Expert answer:ECO2013 FSCJ Chapter 5 Government’s Role and Gover

  

Solved by verified expert:Read Chapter 5 “Government’s Role and Government Failure” of the attached PDF and VIEW ALL OF THE VIDEOS that are attached and complete the assignment below. I attached a PDF of the Book to read Chapter 5 in, and i also attached a Microsoft Word Document to show you what the finished product should look like. If there are no videos, then for section 3 put there were no videos.The 3-Section assignment requires you to talk about being Confused, Surprised, and the Video that i attached.I also attached an image of what the 3-Section Assignment should look like. Please be sure to view the image thoroughly.You must only write 4-sentence paragraphs. You cannot go over 4-sentences per paragraph. Each sentence in the paragraph must be between 10-20 words.3-SECTION ASSIGNMENT3-Section Assignment for this chapter.Read/view the assigned chapter and video(s) in Course Content.Submit 5(+) paragraphs about what you read or saw, in the following three (3) sections.Section 1: What three (3) items MOST still confuse me about the chapter.Section 2: What one (1) thing that MOST surprised me reading the chapter.Section 3: How did the video in this chapter in Course Content help you understand the material? (if there is more than one video, write a paragraph for EACH video).
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ac
ro
macroeconomics
m
McConnell
Brue
Flynn
Macroeconomics
PRINCIPLES, PROBLEMS, AND POLICIES
THE MCGRAW-HILL SERIES: ECONOMICS
ESSENTIALS OF ECONOMICS
Brue, McConnell, and Flynn
Essentials of Economics
Third Edition
Mandel
M: Economics, The Basics
Third Edition
Schiller and Gebhardt
Essentials of Economics
Tenth Edition
PRINCIPLES OF ECONOMICS
Asarta and Butters
Connect Master: Economics
First Edition
Colander
Economics, Microeconomics, and
Macroeconomics
Tenth Edition
Frank, Bernanke, Antonovics, and Heffetz
Principles of Economics, Principles of
Microeconomics, Principles of
Macroeconomics
Sixth Edition
Frank, Bernanke, Antonovics, and Heffetz
Streamlined Editions: Principles of
Economics, Principles of
Microeconomics, Principles of
Macroeconomics
Third Edition
Karlan and Morduch
Economics, Microeconomics, and
Macroeconomics
Second Edition
McConnell, Brue, and Flynn
Economics, Microeconomics, and
Macroeconomics
Twenty-First Edition
ECONOMICS OF SOCIAL
ISSUES
Guell
Issues in Economics Today
Seventh Edition
Register and Grimes
Economics of Social Issues
Twenty-First Edition
ECONOMETRICS
Gujarati and Porter
Basic Econometrics
Fifth Edition
Hilmer and Hilmer
Practical Econometrics
First Edition
MANAGERIAL ECONOMICS
Baye and Prince
Managerial Economics and Business
Strategy
Ninth Edition
Brickley, Smith, and Zimmerman
Managerial Economics and
Organizational Architecture
Sixth Edition
Cecchetti and Schoenholtz
Money, Banking, and Financial Markets
Fifth Edition
URBAN ECONOMICS
O’Sullivan
Urban Economics
Eighth Edition
LABOR ECONOMICS
Borjas
Labor Economics
Seventh Edition
McConnell, Brue, and Macpherson
Contemporary Labor Economics
Eleventh Edition
PUBLIC FINANCE
Rosen and Gayer
Public Finance
Tenth Edition
ENVIRONMENTAL
ECONOMICS
Thomas and Maurice
Managerial Economics
Twelfth Edition
Field and Field
Environmental Economics: An
Introduction
Seventh Edition
INTERMEDIATE ECONOMICS
INTERNATIONAL ECONOMICS
Bernheim and Whinston
Microeconomics
Second Edition
Dornbusch, Fischer, and Startz
Macroeconomics
Twelfth Edition
Samuelson and Nordhaus
Economics, Microeconomics, and
Macroeconomics
Nineteenth Edition
Frank
Microeconomics and Behavior
Ninth Edition
Schiller and Gebhardt
The Economy Today, The Micro Economy
Today, and The Macro
Economy Today
Fourteenth Edition
ADVANCED ECONOMICS
Slavin
Economics, Microeconomics, and
Macroeconomics
Eleventh Edition
MONEY AND BANKING
Romer
Advanced Macroeconomics
Fourth Edition
Appleyard and Field
International Economics
Ninth Edition
Pugel
International Economics
Sixteenth Edition
THE FOUR VERSIONS OF MCCONNELL, BRUE, FLYNN
Chapter*
Economics
Microeconomics
Macroeconomics
Essentials of
Economics
1. Limits, Alternatives, and Choices
x
x
x
x
2. The Market System and the Circular Flow
x
x
x
x
3. Demand, Supply, and Market Equilibrium
x
x
x
x
4. Market Failures: Public Goods and Externalities
x
x
x
x
5. Government’s Role and Government Failure
x
x
x
x
6. Elasticity
x
x
7. Utility Maximization
