Economics Principles Applications and

Tools Global Edition 9th Edition

OSullivan Solutions Manual
Visit to download the full and correct content document: https://testbankdeal.com/dow
nload/economics-principles-applications-and-tools-global-edition-9th-edition-osullivan-
solutions-manual/
 7
The Economy
at Full Employment
Chapter Summary
This chapter studies the economy at full employment. The model developed explains how GDP is produced
with the supply of the factors of production—labor and capital. Since capital is fixed at a point in time, the
text focuses on fixed capital with full employment labor applied. Labor market equilibrium provides the
quantity of labor that, when combined with capital, produces full employment, or potential output. Here are
the main points of the chapter:
• If capital increases, the demand for labor increases. These increases raise wages and the level of
labor employed.
• An increase in the supply of labor causes the wage rate to fall, but the level of labor employed
increases.
• The full-employment model is used to explain taxation issues as well as immigration and
economic fluctuations.
• Government spending can also be studied using the full-employment model. Crowding out occurs
as increased government spending as a percentage of GDP causes the other components to decline
as a percentage.

Learning Objectives:
1. Wage and Price Flexibility and Full Employment: Identify the key assumption of classical models in
macroeconomics.
2. The Production Function: Explain the concept of diminishing returns to labor.
3. Wages and the Demand and Supply for Labor: Analyze how shifts in demand and supply affect wages
and employment.
4. Labor Market Equilibrium and Full Employment: Explain how full employment is determined in a
classical world.
5. Using the Full-Employment Model: Describe how changes in taxes can affect full employment.
6. Dividing Output among Competing Demands for GDP at Full Employment: Explain how countries
must divide output across different uses.

Approaching the Material

Students often find the material in this chapter difficult because they cannot relate to it on a personal
level. Make the production examples personal—the “production” of grades in college works well. Make
them owners of small businesses and ask them what would happen if business was slow. Would they cut

76
©2018 Pearson Education Ltd.
 Chapter 7: The Economy at Full Employment 77

everyone’s wages or lay people off? How would they react as employees if their company reduced their
wages? Later in the chapter, you will discuss technology shocks. Try using the introduction of computers
as a positive technology shock and a massive computer virus as a negative technology shock.

Chapter Outline
7.1 Wage and Price Flexibility and Full Employment
1. Classical models are economic models that assume wages and prices adjust freely to changes
in demand and supply.
2. Classical model was the dominant model until the Great Depression.

 Teaching Tip
Ask students if they’ve heard of the Great Depression. Speak to them of this experience
as having become a cultural touchstone that survives across the generation. Explain the
depth and breadth of the Depression and how this was a huge, supposedly short run,
deviation away from equilibrium.

3. The classical model is the one we will use to study the economy in the long run. And
although Keynes said, “In the long run, we’re all dead,” it’s useful to study the economy at
full employment. Because, although not instantaneous, wages and prices do eventually adjust.

 Teaching Tip
This assumption regarding price and wage flexibility must be made clear at the outset for
students to fully understand the chapter’s material.

4. Issues such as taxation, immigration, and government spending are studied using full-
employment models.
A. Understanding Full Employment
1. Economy at full employment does not imply 0 percent unemployment.
2. Cyclical unemployment at 0 percent; frictional and structural > 0 percent.
3. Cyclical unemployment changes with business cycle. Therefore, the long run implies no
business cycle.

7.2 The Production Function

A. Production function is the relationship between the level of output and the factors of production
that are inputs to production. For simplicity, we look at only labor and the stock of capital as
factors of production.
B. Stock of capital is total of all machines, equipment, and buildings in an entire economy.
C. Labor is human effort, including both physical and mental effort, used to produce goods and
services.
D. Y = F(K, L)
1. Production function is drawn with a fixed level of K because the capital stock does not
change instantaneously.
2. K = f(Investment in previous periods); fixed at a point in time.

©2018 Pearson Education Ltd.

