Principles of Macroeconomics, 12th edition

Karl E. Case Wellesley College
Ray C. Fair Yale University
Sharon E. Oster Yale University

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About the Book

Spotlights Recent Research

NEW! Chapter 3 uses behavioral economics to ask whether having unusually sunny weather increases consumer purchases of convertible cars.
NEW! Chapter 7 looks at new research on how individuals unemployed as a result of a recession spend their time (including on job search versus other activities).
NEW! Chapter 14 describes recent research on how well recessions can be predicted.
NEW! Chapter 20 looks at work that uses children’s height in India to examine hunger and gender inequality.
NEW! Chapter 21 (brand new) contains three boxes that examine the Moving to Opportunity program, birth weight and infant mortality, and the effects of minimum wage.

Shows the Power and Breadth of Economic Models

NEW! Chapter 25 illustrates the role of banks in creating money by describing bank runs in two classic movies and in the legend of Wyatt Earp.

Clear Macroeconomics Organization and Coverage

UPDATED! Macro data throughout the text has been updated through 2014.
Keynesian Cross material is integrated throughout the text and builds up to the AD/AS model so that students won’t mistakenly apply what they learned about simple demand and supply to aggregate demand and supply.
UPDATED! The supply of money and demand for money chapters have been merged into one chapter to streamline analysis (Chapter 10)
Important macroeconomic concepts and trends are discussed, including:

The goods market (Chapters 8 and 9)
NEW! The Fed interest rate rule (Chapter 10)
AD/AS curves and the equilibrium values of aggregate output, price level, and interest rate (Chapter 11)
Policy effects and cost shocks (Chapter 12)
The labor market (Chapter 13)

UPDATED! Coverage of the modern approach to economic development has been updated, including discussion of the millennium challenge (Chapter 20).
NEW! Discussion of the research methodology of economics has been added and highlights some of the key concerns of empirical economics: selection issues, causality, statistical significance, and regression analysis (Chapter 21).

A History of Excellence in Economic Content and Application

News Analysis features real news articles from The Wall Street Journal, The New York Times, The Economist, and others, strategically integrated into the text. The authors have also added homework problems for News Analysis articles at the end of the chapter.
Incorporation of international examples and applications includes discussion of:

The many countries that contributed to creating the iPod (Chapter 1).
How UPS is using technology to speed worldwide delivery (Chapter 7).
How high-speed trains in Europe benefit travelers, the environment, and the economies of communities served (Chapter 10).
The world’s distribution of income and how technology affects distribution (Chapter 33).
The world economy (Chapters 35 and 36).

A three-tiered explanation of key concepts (Stories-Graphs-Equations) is presented. Each concept is presented in the context of a simple intuitive story often followed by a table or graph, and in some cases, an equation that presents the concept with a mathematical formula.
UPDATED! End-of-chapter material delivers questions designed to help individuals learn course concepts and help instructors assess student performance.

Also Available with MyEconLab^®

This title is also available with MyEconLab–an online homework, tutorial, and assessment program designed to work with this text to engage students and improve results. Within its structured environment, students practice what they learn, test their understanding, and pursue a personalized study plan that helps them better absorb course material and understand difficult concepts.

Concept Checks at the end of each section act as “speed bumps” that encourage students to stop and check their understanding of fundamental terms and concepts before moving on to the next section. Consisting of a few multiple-choice, true/false, or fill-in-the-blank questions, they help students assess their progress on a section-by-section basis, so they can better prepare for homework, quizzes, and exams.
Animated graphs in MyEconLab accompany many of the key graphs and figures in the text, helping students better understand how to analyze and work with graphs. More dynamic than graphs on a printed page, they help students understand shifts in curves, movements along curves, and changes in equilibrium values.
Learning Catalytics™. Generate class discussion, guide your lecture, and promote peer-to-peer learning with real-time analytics. MyEconLab with eText now provides Learning Catalytics–an interactive student response tool that uses students’ smartphones, tablets, or laptops to engage them in more sophisticated tasks and thinking. Instructors, you can:

Pose a variety of questions that help your students develop critical thinking skills
Monitor responses to find out where students are struggling
Use real-time data to adjust your instructional strategy and try other ways of engaging your students during class
Manage student interactions by automatically grouping students for discussion, teamwork, and peer-to-peer learning

