Concepts of Economic Analysis
Textbook: Economics (21e) by McConnell, Brue, and Flynn, McGraw Hill Irwin, 2018. ISBN: 978-1260386059.
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Economics Online Learning Center
Go to this website for the PPT slides, videos, quizzes, study guides, and other important chapter-by-chapter information.
Helpful online learning tools:
Khan Academy
Lynda.com
NBC Learn Higher Education
CHAPTER MATERIAL
Chapter 1: Limits, Alternatives, and Choices
After reading this chapter, you should be able to:
- Define economics and the features of the economic perspective.
- Describe the role of economic theory in economics.
- Distinguish microeconomics from macroeconomics.
- List the categories of scarce resources and delineate the nature of the economizing problem.
- Apply production possibilities analysis, increasing opportunity costs, and economic growth.
- (Appendix) Understand graphs, curves, and slopes as they relate to economics.
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Chapter 1: PPC
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Chapter 1: Budget Line
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Chapter 2: The Market System and the Circular Flow
After reading this chapter, you should be able to:
- Differentiate between a command system and a market system.
- List the main characteristics of the market system.
- Explain how the market system answers the four fundamental questions.
- Discuss how the market system adjusts to change and promotes progress.
- Describe the mechanics of the circular flow model.
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Chapter 3: Demand, Supply, and Market Equilibrium
After reading this chapter, you should be able to:
- Describe demand and explain how it can change.
- Describe supply and explain how it can change.
- Relate how supply and demand interact to determine market equilibrium.
- Explain how changes in supply and demand affect equilibrium prices and quantities.
- Identify what government-set prices are and how they can cause product surpluses and shortages.
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Video Links:
Chapter 3: The Demand Curve (23 Mb download) Chapter 3: The Supply Curve (21 Mb download) Chapter 3: Equilibrium (40 Mb download) Chapter 3: Curves Shifting (47 Mb download) What's Behind the Slide in Oil Price? | ||||
Chapter 4: Market Failures: Public Goods and Externalities
After reading this chapter, you should be able to:
- Differentiate between demand-side market failures and supply-side market failures.
- Explain consumer surplus and producer surplus, and discuss how properly functioning markets maximize their sum while optimally allocating resources.
- Identify how public goods are distinguished from private goods, and explain the method for determining the optimal quantity of a public good.
- Explain how positive and negative externalities cause under-and overallocations of resources, and how they might be corrected.
- Show why we normally won't want to pay what it would cost to eliminate every last bit of a negative externality.
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Chapter 6: Elasticity
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Chapter 9: Businesses and the Costs of Production
After completing this chapter, students should be able to:
1. Explain the difference between a plant, a firm, and an industry.
2. State the advantages and disadvantages of the corporate form of business.
3. Describe the principal-agent problem.
4. Distinguish between explicit and implicit costs, and between accounting, normal, and economic profits.
5. Explain why normal profit is an economic cost, but economic profit is not.
6. Calculate accounting and economic profit.
7. Differentiate between the short run and the long run.
8. Graph and explain the relationship between total, marginal, and average product.
9. Explain the law of diminishing returns.
10. Compute and graph marginal and average product when given total product data.
11. Distinguish between fixed, variable, and total costs.
12. Explain the difference between average and marginal costs.
13. Compute and graph AFC, AVC, ATC, and marginal cost when given total cost data.
14. Explain how AVC, ATC, and marginal cost relate to one another.
15. Explain what can cause cost curves to rise or fall.
16. Explain the difference between short-run and long-run costs.
17. State why the long-run average cost is expected to be U-shaped.
18. Identify causes of economies and diseconomies of scale.
19. Indicate the relationship between economies of scale and the number of firms in an industry.
20. Define and identify terms and concepts listed at the end of the chapter.
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Chapter 26: An Introduction to Macroeconomics
After completing this chapter, students should be able to:
- Understand the basic statistical tools and measures that economists use to analyze the economy.
- Differentiate between nominal GDP and real GDP (gross domestic product).
- Understand the basic concept of unemployment.
- Understand the basic measure of inflation.
- Explain the miracle of modern economic growth.
- Understand and define the basic concepts of savings and investment.
- Differentiate between financial investment and economic investment.
- Understand the role of expectations and uncertainty in economic activity.
- Explain how unanticipated shocks to supply and demand affect the economy under fixed and flexible prices.
- Explain the role of inventories in the economy.
- Explain the difference between “sticky prices” and “flexible prices” and understand the basic evidence supporting the two concepts.
- Define and identify terms and concepts listed at the end of the chapter.
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Data Links
Chapter 27: Measuring Domestic Output and National Income
After completing this chapter, students should be able to:
- State the purposes of national income accounting.
- List the components of GDP in the output (expenditures) approach and in the income approach.
- Compute GDP using either the expenditure or income approach when given national income data.