x
x
8. Behavioral Economics
x
x
9. Businesses and the Costs of Production
x
x
x
x
10. Pure Competition in the Short Run
x
x
x
11. Pure Competition in the Long Run
x
x
x
12. Pure Monopoly
x
x
x
13. Monopolistic Competition
x
x
x
14. Oligopoly and Strategic Behavior
x
x
x
15. Technology, R&D, and Efficiency
x
x
16. The Demand for Resources
x
x
17. Wage Determination
x
x
18. Rent, Interest, and Profit
x
x
19. Natural Resource and Energy Economics
x
x
20. Public Finance: Expenditures and Taxes
x
x
21. Antitrust Policy and Regulation
x
x
22. Agriculture: Economics and Policy
x
x
23. Income Inequality, Poverty, and Discrimination
x
x
24. Health Care
x
x
25. Immigration
x
x
26. An Introduction to Macroeconomics
x
x
x
x
27. Measuring Domestic Output and National Income
x
x
x
28. Economic Growth
x
x
x
29. Business Cycles, Unemployment, and Inflation
x
x
x
30. Basic Macroeconomic Relationships
x
x
31. The Aggregate Expenditures Model
x
x
32. Aggregate Demand and Aggregate Supply
x
x
x
33. Fiscal Policy, Deficits, and Debt
x
x
x
x
34. Money, Banking, and Financial Institutions
x
x
35. Money Creation
x
x
36. Interest Rates and Monetary Policy
x
x
37. Financial Economics
x
x
38. Extending the Analysis of Aggregate Supply
x
x
39. Current Issues in Macro Theory and Policy
x
40. International Trade
x
x
x
x
41. The Balance of Payments, Exchange Rates, and Trade Deficits
x
x
x
x
42. The Economics of Developing Countries
x
x
x
*Chapter numbers refer to Economics: Principles, Problems, and Policies.
A red “X” indicates chapters that combine or consolidate content from two or more Economics chapters.
x
x
Twenty-First Edition
Macroeconomics
PRINCIPLES, PROBLEMS, AND POLICIES
Campbell R. McConnell
University of Nebraska
Stanley L. Brue
Pacific Lutheran University
Sean M. Flynn
Scripps College
MACROECONOMICS: PRINCIPLES, PROBLEMS, AND POLICIES, TWENTY-FIRST EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2015, 2012, and
2009. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a
database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not
limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers
outside the United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 21 20 19 18 17
ISBN
MHID
ISBN
MHID
978-1-259-91567-3 (student edition)
1-259-91567-0 (student edition)
978-1-259-91575-8 (instructor’s edition)
1-259-91575-1 (instructor’s edition)
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All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
Names: McConnell, Campbell R., author. | Brue, Stanley L., 1945- author. |
Flynn, Sean Masaki, author.
Title: Macroeconomics : principles, problems, and policies / Campbell R.
McConnell, University of Nebraska, Stanley L. Brue, Pacific Lutheran
University, Sean M. Flynn, Scripps College.
Description: Twenty First Edition. | Dubuque : McGraw-Hill Education, [2018]
| Revised edition of Macroeconomics, 2015.
Identifiers: LCCN 2016044903| ISBN 9781259915673 (student edition : alk.
paper) | ISBN 1259915670 (student edition : alk. paper)
Subjects: LCSH: Macroeconomics.
Classification: LCC HB172.5 .M3743 2018 | DDC 339—dc23 LC record available at
https://lccn.loc.gov/2016044903
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a
website does not indicate an endorsement by the authors or McGraw-Hill Education, and
McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.
mheducation.com/highered
To Mem and to Terri and Craig, and to past instructors
ABOUT THE AUTHORS
CAMPBELL R. MCCONNELL earned his Ph.D. from the University of
Iowa after receiving degrees from Cornell College and the University of
Illinois. He taught at the University of Nebraska–Lincoln from 1953 until
his retirement in 1990. He is also coauthor of Contemporary Labor
Economics, eleventh edition, and Essentials of Economics, third edition,
and has edited readers for the principles and labor economics courses. He
is a recipient of both the University of Nebraska Distinguished Teaching
Award and the James A. Lake Academic Freedom Award and is past president of the Midwest Economics Association. Professor McConnell was
awarded an honorary Doctor of Laws degree from Cornell College in
1973 and received its Distinguished Achievement Award in 1994. His primary areas of interest are labor economics and economic education. He has
an extensive collection of jazz recordings and enjoys reading jazz history.
