(eBook PDF) Essentials of Economics

10th Edition by Bradley Schiller

Go to download the full and correct content document:
https://ebooksecure.com/product/ebook-pdf-essentials-of-economics-10th-edition-by-
bradley-schiller/
More products digital (pdf, epub, mobi) instant
download maybe you interests ...

(eBook PDF) Essentials of Economics 11th Edition by

Bradley Schiller

http://ebooksecure.com/product/ebook-pdf-essentials-of-
economics-11th-edition-by-bradley-schiller/

(eBook PDF) The Economy Today 15th by Bradley Schiller

http://ebooksecure.com/product/ebook-pdf-the-economy-today-15th-
by-bradley-schiller/

(eBook PDF) The Macro Economy Today 15 Edition by

Bradley Schiller

http://ebooksecure.com/product/ebook-pdf-the-macro-economy-
today-15-edition-by-bradley-schiller/

The Micro Economy Today, 16th Edition Bradley Schiller

- eBook PDF

https://ebooksecure.com/download/the-micro-economy-today-16th-
edition-ebook-pdf/
Essentials of Economics 10th Edition (eBook PDF)

http://ebooksecure.com/product/essentials-of-economics-10th-
edition-ebook-pdf/

Essentials of Economics, 10e 10th Edition N. Gregory

Mankiw - eBook PDF

https://ebooksecure.com/download/essentials-of-
economics-10e-ebook-pdf/

(eBook PDF) Essentials of Economics 3th by Glenn

Hubbard

http://ebooksecure.com/product/ebook-pdf-essentials-of-
economics-3th-by-glenn-hubbard/

(eBook PDF) Essentials of Economics 3rd edition by Sean

Flynn

http://ebooksecure.com/product/ebook-pdf-essentials-of-
economics-3rd-edition-by-sean-flynn/

(eBook PDF) Essentials of Economics 7th Edition by R.

Glenn Hubbard

http://ebooksecure.com/product/ebook-pdf-essentials-of-
economics-7th-edition-by-r-glenn-hubbard-2/
 keep churning out more goods and services every year like some perpetual motion ma-
chine? Or will we run out of goods, basic resources, and new technologies? Will the future
bring more goods and services — or less?

THE GREAT RECESSION OF 2008–2009 Anxiety about the ability of the U.S. vii
Preface
economy to crank out more goods every year spiked in 2008–2009. Indeed, the economic

NEWS WIRE INSATIABLE WANTS

Never Enough Money!

A public opinion poll asked Americans how much money they would need each year
to be “happy.” In general, people said they needed twice as much income as they had
at present to be happy.

Current Income Amount of Income Needed

to be Happy (median)
The real-world approach Less than $50,000 of Essentials
$60,000 is reinforced by the boxed News Wires that
More than $50,000 $127,000
­appear in every chapter. The 73 News Wires offer up-to-date domestic and international
applications of economic
Photo Source: © Roberto concepts.
Machado Noa/Getty Images Some new examples that will particularly interest your
students include:
Data Source: CNN/ORC opinion poll of May 29 - June 1, 2014.

∙∙ The
NOTE: opportunity
People always wantcost
more(famine) of North
than they have. Korea’s rocket
Even multimillionaires sayprogram
they
don’t have enough to live “comfortably.”
∙∙ The impact of lower gas prices on sales of electric vehicles
∙∙ The diversity in starting pay for various college majors
∙∙ The incidence of passive smoking deaths
∙∙ 2014–2015 tuition hikes
∙∙ The impact of the 2013 payroll tax hike on consumer spending
∙∙ How the strong dollar has made European vacations cheaper
d 4 01/29/16 9:49 PM
This is just a sampling of the stream of real-world applications that cascades throughout
this text. Twenty-eight of the News Wires are new to this edition.

THEORY AND REALITY

In becoming acquainted with the U.S. economy, students will inevitably learn about the
woes of the business cycle. As the course progresses, they will not fail to notice a huge gap
between the pat solutions of economic theory and the dismal realities of occasional reces-
sion. This experience will kindle one of the most persistent and perplexing questions stu-
dents have. If the theory is so good, why is the economy such a mess?
Economists like to pretend that the theory is perfect but politicians aren’t. That’s part of
the answer, to be sure. But it isn’t fair to either politicians or economists. In reality, the
design and implementation of economic policy is impeded by incomplete information,
changing circumstances, goal trade-offs, and politics. Chapter 16 examines these re-
al-world complications. A News Wire on the “black art” of economic modeling, together
with new examples of the politics of macro policy, enliven the discussion. In this signature
chapter, students get a more complete explanation of why the real world doesn’t always live
up to the promises of economic theory.

NEW IN THIS EDITION

The dedication of Essentials to introducing core economic principles in a real-world con-
text requires every edition to focus on trending policies and front-page developments. As in
earlier editions, this tenth edition strives to arouse interest in economic theories by illus-
trating them in the context of actual institutions, policy debates, and global developments.
viii Preface

The following list highlights both the essential focus of each chapter and the new material
that enlivens its presentation:
Chapter 1: The Challenge of Economics—The first challenge here is to get students to
appreciate the concept of scarcity and how it forces us to make difficult choices among
desirable, but competing, options. That is really the essence of economic thinking. How
we make those choices is also critical. The 2016 presidential campaign seemed to imply
that we can have it all, without higher taxes or other sacrifices. That created a great chance
to emphasize opportunity costs. The opportunity costs of North Korea’s stepped-up rocket
program and the implied costs of “affordable” health care also make for good illustra-
tions. Chapter 1 includes 10 new Problems, one new Discussion Question, and three new
News Wires.
Chapter 2: The U.S. Economy—The purpose of this chapter is to give students an accu-
rate picture of the size and content of the U.S. economy, especially as compared to other
nations. Most students have no sense of how large the U.S. economy is or what it produces
or trades. The description here is organized around the core questions of What, How, and
For Whom output is produced. The portrait includes the latest data on U.S. and global out-
put, income distributions, and government sectors. A new News Wire on manufacturing
jobs versus output helps put the changing answers to the What question into perspective.
There are 6 new Problems.
Chapter 3: Supply and Demand—This is the introduction to the market mechanism, that
is, how markets set both prices and production for various goods. Interesting new News
Wires include the shortages that accompany new iPhone launches and the impact of falling
gasoline prices on sales of electric vehicles. Five new Problems and two new Discussion
Questions are included.
Micro
Chapter 4: Consumer Demand—This chapter starts by looking at patterns of U.S. con-
sumption, then analyzing the demand factors that shape those patterns. The elasticity of
demand gets a lot of attention, as illustrated by consumer responses to iMac prices, price
hikes at Starbucks, and higher gasoline prices (all new News Wires). There are 6 new Prob-
lems and 3 new Discussion Questions.
Chapter 5: Supply Decisions—The key point of this chapter is to highlight the differ-
ence between what firms can produce (as illustrated by the production function) and what
they want to produce (as illustrated by profit-maximization calculations). The importance
of marginal costs in the production decision gets its proper spotlight. The Tesla decision to
build a “gigafactory” to produce lithium batteries for electric cars is used to contrast the
long-run investment decision and the short-run production decision. The addition of 5 new
Problems and 3 new Discussion Questions keep the topic lively.
Chapter 6: Competition—This first look at market structure emphasizes the lack of
pricing power possessed by small, competitive firms. Perfectly competitive firms must
­relentlessly pursue cost reductions, quality improvements, and product innovation if they
are to survive and prosper. Although few firms are perfectly competitive, competitive
­dynamics keep all firms on their toes. Those dynamics affect even the behavior of such
giants as Apple (relentlessly trying to stay ahead of the pack)—not just the small T-shirt
vendors on beach boardwalks (both in new News Wires). How firms locate the most prof-
itable rate of production with the use of market prices and marginal costs is illustrated. The
chapter includes 3 new Problems and 1 new Discussion Question. The chapter-ending
­Policy Perspective considers how competition helps rather than hurts society.
Chapter 7: Monopoly—As a survey introduction to economics, Essentials focuses on the
differences in structure, behavior, and outcomes of only two market structures, namely, per-
fect competition and monopoly. This two-way contrast underscores the importance of market
structure for social welfare. The monopoly produces less and charges more than a competi-
tive market with the same cost structure, as illustrated with a step-by-step comparison of
market behavior. The various barriers monopolies use to preserve their position and profits
are illustrated as well. The chapter includes 3 new Problems and 1 new Discussion Question.
 ix
Preface