Digital Interactives are designed to change how students learn core economic concepts. Organized in progressive levels, each focusing on a core learning outcome, Digital Interactives immerse students in a fundamental economic principle, helping them to learn actively. Digital Interactives are designed for use in traditional, online, and hybrid courses, and many incorporate real-time data, as well as data display and analysis tools. Digital Interactive modules include Opportunity Cost, Comparative Advantage, Unemployment, Consumer Price Index and Inflation, Monetary Policy, Supply and Demand, and Gross Domestic Product. Each of these is available as a lecture tool for classroom presentation and are assignable with assessment questions for grading.
Dynamic Study Modules help students study effectively on their own by continuously assessing their activity and performance in real time. Here's how it works: students complete a set of questions with a unique answer format that also asks them to indicate their confidence level. Questions repeat until the student can answer them all correctly and confidently. Once completed, Dynamic Study Modules explain the concept using materials from the text. These are available as graded assignments prior to class, and accessible on smartphones, tablets, and computers.
NEW! Math Review Exercises. MyEconLab now offers a rich array of assignable and auto-graded exercises covering fundamental math concepts geared specifically to principles of and intermediate economics students. Aimed at increasing student confidence and success, our new math skills review Chapter R is accessible from the assignment manager and contains over 150 graphing, algebra, and calculus exercises for homework, quiz, and test use. Offering economics students warm-up math assignments, math remediation, or math exercises as part of any content assignment has never been easier!
UPDATED! Graphs Have Been Updated with Real-Time Data from FRED (Federal Reserve Economic Data)—a comprehensive, up-to-date data set maintained by the Federal Reserve Bank of St. Louis. Students can display a pop-up graph that shows new data plotted in the graph, to better understand how to work with data and understand how including new data affects graphs.
UPDATED! Interactive Problems and Exercises Have Been Updated with Real-Time Data from FRED. The end-of-chapter problems in select chapters include Real-Time Data Exercises that use the latest data from FRED to help students become familiar with this key data source, learn how to locate data, and develop skills in interpreting data.
Current News Exercises. Every week, current Microeconomic and Macroeconomic news stories, with accompanying exercises, are posted to MyEconLab. Assignable and auto-graded, these multi-part exercises ask students to recognize and apply economic concepts to real-world events.
A Chapter-by-Chapter News Archive features an online library of all Weekly News Updates, organized by chapter and accessible via MyEconLab.
An Enhanced eText keeps students engaged in learning on their own time, while helping them achieve greater conceptual understanding of course material. The worked examples bring learning to life, and algorithmic practice allows students to apply the very concepts they are reading about. Combining resources that illuminate content with accessible self-assessment, MyEconLab with Enhanced eText provides students with a complete digital learning experience—all in one place.
Question Help. MyEconLab's homework and practice questions are correlated to the textbook; they generate algorithmically to give students unlimited opportunity for practice and mastery, and offer helpful feedback when students enter incorrect answers. Questions include guided solutions and other multimedia assets for extra help at point-of-use.
Figure Animations. Key textbook figures are accompanied by a step-by-step animation, with audio, to help students learn the intuition behind reading and interpreting graphs. These animations may be used for review, or as an instructional aid in the classroom.

For each major figure, a graph drawing exercise accompanies the step-by-step animation. The student builds and interprets the key diagrams and develops understanding by working a multiple-choice question about the figure. Each graph drawing exercise is auto-graded and feeds into MyEconLab’s Adaptive Study Plan.