78 O'Sullivan/Sheffrin/Perez, Economics, 9e, Global Edition

E. Therefore, labor is the only variable that changes in the figure.

F. However, if the capital stock changes, this shifts the production function.
1. An increase in K will increase Y for all levels of Y => shift the production function up.

Remind students of the following key principle:

KEY PRINCIPLE: PRINCIPLE OF DIMINISHING RETURNS

Suppose that output is produced with two or more inputs and that we increase one input while holding the
other inputs fixed. Beyond some point—called the point of diminishing returns—output will increase at a
decreasing rate.

 Teaching Tip
Students often benefit if you provide simple examples of production and the types of
capital and labor used in the process. This can include any production process. For
example, the local copy store has both copy machines (capital) and workers (labor).

7.3 Wages and the Demand and Supply for Labor

1. Real wage is the wage rate paid to employees adjusted for changes in the price level.

 Teaching Tip
Students often have trouble grasping what the real-nominal difference means when
applied to something like wages. The best way to show the difference is to introduce
annual rates of inflation and changes in nominal wage rates. Show students how in some
years the average wage grows more quickly, but other times the average wage is
outpaced by inflation. Now make explicit that this means people are losing the ability to
purchase goods and services when the latter occurs. Watch for the shock as some now
understand the distinction.

2. Labor demand from firms.

3. Labor supply by workers.
a. Substitution effect: With increased wages, opportunity cost of leisure rises, hours worked
rises. This implies an upward-sloping labor supply curve.
b. Income effect: With increased wages, workers may choose to work less and enjoy more
leisure. This implies a downward-sloping labor supply curve.
4. Typically assume Substitution effect > Income effect; labor supply slopes upward.

Remind students of the following key principle:

KEY PRINCIPLE: MARGINAL PRINCIPLE

Increase the level of an activity as long as its marginal benefit exceeds its marginal cost. Choose the level
at which the marginal benefit equals the marginal cost.

©2018 Pearson Education Ltd.

 Chapter 7: The Economy at Full Employment 79

A. Labor Market Equilibrium

1. Quantity of labor demanded equals quantity of labor supplied, determining equilibrium real
wage.
B. Changes in Demand and Supply
1. Increase in Ld increases real wage and equilibrium quantity.
2. Increase in Ls decreases real wage but increases equilibrium quantity.
a. Increase immigration, increase Ls, pushing down real wage and increasing quantity.
b. Current employees dislike immigration because wages fall.
c. However, product prices are held down due to lower wages.

Review this key question and the related application:

Question 1: How can changes in the supply of labor affect real wages?

APPLICATION 1: THE BLACK DEATH AND LIVING STANDARDS IN OLD

ENGLAND

The Application points out that while real wages for laborers in England were nearly the same in 1800 as
in 1200, from 1350 to 1550 wages were considerably higher. The simple explanation was the bubonic
plague—the Black Death—arrived from Asia in 1348 and caused a long decline in total population
through the 1450s. This reduction in labor supply resulted in higher real wages and lower output,
consistent with the Malthusian view of demographic changes.

7.4 Labor Market Equilibrium and Full Employment

A. Full-employment output is the level of output that results when the labor market is in
equilibrium and the economy is producing at full employment. We show this diagrammatically as
equilibrium in the labor market.
B. Equilibrium in the labor market displays W* and L*, equilibrium wage and quantity respectively.
From the production function we know that potential output is Y* = F(K*, L*).

 Teaching Tip
It’s good to show the graph of the production function stacked on top of the labor market
graph and illustrate how changes in the labor market affect potential output. Stacking the
two graphs together gives a good visual representation of the links between what could be
considered different topics covered in macroeconomics.

C. Measuring an Economy’s Output at Full Employment

1. Start with an estimate of unemployment at full employment (cyclical unemployment equal to 0).
2. In 1996 unemployment was 5.6 percent and was close to the natural rate. The labor force
equaled 126.7 million. RGDP equaled $7.8 billion, in 1996 dollars. Since unemployment was
close to the natural rate, RGDP was close to potential.

7.5 Using the Full-Employment Model

A. Taxes and Potential Output
1. Tax on employers for hiring workers, such as Social Security; increase MC of production due
to increased labor cost for employers.