Chapter 8: The Labor Market—The 2016 presidential campaign highlighted very differ-
ent views about income equality, minimum wages, unions, and mandatory workforce regu-
lations. This chapter delves into these issues by first illustrating how market wages are set,
and then examining how various interventions alter market outcomes. Highlighted stories
include Dale Earnhardt’s earnings, Nick Saban’s salary and benefits at Alabama, mini-
mum-wage proposals, and the Swiss rejection of CEO pay caps. Of special interest to stu-
dents is the latest data on salaries for college grads in various majors. There are 6 new
Problems and 3 new Discussion Questions.
Chapter 9: Government Intervention—Another focus of every election is the appropri-
ate role for government in a market-driven economy. This chapter identifies the core ra-
tionale for government intervention and offers new illustrations of public goods (Israel’s
“Iron Dome” anti-missile program) and externalities (the Keystone XL Pipeline). There is
also new poll data on trust in government. The chapter includes 1 new Problem and 2 new
Discussion Questions.

Macro
Chapter 10: The Business Cycle—This introduction to macro examines the up and down
history of the economy, then looks at the impact of cyclical instability on unemployment,
inflation, and the distribution of income. The goal here is to get students to recognize why
macro instability is a foremost societal concern. The latest macro data are incorporated,
along with 3 new News Wires, 9 new Problems, and 4 new Discussion Questions.
Chapter 11: Aggregate Supply and Demand—This chapter gives students a conceptual
overview of the macro economy, highlighting the role that market forces and other factors
play in shaping macro outcomes. Aggregate supply (AS) and aggregate demand (AD) are
assessed, with an emphasis on the distinction between curve positions and curve shifts (the
source of instability). The bottom line is that either AS or AD must shift if macro outcomes
are to change. There are 3 new News Wires highlighting shift factors, 6 new Problems, and
2 new Discussion Questions. The Policy Perspectives section summarizes the broad policy
options that President Obama’s successor will have to work with.
Chapter 12: Fiscal Policy—This chapter highlights the potential of changes in govern-
ment spending and taxes to shift the AD curve. The power of the income multiplier is illus-
trated in the context of the AS/AD framework and operationalized with analysis of the
2009 Economic Recovery Act and the 2013 payroll tax hike. The implications of fiscal
policy for budget deficits are also examined. Updated budget data are included, along with
9 new Problems.
Chapter 13: Money and Banks—ApplePay and Bitcoins are used to illustrate differ-
ences between payment services and money. A new News Wire focuses on the methods of
payment consumers utilize. The core of the chapter depicts how deposit creation and the
money multiplier work, using a step-by-step illustration of each. The new Policy Perspec-
tives section assesses why Bitcoins aren’t really “money.” There are 8 new Problems and
2 new Discussion Questions.
Chapter 14: Monetary Policy—In this chapter, students first get an overview of how the
Federal Reserve is organized, including an introduction to Janet Yellen. Then the 3 basic
tools of monetary policy are illustrated, with an emphasis on how open-market operations
work. The narrative then focuses on how the use of these monetary tools shifts the AD curve,
ultimately impacting both output and prices. News about China’s cut in reserve requirements
helps illustrate the intended effects. The 2008–2015 spike in excess reserves is also dis-
cussed, along with the Fed’s new policy targeting. The chapter includes 6 new Problems.
Chapter 15: Economic Growth—The challenge of every society is to grow its economy
and lift living standards. This chapter reviews the world’s growth experience, then highlights
the factors that affect growth rates. Of special interest in today’s policy context is the role of
immigration in spurring growth. The chapter’s Policy Perspectives section examines whether
economic growth is desirable, a question students often ask. There are 5 new Problems.
Chapter 16: Theory and Reality—This unique capstone chapter addresses the perennial
question of why economies don’t function better if economic theory is so perfect. The
x Preface

chapter reviews the major policy tools and their idealized uses. Then it contrasts theoretical
expectations with real-world outcomes and asks why macro performance doesn’t live up to
its promise. Impediments to better outcomes are explored and the chapter ends by asking
students whether they favor more or less policy intervention. Lots of new data are incorpo-
rated, along with 4 new Problems and 2 new Discussion Questions.

International
Chapter 17: International Trade—Students are first introduced to patterns of global trade,
highlighting international differences in export dependence and trade balances. Then the
question of “why trade at all?” is explicitly addressed, leading into an illustration of com-
parative advantage. Of importance is also a discussion of the sources of resistance to free
trade and the impact of trade barriers. In addition to updating all data, 2 new News Wires,
5 new Problems, and 2 new Discussion Questions are included.

ASSURANCE OF LEARNING READY

Many educational institutions today are focused on the notion of assurance of learning,
an important element of some accreditation standards. Essentials of Economics is de-
signed specifically to support your assurance of learning initiatives with a simple yet
powerful solution.
Each test bank question for Essentials of Economics maps to a specific chapter learning
objective listed in the text. You can use Connect Economics or our test bank software, EZ
Test Online, to easily query for learning objectives that directly relate to the learning
­objectives for your course. You can then use the reporting features of Connect to aggregate
student results in similar fashion, making the collection and presentation of assurance of
learning data simple and easy.

AACSB STATEMENT
The McGraw-Hill Companies is a proud corporate member of AACSB International. Un-
derstanding the importance and value of AACSB accreditation, Essentials of Economics,
10e, recognizes the curricula guidelines detailed in the AACSB standards for business ac-
creditation by connecting selected questions in the text and the test bank to the six general
knowledge and skill guidelines in the AACSB standards.
The statements contained in Essentials of Economics, 10e, are provided only as a guide
for the users of this textbook. The AACSB leaves content coverage and assessment within
the purview of individual schools, the mission of the school, and the faculty. While Essen-
tials of Economics, 10e, and the teaching package make no claim of any specific AACSB
qualification or evaluation, we have within Essentials of Economics, 10e, labeled selected
questions according to the six general knowledge and skills areas.

MCGRAW-HILL CUSTOMER CARE CONTACT INFORMATION

At McGraw-Hill we understand that getting the most from new technology can be chal-
lenging. That’s why our services don’t stop after you purchase our products. You can
e-mail our product specialists 24 hours a day to get product training online. Or you can
search our knowledge bank of frequently asked questions on our support website. For Cus-
tomer Support, call 800-331-5094 or visit www.mhhe.com/support. One of our technical
support analysts will be able to assist you in a timely fashion.

