Bradley R.

Schiller
with Cynthia Hill & Sherri VVall
-comect ECONOMICS

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 THE
MACRO

TODAY
i

13e
The McGraw-Hill Series Economics
ESSENTIALS OF ECONOMICS The Economy Today, The Micro Microeconomics and Behavior
Brue, McConnell, and Flynn Essentials of Economy Today, and The Macro Eighth Edition
Economics Economy Today ADVANCED ECONOMICS
Second Edition Thirteenth Edition Romer
Mandel Slavin Advanced Macroeconomics
Economics: The Basics Economics, Microeconomics, and Fourth Edition
Second Edition Macroeconomics MONEY AND BANKING
Schiller Tenth Edition Cecchetti and Schoenholtz
Essentials of Economics ECONOMICS OF SOCIAL ISSUES Money, Banking, and Financial Markets
Eighth Edition Guell Third Edition
PRINCIPLES OF ECONOMICS Issues in Economics Today URBAN ECONOMICS
Colander Sixth Edition OSullivan Urban Economics
Economics, Microeconomics, and Sharp, Register, and Grimes Eighth Edition
Macroeconomics Economics of Social Issues Nineteenth LABOR ECONOMICS
Eighth Edition Edition Borjas
Frank and Bernanke Principles of ECONOMETRICS Labor Economics
Economics, Gujarati and Porter Basic Econometrics Fifth Edition
Principles of Microeconomics, Principles Fifth Edition McConnell, Brue, and Macpherson
of Macroeconomics Gujarati and Porter Essentials of Contemporary Labor Economics
Fifth Edition Econometrics Ninth Edition
Frank and Bernanke Brief Editions: Fourth Edition PuBLIC FINANCE
Principles of Economics, Principles of MANAGERIAL ECONOMICS Rosen and Gayer Public Finance
Microeconomics, Principles of Baye Ninth Edition
Macroeconomics Managerial Economics and Business Seidman
Second Edition Strategy Public Finance
McConnell, Brue, and Flynn Seventh Edition First Edition
Economics, Microeconomics, and Brickley, Smith, and Zimmerman ENVIRONMENTAL ECONOMICS
Macroeconomics Managerial Economics and Field and Field
Nineteenth Edition Organizational Architecture Environmental Economics: An
McConnell, Brue, and Flynn Fifth Edition Introduction
Brief Editions: Microeconomics and Thomas and Maurice Fifth Edition
Macroeconomics Managerial Economics INTERNATIONAL ECONOMICS
Second Edition Tenth Edition Appleyard, Field, and Cobb
Miller INTERMEDIATE ECONOMICS International Economics
Principles of Microeconomics Bernheim and Whinston Seventh Edition
First Edition Microeconomics King and King
Samuelson and Nordhaus Economics, First Edition International Economics, Globaliza-
Microeconomics, and Macroeconomics Dornbusch, Fischer, and Startz tion, and Policy: A Reader
Nineteenth Edition Macroeconomics Fifth Edition
Schiller Eleventh Edition Pugel
Frank International Economics
Fifteenth Edition
THE MACRO

TODAY
13e

Bradley R. Schiller
The University of NevadaReno

with Cynthia Hill ^

Idaho State University

& Sherri Wc
Hl University of Alatca Fairbanks

8L, McGraintHIlI Hi lrwin

 The McGraw-Hill
Companles
McGraw-Hill
lrwin

THE MACRO ECONOMY TODAY

Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright
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Library of Congress Cataloging-in-Publication Data

Schiller, Bradley R., 1943-

The macro economy today / Bradley R. Schiller, Cynthia Hill, Sherri Wall.13th ed.
p. cm.(The McGraw-Hill series economics)
Includes index.
ISBN 978-0-07-741647-8 (alk. paper)
ISBN 0-07-741647-3 (alk. paper)
1. Macroeconomics. I. Hill, Cynthia. II. Wall, Sherri. III. Title.
HB172.5.S3425 2013
339dc23
2011046539