STANLEY L. BRUE did his undergraduate work at Augustana College
(South Dakota) and received its Distinguished Achievement Award in
1991. He received his Ph.D. from the University of Nebraska–Lincoln. He
is retired from a long career at Pacific Lutheran University, where he was
honored as a recipient of the Burlington Northern Faculty Achievement
Award. Professor Brue has also received the national Leavey Award for
excellence in economic education. He has served as national president and
chair of the Board of Trustees of Omicron Delta Epsilon International
Economics Honorary. He is coauthor of Economic Scenes, fifth edition
(Prentice-Hall); Contemporary Labor Economics, eleventh edition;
Essentials of Economics, third edition; and The Evolution of Economic
Thought, eighth edition (Cengage Learning). For relaxation, he enjoys international travel, attending sporting events, and going on fishing trips.
SEAN M. FLYNN did his undergraduate work at the University of
Southern California before completing his Ph.D. at U.C. Berkeley, where
he served as the Head Graduate Student Instructor for the Department of
Economics after receiving the Outstanding Graduate Student Instructor
Award. He teaches at Scripps College (of the Claremont Colleges) and is
the author of Economics for Dummies, second edition (Wiley), and coauthor of Essentials of Economics, third edition. His research interests
include finance, behavioral economics, and health economics. An accomplished martial artist, he has represented the United States in international
aikido tournaments and is the author of Understanding Shodokan Aikido
(Shodokan Press). Other hobbies include running, traveling, and enjoying
ethnic food.
viii
KEY GRAPHS
1.2
The Production Possibilities Curve
11
2.2
The Circular Flow Diagram
38
3.6
Equilibrium Price and Quantity
57
10.2
Consumption and Saving Schedules
203
10.5
The Investment Demand Curve
210
11.2
Equilibrium GDP in a Private Closed Economy
225
11.7
Recessionary and Inflationary Expenditure Gaps
235
12.7
The Equilibrium Price Level and Equilibrium Real GDP
254
16.1
The Demand for Money, the Supply of Money, and the
Equilibrium Interest Rate
325
16.4
Monetary Policy and Equilibrium GDP
340
16.5
The AD-AS Theory of the Price Level, Real Output, and
Stabilization Policy
346
20.2
Trading Possibilities Lines and the Gains from Trade
417
21.1
The Market for Foreign Currency (Pounds)
441
ix
PREFACE
What’s New and Improved?
One of the benefits of writing a successful text is the opportunity to revise—to delete the outdated and install the new, to
rewrite misleading or ambiguous statements, to introduce
more relevant illustrations, to improve the organizational
structure, and to enhance the learning aids.
We trust that you will agree that we have used this opportunity wisely and fully. Some of the more significant
changes include the following.
Separate Presentations of
Monopolistic Competition
and Oligopoly
In response to instructor feedback, we have split the material on monopolistic competition and oligopoly that had together comprised a single chapter in previous editions into
two separate chapters. The separated chapters have been
made modular so that skipping either or covering both will
be equally viable options for instructors. This should be particularly helpful to instructors who want to spend more time
on oligopoly.
Welcome to the 21st edition of Economics, the best-selling
economics textbook in the world. An estimated 15 million
students have used Economics or its companion editions,
Macroeconomics and Microeconomics. Economics has
been adapted into Australian and Canadian editions and
translated into Italian, Russian, Chinese, French, Spanish,
Portuguese, and other languages. We are pleased that
Economics continues to meet the market test: nearly one
out of five U.S. students in principles courses used the
20th edition.
Fundamental Objectives
We have three main goals for Economics:
∙ Help the beginning student master the principles
essential for understanding the economizing problem,
specific economic issues, and policy alternatives.
∙ Help the student understand and apply the economic
perspective and reason accurately and objectively about
economic matters.
∙ Promote a lasting student interest in economics and the
economy.
x
Onboarding of Web Chapters
and COI Material
Economics is everywhere, so the 21st edition continues our
commitment to providing instructors with accessible and intuitive coverage of a wide variety of economic subject areas.
To that end, we are happy to report that we have been able to
pull material that appeared only online in previous editions
into the printed book. That includes what were previously
two full-length Web Chapters as well as a large fraction of the
material that had been posted online as Content Options for
Instructors (COIs).
“The Economics of Developing Countries,” is now
Chapter 22. The online material that was not brought into the
book was COI1, “The United States in the Global Economy.”
That content largely duplicated material that ­appeared in
other chapters and was not much used, so it will no longer be
supported either online or in print.