INSTRUCTOR’S RESOURCE MANUAL

The Instructor’s Resource Manual is designed to assist instructors as they cope with the
demands of teaching a survey of economics in a single term. The manual has been fully
 xi
Preface

updated for the tenth edition by Larry Olanrewaju of John Tyler Community College. Each
chapter of the Instructor’s Resource Manual contains the following features:
∙∙ What is this chapter all about? A brief summary of the chapter.
∙∙ New to this edition A list of changes and updates to the chapter since the last edition.
∙∙ Lecture launchers Designed to offer suggestions on how to launch specific topics in
each chapter.
∙∙ Common student errors To integrate the lectures with the student Study Guide, this
provides instructors with a brief description of some of the most common problems
that students have when studying the material in each chapter.
∙∙ News Wires A list of News Wires from the text is provided for easy reference.
∙∙ Annotated outline An annotated outline for each chapter can be used as lecture notes.
∙∙ Structured controversies Chapter-related topics are provided for sparking small
group debates that require no additional reading. Also accessible on the website.
∙∙ Mini-debates Additional chapter-related debate topics that require individual stu-
dents to do outside research in preparation. Also accessible on the website.
∙∙ Mini-debate projects Additional projects are provided, cutting across all the chap-
ters. These include several focus questions and outside research. Also accessible
on the website.
∙∙ Answers to the chapter questions and problems The Instructor’s Resource Manual
provides answers to the end-of-chapter questions and problems in the text, along
with explanations of how the answers were derived.
∙∙ Answers to Web activities Answers to Web activities from the textbook are provided
in the Instructor’s Resource Manual as well as on the website.
∙∙ Media exercise Provides a ready-to-use homework assignment using current news-
papers and/or periodicals to find articles that illustrate the specific issues.

Test Bank
The Test Bank has been rigorously revised for this tenth edition of Essentials. Digital
co-author Karen Gebhardt and Nancy Rumore of University of Southwestern Louisiana
assessed every problem in the Test Bank, assigning each problem a letter grade and identi-
fying errors and opportunities for improvement. This author team assures a high level of
quality and consistency 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 Assurance of Learning, and Bloom’s Taxonomy guidelines. The computerized
Test Bank is available in EZ Test, a flexible and easy-to-use electronic testing program that
accommodates a wide range of question types, including user-created questions. Tests cre-
ated 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. Additionally, you can access the test bank through McGraw-Hill Connect.

PowerPoints
Digital co-author Karen Gebhardt and Gregory Gilpin of Montana State University have
prepared a concise set of Instructor PowerPoint presentations to correspond with the tenth
edition of Essentials. Developed using Microsoft PowerPoint software, these slides are a
step-by-step review of the key points in each of the book’s chapters. They are equally use-
ful to the student in the classroom 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.

Web Activities
To keep Essentials connected to the real world, Web activities, updated by Charles Newton
of Houston Community College, appear in the Instructor Resources section in Connect for
each chapter. These require the student to access data or materials on a website and then use,
xii Preface

summarize, or explain this external material in the context of the chapter’s core economic
concepts. The Instructor’s Resource Manual provides answers to the Web-based activities.

Digital Image Library

A digital image library of all figures from the textbook is available on the Instructor’s
­Resource section in Connect. Professors can insert the exact images from the textbook into
their presentation slides or simply post them for student viewing on their course manage-
ment site.

News Flashes
As up-to-date as Essentials of Economics is, it can’t foretell the future. As the future be-
comes the present, however, we will provide new two-page News Flashes describing major
economic events and related to specific text references. These News Flashes provide good
lecture material and can be copied for student use. They are also available via the Instructor
Resource Material in Connect. Four to six News Flashes are sent to adopters each year.

ACKNOWLEDGMENTS
The greatest contribution to this tenth edition comes from the enlistment of Karen G­ ebhardt
to the author team. Karen is a distinguished teacher who has won numerous awards for her
pedagogical prowess at Colorado State University. She has assumed responsibility for the
digital content of the Essentials learning package, including an overhaul of the test bank,
the Connect program, LearnSmart, and other digital products. She has done a marvelous
job not only improving the content of each digital supplement but also enhancing the sym-
metry between the text and all dimensions of the digital products. Students and instructors
will share my gratitude for Karen’s excellent work.
Reviewers and users of past editions of Essentials have also contributed to the evolution
of this text. The following manuscript reviewers were generous in sharing their teaching
experiences and offering suggestions for the revision:
Bob Abadie, National College
Vera Adamchik, University of Houston at Victoria
Jacqueline Agesa, Marshall University
Jeff Ankrom, Wittenburg University
J. J. Arias, Georgia College & State University
James Q. Aylsworth, Lakeland Community College
Mohsen Bahmani-Oskooee, University of Wisconsin–Milwaukee
Nina Banks, Bucknell University
John S. Banyi, Central Virginia Community College
Ruth M. Barney, Edison State Community College
Nancy Bertaux, Xavier University
John Bockino, Suffolk County Community College
T. Homer Bonitsis, New Jersey Institute of Technology
Judy Bowman, Baylor University
Jeff W. Bruns, Bacone College
Douglas N. Bunn, Western Wyoming Community College
Ron Burke, Chadron State College
Kimberly Burnett, University of Hawaii–Manoa
Tim Burson, Queens University of Charlotte
Hanas A. Cader, South Carolina State University
Raymond E. Chatterton, Lock Haven University
Hong-yi Chen, Soka University of America
 xiii
Preface

Howard Chernick, Hunter College

Porchiung Ben Chou, New Jersey Institute of Technology
Jennifer L. Clark, University of Florida
Norman R. Cloutier, University of Wisconsin–Parkside
Mike Cohick, Collin County Community College–Plano
James M. Craven, Clark College
Tom Creahan, Morehead State University
Kenneth Cross, Southwest Virginia Community College
Patrick Cunningham, Arizona Western College
Dean Danielson, San Joaquin Delta College
Ribhi M. Daoud, Sinclair Community College
Amlan Datta, Cisco College & Texas Tech University
Susan Doty, University of Southern Mississippi
Kevin Dunagan, Oakton College
James Dyal, Indiana University of Pennsylvania
Angela Dzata, Alabama State University
Erick Elder, University of Arkansas at Little Rock
Vanessa Enoch, National College
Maxwell O. Eseonu, Virginia State University
Jose Esteban, Palomar College
Bill Everett, Baton Rouge Community College
Randall K. Filer, Hunter College
John Finley, Columbus State University
Daisy Foxx, Fayetteville Technical Community College
Scott Freehafer, The University of Findlay
Arlene Geiger, John Jay College
Lisa George, Hunter College
Chris Gingrich, Eastern Mennonite University
Yong U. Glasure, University of Houston–Victoria
Devra Golbe, Hunter College
Emilio Gomez, Palomar College
Anthony J. Greco, University of Louisiana–Lafayette
Cole Gustafson, North Dakota State University
Sheryl Hadley, Johnson County Community College
Patrick Hafford, Wentworth Institute of Technology
John Heywood, University of Wisconsin—Milwaukee
Jim Holcomb, University of Texas at El Paso
Philip Holleran, Radford University
Ward Hooker, Orangeburg–Calhoun Technical College
Yu Hsing, Southeastern Louisiana University
Syed Hussain, University of Wisconsin
Hans Isakson, University of Northern Iowa
Allan Jenkins, University of Nebraska–Kearney
Bang Nam Jeon, Drexel University
Hyojin Jeong, Lakeland Community College
Derek M. Johnson, University of Connecticut
Dan Jubinski, St. Joseph’s University
xiv Preface