©2018 Pearson Education Ltd.

80 O'Sullivan/Sheffrin/Perez, Economics, 9e, Global Edition

2. Increase MC of production with unchanged MB; less hiring as Ld falls.

3. Decreased Ld causes falling real wage and declining employment levels.
4. Decreased potential output due to the reduced employment.
5. The size of the decline is determined by the slope of the Ls.
6. If Ls is perfectly inelastic, decline in real wage with no change in L*

 Teaching Tip
Ask students whether or not they see working as a choice. This will help them begin
understanding the supply curve assumptions. Perhaps working is not a choice, but the
intensity and/or hours of work may be a choice.

 Teaching Tip
This Application leads into a discussion of how high taxes would have to be to
discourage work. Ask the class at what tax rate they would start to work less.

B. Real Business Cycle Theory

1. Real business cycle theory is the economic theory that emphasizes how shocks to
technology can cause fluctuations in economic activity.
2. Changes in technology change full employment and potential output levels because they
change labor productivity and hence labor demand.

 Teaching Tip
It’s always good to emphasize divisions within the economics discipline and the real
business cyclists provide a fruitful example for debate. The moral is that no model can
explain all facets of our diverse economy.

Review this key question and the related application:

Question 2: What evidence is there that taxes on highly paid soccer stars in
Europe affect their location decisions among countries?
APPLICATION 2: DO EUROPEAN SOCCER STARS CHANGE CLUBS TO REDUCE
THEIR TAXES?

In this Application, a study found that when the rules limiting the number of foreign soccer players on
one team were relaxed, the top tax rates did affect the mobility of soccer stars. In addition, players were
influenced by the specific tax breaks offered by different countries. Despite the increase in
“globalization” in recent years, tax rates are very different among countries.

©2018 Pearson Education Ltd.

 Chapter 7: The Economy at Full Employment 81

Review this key question and the related application:

Question 3: What explains Singapore’s high savings rates?

APPLICATION 3: GOVERNMENT POLICIES AND SAVINGS RATES

Singapore has one of the highest savings rates in the world, at about 48 percent. The reason is because
the government of Singapore requires that all workers save a high percentage of their income in
government accounts. These accounts are kept in people’s own names and held by the government to be
used for retirement and other expenses such as housing and health care.

7.6 Dividing Output among Competing Demands for GDP at Full Employment
A. International Comparisons
1. Show the large disparity across different nations and the comparative data regarding the
division of output across C, I, G, and NX.
a. United States has high C, low I, and negative NX.
b. France has lower C, higher G, higher I, and small positive NX.
c. China has very low C, very low G, and high positive NX.
d. Japan and China have very high I.

 Teaching Tip
Explore the differences by pointing out that the United States has the highest level of
consumption and is the only nation among this group with a trade deficit. Look at the
various levels of government activity relative to each nation’s GDP. Very simply, if one
category takes a larger percentage, the other percentages must fall. Lastly, point out that
the table is a snapshot and that these numbers fluctuate a great deal.

B. Crowding Out in a Closed Economy

1. Crowding out is the reduction in investment (or other components of GDP) caused by an
increase in government spending.
2. A closed economy is an economy without international trade.

Remind students of the following key principle:

KEY PRINCIPLE: PRINCIPLE OF OPPORTUNITY COST

The opportunity cost of something is what you sacrifice to get it.

3. Use a closed economy model (no trade) to study crowding out.

a. Y = C + I + G (in a closed economy)
b. Y is fixed in the long run unless there are changes to the labor market and/or technology.
c. An increase in G with a fixed Y must be offset by a fall in C + I.
C. Crowding Out in an Open Economy
1. An open economy is an economy with international trade.
a. Y = C + I + G + NX (in an open economy)
2. In an open economy, with trade, domestic C and I need not be crowded out. Instead, NX
could go down.

©2018 Pearson Education Ltd.

