the basics of economics

420 Pages·2007·4.2 MB·English

THE BASICS OF
ECONOMICS
David E. O’Connor
GREENWOOD PRESS
The Basics of Economics
Recent titles in
Basics of the Social Sciences
The Basics of Western Philosophy
Eugene Kelly
THE BASICS OF
ECONOMICS
David E. O’Connor
Basics of the Social Sciences
GREENWOOD PRESS
Westport,Connecticut • London
Library of Congress Cataloging-in-Publication Data
O’Connor, David E. (David Edward)
The basics of economics / David E. O’Connor.
p. cm. — (Basics of the social sciences)
Includes index.
ISBN 0–313–32520–0 (alk. paper)
1. Economics. 2. Economics—History. I. Title. II. Series.
HB71.027 2004
330—dc22 2004008304
British Library Cataloguing in Publication Data is available.
Copyright © 2004 by David E. O’Connor
All rights reserved. No portion of this book may be
reproduced, by any process or technique, without the
express written consent of the publisher.
Library of Congress Catalog Card Number: 2004008304
ISBN: 0–313–32520–0
First published in 2004
Greenwood Press, 88 Post Road West, Westport, CT 06881
An imprint of Greenwood Publishing Group, Inc.
www.greenwood.com
Printed in the United States of America
The paper used in this book complies with the
Permanent Paper Standard issued by the National
Information Standards Organization (Z39.48–1984).
10 9 8 7 6 5 4 3 2 1
Contents
List of Figures and Tables vii
Acknowledgments ix
Preface xi
Common Abbreviations in Economics xvii
Timeline of Key Economic Events of the Modern Era: xxiii
1750 to 2005
Chapter 1: Economics as a Social Science 1
Chapter 2: A Survey of Economic History and
Economic Thought 21
Chapter 3: The Rise of Modern Capitalism:
The Power of the Market 47
Chapter 4: The Other Isms:Socialism,Communism,
and Fascism 75
Chapter 5: Business Firms:The Basic Production Unit 105
Chapter 6: Consumers Organize:Consumer Behavior
and Consumer Power 131
Chapter 7: Workers Organize:The Labor Force
and Labor Power 159
Chapter 8: Financial Markets:The Arteries of
Economic Activity 189
Contents
Chapter 9: Perspectives on Economic Growth 223
Chapter 10: In Search of Economic Stability 251
Chapter 11: Globalization:Creating a Global
Marketplace 273
Chapter 12: The Challenge of Sustainable Economic
Development 295
Chapter 13: Careers in Economics 319
Appendix A: Glossary of Selected Terms 335
Appendix B: Key Economic Web Sites 351
Appendix C: Selected Videotapes 355
Appendix D: Index to Biographies 361
General Index 365
vi
List of Figures and Tables
FIGURES
1.1 Production Possibilities Curve for Nation X 5
2.1 Adam Smith Describes the Division of Labor 35
3.1 The Circular Flow Model 54
3.2 Government Workers by Level of Government: 1950–2003 62
4.1 The Pudong New Area 95
6.1 Sources of Household Income: 2003 132
6.2 Household Spending: 2001 133
6.3 Illustrating the Demand for Product X 138
6.4 Illustrating the Supply of Product X 140
6.5 Market Equilibrium for Product X 142
6.6 Price Ceilings and Shortages 143
7.1 U.S. Employment by Sector: 1900 and 2003 161
7.2 The Substitution Effect of a Wage Increase 164
7.3 The Income Effect of a Wage Increase 165
7.4 The Equilibrium Wage 168
7.5 Education and Income: 2000 169
7.6 The Minimum Wage and Labor Markets 172
8.1 The U.S. Money Supply (M1): 2003 192
8.2 Holders of Consumer Credit: 2002 195
8.3 Personal Income, Spending, and Saving: 2003 198
8.4 Commercial Banks and the Fed: 2002 204
8.5 The Dow Jones Industrial Average: 1896 and 2004 209
8.6 Types of Mutual Funds: 2002 213
9.1 Economic Growth: An Illustration 224
9.2 Calculating the Real GDP: 2003 225
List of Figures and Tables