Judy Kamm, Lindenwood University

Jimmy Kelsey, Whatcom Community College
R.E. Kingery, Hawkeye Community College
Allen Klingenberg, Ottawa University–Milwaukee
Shon Kraley, Lower Columbia College
Sean LaCroix, Tidewater Community College
Richard Langlois, University of Connecticut
Teresa L. C. Laughlin, Palomar College
Willis Lewis, Jr., Lander University
Joshua Long, Ivy Tech Community College
B. Tim Lowder, Florence–Darlington Technical College
Kjartan T. Magnusson, Salt Lake Community College
Tim Mahoney, University of Southern Indiana
Michael L. Marlow, California Polytechnic State University
Vincent Marra, University of Delaware
Mike Mathea, Saint Charles Community College
Richard McIntyre, University of Rhode Island
Tom Menendez, Las Positas College
Amlan Mitra, Purdue University–Calumet–Hammond
Robert Moden, Central Virginia Community College
Carl Montano, Lamar University
Daniel Morvey, Piedmont Technical College
John Mundy, University of North Florida
Jamal Nahavandi, Pfeiffer University
Diane R. Neylan, Virginia Commonwealth University
Henry K. Nishimoto, Fresno City College
Gerald Nyambane, Davenport University
Diana K. Osborne, Spokane Community College
Shawn Osell, Minnesota State University–Mankato
William M. Penn, Belhaven College
Diana Petersdorf, University of Wisconsin–Stout
James Peyton, Highline Community College
Ron Presley, Webster University
Patrick R. Price, University of Louisiana at Lafayette
Janet Ratliff, Morehead State University
Mitchell H. Redlo, Monroe Community College
David Reed, Western Technical College
Terry L. Riddle, Central Virginia Community College
Jean Rodgers, Wenatchee Valley College at Omak
Vicki D. Rostedt, University of Akron
Terry Rotschafer, Minnesota West Community and Technical College–Worthington
Matthew Rousu, Susquehanna University
Sara Saderion, Houston Community College–Southwest
George Samuels, Sam Houston State University
Mustafa Sawani, Truman State University
Joseph A. Schellings, Wentworth Institute of Technology
Lee J. Van Scyoc, University of Wisconsin–Oshkosh
 xv
Preface

Dennis D. Shannon, Southwestern Illinois College

William L. Sherrill, Tidewater Community College
Gail Shipley, El Paso Community College
Johnny Shull, Central Carolina Community College
James Smyth, San Diego Mesa College
John Somers, Portland Community College–Sylvania
Rebecca Stein, University of Pennsylvania
Carol Ogden Stivender, University of North Carolina–Charlotte
Carolyn Stumph, Indiana University Purdue University–Fort Wayne
James Tallant, Cape Fear Community College
Frank Tenkorang, University of Nebraska–Kearney
Audrey Thompson, Florida State University
Ryan Umbeck, Ivy Tech Community College
Darlene Voeltz, Rochester Community & Technical College
Yongqing Wang, University of Wisconsin–Waukesha
Dale W. Warnke, College of Lake County
Nissan Wasfie, Columbia College–Chicago
Luther G. White, Central Carolina Community College
Mary Lois White, Albright College
Dave Wilderman, Wabash Valley College
Amy Wolaver, Bucknell University
King Yik, Idaho State University
Yongjing Zhang, Midwestern State University
Richard Zuber, University of North Carolina–Charlotte

FINAL THOUGHTS
I am deeply grateful for the enormous success Essentials has enjoyed. Since its first publi-
cation, it has been the dominant text in the one-semester survey course. I hope that its
brevity, content, style, and novel features will keep it at the top of the charts for years to
come. The ultimate measure of the book’s success, however, will be reflected in student
motivation and learning. As the author, I would appreciate hearing how well Essentials
lives up to that standard.

Bradley R. Schiller
The McGraw-Hill Series
Economics

ESSENTIALS OF ECONOMICS Slavin MONEY AND BANKING

Economics, Microeconomics, and
Brue, McConnell, and Flynn Cecchetti and Schoenholtz
­Macroeconomics
Essentials of Economics Money, Banking, and Financial Markets
Eleventh Edition
Third Edition Fourth Edition
Mandel
Economics: The Basics ECONOMICS OF SOCIAL ISSUES
URBAN ECONOMICS
Second Edition Guell
O’Sullivan
Schiller Issues in Economics Today
Urban Economics
Essentials of Economics Seventh Edition
Eighth Edition
Tenth Edition Sharp, Register, and Grimes
Economics of Social Issues
Twenty-First Edition LABOR ECONOMICS
PRINCIPLES OF ECONOMICS
Borjas
Asarta and Butters Labor Economics
Principles of Economics, Principles of Micro- ECONOMETRICS
Seventh Edition
economics, Principles of Macroeconomics Gujarati and Porter
McConnell, Brue, and Macpherson
First Edition Basic Econometrics
Contemporary Labor Economics
Colander Fifth Edition
Eleventh Edition
Economics, Microeconomics, and Gujarati and Porter
Macroeconomics Essentials of Econometrics
Ninth Edition Fourth Edition PUBLIC FINANCE
Frank, Bernanke, Antonovics, and Heffetz Hilmer and Hilmer Rosen and Gayer
Principles of Economics, Principles of Practical Econometrics Public Finance
­Microeconomics, Principles of First Edition Tenth Edition
­Macroeconomics Seidman
Sixth Edition
MANAGERIAL ECONOMICS Public Finance
Frank, Bernanke, Antonovics, and Heffetz First Edition
Baye
Streamlined Editions: Principles of
Managerial Economics and Business Strategy
­Economics, Principles of Microeconomics, ENVIRONMENTAL ECONOMICS
Eighth Edition
Principles of Macroeconomics
Brickley, Smith, and Zimmerman Field and Field
Third Edition
Managerial Economics and Organizational Environmental Economics: An Introduction
Karlan and Morduch Seventh Edition
Architecture
Economics, Microeconomics, and
Sixth Edition
­Macroeconomics
First Edition Thomas and Maurice INTERNATIONAL ECONOMICS
Managerial Economics Appleyard, Field, and Cobb
McConnell, Brue, and Flynn
Twelfth Edition International Economics
Economics, Microeconomics, and
­Macroeconomics Eighth Edition
Twentieth Edition INTERMEDIATE ECONOMICS King and King
McConnell, Brue, and Flynn Bernheim and Whinston International Economics, Globalization,
Brief Editions: Microeconomics and Microeconomics and Policy: A Reader
­Macroeconomics Second Edition Fifth Edition
Second Edition Dornbusch, Fischer, and Startz Pugel
Miller Macroeconomics International Economics
Principles of Microeconomics Twelfth Edition Sixteenth Edition
First Edition Frank
Samuelson and Nordhaus Microeconomics and Behavior
Economics, Microeconomics, and Ninth Edition
­Macroeconomics
Nineteenth Edition
ADVANCED ECONOMICS
Schiller
Romer
The Economy Today, The Micro Economy
Advanced Macroeconomics
Today, and The Macro Economy Today
Fourth Edition
Fourteenth Edition

xvi
 CONTENTS IN BRIEF

Preface iv

Section I BASICS
Chapter 1 THE CHALLENGE OF ECONOMICS 2
Chapter 2 THE U.S. ECONOMY 26
Chapter 3 SUPPLY AND DEMAND 46

Section II MICROECONOMICS
Chapter 4 CONSUMER DEMAND 72
Chapter 5 SUPPLY DECISIONS 92
Chapter 6 COMPETITION 110
Chapter 7 MONOPOLY 132
Chapter 8 THE LABOR MARKET 152
Chapter 9 GOVERNMENT INTERVENTION 172