82 O'Sullivan/Sheffrin/Perez, Economics, 9e, Global Edition

D. Crowding In
Crowding in is the increase of investment (or other component of GDP) caused by a decrease in
government spending.
1. A decline in government spending in long run causes other components such as I, C, or NX to
increase.
2. The nature of changes in G will determine what components are crowded in/out.

 Teaching Tip
Using various government Web sites, gather data on the trade deficit, budget deficit, and
investment. Have the students compare interest rates and government deficits. Ask them
about the relationships. A good Web site for macroeconomic data is at the St. Louis Fed:
http://research.stlouisfed.org/fred2/.

Additional Applications to Use in Class

Question: Why are durable goods an indicator of economic growth?
ADDITIONAL APPLICATION: U.S. DURABLE GOODS ORDERS PLUNGE
Anonymous
“U.S. Durable Goods Orders Plunge”
Posted 11/28/2006 on MSNBC.com
FT.com
Financial Times

Summary: Key Points in the Article

Durable goods posted their largest single monthly decline in more than six years during October 2006.
New orders fell by 8.3 percent for the month. While the decline was worrisome, the previous two months
posted gains that offset the drop. Economists indicated the volatility in durable goods failed to provide
good information and that now more attention would fall on home sales and consumer confidence
numbers due later today. The Fed chairman, Ben Bernanke, was also expected to speak and his comments
were widely anticipated.

The breakdown in durable goods numbers failed to provide much hope for some analysts. Nondefense
durable good spending was down 44.5 percent. After excluding aircraft spending, the indicator fell by 5.1
percent. This number is thought to closely mirror overall business spending.

Analyzing the News

Business spending on durable goods is seen as a positive sign for economic growth. Businesses don’t tend
to spend money in the face of an economic slowdown. Therefore, this component falling potentially
indicates a greater slowdown than expected.

Thinking Critically Questions

1. Why is durable good spending monitored?
2. Why is nondefense spending a more valuable number?
3. Why are Ben Bernanke’s comments so anticipated?

©2018 Pearson Education Ltd.

 Chapter 7: The Economy at Full Employment 83

Solutions to End-of-Chapter Exercises

Chapter 7

SECTION 7.1: WAGE AND PRICE FLEXIBILITY AND FULL EMPLOYMENT

1.1 classical
1.2 structural
1.3 False
1.4 The classical view of the labor market assumes that wages are sufficiently flexible so that the labor
market is always in equilibrium. Alternatively, if there is excess supply or demand for labor, the
wage will quickly adjust in order to eliminate the surplus or shortage of labor. As wages adjust
quickly, unemployment will not be observed based on the classical view

SECTION 7.2: THE PRODUCTION FUNCTION

2.1 production function
2.2 a.
2.3 downward

2.4 downward
2.5

2.6

©2018 Pearson Education Ltd.

84 O'Sullivan/Sheffrin/Perez, Economics, 9e, Global Edition

2.7 No, the second increase in output is greater than the first.

SECTION 7.3: WAGES AND THE DEMAND AND SUPPLY FOR LABOR
3.1 supplied
3.2 supply, workers
3.3 downward, more
3.4 False. It is caused by a decrease in demand.
3.5. a.

b.

3.6 Immigration may not affect the overall supply of labor for the entire U.S. economy, but may have a
stronger impact on supply near the border.
3.7 It would reduce wages and increase employment, as the supply curve would shift to the right.

3.8 If an increase in the demand for labor raises wages, the Malthusian argument is that increases in
population will shift the supply curve for labor to the right until wages fall back down to
subsistence.

©2018 Pearson Education Ltd.

 Chapter 7: The Economy at Full Employment 85

3.9. Improved technology will shift the demand curve for labor to the right, raising real wages. This will
eventually lead to a shift in the supply curve to the right, as population increases. In the long run,
population has increased while real wages return to subsistence levels.

SECTION 7.4: LABOR MARKET EQUILIBRIUM AND FULL EMPLOYMENT

4.1

©2018 Pearson Education Ltd.

