this story an analogy for th
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___ 2. In 2013, the Lowest Income 6
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Problems: 1. Explain the two primar
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Absolute advantage - when one natio
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Fiat money - money by government de
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Nonrivalrous good - a good for whic
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Absolute advantage, 16-9 Absolute e
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“Company town”, 25-6 Comparativ
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Eli Lilly and Company, 22-1 Emergen
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Houston, Texas, 15-10 Human capital
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Market, 3-1, 3-8-9 Market basket, 4
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Political bias, 9-4, 12-7 Political
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Short run production, 20-2-3 Short-
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Upturns, 9-4 USDA, 27-9, 30-1-2, 30
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