Section III MACROECONOMICS

Chapter 10 THE BUSINESS CYCLE 192
Chapter 11 AGGREGATE SUPPLY AND DEMAND 214
Chapter 12 FISCAL POLICY 234
Chapter 13 MONEY AND BANKS 254
Chapter 14 MONETARY POLICY 270
Chapter 15 ECONOMIC GROWTH 286

Section IV INTERNATIONAL
Chapter 16 THEORY AND REALITY 304
Chapter 17 INTERNATIONAL TRADE 324

Glossary 347
Index 351

xvii
CONTENTS

About the Authors iii How America Produces 35

Preface iv Factors of Production 35
The Private Sector: Business Types 37
The Government’s Role 38
Section I BASICS Striking a Balance 40
For Whom America Produces 40
Chapter 1 The Distribution of Income 40
THE CHALLENGE OF ECONOMICS 2 Income Mobility 41
Government Redistribution: Taxes and Transfers 41
How Did We Get So Rich? 3 Policy Perspectives: Can We End Global Poverty? 43
The Central Problem of Scarcity 6 Summary 43
Three Basic Economic Questions 6 News Wires
WHAT to Produce 7 U.S. Manufacturing: Output vs. Jobs since 1975 35
HOW to Produce 12 The Education Gap between Rich and
FOR WHOM to Produce 13 Poor Nations 37
The Mechanisms of Choice 13 Income Share of the Rich 42
The Political Process 14
The Market Mechanism 14 Chapter 3
Central Planning 14 SUPPLY AND DEMAND 46
Mixed Economies 15
Market Participants 47
What Economics Is All About 15
Goals 47
Market Failure 15
Constraints 47
Government Failure 15
Specialization and Exchange 47
Macro versus Micro 16
Market Interactions 48
Theory versus Reality 16
The Two Markets 49
Politics versus Economics 17
Dollars and Exchange 49
Modest Expectations 18
Supply and Demand 50
Policy Perspectives: Is “Free” Health Care Really Free? 18
Demand 50
Summary 19
Individual Demand 50
Appendix: Using Graphs 21
Determinants of Demand 53
Slopes 22
Ceteris Paribus 53
Shifts 23
Shifts in Demand 54
Linear versus Nonlinear Curves 24
Movements versus Shifts 55
Causation 24
Market Demand 55
News Wires
The Market Demand Curve 56
Never Enough Money! 4
The Use of Demand Curves 56
Will Your Kids Be Better Off? 5
Supply 58
North Korea’s Rockets Deepen Food Crisis 11
Determinants of Supply 58
Chapter 2 The Market Supply Curve 59
Shifts in Supply 59
THE U.S. ECONOMY 26 Equilibrium 60
What America Produces 27 Market Clearing 60
How Much Output 27 Market Shortage 62
The Mix of Output 31 Market Surplus 63
Changing Industry Structure 33 Changes in Equilibrium 64

xviii
 xix
Contents

Disequilibrium Pricing 65 Marginal Physical Product 95

Price Ceilings 65 Law of Diminishing Returns 96
Price Floors 66 Short Run versus Long Run 97
Laissez Faire 67 Costs of Production 98
Policy Perspectives: Did Gas Rationing Help or Hurt New Total Cost 98
Jersey Motorists? 68 Which Costs Matter? 99
Summary 69 Average Cost 100
News Wires Marginal Cost 100
Higher Alcohol Prices and Student Drinking 53 Supply Horizons 102
Electric Cars Hurt Most among Renewables on Oil’s Slump 55 The Short-Run Production Decision 103
Hurricane Sandy to Raise Prices on Used Cars 60 The Long-Run Investment Decision 103
Scalpers Want Small Fortune for Tickets to See the Pope Economic versus Accounting Costs 104
in NYC 62
Economic Cost 105
Apple iPhone 6 Plus Sells Out: Shipping Delays Expected 63
Economic Profit 105
Gov. Christie Signs Order to Ration Gas in 12 NJ
Policy Perspectives: Can We Outrun Diminishing Returns? 106
Counties 69
Summary 107
News Wires
Section II MICROECONOMICS “We Pretend to Work, They Pretend to Pay Us” 97
Tesla to Boost Output in 2015; Tesla Plans “Gigafactory” 104
Chapter 4
CONSUMER DEMAND 72 Chapter 6
Patterns of Consumption 73 COMPETITION 110
Determinants of Demand 74
Market Structure 111
The Sociopsychiatric Explanation 74
Perfect Competition 113
The Economic Explanation 76
No Market Power 113
The Demand Curve 76
Price Takers 114
Utility Theory 76
Market Demand versus Firm Demand 114
Price and Quantity 78
The Firm’s Production Decision 116
Price Elasticity 79
Output and Revenues 116
Elastic versus Inelastic Demand 81
Revenues versus Profits 116
Price Elasticity and Total Revenue 82
Profit Maximization 117
Determinants of Price Elasticity 84
Price 117
Other Changes in Consumer Behavior 85
Marginal Cost 117
Changes in Income 87
Profit-Maximizing Rate of Output 117
Policy Perspectives: Does Advertising Change Our
Total Profit 120
Behavior? 87
Supply Behavior 121
Summary 88
A Firm’s Supply 121
News Wires
Market Supply 122
Men versus Women: How They Spend 75
Industry Entry and Exit 123
Price Cut on MacBook Air Jumpstarts Sales 80
Entry 124
Smokers Gasping at Obama’s Tax Hike 82
Tendency toward Zero Economic Profits 125
Starbucks Customers Shrug off Price Hike 84
Exit 126
San Francisco: The Butts Stop Here 85
Equilibrium 126
Truck Sales Rise and Hybrid Sales Fall as Gas Prices Drop 86
Low Barriers to Entry 127
Chapter 5 Market Characteristics 127
Policy Perspectives: Does Competition Help Us or Hurt
SUPPLY DECISIONS 92 Us? 128
Capacity Constraints: The Production Function 93 Summary 130
Efficiency 95 News Wires
Capacity 95 Catfish Farmers Feel Forced Out of Business 114
xx Contents