86 O'Sullivan/Sheffrin/Perez, Economics, 9e, Global Edition

4.2

4.3 True
4.4 increases, increases, decreases
4.5 All else being equal, the economist who estimated natural unemployment to be lower would
estimate a higher value for potential output.
4.6 The main cause is that average work hours per year are less in Germany than in the United States. If
these were equalized, per-capita output levels would be similar.
4.7 Potential output increases.

SECTION 7.5: USING THE FULL-EMPLOYMENT MODEL

5.1

5.2 Demand for labor shifts to the left, wages go down, and employment goes down.
5.3 steam engine, electric lighting
5.4 Only top athletes or entertainers would be paying enough tax to make it worthwhile for them to
relocate. For middle-class workers, the costs of relocation would exceed the tax savings.

©2018 Pearson Education Ltd.

 Chapter 7: The Economy at Full Employment 87

5.5 a.

b. Wages would fall, while employment and output remain unchanged. Economists say labor
bears the full burden of the tax because there is no change in what employers experience;
labor input and total expense of hiring (wages + tax) are the same.
c. Employment and output fall, while wages remain unchanged.
d. More elastic labor supply in Europe than in the U.S. or Japan would magnify the employment
effects of payroll taxes in Europe.
5.6

5.7 Labor supply almost vertical suggests than workers cannot adjust employment in order to avoid
payment of the higher payroll tax, leading to increased tax revenue collected by the government.
5.8 No, if there is a negative technology shock, output and real wages will both fall.
5.9 If fewer people sold stocks when the capital gains tax was increased, total revenue could actually
fall even though the tax rate was increased.
5.10 According to this study, married women are the most sensitive to tax rate changes. About one-half
of the increase in labor supply following a decline in tax rates comes from new entrants in the labor
force.

©2018 Pearson Education Ltd.

88 O'Sullivan/Sheffrin/Perez, Economics, 9e, Global Edition

SECTION 7.6: DIVIDING OUTPUT AMONG COMPETING DEMANDS FOR GDP AT

FULL EMPLOYMENT
6.1 false
6.2 open
6.3 net exports
6.4 high
6.5 The best explanation is that Singapore forces its residents to save through the Central Provident
Fund.
6.6 Increased spending on swimming pools would crowd out consumption; spending on space
exploration could crowd out either investment or consumption spending.
6.7 The custom of high-value gifts might reduce consumption and increase saving.

©2018 Pearson Education Ltd.

Another random document with
no related content on Scribd:
1.E.6. You may convert to and distribute this work in any binary,
compressed, marked up, nonproprietary or proprietary form,
including any word processing or hypertext form. However, if you
provide access to or distribute copies of a Project Gutenberg™ work
in a format other than “Plain Vanilla ASCII” or other format used in
the official version posted on the official Project Gutenberg™ website
(www.gutenberg.org), you must, at no additional cost, fee or expense
to the user, provide a copy, a means of exporting a copy, or a means
of obtaining a copy upon request, of the work in its original “Plain
Vanilla ASCII” or other form. Any alternate format must include the
full Project Gutenberg™ License as specified in paragraph 1.E.1.

1.E.7. Do not charge a fee for access to, viewing, displaying,

performing, copying or distributing any Project Gutenberg™ works
unless you comply with paragraph 1.E.8 or 1.E.9.

1.E.8. You may charge a reasonable fee for copies of or providing

access to or distributing Project Gutenberg™ electronic works
provided that:

• You pay a royalty fee of 20% of the gross profits you derive from
the use of Project Gutenberg™ works calculated using the
method you already use to calculate your applicable taxes. The
fee is owed to the owner of the Project Gutenberg™ trademark,
but he has agreed to donate royalties under this paragraph to
the Project Gutenberg Literary Archive Foundation. Royalty
payments must be paid within 60 days following each date on
which you prepare (or are legally required to prepare) your
periodic tax returns. Royalty payments should be clearly marked
as such and sent to the Project Gutenberg Literary Archive
Foundation at the address specified in Section 4, “Information
about donations to the Project Gutenberg Literary Archive
Foundation.”