www.mhhe.com
ABOUT THE AUTHORS
The McGraw-Hill
Companles
Bradley R. Schiller has over four decades of experience teaching introductory economics at
the University of Nevada, American University, the University of California (Berkeley and
Santa Cruz), and the University of Maryland. He has given guest lectures at more than 300
colleges ranging from Fresno, California, to Istanbul, Turkey. Dr. Schillers unique
contribution to teaching is his ability to relate basic principles to current socioeconomic
problems, institutions, and public policy decisions. This perspective is evident throughout The
Macro Economy Today.
Dr. Schiller derives this policy focus from his extensive experience as a Washington
consultant. He has been a consultant to most major federal agencies, many congressional
committees, and political candidates. In addition, he has evaluated scores of government
programs and helped design others. His studies of poverty, discrimination, training pro-
grams, tax reform, pensions, welfare, Social Security, and lifetime wage patterns have
appeared in both professional journals and popular media. Dr. Schiller is also a frequent
commentator on economic policy for television and radio, and his commentary has appeared
in The Wall Street Journal, The Washington Post, The New York Times, and Los Angeles
Times, among other major newspapers.
Dr. Schiller received his Ph.D. from Harvard and his B.A. degree, with great distinction,
from the University of California (Berkeley). He is now a professor of economics at the
University of Nevada in Reno, where he hosts McGraw-Hills annual West Coast Teaching
Economics Conference. On his days off, Brad is on the tennis courts, the ski slopes, or the
crystal-blue waters of Lake Tahoe.

Cynthia D. Hill is a professor of economics at Idaho State University, where she has dedi-
cated herself to helping students develop as thinkers and scholars. Her academic research is
primarily focused on economic education and the advancement of classroom pedagogy. Over
the past decade Professor Hill has undertaken many administrative roles, which focus on
student success and educational advancement. These positions include director of the
University Honors Program, director of the Center for Teaching and Learning, and cur- rently
the position of executive director of the Student Success Center.
Professor Hill has won numerous teaching and public service awards over her 14-year
tenure at Idaho State University, including the Carnegie Foundation for the Advancement of
Teaching Idaho Professor of the Year, two-time Master Teacher, five-time Most Influential
Professor, two-time Outstanding Public Servant, and Distinguished Public Servant. She
earned her bachelors degree from the University of Montana and her Ph.D. from Washington
State University.

Sherri L. Wall has taught economics in the School of Management at the University of
AlaskaFairbanks since 2006. She is the founding faculty advisor for two student organiza-
tions at UAF: SWEET (Students Who Enjoy Economic Thinking) and SIFE (Students in Free
Enterprise). The UAF SIFE team has won three Regional championships, and in 2011, were
2nd runner up in the opening round of competition at the National Exposition. Sherri was a
finalist in the Market-Based Management Institutes Economic Communicators con- test at
the Association of Private Enterprise Conference in 2008. In that same year, she was
recognized as Outstanding Faculty Member of the year by the UAF student body, and in 2010,
Outstanding Student Organization Advisor.
Sherri has a Masters of Science in Resource and Applied Economics, and is completing her
Ph.D. through a National Science Foundation fellowship. Her research interests include
economic issues of climate change in Alaska, institutional economics and economic educa-
tion. She has presented her research at universities and conferences around the world. In her Kelly Atlee Photography.

spare time, she finds great utility in the outdoor recreational opportunities in Alaska, including
flying with her husband, hiking, fishing, hunting, skiing, and trail running.
 The Great Recession of 2008-2009 lingered for far too long. But that devastating experi- ence had at least one positive effect: it revitalized
interest in economics. People wanted to know how a modern economy could stumble so badly. And why it took so long to recover. Public
debates about economic theory became increasingly intense and partisan. Every- thing from Keynesian theory to environmental regulation
became the subject of renewed scrutiny. These debates increased the demand for economic analysis and for principles instruction as well.
Indeed, one could argue that the Great Recession proved that econom- ics instruction is an inferior good: as the economy contracts, the
demand for economics courses increases.
While we might take offense at the thought of producing an inferior good, we should certainly rise to the occasion. This means bringing
the real world into the classroom as never before: tying theoretical controversies about macro stability to both the ongoing busi- ness cycle
and the intensely partisan policy debates about cause and effect; and getting students to appreciate why and how economic issues were the
central focus of the 2012 election campaigns.
The Macro Economy Today has always been a policy-driven introduction to economic principles. Indeed, that is one of its most distinctive
features. This 13th edition continues that tradition, with even more fervor. It challenges students to think more critically about the dominant
policy issues of the day. Take solar energy, for example. Students over- whelmingly embrace the potential of clean solar energy to replace
dirty fossil fuels, thereby saving the environment, breaking the power of Big Oil, and achieving energy independence. But what about
opportunity costs? Economists preach that there is neither a free lunch nor free solar panel. The first chapter of this text tries to get
students thinking more like economiststhat is, about resource constraints and implied trade- offs. The same critical thinking is applied in
Chapter 1 to the guns versus butter debate that soaring budget deficits have brought to the fore once again (that is, which to cut). Then
there is the renewed debate over taxes on the rich, which relates both to equality (what is a fair distribution of the deficit-cutting burden)
and to efficiency (production and investment disincentives).
A section titled, The Economy Tomorrow at the end of every chapter focuses on these kinds of front-page policy issues. But the real-
world emphasis of this text is not confined to that feature. Every chapter has an array of In the News and World View boxes that offer real-
world illustrations of basic economic principles. And the body of the text itself is per- meated with actual companies, products, people, and
policy issues that students will recog- nize. There are no mythical widgets or Jack & Jill water companies in this textbook. Stu- dents will see
and appreciate the links between core principles and real-life events. They will also learn and remember those principles far longer.