Flat Panels, Thin Margins 124 Marginal Physical Product 157

U.S. Catfish Growers Struggle against High Feed Prices, Marginal Revenue Product 158
Foreign Competition 126 The Law of Diminishing Returns 158
The T-Shirt Business: Too Much Competition 128 The Hiring Decision 161
The Firm’s Demand for Labor 161
Chapter 7
Market Equilibrium 162
MONOPOLY 132 Equilibrium Wage 163
Monopoly Structure 133 Equilibrium Employment 163
Monopoly = Industry 133 Changing Market Outcomes 163
Price versus Marginal Revenue 134 Changes in Productivity 163
Monopoly Behavior 136 Changes in Price 164
Profit Maximization 136 Legal Minimum Wages 164
The Production Decision 136 Labor Unions 166
The Monopoly Price 137 Policy Perspectives: Should CEO Pay Be Capped? 167
Monopoly Profits 138 Summary 169
Barriers to Entry 138 News Wires
Threat of Entry 139 Thousands of Hopeful Job Seekers Attend Career Fair at
Patent Protection: Polaroid versus Kodak 139 Rutgers 154
Other Entry Barriers 140 Hewlett-Packard’s Job Cuts to Hit 34,000 156
Comparative Outcomes 141 Most Lucrative College Degrees 157
Competition versus Monopoly 141 Alabama’s Nick Saban Gets Raise, Contract Extension 162
Near Monopolies 142 Obama Proposes to Increase Federal Minimum Wage 165
WHAT Gets Produced 144 Swiss Voters Reject Strict CEO Pay Limits in Referendum 168
FOR WHOM 145
HOW 145 Chapter 9
Any Redeeming Qualities? 145
GOVERNMENT INTERVENTION 172
Research and Development 146
Entrepreneurial Incentives 146 Market Failure 173
Economies of Scale 146 The Nature of Market Failure 174
Natural Monopolies 147 Sources of Market Failure 174
Contestable Markets 147 Public Goods 174
Structure versus Behavior 147 Joint Consumption 175
Policy Perspectives: Why Is Flying Monopoly Air Routes So The Free-Rider Dilemma 175
Expensive? 148 Externalities 177
Summary 150 Consumption Decisions 177
News Wires Production Decisions 179
SCO Suit May Blunt the Potential of Linux 140 Social versus Private Costs 181
Judge Rules Microsoft Violated Antitrust Laws 141 Policy Options 182
OPEC Keeps Output Target on Hold, Predicts Low Market Power 185
Prices 143 Restricted Supply 185
German Brewers Fined over Price-Fixing 144 Antitrust Policy 186
Two Drug Firms Agree to Settle Pricing Suit 145 Inequity 186
Following the Fares 149 Macro Instability 188
Policy Perspectives: Will the Government Get It Right? 188
Chapter 8
Summary 190
THE LABOR MARKET 152 News Wires
Labor Supply 153 Israel’s “Iron Dome” Works! 176
Income versus Leisure 154 Secondhand Smoke Kills 600,000 People a Year: Study 178
Market Supply 155 Obama Vetoes Keystone Pipeline 183
Labor Demand 155 Breathing Easier 184
Derived Demand 155 Bloomberg: Forced Recycling a Waste 185
 xxi
Contents

Section III MACROECONOMICS Supply-Side Theories 228

Eclectic Explanations 228
Chapter 10 Policy Options 229
Fiscal Policy 229
THE BUSINESS CYCLE 192
Monetary Policy 229
Assessing Macro Performance 194 Supply-Side Policy 229
GDP Growth 195 Policy Perspectives: Which Policy Lever to Use? 230
Business Cycles 195 Summary 231
Real GDP 195 News Wires
Erratic Growth 196 Job Losses Surge as U.S. Downturn Accelerates 223
Unemployment 198 Consumer Confidence Plummets 225
The Labor Force 198 Sandy Pummels New York Area 226
The Unemployment Rate 200
The Full Employment Goal 201 Chapter 12
Inflation 203 FISCAL POLICY 234
Relative versus Average Prices 203
Components of Aggregate Demand 235
Redistributions 205
Consumption 236
Uncertainty 209
Investment 236
Measuring Inflation 210
Government Spending 237
The Price Stability Goal 210
Net Exports 238
Policy Perspectives: Is Another Recession Coming? 211
Equilibrium 238
Summary 212
The Nature of Fiscal Policy 239
News Wires
Fiscal Stimulus 239
Market in Panic as Stocks Are Dumped in 12,894,600
Share Day: Bankers Halt It 193 More Government Spending 241
Economy: Sharpest Decline in 26 Years 195 Tax Cuts 244
Depression Slams World Economies 198 Inflation Worries 247
How Unemployment Affects the Family 201 Fiscal Restraint 247
UPS to Hire up to 95,000 Seasonal Employees for Holiday Budget Cuts 248
Season 202 Tax Hikes 248
Inflation and the Weimar Republic 204 Fiscal Guidelines 248
College Tuition in the U.S. Again Rises Faster than Inflation 205 Policy Perspectives: Must the Budget Be Balanced? 249
Summary 252
Chapter 11 News Wires
AGGREGATE SUPPLY AND DEMAND 214 Recession Looming 237
U.S. Congress Gives Final Approval to $787 Billion
A Macro View 215 Stimulus 240
Macro Outcomes 215 The 2008 Economic Stimulus: First Take on Consumer
Macro Determinants 216 Response 245
Stable or Unstable? 216 Wal-Mart Woes: Consumer Spending Curbed by Payroll
Classical Theory 216 Tax 249
The Keynesian Revolution 217
Chapter 13
The Aggregate Supply–Demand Model 218
Aggregate Demand 218
MONEY AND BANKS 254
Aggregate Supply 220 The Uses of Money 255
Macro Equilibrium 221 Many Types of Money 256
Macro Failure 222 The Money Supply 256
Undesirable Outcomes 222 Cash versus Money 256
Unstable Outcomes 223 Transactions Accounts 257
Shift Factors 225 Basic Money Supply 257
Competing Theories of Short-Run Instability 227 Near Money 258
Demand-Side Theories 227 Aggregate Demand 259
xxii Contents

Creation of Money 259 Growth Indexes 289

Deposit Creation 259 The GDP Growth Rate 289
A Monopoly Bank 260 GDP per Capita: A Measure of Living Standards 290
Reserve Requirements 262 GDP per Worker: A Measure of Productivity 292
Excess Reserves 263 Sources of Productivity Growth 294
A Multibank World 263 Labor Quality 294
The Money Multiplier 263 Capital Investment 294
Limits to Deposit Creation 264 Management 294
Excess Reserves as Lending Power 265 Research and Development 294
The Macro Role of Banks 265 Policy Levers 295
Financing Aggregate Demand 265 Education and Training 295
Constraints on Money Creation 266 Immigration Policy 295
Policy Perspectives: Are Bitcoins the New Money? 267 Investment Incentives 296
Summary 267 Savings Incentives 297
News Wires Government Finances 297
Bras: The Currency of Russia in the 1990s 256 Deregulation 298
How Would You Like to Pay for That? 259 Economic Freedom 299
Policy Perspectives: Is More Growth Desirable? 300
Chapter 14 Summary 301
MONETARY POLICY 270 News Wires
What Economic Growth Has Done for U.S. Families 291
The Federal Reserve System 271
House Poised to Pass STEM Immigration Bill 296
Federal Reserve Banks 272
Americans Save Little 297
The Board of Governors 272
Improvement in Economic Freedom and Economic
The Fed Chair 273 Growth 300
Monetary Tools 273
Reserve Requirements 273
The Discount Rate 275 Chapter 16
Open Market Operations 277 THEORY AND REALITY 304
Powerful Levers 279 Policy Tools 305
Shifting Aggregate Demand 279 Fiscal Policy 305
Expansionary Policy 280 Monetary Policy 307
Restrictive Policy 280 Supply-Side Policy 309
Interest Rate Targets 281 Idealized Uses 311
Price versus Output Effects 281 Case 1: Recession 311
Aggregate Demand 281 Case 2: Inflation 311
Aggregate Supply 281 Case 3: Stagflation 311
Policy Perspectives: How Much Discretion Should the Fed Fine-Tuning 312
Have? 283
The Economic Record 313
Summary 284
Why Things Don’t Always Work 314
News Wires
Goal Conflicts 314
China Cuts Reserve Requirements 275
Measurement Problems 315
Fed Cuts Key Interest Rate Half-Point to
1 Percent 277 Design Problems 317
Implementation Problems 318
Chapter 15 Policy Perspectives: Hands Off or Hands On? 320
Summary 321
ECONOMIC GROWTH 286
News Wires
The Nature of Growth 287 Budget Deficit Sets Record in February 308
Short-Run Changes in Capacity Use 287 Macro Performance, 2004–2014 314
Long-Run Changes in Capacity 287 NBER Makes It Official: Recession Started One Year Ago 316
Nominal versus Real GDP 289 Tough Calls in Economic Forecasting 317
 xxiii
Contents