• You provide a full refund of any money paid by a user who

notifies you in writing (or by e-mail) within 30 days of receipt that
s/he does not agree to the terms of the full Project Gutenberg™
License. You must require such a user to return or destroy all
 copies of the works possessed in a physical medium and
discontinue all use of and all access to other copies of Project
Gutenberg™ works.

• You provide, in accordance with paragraph 1.F.3, a full refund of

any money paid for a work or a replacement copy, if a defect in
the electronic work is discovered and reported to you within 90
days of receipt of the work.

• You comply with all other terms of this agreement for free
distribution of Project Gutenberg™ works.

1.E.9. If you wish to charge a fee or distribute a Project Gutenberg™

electronic work or group of works on different terms than are set
forth in this agreement, you must obtain permission in writing from
the Project Gutenberg Literary Archive Foundation, the manager of
the Project Gutenberg™ trademark. Contact the Foundation as set
forth in Section 3 below.

1.F.

1.F.1. Project Gutenberg volunteers and employees expend

considerable effort to identify, do copyright research on, transcribe
and proofread works not protected by U.S. copyright law in creating
the Project Gutenberg™ collection. Despite these efforts, Project
Gutenberg™ electronic works, and the medium on which they may
be stored, may contain “Defects,” such as, but not limited to,
incomplete, inaccurate or corrupt data, transcription errors, a
copyright or other intellectual property infringement, a defective or
damaged disk or other medium, a computer virus, or computer
codes that damage or cannot be read by your equipment.

1.F.2. LIMITED WARRANTY, DISCLAIMER OF DAMAGES - Except

for the “Right of Replacement or Refund” described in paragraph
1.F.3, the Project Gutenberg Literary Archive Foundation, the owner
of the Project Gutenberg™ trademark, and any other party
distributing a Project Gutenberg™ electronic work under this
agreement, disclaim all liability to you for damages, costs and
expenses, including legal fees. YOU AGREE THAT YOU HAVE NO
REMEDIES FOR NEGLIGENCE, STRICT LIABILITY, BREACH OF
WARRANTY OR BREACH OF CONTRACT EXCEPT THOSE
PROVIDED IN PARAGRAPH 1.F.3. YOU AGREE THAT THE
FOUNDATION, THE TRADEMARK OWNER, AND ANY
DISTRIBUTOR UNDER THIS AGREEMENT WILL NOT BE LIABLE
TO YOU FOR ACTUAL, DIRECT, INDIRECT, CONSEQUENTIAL,
PUNITIVE OR INCIDENTAL DAMAGES EVEN IF YOU GIVE
NOTICE OF THE POSSIBILITY OF SUCH DAMAGE.

1.F.3. LIMITED RIGHT OF REPLACEMENT OR REFUND - If you

discover a defect in this electronic work within 90 days of receiving it,
you can receive a refund of the money (if any) you paid for it by
sending a written explanation to the person you received the work
from. If you received the work on a physical medium, you must
return the medium with your written explanation. The person or entity
that provided you with the defective work may elect to provide a
replacement copy in lieu of a refund. If you received the work
electronically, the person or entity providing it to you may choose to
give you a second opportunity to receive the work electronically in
lieu of a refund. If the second copy is also defective, you may
demand a refund in writing without further opportunities to fix the
problem.

1.F.4. Except for the limited right of replacement or refund set forth in
paragraph 1.F.3, this work is provided to you ‘AS-IS’, WITH NO
OTHER WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PURPOSE.

1.F.5. Some states do not allow disclaimers of certain implied

warranties or the exclusion or limitation of certain types of damages.
If any disclaimer or limitation set forth in this agreement violates the
law of the state applicable to this agreement, the agreement shall be
interpreted to make the maximum disclaimer or limitation permitted
by the applicable state law. The invalidity or unenforceability of any
provision of this agreement shall not void the remaining provisions.
1.F.6. INDEMNITY - You agree to indemnify and hold the
Foundation, the trademark owner, any agent or employee of the
Foundation, anyone providing copies of Project Gutenberg™
electronic works in accordance with this agreement, and any
volunteers associated with the production, promotion and distribution
of Project Gutenberg™ electronic works, harmless from all liability,
costs and expenses, including legal fees, that arise directly or
indirectly from any of the following which you do or cause to occur:
(a) distribution of this or any Project Gutenberg™ work, (b)
alteration, modification, or additions or deletions to any Project
Gutenberg™ work, and (c) any Defect you cause.