DIFFERENTIATING FEATURES
The policy-driven focus of The Macro Economy Today clearly differentiates it from other principles texts. Other texts may claim real-world
content, but none comes close to the empirical perspectives of this text. Beyond this unique approach, The Macro Economy Today offers a
combination of features that no other text matches, including the following.
Macro Focus Most principles texts moved away from the short-run business cycles to more emphasis on long-run macro dynamics
on Short-Run about 10-15 years ago. Many even suggested the business cycle was dead. Now they know they missed the boat. And so
Cycles do the students who have to read those texts and wonder why there is so little discussion of the macro events that
14 P R E FAC E

have created so much economic and political turmoil. The Macro Economy Today is one of the few textbooks that puts greater
emphasis on short-run cyclicality than on long-run stability.
Another pedagogical advantage of The Macro Economy Today is its use of a single framework for teaching all macro
perspectives. Other principles texts continue to pres- ent both the Keynesian Cross framework One-Model
and the aggregate demand/supply (AD/AS) framework. This two-model approach is neither Macro
necessary nor efficient. All of the core ideas of Keynesian theory, including the multiplier, can be
illustrated in the AD/AS framework. Keynes never drew the Keynesian cross and would not use it today, espe- cially in view of
the superiority of the AD/AS model in conveying his ideas. And we all know that the Keynesian cross is of no use in illustrating
the short-run trade-off between inflation and full employment that bedevils policy makers and even defines our concept of full
employment. Why overburden students with a two-model approach that confuses them and eats scarce instruction time?
Instructors who adopt this texts one-model approach are invariably impressed with how much more efficient and effec- tive it is.
We all know there is no such thing as a pure market-driven economy and that markets operate on the fringe even in the most
centralized economics. So markets versus government is not an all-or-nothing proposition. It is still a central theme, however, in
the real world. Should the government assume more responsibility for managing the economyor will less intervention generate
better macro outcomes? Public opinion is clear: as the accompanying News reveals, three out of four Americans have a negative
view of federal intervention. The challenge for economics instructors is to enunciate principles that help define the boundaries of
public and private sector activity. When do we expect market failure to occur? How and why do Markets versus
we anticipate that government intervention might result in government failure? Can we get Government
students to think critically about these central issues? The Macro Economy Today certainly tries, Theme
aided by scores of real-world illustrations.
Government Failure?
An August 2011 Washington Post poll asked a cross-section of Americans the following question:
Question: In general, when the government in Washington decides to solve economics
problems, how much confidence do you have that the problem actually will be solved?
market failure:
Response A lot 5% An
s:
imperfection in the
Some 21% market mechanism that
prevents optimal
Little 34% outcomes.

government
None 39% failure:
IN THE Government intervention
NEWS that fails to improve
economic outcomes.
Source: The Washington Post, August 9, 2011. All rights reserved. Used with permission.