Section IV INTERNATIONAL Barriers to Trade 335

Tariffs 335
Chapter 17 Quotas 336
Nontariff Barriers 338
INTERNATIONAL TRADE 324
Exchange Rates 339
U.S. Trade Patterns 325 Global Pricing 340
Imports 325 Appreciation/Depreciation 340
Exports 325 Foreign Exchange Markets 341
Trade Balances 327 Policy Perspectives: Who Enforces World Trade Rules? 342
Motivation to Trade 328 Summary 344
Production and Consumption without Trade 328 News Wires
Trade Increases Specialization and World Exports in Relation to GDP 326
Output 330
Insight: Brazil Protects Its... Wines? 334
Comparative Advantage 331
A Litany of Losers 335
Opportunity Costs 331
U.S. Solar Tariffs on Chinese Cells May Boost Prices 336
Absolute Costs Don’t Count 332
Obama Cuts Sour Deal on Sugar 339
Terms of Trade 332
What the Strong U.S. Dollar Means for Americans Traveling
Limits to the Terms of Trade 332 to Europe This Year 340
The Market Mechanism 332
Protectionist Pressures 333 Glossary 347
Microeconomic Losers 333
Index 351
The Net Gain 334

xxiii
 
Another random document with
no related content on Scribd:
him has been the trait which Walt Whitman perfectly phrased when
he exclaimed:

“In me the caresser of life, wherever moving.”

For this psychologist and teacher, who was also for some time
president of the New England Watch and Ward Society, a voluntary
censorship which asserts itself chiefly over books and plays and in
opposition to the social evil, always had “a love for glimpsing at first
hand the raw side of life. I have never missed an opportunity to
attend a prize fight if I could do so unknown and away from home.
Thrice I have taken dancing lessons from experts sworn to secrecy,
and tried to learn the steps of ancient and some of the tabooed
modern dances—just enough to know the feel of them—up to some
six years ago, although I have always been known as a non-dancer.”
In Paris, London, Vienna, Berlin, New York and San Francisco he
found guides to take him through the underworld by night. In an
institution for the blind, he blindfolded himself for an entire day; he
learned the deaf mute alphabet; he had seen three executions,
visited morgues, revival meetings, anarchist meetings. Paupers,
criminals, wayward children, circus freaks were among his hobbies.
“I believe that such zests and their indulgence are a necessary part
of the preparation of a psychologist or moralist who seeks to
understand human nature as it is.” And as, probably, it will continue
to be for a while to come.

BOOKS BY G. STANLEY HALL

1874 Hegel as the National Philosopher of Germany. Translated

from the German of Dr. Karl Rosenkrans
1881 Aspects of German Culture
1883 Methods of Teaching History
1886 Hints Towards a Select and Descriptive Bibliography of
Education (with John M. Mansfield)
1904 Adolescence: Its Psychology, and Its Relations to
Physiology, Anthropology, Sociology, Sex, Crime,
 Religion and Education. Two volumes
1906 Youth, Its Education, Regimen, and Hygiene. An
abridgement of Adolescence
1907 Aspects of Child Life and Education
1911 Educational Problems. Two volumes
1912 Founders of Modern Psychology
1917 Jesus, the Christ, in the Light of Psychology. Two volumes
1920 Morale: The Supreme Standard of Life and Conduct
1920 Recreations of a Psychologist. Stories, reminiscences and
sketches
1922 Senescence: The Last Half of Life
1923 Life and Confessions of a Psychologist
1923 Jesus, the Christ, in the Light of Psychology. One volume
edition

Note: An extended list of articles, some of them popularly-written,

will be found in the bibliography appended to Life and Confessions of
a Psychologist.

SOURCES ON G. STANLEY HALL

His autobiographical Life and Confessions of a Psychologist is of
the first importance.
How You Can DO More and BE More, by Bruce Barton. An
interview with G. Stanley Hall. In the American Magazine for
November, 1923.
“Stanley Hall: A Memory,” by A. E. Hamilton in the American
Mercury for July, 1924.
Article by Dr. Joseph Jastrow on Dr. Hall in the Literary Review of
The Evening Post, New York, 28 June 1924.
 10. The Mode in New Fiction
i
If only books were like hats and gowns it would simplify matters a
good deal. I could say: “Ostrich feathers are being much used,” or
“Egotism is usually the center of the design.” But although there is an
observable tendency to buy books like clothes, because some novel
or other is all the rage, the tendency grows weaker from year to year,
I think; and if in the title of this chapter I use the word “mode” it is
phrasemaking.
Phrasemaking has its excuse in convenience, but it must be
abandoned in the discussion of some of the fiction I am going to talk
about. Among these books just one is a first novel. Because it has
this distinction, because of its human quality, and because it borders
a theme of great significance, I want to speak at once of Marjorie
Barkley McClure’s High Fires. Mrs. McClure, the daughter of a
Detroit clergyman, has laid her story principally in that city, in the
period from 1905 to about the present. Angus Stevenson is a
minister of the gospel who sticks by the letter of a somewhat rigid,
old-fashioned creed. His sons and his daughter are young people of
today. They cannot see why they should not do what other boys and
girls of their age are doing. But their father will not for one moment
countenance such things as dancing and card-playing and Sunday
baseball.
The struggle is tempered and made human by Angus Stevenson’s
goodness. He loves his children; especially is his daughter the apple
of his eye. But he cannot sacrifice one inch of his principles. They
are just as effectual in one direction as another. He voluntarily
reduces his own salary when it seems to him that the act is called
for. If he is intolerant, he is Christ-like.
 Of several crises, the one that cuts into him most deeply is his
daughter’s falling in love with a young man whom Angus Stevenson
is constrained to regard as an atheist and an infidel. I have said that
he loves his children; I should add that even when they are most
rebellious against their father, they love him no less. The intensity
and depth of Mrs. McClure’s portrait of Angus Stevenson fully
realizes the feeling on all sides. You are made to see and to
acknowledge the claim to justice of conflicting creeds, the rare
courage and noble faith and life-long devotion of the father, the right
to happiness and a certain self-fulfillment of the children. I know
scarcely a novel of this year in which the human element is so
strong; none in which it is stronger; none in which the lessons of a
right feeling are more clearly conveyed or are more capable of a
direct application in the lives of ordinary Americans.

Here lies the flesh that tried

To follow the spirit’s leading;
Fallen at last, it died,
Broken, bruised and bleeding,
Burned by the high fires
Of the spirit’s desires.