Section 2. Information about the Mission of

Project Gutenberg™
Project Gutenberg™ is synonymous with the free distribution of
electronic works in formats readable by the widest variety of
computers including obsolete, old, middle-aged and new computers.
It exists because of the efforts of hundreds of volunteers and
donations from people in all walks of life.

Volunteers and financial support to provide volunteers with the

assistance they need are critical to reaching Project Gutenberg™’s
goals and ensuring that the Project Gutenberg™ collection will
remain freely available for generations to come. In 2001, the Project
Gutenberg Literary Archive Foundation was created to provide a
secure and permanent future for Project Gutenberg™ and future
generations. To learn more about the Project Gutenberg Literary
Archive Foundation and how your efforts and donations can help,
see Sections 3 and 4 and the Foundation information page at
www.gutenberg.org.

Section 3. Information about the Project

Gutenberg Literary Archive Foundation
The Project Gutenberg Literary Archive Foundation is a non-profit
501(c)(3) educational corporation organized under the laws of the
state of Mississippi and granted tax exempt status by the Internal
Revenue Service. The Foundation’s EIN or federal tax identification
number is 64-6221541. Contributions to the Project Gutenberg
Literary Archive Foundation are tax deductible to the full extent
permitted by U.S. federal laws and your state’s laws.

The Foundation’s business office is located at 809 North 1500 West,

Salt Lake City, UT 84116, (801) 596-1887. Email contact links and up
to date contact information can be found at the Foundation’s website
and official page at www.gutenberg.org/contact

Section 4. Information about Donations to

the Project Gutenberg Literary Archive
Foundation
Project Gutenberg™ depends upon and cannot survive without
widespread public support and donations to carry out its mission of
increasing the number of public domain and licensed works that can
be freely distributed in machine-readable form accessible by the
widest array of equipment including outdated equipment. Many small
donations ($1 to $5,000) are particularly important to maintaining tax
exempt status with the IRS.

The Foundation is committed to complying with the laws regulating

charities and charitable donations in all 50 states of the United
States. Compliance requirements are not uniform and it takes a
considerable effort, much paperwork and many fees to meet and
keep up with these requirements. We do not solicit donations in
locations where we have not received written confirmation of
compliance. To SEND DONATIONS or determine the status of
compliance for any particular state visit www.gutenberg.org/donate.

While we cannot and do not solicit contributions from states where

we have not met the solicitation requirements, we know of no
prohibition against accepting unsolicited donations from donors in
such states who approach us with offers to donate.

International donations are gratefully accepted, but we cannot make

any statements concerning tax treatment of donations received from
outside the United States. U.S. laws alone swamp our small staff.

Please check the Project Gutenberg web pages for current donation
methods and addresses. Donations are accepted in a number of
other ways including checks, online payments and credit card
donations. To donate, please visit: www.gutenberg.org/donate.

Section 5. General Information About Project

Gutenberg™ electronic works
Professor Michael S. Hart was the originator of the Project
Gutenberg™ concept of a library of electronic works that could be
freely shared with anyone. For forty years, he produced and
distributed Project Gutenberg™ eBooks with only a loose network of
volunteer support.

Project Gutenberg™ eBooks are often created from several printed

editions, all of which are confirmed as not protected by copyright in
the U.S. unless a copyright notice is included. Thus, we do not
necessarily keep eBooks in compliance with any particular paper
edition.

Most people start at our website which has the main PG search
facility: www.gutenberg.org.

This website includes information about Project Gutenberg™,

including how to make donations to the Project Gutenberg Literary
Archive Foundation, how to help produce our new eBooks, and how
to subscribe to our email newsletter to hear about new eBooks.