Analysis: "Government failure" occurs when government intervention fails to improve economic outcomes
that is, solve economics problems. Three out of four Americans expect such failures to occur.
 Unique The Staples of introductory economics are fully covered in The Macro Economy Today. Beyond the core chapters,
Topic however, there is always room for additional coverage. In fact, authors reveal their uniqueness in their choice of such
Coverage chapters. Those choices tend to be more abstract in competing texts, offering extra chapters on pubic choice, behavioral
economics, economics of information, uncertainty, and asymmetric information. All of these are interesting and important, but
entail opportunity costs that are particularly high at the principles level. The menu in The Macro Economy Today is more tailored
to the dimen- sions and issues of the world around us. Chapter 2, for example, depicts the dimensions of the U.S. economy in a
comparative global framework. Where else are students going to learn that China is not the worlds largest economy, that U.S.
workers are the most produc- tive, or that income inequality is more severe in poor nations than rich ones?
The same empirical foundation is apparent in the chapters on unemployment (6) and inflation (7). We economists take for
granted that these are central macroeconomic prob- lems. But students have little personal experience with either problem and
even less appre- ciation of their significance. Chapters 6 and 7 try to bridge this gap by discussing why unemployment and
inflation are such central concerns, that is, kinds of socioeconomic harm they inflict. The intent here is to help students
understand and embrace our economic goals before we ask them to explore potential solutions.
Chapter 18 on Theory versus Reality offers yet another unique perspective on macro- economics. It confronts the perennial
question students ask: If economic theory is so great, why is the economy so messed up? Chapter 18 answers this questions by
reviewing the goal conflicts, measurement problems, design issues, and implementation obstacles that constrain even the best
macro policies.
Global perspective, along with real-world content is promised by just about every prin- ciples author. The Macro Economy
Today actually delivers on that promise. This is mani- festly evident in the titles of Chapter 2 (global comparisons) and Chapter
21 (global pov- erty). The global perspective is also easy to discern in the boxed World View features embedded in every
chapter. More subtle, but at least as important, is the portrayal of an open economy from the get-go. While some texts start with a
closed economyor worse still, a closed, private economyand then add international dimensions as an afterthought, The
Macro Economy Today depicts an open economy from start to finish. These global linkages are a vital dimension of macro issues
Global (e.g., cyclical instability, monetary control).
Perspective YouTube content has come to The Macro Economy Today! Students are always checking things out on YouTube
and even forwarding occasional videos they think relate to economics. So we decided to integrate YouTube videos into The
Macro Economy Today. Professors Sherri Wall (University of AlaskaFairbanks) and Cindy Hill (Idaho State University)
identified scores of YouTube videos that do, indeed, illustrate basic economic concepts. These were then annotated to explain
that economic content, highlighting key terms from the text. Sherri and Cindy also provided questions to test student
comprehension of the economic principles covered. The result is a new and exciting student supplement to The Macro Economy
Todaya catalog of chapter-specific, engaging, and instructive YouTube videos. They are available in the book-specific Connect
software system and the book-specific Online Learning Center.
YouTube
Content! WHAT'S NEW IN THIS 1 3 T H EDITION
Every edition of The Macro Economy Today introduces a wealth of new content and peda- gogy. This is critical for a text that
prides itself on currency of policy issues, institutions, and empirical perspectives. Every page, every example, and all the data
have been reviewed for currency and updated where needed. Beyond this general upgrade, previous users of The Macro
Economy Today will notice some specific revisions, including the following.
Each chapter ends with a feature called The Economy Tomorrow that challenges students to apply key concepts to current
policy issues. The new Economy Tomorrow features range

New "Economy
Tomorrow"
Topics
from Harnessing the Sun (the opportunity costs of solar energy) in Chapter 1 to Policing World Trade (international trade
disputes) in Chapter 19.
The boxed World Views in each chapter are designed to showcase the global reach of eco- New "World
nomic principles. There are various new World Views in the 13th edition, including the 2010- Views"
2011 surge in oil prices (supply and demand shifts) in Chapter 3, the $100 trillion Zimbabwean banknote (the ravages of
hyperinflation) in Chapter 7, and Chinas monetary restraint in Chapter 15. All of the World Views are annotated, are referred to
in the body of the text, and often are the subject of end-of-chapter questions. These added dimensions help ensure that students
will actually read the boxed material.
The boxed In the News features highlight domestic applications of basic principles. In Chapter New "In the
3 alone there are three new ones on selling human organs (supply and demand); the BP oil spill News" Content
and shrimp prices (supply shift); and ticket scalping (disequilibrium prices). The News in Chapter 4 about firefighters watching
a house burn to the ground in Tennessee is a vivid introduction to the concepts of public goods and externalities. Some of my
new favorites are the depiction of the 2008-2009 multiplier process as it spread despair beyond the housing industry (p. 213)
and the avowed reluctance of banks to lend money despite burgeoning reserves (p. 322).
At the end of every chapter there are both questions for discussion and a separate set of New Problems
numerical and graphing problems. The problem set is designed so that students can answer and & Questions
submit manually if desired. The same problems are also embedded in the course management for Discussion
system Connect to facilitate online submissions, automatic grading, and course monitoring. Both the questions for discussion
and problems utilize tables, graphs, and boxed material from the body of the chapter, requiring the students to read and pro-
cess core content. As a result, the end of chapter material has to be updated along with the text itself.
We are pleased to welcome Cynthia Hill (Idaho State University) and Sherri Wall (Univer- sity New Digital
of AlaskaFairbanks) to the author team. Both are active instructors at their respective Coauthors and
institutions and are dedicated to teaching and using technology as an innovative part of their Enhanced
courses. Cindy and Sherri have been brought into the Schiller franchise as digital coauthors. Digital Content
They have made important contributions to the 13th edition, including revising the end-of-chapter content, streamlining
learning objective pedagogy, and most notably updating the technology features of the text. Working directly with the content
in McGraw- Hills homework management system, Connect, they have each created algorithmic prob- lems, provided datasets,
and accuracy-checked the content, ensuring correct and accurate material.
YouTube Videos. The YouTube videos added to The Macro Economy Todays instruc- tional package is the most visible
contribution to this edition made by Cindy and Sherri. These short, engaging videos are annotated to highlight basic economic
concepts. They can be used independently by students or used as visual aids in the classroom. In either case, they will enhance
the learning experience.