Reporting Dashboard. View, analyze, and report learning outcomes clearly and easily, and get the information you need to keep your students on track throughout the course, with the new Reporting Dashboard. Available via the Gradebook and fully mobile-ready, the Reporting Dashboard presents student performance data at the class, section, and program levels in an accessible, visual manner.
UPDATED! HTML5 Player Enhancements. In addition to matching the Flash player’s support of Accessibility requirements, the HTML5 player has a new “Show Work” feature to allow students to enter text either from a keyboard or stylus and to draw freehand on different backgrounds, such as a coordinate graph, with multiple fonts and colors. Students can also continue to upload images such as phone-photos of handwritten work. Printing enhancements include:

a more pen-and-paper-friendly layout of exercises
the ability for instructors to choose whether to print the header; to include an honor statement; and to print with answers inline, after each question, or on a separate sheet

About the Book

Spotlights Recent Research

Chapter 3 uses behavioral economics to ask whether having unusually sunny weather increases consumer purchases of convertible cars.
Chapter 7 looks at new research on how individuals unemployed as a result of a recession spend their time (including on job search versus other activities).
Chapter 14 describes recent research on how well recessions can be predicted.
Chapter 20 looks at work that uses children’s height in India to examine hunger and gender inequality.
Chapter 21 (brand new) contains three boxes that examine the Moving to Opportunity program, birth weight and infant mortality, and the effects of minimum wage.

Shows the Power and Breadth of Economic Models

Chapter 25 illustrates the role of banks in creating money by describing bank runs in two classic movies and in the legend of Wyatt Earp.

Clear Macroeconomics Organization and Coverage

UPDATED! Macro data throughout the text has been updated through 2014.
UPDATED! The supply of money and demand for money chapters have been merged into one chapter to streamline analysis (Chapter 10)
Important macroeconomic concepts and trends are discussed, including:

The Fed interest rate rule (Chapter 10)

UPDATED! Coverage of the modern approach to economic development has been updated, including discussion of the millennium challenge (Chapter 20).
Discussion of the research methodology of economics has been added and highlights some of the key concerns of empirical economics: selection issues, causality, statistical significance, and regression analysis (Chapter 21).

A History of Excellence in Economic Content and Application

UPDATED! End-of-chapter material delivers questions designed to help individuals learn course concepts and help instructors assess student performance.

Also Available with MyEconLab^®

Math Review Exercises. MyEconLab now offers a rich array of assignable and auto-graded exercises covering fundamental math concepts geared specifically to principles of and intermediate economics students. Aimed at increasing student confidence and success, our new math skills review Chapter R is accessible from the assignment manager and contains over 150 graphing, algebra, and calculus exercises for homework, quiz, and test use. Offering economics students warm-up math assignments, math remediation, or math exercises as part of any content assignment has never been easier!
UPDATED! Graphs Have Been Updated with Real-Time Data from FRED (Federal Reserve Economic Data)—a comprehensive, up-to-date data set maintained by the Federal Reserve Bank of St. Louis. Students can display a pop-up graph that shows new data plotted in the graph, to better understand how to work with data and understand how including new data affects graphs.
UPDATED! Interactive Problems and Exercises Have Been Updated with Real-Time Data from FRED. The end-of-chapter problems in select chapters include Real-Time Data Exercises that use the latest data from FRED to help students become familiar with this key data source, learn how to locate data, and develop skills in interpreting data.
UPDATED! HTML5 Player Enhancements. In addition to matching the Flash player’s support of Accessibility requirements, the HTML5 player has a new “Show Work” feature to allow students to enter text either from a keyboard or stylus and to draw freehand on different backgrounds, such as a coordinate graph, with multiple fonts and colors. Students can also continue to upload images such as phone-photos of handwritten work. Printing enhancements include:

a more pen-and-paper-friendly layout of exercises
the ability for instructors to choose whether to print the header; to include an honor statement; and to print with answers inline, after each question, or on a separate sheet