Modernized Presentation of Fixed
Exchange Rates and Currency Interventions
For this new edition, we have reorganized and rewritten large
parts of Chapter 21 (The Balance of Payments, Exchange
ere designed for our ancesThus, we often have diffiand decisions that involve
d the future. Two of the maand time inconsistency.
edness, refers to a defect of
s appear fuzzy, out of focus,
omists use the word myopia
s have a hard time conceptuwith the present, the future
rd to see.
e very good at weighing curin order to make immediate
seem “future blind” when it
uture costs or future benefits.
luating possibilities that will
months into the future.
myopia is that when people
omething that will generate
hat won’t yield benefits for a
strong tendency to favor the
ample, imagine that Terence
nd on a vacation next month
ears.
ve great difficulty imagining
at he will be able to enjoy in
On the other hand, it is very
un he could have next month
a result, he will be strongly
ey next month. With myopia
g-term option, the short-term
active.
stick with a diet or follow an
e immediate and clearly vists or hanging out, the future
ercising consistently are just
to be very attractive.
Preface xi
Rates, and Trade Deficits). The key revision has to do with our
presentation of fixed exchange rates. We now show with
greater clarity that under a fixed exchange rate regime,
changes in the balance of payments generate automatic
changes in both foreign exchange reserves and the domestic
money supply that then have to be dealt with by a nation’s
central bank. Our new presentation uses China as an example
of these forces and how they often lead to “sterilization”
­actions on the part of the central banks that are engaged in
currency pegs. Our new presentation also clarifies the relationship between trade deficits and foreign exchange reserves
under a currency peg.
We have also inserted additional examples into our presentation of flexible exchange rates and have introduced a
new Last Word on optimal currency areas to give students
insight into some of the European Monetary Union’s current
problems and how they relate to the fact that a monetary
union is equivalent to simultaneous multilateral currency
pegs. For instructors who wish to give a larger historical perspective, we have created a brief appendix that covers the
gold standard era as well as the Bretton Woods period. This
material was previously available in Content Options for
Instructors 1 (COI2).
New “Consider This” and
“Last Word” Pieces
LAST WORD
Antitrust Online
The Internet Has Presented Antitrust Authorities with Both Old and New Causes for Concern.
The Airline Tariff Publishing case was the first important example
of how digital communication platforms could be used by businesses to engage in price-fixing. In the late 1980s, U.S. airlines began to post both current and future prices for airline tickets on a
centralized computer system known as the Airline Tariff Publishing
Company. The system was set up so that travel agents could comparison shop for their clients. But the airlines used the system’s ability to list start dates and end dates for ticket purchases as a way of
colluding.
As an example, suppose that American Airlines and Delta
Airlines had both been charging $200 for a one-way ticket between
New York and Chicago. American could then post a higher price of
$250 for the route with the stipulation that nobody could start buying tickets at that price until the next month. Delta could then respond by also saying that it would start selling tickets at the higher
price next month. In that way, the two airlines could tacitly coordinate their price setting ahead of time so as to collude on a major
price increase.
The antitrust authorities at the U.S. Department of Justice stopped
this practice in 1994 by getting the airlines to agree to the behavioral
remedy that any fare changes would have to become immediately
available to consumers. Airlines could no longer use suggested future
prices as a way of signaling each other about how to collude.
The monopoly power gained during the 1990s and early 2000s
by online giants such as Microsoft and Google has also led to business practices that have raised the ire of antitrust authorities.
Microsoft, for example, was fined $2.7 billion after being convicted
in 2000 of using the near-monopoly (95 percent market share) dominance of its Windows operating system software to coerce computer makers into favoring Microsoft’s Internet Explorer web
browser over rival browsers such as Netscape Navigator.
More recently, Google was indicted in 2015 by European Union
antitrust officials for allegedly using its 90 percent share of the market for Internet searches in Europe to favor its Google Shopping
price-comparison service over price-comparison services run by rival firms. For example, if a person in Germany types “prices for
used iPhones” into Google’s search bar, the top of the search results
page will feature images of several used iPhones for sale on Google
Shopping. By contrast, anyone wanting comparison prices for used
iPhones that are listed on other price-comparison sites will have to
click on links further down on the search-results page to get to those
other sites and their respective lists of used iPhone prices. Google
faces up to €6.6 billion in fines if convicted.
© grzegorz knec/Alamy Stock Photo
The most recent threat to competition spawned by the Internet is
the rise of collusion via pieces of software that use pricing algorithms (automatically applied rules for setting prices) to constantly
adjust a company’s the online prices in response to seeing what rival
firms are charging for similar products. The problem for regulators
is that the pricing algorithms of different firms coul …
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