CHAPTER-BY-CHAPTER CHANGES
The Macro Economy Today, 13th edition, features improved and expanded learning objec- tives, end-of-chapter content, and
up-to-date material and data reflecting todays economy in every chapter. Changes include the following.
Chapter 1 focuses on respective powers of market and government to fashion economic outcomes, reinforcing the market
versus government theme of the text. A new discussion of normative versus positive analysis, an In the News article on
unemployment in 2011, and illustrations of opportunity cost have been added, including a new Economy Tomorrow section
discussing solar power and the opportunity costs of development.
 Chapter 2 is thoroughly updated with global and domestic comparison data, such as comparative output (GDP); GDP per
capita around the world; GDP growth versus popula- tion growth; the education gap between rich and poor nations; the income
share of the rich; U.S. output and population growth; and U.S. distribution of income.
Chapter 3 emphasizes comparative advantage and specialization and features In the News and World View articles such as
AT&Ts price cuts on the iPhone to illustrate the law of demand; BPs oil spill and its effects on shrimp prices to show supply-
curve shifts; ticket scalping to exemplify market shortages; the 2011 gasoline price surge to demonstrate changing equilibrium;
and the selling of human organs to describe a zero price ceiling.
Chapter 4s revisions include updated domestic data, new In the News and World View articles on fire protection in regards
to public goods and the free-rider dilemma, externali- ties described by deaths due to secondhand smoke, and a new Economy
Tomorrow section on public choice theory in right-sizing government.
Chapter 5 streamlines the discussion on real versus nominal GDP, includes updated GDP data for 2010, and has a revised
World View on the subject of global living standards.
Chapter 6 covers an explicit analysis of inflationary flashpoint that describes full employ- ment showcases the new key
term and definition of inflationary flashpoint, New In the News articles on structural unemployment and the unemployment
rate have been added.
Chapter 7 highlights the new key term inflationary flashpoint from the previous chap- ter, and associates this topic in a
new Economy Tomorrow section about the virtues of inflation, which includes a new article about U.K. inflation and
inflationary expectations. This chapter also illustrates inflation and hyperinflation in the In The News and World View pieces
about the 2010-2011 tuition hikes and Zimbabwes $100 trillion banknote.
Chapter 8 adds further coverage of the Great Recession with discussions of GDP decline in a new In the News article and a
revised Economy Tomorrow section focusing on Obama-nomics.
Chapter 9 introduces a new key term, autonomous consumption, helping to simplify the discussion of consumer spending.
New In the News articles discuss New York States spending cuts in reaction to the recession and U.S. leading indicators
predicting the eco- nomic outlook.
Chapter 10 integrates 2007-2009 investment data and In the News examples concerning residential construction and
consumer spending to illustrate and streamline the multiplier process.
Chapter 11 lists new CBO estimates of Obamas stimulus effects and includes an exam- ple of inflationary pressures in a
new World View on U.K. inflation.
Chapter 12 incorporates the CBO decomposition of deficit into cyclical and structural com- ponents and identifies
ownership and burdens of the national debt. This chapter also covers the 2011 budget ceiling crisis and the debate on the 2011
deficit/debt in a new In the News article.
Chapter 13 expands the discussion of bank bailouts and includes a recent In the News article about CD rates relating to
money supply (M1 and M2).
Chapter 14 focuses on the federal handling in the 2008 credit crisis, reviews the 2010 2011 quantitative easing strategy,
and illustrates Chinas 2011 increase in reserve require- ments as an example of the central bank slowing economic growth.
Chapter 15 uses the Bernanke rule to quantify equivalence of fiscal and monetary policies; discusses constraints on the
effectiveness of the 2008-2011 monetary stimulus; and features new In the News and World View articles about the Feds 2009-
2011 massive bond purchases to stimulate economic activity, the banks reluctance to lend in 2010-2011, and Chinas 2010-
2011 monetary restraint to stabilize inflation.
Chapter 16 highlights new estimates of costs and benefits of infrastructure development, Obamas 2011 executive order
requiring the rebalance between regulation and economic growth, and current In the News and World View articles about the
regulation of lead con- tent used in toys potentially imposing additional costs for sellers and Japans tsunami/ earthquake-
induced AS shift.
Chapter 17 includes updated comparisons of global production and a new World View section on the IMFs fear of raised
interest rates and crowding out private investment.
 Chapter 18 has extended coverage and discussion on the 2009-2011 stimulus poli- cies, including QE1, QE2, and budget
deals; coverage of the July 2011 deficit ceiling debate; new global performance comparisons throughout the chapter; more
emphasis on the absence of shovel ready federal spending; new use of the key term inflation- ary flashpoint; and an In the
News article on the belated NBER dating of the Great Recession.
Chapter 19 includes updated export ratio and trade balances data. New World View and In the News articles explore tariffs
on Chinese tires and sugar import quotas, discuss the Mexican trucking dispute, and focus on Policing World Trade in the
Economy Tomorrow section.
Chapter 20 contains updated data on foreign exchange rates, 2010 data for the U.S. bal- ance of payment summary statement
and a World View about Chinas deliberate attempt to keep the value of the yuan low by purchasing foreign currency.
Chapter 21 is thoroughly updated with global data such as poverty thresholds and popu- lation, income distribution, foreign
aid, growth rates, agriculture share of total output and productivity, and business climates.