Part I: Introduction To Economics

1. The Scope and Method of Economics

2. The Economic Problem: Scarcity and Choice

3. Demand, Supply, and Market Equilibrium

4. Demand and Supply Applications

Part II: Concepts and Problems in Macroeconomics

5. Introduction to Macroeconomics

6. Measuring National Output and National Income

7. Unemployment, Inflation, and Long-Run Growth

Part III: The Core of Macroeconomic Theory

8. Aggregate Expenditure and Equilibrium Output

9. The Government and Fiscal Policy

10. Money, the Federal Reserve, and the Interest Rate

11. The Determination of Aggregate Output, the Price Level, and the Interest Rate

12. Policy Effects and Cost Shocks in the AS/AD Model

13. The Labor Market in the Macroeconomy

Part IV: Further Macroeconomics Issues

14. Financial Crises, Stabilization, and Deficits

15. Household and Firm Behavior in the Macroeconomy: A Further Look

16. Long-Run Growth

17. Alternative Views in Macroeconomics

Part V: The World Economy

18. International Trade, Comparative Advantage, and Protectionism

19. Open-Economy Macroeconomics: The Balance of Payments and Exchange Rates

20. Economic Growth in Developing Economies

Part VI: Methodology

21. Critical Thinking about Research

Karl E. Case is Professor of Economics Emeritus at Wellesley College where he has taught for 34 years and served several tours of duty as Department Chair. He is a Senior Fellow at the Joint Center for Housing Studies at Harvard University and a founding partner in the real estate research firm of Fiserv Case Shiller Weiss, which produces the S&P Case-Shiller Index of home prices. He serves as a member of the Index Advisory Committee of Standard and Poor’s, and along with Ray Fair he serves on the Academic Advisory Board of the Federal Reserve Bank of Boston.

Before coming to Wellesley, he served as Head Tutor in Economics (director of undergraduate studies) at Harvard, where he won the Allyn Young Teaching Prize. He was Associate Editor of the Journal of Economic Perspectives and the Journal of Economic Education, and he was a member of the AEA’s Committee on Economic Education.

Professor Case received his B.A. from Miami University in 1968; spent three years on active duty in the Army, and received his Ph.D. in Economics from Harvard University in 1976.

Professor Case’s research has been in the areas of real estate, housing, and public finance. He is author or coauthor of five books, including Principles of Economics, Economics and Tax Policy, and Property Taxation: The Need for Reform, and he has published numerous articles in professional journals.

For the last 25 years, his research has focused on real estate markets and prices. He has authored numerous professional articles, many of which attempt to isolate the causes and consequences of boom and bust cycles and their relationship to regional and national economic performance.

Ray C. Fair is Professor of Economics at Yale University. He is a member of the Cowles Foundation at Yale and a Fellow of the Econometric Society. He received a B.A. in Economics from Fresno State College in 1964 and a Ph.D. in Economics from MIT in 1968. He taught at Princeton University from 1968 to 1974 and has been at Yale since 1974.

Professor Fair’s research has primarily been in the areas of macroeconomics and econometrics, with particular emphasis on macroeconometric model building. He also has done work in the areas of finance, voting behavior, and aging in sports. His publications include Specification, Estimation, and Analysis of Macroeconometric Models (Harvard Press, 1984); Testing Macroeconometric Models (Harvard Press, 1994);Estimating How the Macroeconomy Works (Harvard Press, 2004), and Predicting Presidential Elections and Other Things (Stanford University Press, 2012).

Professor Fair has taught introductory and intermediate macroeconomics at Yale. He has also taught graduate courses in macroeconomic theory and macroeconometrics.

Professor Fair’s U.S. and multicountry models are available for use on the Internet free of charge. The address is http://fairmodel.econ.yale.edu. Many teachers have found that having students work with the U.S. model on the Internet is a useful complement to an introductory macroeconomics course.

Sharon M. Oster is the Frederic Wolfe Professor of Economics and Management and former Dean of the Yale School of Management. Professor Oster joined Case and Fair as a coauthor in the ninth edition of this book. Professor Oster has a B.A. in Economics from Hofstra University and a Ph.D. in Economics from Harvard University.

Professor Oster’s research is in the area of industrial organization. She has worked on problems of diffusion of innovation in a number of different industries, on the effect of regulations on business, and on competitive strategy. She has published a number of articles in these areas and is the author of several books, including Modern Competitive Analysis and The Strategic Management of Nonprofits.

Prior to joining the School of Management at Yale, Professor Oster taught for a number of years in Yale’s Department of Economics. In the department, Professor Oster taught introductory and intermediate microeconomics to undergraduates as well as several graduate courses in industrial organization. Since 1982, Professor Oster has taught primarily in the Management School, where she teaches the core microeconomics class for MBA students and a course in the area of competitive strategy. Professor Oster also consults widely for businesses and nonprofit organizations and has served on the boards of several publicly traded companies and nonprofit organizations.

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Pearson eTextbook: What’s on the inside just might surprise you

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Principles of Macroeconomics, 12th edition

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