Principles of Economics

New in This Version

Many graphs are hyperlinked to the underlying Federal Reserve Economic Data (FRED) source. Students can easily link to the most updated data for these graphs and become familiar with manipulating data from the Federal Reserve. 

Key updates include:

• Can AI and machine learning improve resource allocations? (Ch. 1)
• Netflix pricing and demand elasticity. (Ch. 4)
• Google as a monopoly. (Ch. 10)
• Antitrust developments (RiteAid/Walgreens, Amazon, Apple, Google, and Facebook). (Ch. 12)
• Net neutrality and differential rate pricing. (Ch. 12)
• Tax discussions updated to align with the Tax Cut and Jobs Act of 2017. (Ch. 14 and 26)
• Updated economic data includes increasingly positive economic data prior to 2020, initial recessionary impact of the COVID-19 pandemic as reflected in first- and second-quarter economic data, and fluctuations in labor market strength. (Ch. 17– 19)
• New coverage of cryptocurrencies, Venezuela’s hyperinflation, negative interest rates, and Fed tapering. (Ch. 22)
• Fully revised discussion of post-2016 recovery following the Great Recession and impact of the COVID-19 pandemic on the recovery. (Ch. 23)
• New discussion of why inflation was absent from the Great Recession’s recovery—and what considerations might be missing from economic models as a result. (Ch. 25)
• Updated discussion of the Fed’s balance sheet normalization and unwinding of quantitative easing (QE) from 2017–2019. Coverage of renewed growth of the Fed’s balance sheet in response to the impact of the COVID-19 pandemic and prospects for eventual unwinding. New coverage of negative interest rates in Sweden and Switzerland. (Ch. 27)
• Explains the switch from poverty-alleviation goals from Millennium Development Goals to Sustainable Development Goals. China’s Belt and Road initiatives that propel that country to a global leader in funding development projects. (Ch. 28)
• Explores the Trump Administration’s trade policies and their impacts, including the USMCA’s replacement of NAFTA, the brewing trade war with China, and how import tariffs impact U.S. consumers. (Ch. 29)
• Updates specific to the COVID-19 pandemic throughout include:
• New boxed feature on “The Price System During National Disasters.” (Section 1.3)
• Clear illustration of differences between correlation and causation using impact of the pandemic on gas prices and miles traveled. (Section 2.2)
• Ventilators and impact of demand on pricing. (Ch. 3 Introduction)
• Price elasticity of supply for scarce goods in a crisis. (Section 4.4)
• Profile of the company that produces Purell hand sanitizer. (Ch. 6 Introduction)
• Business challenges resulting from the initial shutdown response to the pandemic. (Ch. 8 Introduction)
• Expanded discussion of long-run equilibrium to encompass firms impacted by the pandemic. (Section 9.2)
• Hazard pay considerations and compensating differentials. (Section 13.5)
• Unemployment insurance during the pandemic. (Section 14.2)
• Social distancing and mask wearing as positive externalities. Subsidies for encouraging use of masks and sanitizers. (Sections 15.2 and 15.3)
• Impact of pandemic responses on early 2020 stock returns. (Ch. 16 Introduction)
• General economic turmoil induced by early reactions to the pandemic including economic slowdown, increase in unemployment, recessionary impact, and initial monetary and fiscal policy responses. (Ch. 17 Introduction, Section 17.2–17.3)
• The pandemic’s impact on unemployment. (Ch. 20 Introduction)
• The pandemic’s impact on labor markets. (Section 20.1)
• Fed interventions and a new round of quantitative easing (QE). (Section 22.2)
• The pandemic-induced recession and its potential duration. (Ch. 23 Introduction and Section 23.1)
• Passage and impact of CARES Act. (Ch. 24 Introduction)
• Unexpected transition to the pandemic-induced recession and using the model to analyze the policy response. (Ch. 25 Introduction and Section 25.5)
• Impact of policy responses to the pandemic on the national debt and differing policy views on the right mix of fiscal interventions (Section 26.1 and 26.2)
• The Fed’s response to the pandemic, new balance sheet expansion, a return to zero interest rate policy, security purchases, and “Main Street” lending program. (Ch. 27 Introduction, Sections 27.1–     27.3 and 27.5)
• Global economic shocks caused by the pandemic. (Ch. 28 Introduction)
• National security-based trade restrictions on supply chains for personal protective equipment (PPE) in a health crisis (Section 29.7)