EFFECTIVE PEDAGOGY
Despite the abundance of real-world applications, this is at heart a principles text, not a compendium of issues. Good theory
and interesting applications are not mutually exclusive. This is a text that wants to teach economics, not just increase awareness
of policy issues. To that end, The Macro Economy Today provides a logically organized and uncluttered theo- retical structure
for macro and international theory. What distinguishes this text from others on the market is that it conveys theory in a lively,
student-friendly manner.
Student comprehension of core theory is facilitated with careful, consistent, and effective Clean, Clear
pedagogy. This distinctive pedagogy includes the following features: Theory
Chapter Learning Objectives. Each chapter contains a set of chapter-level learning objectives. Students and professors
can be confident that the organization of each chapter surrounds common themes outlined by three to five learning objectives
listed on the first page of each chapter. End-of-chapter material, including the chapter summary, discussion questions, and
student problem sets, is tagged to these learning objectives, as is the supple- mentary material,
which includes the Test Bank, and Instructors Resource Manual. Concept
Reinforceme
Self-Explanatory Graphs and Tables. Graphs are completely labeled, colorful, and nt
posi- tioned on background grids as the graph on the next page illustrates. Because students
often enter the principles course as graph-phobics, graphs are frequently accompanied by synchro- nized tabular data. Every
table is also annotated. This shouldnt be a product-differentiating feature but, sadly, it is. Putting a table in a textbook without
an annotation is akin to writing a cluster of numbers on the board, then leaving the classroom without any explanation.
Reinforced Key Concepts. Key terms are defined in the margin when they first appear and, unlike in other texts,
redefined in the margin as necessary in subsequent chapters. Website references are directly tied to the books content, not hung
on like ornaments. End- of-chapter discussion questions use tables, graphs, and boxed news stories from the text, reinforcing
key concepts, and are linked to the chapters learning objectives.
Boxed and Annotated Applications. In addition to the real-world applications that run through the body of the text,
the new design of The Macro Economy Today inter- sperses boxed domestic (In the News) and global (World View) case
studies intertextu- ally for further understanding and reference. Although nearly every text on the market now offers boxed
applications, The Macro Economy Todays presentation is distinctive. First, the sheer number of In the News and World View
boxes is unique. Second, and more important, every boxed application is referenced in the body of the text. Third,
 Demand shifts whei

ss
tastes, income,
other gc or
ShiTt in expectations chan<
d
demand d
2
i D
2:
FIGURE 3.3 increas
Shifts vs. Movements ed
deman
A demand curve shows how a Moveme d
con- sumer responds to price nt along
changes. If the determinants of curve
demand stay constant, the
D1:
response is a move- ment
initial
along the curve to a new dema
quantity demanded. In this nd
case, the quantity demanded
increases from 5 (point d1), to QUANTITY (hours per
12 (point g1), when price falls semester)
from $35 to $20 per hour.
If the determinants
Quantityof Demanded (Hours per Semester)
demand change, the entirePrice (per Hour) Initial Demand After Increase
demand curve shifts. In this
case, a rise in A income $50
1 8
increases demand. With B more 45 9
2
income, Tom is willingC to buy 40 3 10
12 hours at the initial Dprice of 35 5 12
$35 (point d2), not just the 5
E 30 7 14
hours he demanded beforeF the 25 9 16
lottery win. G 20 12 19
H 15 15 22
I 10 20 27

WORLD VI E W
Gas Prices Highand Might Get Higher
NEW YORK (CNNMoney)Strong worldwide oil demand and lack of supply are to blame for steadily rising gasoline
prices in the United States, an oil industry group
said Friday. . . .
Felmy said worldwide oil demand in 2010 hit a
record of more than 87 million barrels a day, driven
largely by strong growth in India, China, and the
Middle East.
Supply, meanwhile, was constricted by the
drilling moratorium in the Gulf of Mexico following
the BP disaster, slow production growth in non-
OPEC countries, and OPEC production controls. . . .
Over the last year, prices are up 39 cents a gallon or 14 percent. Crude oil is up by a similar percentage,
currently trading at just under $90 a barrel.
Steve Hargreaves
Source: CNNMoney.com, January 21, 2011. 2011 Time Inc. Used under license.