9.3 Funding Research and Development: 2000 235
10.1 The Business Cycle Model 252
10.2 Calculating the Inflation Rate: 2002 255
12.1 Population Explosion: 1900–2050 299
13.1 Wages of Social Scientists: 2001 320
TABLES
4.1 Russia’s Performance Indicators: 1995–2004 91
5.1 Top 10 U.S. Corporations: 2003 107
5.2 Forms of Business Organization: 1997 114
5.3 Top 10 Franchises: 2003 115
6.1 Jeremy’s Diminishing Marginal Utility 134
6.2 Domestic Advertising Spending: 2002 Rankings 136
6.3 Major Consumer Organizations 145
6.4 Bankruptcy Filings: 2000–2003 152
7.1 Labor Force Participation Rate: 1900–2003 162
7.2 Education and Employment: March 2003 162
7.3 U.S. Population and the Labor Force: 1950–2010 168
7.4 U.S. Union Membership: 1900–2000 177
8.1 The U.S. Money Supply: 2003 193
8.2 U.S. Depository Institutions: 2002 196
8.3 Outstanding Bond Market Debt: 2003 210
9.1 Calculating the Nominal GDP: 2003 226
9.2 Economic Growth in the Global Economy: 1985–2004 227
9.3 The World’s Largest Economies: 2001 229
9.4 Total Entrepreneurial Activity: 2002 233
9.5 Freedom in the World: 1972–2002 238
10.1 Global Inflation Rates: 1985–2004 254
10.2 Federal Tax Receipts by Category: FY 2004 262
10.3 Budget Surpluses and Deficits: 1980–2009 264
10.4 Distribution of U.S. Money Income: 1975–2000 265
11.1 Top Exporting and Importing Nations: 2002 275
11.2 Exchange Rates: February 23, 2004 276
11.3 Selected Indicators of Transnationals: 1982–2002 277
11.4 Largest Nonfinancial Transnational Corporations: 2001 278
12.1 Classification of the World’s Economies: 2003 296
12.2 Income Distribution in Selected Developing Countries 297
12.3 Selected Quality of Life Indicators: 2001 301
12.4 Official Development Assistance: 2002 310
13.1 Annual Salaries of Business Economists: 2000 323
13.2 Top Salaries in the Federal Government: 2001 327
viii
Acknowledgments
The author recognizes the following individuals for their contributions to this
publication: Desmond McCaffrey, Instructional Developer at the Institute for
Teaching and Learning, University of Connecticut, for the production of the
book’s charts, graphs, and diagrams; Linda Mathes, Jane White, Jan Nuhn, and
Peter Salesses of the Edwin O. Smith High School Library Media Center for
technical assistance; the Government Publications research staff at the Homer
Babbidge Library, University of Connecticut, for its research support; Anne
Thompson, Senior Development Editor, and Marie Ellen Larcada, Senior Ac-
quisitions Editor, of the Greenwood Publishing Group, for their encouragement,
advice, and guidance; and Liz Kincaid, Photo Researcher, for her assistance in
locating and obtaining photo permissions.
The author recognizes the following organizations and agencies for their
work on behalf of economic education in the United States. Two of the unsung
heroes are the National Council on Economic Education (NCEE) and the Foun-
dation for Teaching Economics (FTE). Over the years their innovative programs
for teachers and students and their instructional materials have advanced the
cause of economic literacy at the elementary, middle, and high school levels.
Deep appreciation is also extended to the National Council for the Social Stud-
ies (NCSS) for its continued support of economic education in the nation’s
schools. Finally, kudos are offered to the many U.S. government agencies and
multilateral organizations that collect and disseminate important economic in-
formation to citizens.
The author recognizes the inspirational work of civil society organi-
zations, which, collectively, work to improve the human condition. Civil society