- Differentiate between gross and net investment.
- Explain why changes in inventories are investments.
- Discuss the relationship between net investment and economic growth.
- Compute NDP, NI, PI, and DI when given relevant data.
- Describe the system represented by the circular flow in this chapter when given a copy of the diagram.
- Calculate a GDP price index using simple hypothetical data.
- Find real GDP by adjusting nominal GDP with use of a price index.
- List seven shortcomings of GDP as an index of social welfare.
- Explain what is meant by the underground economy and state its approximate size in the United States and how that compares to other nations.
- Give an estimate of actual 2014 (or later) U.S. GDP in trillions of dollars and be able to rank the United States relative to a few other countries.
- Define and identify terms and concepts listed at the end of the chapter.
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Chapter 28: Economic Growth
After completing this chapter, students should be able to:
- Define two measures of economic growth.
- Explain why growth is a desirable goal.
- Identify two main sources of growth.
- Explain and apply the “rule of 70.”
- Give average long-term growth rates for the United States and qualifications of raw data.
- Show economic growth using production possibilities analysis and aggregate demand–aggregate supply analysis.
- Describe the growth record of the U.S. economy since 1950, including two measures of its long‑term growth rates.
- Identify six major factors that contributed to U.S. economic growth according to empirical studies.
- List three primary reasons for the rise in the average rate of productivity growth in the United States since 1995.
- List five reasons for increasing returns during the period of productivity growth.
- Evaluate the potential for the average rate of productivity growth to be a permanent phenomenon.
- Identify and explain the arguments for and against economic growth.
- Define and identify terms and concepts at the end of the chapter.
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Chapter 29: Business Cycles, Unemployment, and Inflation
After reading this chapter, you should be able to:
- Describe the business cycle and its primary phases.
- Illustrate how unemployment and inflation are measured.
- Explain the types of unemployment and inflation and their various economic impacts.
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Chapter 32: Aggregate Demand and Aggregate Supply
After reading this chapter, you should be able to:
- Define aggregate demand (AD) and explain the factors that cause it to change.
- Define aggregate supply (AS) and explain the factors that cause it to change.
- Discuss how AD and AS determine an economy's equilibrium price level and level of real GDP.
- Describe how the AD-AS model explains periods of demand-pull inflation, cost-push inflation, and recession.
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Chapter 33: Fiscal Policy, Deficits, and Debt
After reading this chapter, you should be able to:
- Identify and explain the purposes, tools, and limitations of fiscal policy.
- Explain the role of built-in stabilizers in dampening business cycles.
- Describe how the cyclically adjusted budget reveals the status of U.S. fiscal policy.
- Discuss the size, composition, and consequences of the U.S. public debt.
- Explain why there is a long-run fiscal imbalance in the Social Security system.
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Chapter 34: Money, Banking, and Financial Institutions
After reading this chapter, you should be able to:
- Identify and explain the functions of money and the components of the U.S. money supply.
- Describe what "backs" the money supply, making us willing to accept it as payment.
- Discuss the makeup of the Federal Reserve and the U.S. banking system.
- Identify the functions and responsibilities of the Federal Reserve.
- Identify and explain the main factors that contributed to the financial crisis of 2007–2008.
- Discuss the actions of the U.S. Treasury that helped keep the banking and financial crisis of 2007–2008 from worsening.
- Identify the main subsets of the financial services industry in the United States and provide examples of some firms in each category.
- Describe how banks create money in a "fractional reserve" banking system.
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Video: Monetary Policy (Solman video)
Video: Steering the Course (The Fed) (Solman video) Video: In Plain English |
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Chapter 35: Money Creation
After studying this chapter, you should be able to:
1. Discuss why the U.S. banking system is called a "fractional reserve" system.
2.Explain the basics of a bank's balance sheet and the distinction between a bank's actual reserves and its required reserves.
3.Describe how a bank can create money.
4.Describe the multiple expansion of loans and money by the entire banking system.
5.Define the monetary multiplier, explain how to calculate it, and demonstrate its relevance.
1. Discuss why the U.S. banking system is called a "fractional reserve" system.
2.Explain the basics of a bank's balance sheet and the distinction between a bank's actual reserves and its required reserves.
3.Describe how a bank can create money.
4.Describe the multiple expansion of loans and money by the entire banking system.
5.Define the monetary multiplier, explain how to calculate it, and demonstrate its relevance.
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Chapter 36: Interest Rates and Monetary Policy
After reading this chapter, you should be able to:
- Discuss how the equilibrium interest rate is determined in the market for money.
- List and explain the goals and tools of monetary policy.
- Describe the mechanisms by which monetary policy affects GDP and the price level.
- Discuss the effectiveness of monetary policy and its shortcomings.
- Describe how the Fed has used monetary policy in recent years to promote macroeconomic stability.
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Important Links:
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