Analysis: Equilibrium prices change whenever market demand or supply

curves shift. In this case, both curves are shifting, and the equilibrium price is
rising.
every News and World View comes with a brief, self-contained explanation as the previ- ous
example illustrates. Fourth, the News and World View boxes are the explicit subject of the end-of-
chapter discussion questions and student problem set exercises. In combi- nation, these distinctive
features assure that students will actually read the boxed appli- cations and discern their economic
content. The Test Bank provides subsets of questions tied to the News and World View boxes so
that instructors can confirm student use of this feature.
Photos and Cartoons. The text presentation is also enlivened with occasional photos and
cartoons that reflect basic concepts. The photos on page 40 are much more vivid testimony to the
extremes of inequality than the data in Figure 2.3 (p. 39). Every photo and cartoon is annotated
and referenced in the body of the text. These visual features are an integral part of the
presentation, not diversions.
The one adjective invariably used to describe The Macro Economy Today is readable. Readability Professors often express a
bit of shock when they realize that students actually enjoy read- ing the book. (Well, not as much as a Stephen King novel, but a whole lot
better than most textbooks theyve had to plow through.) The writing style is lively and issue-focused.
Unlike any other textbook in the market, every boxed feature, every graph, every table, and every
cartoon is explained and analyzed. Every feature is also referenced in the text, so students actually
learn the material rather than skipping over it. Because readability is ulti- mately in the eye of the
beholder, you might ask a couple of students to read and compare a parallel chapter in The Macro
Economy Today and in another text. This is a test The Macro Economy Today usually wins.
I firmly believe that students must work with key concepts in order to really learn them. Student Problem Set
Weekly homework assignments are de rigueur in my own classes. To facilitate home-
work assignments, I have prepared the student problem set, which includes built-in
numerical and graphing problems that build on the tables, graphs, and boxed material
that align with each chapters learning objectives. Grids for drawing graphs are also pro-
vided. Students cannot complete all the problems without referring to material in the
chapter. This increases the odds of students actually reading the chapter, the tables, and
the boxed applications.
The student problem set at the end of each chapter is reproduced in the online student tutorial
software (Connect Economics, discussed in the following pages). This really helps students
transition between the written material and online supplements. It also means that the online
assignments are totally book specific.
Analysis: An abundance of capital equipment and advanced technology make American farmers and workers far more
productive than workers in poor nations.

Santokh Kochar/Getty Images/DAL Gene Alexander, USDA Natural Resources Conservation Service/DAL
 NEW AND IMPROVED SUPPLEMENTS
Instructor Aids Test Bank. William Aldridge of the University of AlabamaTuscaloosa and Diane Keenan of
Cerritos College, with the help of Mack Bean of Franklin Pierce University and Steve Abid of
Grand Rapids Community College, have thoroughly revised the Test Bank for the Thirteenth
edition. This team assures a high level of quality and consis- tency of the test questions and the
greatest possible correlation with the content of the text. All questions are coded according to
chapter learning objectives, AACSB Assur- ance of Learning, and Blooms Taxonomy guidelines.
The computerized Test Bank is available in EZ Test, a flexible and easy-to-use electronic testing
program that accom- modates a wide range of question types including user-created questions.
Tests created in EZ Test can be exported for use with course management systems such as
WebCT, BlackBoard, or PageOut. The program is available for Windows, Macintosh, and Linux
environments.
PowerPoint Presentations. Mike Cohick of Collin College, with the help of Susan Glanz
of Saint Johns University, created new presentation slides for the Thirteenth edition. Developed
using Microsoft PowerPoint software, these slides are a step-by-step review of the key points in
the books 21 chapters. They are equally useful to the student in the class- room as lecture aids or
for personal review at home or the computer lab. The slides use animation to show students how
graphs build and shift.
Digital Image Library. All of the texts tables and graphs have been reproduced as full-
color images on the website for instructor access.
Instructor's Resource Manual. Jan Ojdana of the University of Cincinnati, with the help
of Stephanie Campbell of Mineral Area College, has prepared the Instructors Resource Manual.
The Instructors Resource Manual is available online, and it includes chapter sum- maries and
outlines, lecture launchers to stimulate class discussion, and media exercises to extend the
analysis.
News Flashes. As up-to-date as The Macro Economy Today is, it cant foretell the future. As
the future becomes the present, however, I write two-page News Flashes describing major
economic events and relating them to specific text references. These News Flashes provide good
lecture material and can be copied for student use. Adopters of The Macro Economy Today have
the option of receiving News Flashes via fax or mail. Theyre also available on the Schiller
website. Four to six News Flashes are sent to adopters each year. (Contact your local McGraw-
Hill/Irwin sales representative to get on the mailing list.)
Student Aids At the instructors discretion, students have access to the News Flashes. In addition, the following
supplements can facilitate learning.
Built-in Student Problem Set. The built-in student problem set is found at the end of
every chapter of The Macro Economy Today. Each chapter has 8 to 10 numerical and graph- ing
problems tied to the content of the text. Graphing grids are provided. The answer blanks are
formatted to facilitate grading and all answers are contained in the end-of-chapter Solutions
Manual. For convenience, the student problem set pages can also be found on the textbooks
website in exactly the same order and format. This facilitates either manual or electronic retrieval
of homework assignments.
Study Econ Mobile App. McGraw-Hill is proud to offer a new mobile study app for
students learning economics from Schiller The Macro Economy Today, 13th edition. The features
of the Study Econ app include flashcards for all key terms, a basic math review, customizable
self-quizzes, common mistakes, and games. For additional information, please refer to the back
inside cover of this book. Visit your mobile app store and download a trial version of the Schiller
Study Econ app today!
DISTINCTIVE WEB SUPPORT
The Thirteenth edition of The Macro Economy Today continues to set the pace for web
applications and support of the principles course.
A mini website directory is provided in each chapters marginal Web Analysis boxes, cre- ated Web Analysis
and updated by Mark Wilson of West Virginia University Institute of Technology. These URLs Boxes
arent random picks; they were selected because they let students extend and update adjacent
in-text discussions.
The Macro Economy Todays website now includes even more features that both instruc- tors Online Learning
and students will find engaging and instructive. The Online Learning Center is user-friendly. Center
Upon entering the site at www.mhhe.com/schiller13e, students and instructors will find www.mhhe.
detailed information on the new edition and links to the specific site for the version of the book com/schiller13e
they are using.
Proceeding into the Student Center, students will find lots of brand-new interactive study
material. Mark Wilson, with the help of Rondi Schei of Portland State University, has revised
10 self-grading multiple-choice questions per chapter, which are ideal for self- quizzing before
a test. In addition, they have enhanced the Auxiliary Problem Sets for the site through updating
the problems for added practice. Professors can assign these extra problems as homework or
students can access them for additional skills practice. Answers can be found on the password-
protected Instructors Edition of the website. Mark and Rondi have also revised and created
new Web Activities for each chapter. On top of all that, students have access to my periodic
News Flashes along with my e-mail address to ask me any questions directly, under ask
Brad.
The password-protected Instructor Center includes some wonderful resources for
instructors who want to include more interactive student activities in their courses. The
downloadable Instructors Resource Manual, end-of-chapter Solution Manual, Test Bank,
PowerPoints, Auxiliary Problem Sets and answers, Web-Based Activities and answers, and
YouTube Activity answers are available to provide guidance for instructors who collect these
assignments and grade them.
Premium Content. The Online Learning Center now offers students the opportunity to
purchase Premium Content. Like an electronic study guide, the OLC Premium Content enables
students to download Schiller-exclusive iPod content including podcasts by Brad Schiller, Paul
Solman videos, and chapter summariesall accessible through the students MP3 device.
Less Managing. More Teaching. Greater Learning. McGraw-Hill Connect
Economics McGraw-Hill
is an online assignment and assessment solution that connects students with the tools and Connect
resources theyll need to achieve success. Economics

aconnect
McGraw-Hill Connect Economics helps prepare students for their future by enabling
faster learning, more efficient studying, and higher retention of knowledge.
Connect Economics offers a number of powerful tools and features to make managing |ECONOMICS
assign- ments easier, so faculty can spend more time teaching. With Connect Economics, McGraw-Hill
students can engage with their coursework anytime and anywhere, making the learning process Connect
more accessible and efficient. Connect Economics offers you the features described below. Economics Features
Simple Assignment Management. With Connect Economics, creating assignments
is easier than ever, so you can spend more time teaching and less time managing. The assign-
ment management function enables you to
Create and deliver assignments easily with selectable end-of-chapter questions and
test bank items.
Streamline lesson planning, student progress reporting, and assignment grading to
make classroom management more efficient than ever.
Go paperless with the eBook and online submission and grading of student assignments.