Mrs. McClure’s novel is of interest, too, for its evidence that

religion is quickening in the American mind. I am using “religion” in
the sense of personal faith, which is at the present hour having a
difficult time with established creeds, on the one hand, and life’s
machinery of motion on the other. There were evidences before High
Fires was published, in the huge sale of a new life of Christ and in
the fundamentalist-liberal controversy in the churches, that
something deeply disquieting was coming to the surface. Almost
simultaneously with the publication of High Fires, a first novel by
Lyon Montross, Half Gods, by means of the highly realistic
presentation of American small town life, tried to disclose the trouble.
Mr. Montross’s story implied what is probably true: the wine of a
strong belief in anything is no longer fermented in most of us; we
half-worship, or, at best, only worship half-heartedly.
 Now the business of a novelist, or his art, is, as Joseph Conrad
said, “a form of imagined life clearer than reality.” It is to show you
something more plainly than life shows it you; a good novel is a
beacon, not a bonfire. Thus in the new novel by Margaret Culkin
Banning (the most ambitious work she has so far done), the heroine,
after a life of vicissitudes, comes to realize that she is, in the
Scriptural phrase of the title, but a “handmaid of the Lord.” Veronica
is a sensitive girl brought up in depressing though scarcely unusual
circumstances. She marries a man whose business career takes her
to a social height, both in America and, for a time, in England. Her
church, which should mean so much to her constantly, affects her life
only at intervals. When the crash comes she finds herself separated
from her husband by his struggle to keep afloat. She goes back to
her home town. It seems as though she were back where she had
started, with little difference except in the perplexity of an
uncomprehended experience. So it is that finally she comes to a
measure of understanding, to an unquiet peace. She sees that
things will go on, though not in her way nor in any way of her
choosing. A Handmaid of the Lord, like High Fires and Half Gods,
does something to get at the trouble that is in us.
To show what is, including what is wrong, is the novelist’s object;
to show what came right is also sometimes possible. Dealing with
the subject of religion, it has taken that very able novelist, Compton
Mackenzie, three books in sequence to show the history of Mark
Lidderdale. The Altar Steps gave the young man’s background and
the story of his life up to his ordination in the Church of England. In
The Parson’s Progress we see him as a priest of the English Church
constantly beset by doubts and difficulties. These are by no means
solved when the third novel of the trilogy, The Heavenly Ladder,
opens; but they find their solution as it ends. Mark, as a convert in
Rome, finds a happiness that Mr. Mackenzie has expressed with the
utmost simplicity and with a restrained but lofty fervor.
With a simplicity different but equally honest, Ralph Connor writes
his novels of men in a newer country. “Imagine,” he said, when
asked to tell briefly about his new book, “a man of vitality and power
who has given and taken heavy blows in the struggle of human life,
who finds himself cornered by forces he cannot subdue. Suddenly
he realizes that his back is against the wall, that no further retreat is
possible. Spiritually, mentally, physically there is a last stand to be
made—a hold on the essentials of life to be groped for and seized. It
is this last stand, this fighting chance that I have made the theme of
Treading the Winepress.” The scenes of the story are laid in Nova
Scotia.

ii
If there is no single preoccupation common to the new fiction of
other authors, readers will be highly content to find thoroughly
characteristic new work by such favorites as Joseph C. Lincoln,
Hugh Walpole, Mary Roberts Rinehart, Arnold Bennett, Bertrand W.
Sinclair, Susan Ertz, Robert Hichens, and Ruth Comfort Mitchell.
Both Joseph C. Lincoln and Hugh Walpole—and different as they
are—seem to me to have surpassed themselves. Mr. Lincoln’s
Rugged Water is not basically different from his other Cape Cod
novels. Perhaps in the loose chronology of his stories it is more
nearly contemporaneous with Cap’n Eri than with his more recent
books. It is a story of a Coast Guard Station in the days when the
Coast Guard was the Life Saving Service. The chief character is
Calvin Homer, Number One man of the crew, brave, honest, and shy
of women. In temporary command of the Station, he does gallant
rescue work which should place him in line for promotion to Keeper
of the Station. But in the same storm, Benoni Bartlett, of a nearby
Station, stands out more conspicuously as the sole survivor of a
brave crew. Benoni is made Keeper over Homer.
These two men, Benoni Bartlett and Homer; Myra Fuller, to whom
Homer became engaged before he quite knew what was happening;
Norma Bartlett, daughter of the former Keeper and the young woman
with whom Homer eventually discovers himself to be in love, are the
main persons of the novel. It is difficult to regard them as Mr.
Lincoln’s real subject, for the life of the Station and the drama of
shipwreck asserts itself constantly in pages that teem with humor
and with other qualities of human nature less easy of superficial
exhibition.
In other words, the largeness of what he is essentially dealing with
has seized upon Mr. Lincoln, and without the sacrifice of his lesser
drama, or any of the picturesqueness that has made him so beloved,
he has caught something of the loneliness of the Station, the whisper
and thunder of the surf, the struggle of men in an “overmatched
littleness” under a black sky in the tempest of waters. To me, these
captures make Rugged Water the best novel he has written.
As for Mr. Walpole in The Old Ladies, my verdict, arrived at on
different grounds, is equally affirmative and emphatic. Here is a short
novel to stand beside Edith Wharton’s Ethan Frome. There is
bleakness as well as sunniness about the story; no haze; no
sentimentality, though sentiment a-plenty and a deep, clear feeling.
Three women, Lucy Amorest, May Beringer, and Agatha Payne, all
seventy, live together in the top of a “rain-bitten” old house in
Polchester. All are very poor. Lucy has a cousin who may leave her
money, and a son in America from whom she has not heard for a
couple of years. May Beringer, close to penury, is a weak, stupid,
kind creature always terrified of life. Agatha Payne is sensual and
strong. There has never, in my knowledge, been a picture more
honest or more terribly pathetic of what old age sometimes means.
Mr. Walpole has not evaded an inch of the truth or the tragedy; and
the measured happiness accorded at last to Lucy Amorest comes
not in the least as a concession toward a “happy ending” but solely
as a reprieve of pity for her—and for the reader also.
The stories in Mary Roberts Rinehart’s Temperamental People
represent her most recent work and have a unity as interesting as
their wide range. Each shows the force of temperament—that quality
in people which makes the drama of life. But who are the
temperamental people? A queen, a cowboy, a famous singer, a wife,
a great sculptor and a business man’s secretary are some of them.
People as diverse as life; but all of them have temperament, and
each story is a revelation of human emotion in action. As one of the
characters says (it is the opening of the story of the sculptor,
“Cynara”): “I suppose once in every creative life there comes the
sublime moment, the consecrated hour when, not from within but
from without there comes the onrush of true greatness.” These
records of that moment and that hour are among the best things Mrs.
Rinehart has done.
The title of Arnold Bennett’s new collection, Elsie and the Child
and Other Stories, should be notice enough to the thousands who
revelled in Riceyman Steps that the new book is one they may not
miss. Yes, it is Elsie, the humble but lovable heroine of Clerkenwell,
who figures again in this volume. It will be remembered that at the
close of Riceyman Steps, Elsie, about to marry Joe, weakly
consented to go to work as a servant for Mrs. Raste, while Joe (it
was arranged) should resume his rôle as Dr. Raste’s handy man.
This was due to the pleading of young Miss Raste; Elsie was never
one to resist children. And so “Elsie and the Child” begins
approximately where Riceyman Steps left off. It is a novelette in
length, a most satisfactory morsel left over from the novel’s feast.
With the very first page the feeling of Riceyman Steps in its more
blissful moments is restored to the reader. The dozen shorter tales in
the book are all from Mr. Bennett’s most recent work.
Bertrand W. Sinclair’s The Inverted Pyramid is work of such
proportions and of a sufficient dignity to take him quite out of the
group of “Western” writers. This is not to rate down the cowboy story,
but it is to recognize that such work as Mr. Sinclair’s is something far
more consequential. The inverted pyramid of the title is the social
structure of a family set up by entailed wealth. Hawk’s Nest, on Big
Dent, just off the coast of Vancouver Island, is the home of the
Norquay family, founded in 1809 by a roving pioneer fur trader who
obtained the immense tract of land from the Indians for a pittance.
He held it intact and it has come down unspoiled to the fifth
generation of Norquays—Dorothy, Roderick, Phil and Grove. Luck
and ability has aggregated a huge fortune from the natural resources
of the estate, which Roderick’s grandfather converted into a
corporation, seventy per cent. of income going to the oldest son, the
rest being divided among the others.
In the fifth generation various destinies open before the three
brothers. Money, in the sense of finance (money plus power); love;
the call of adventure; the quest of romance exert themselves on the
three. The very structure of the family, however, makes it quite
impossible that the destinies of one should not react in an
exceptional degree upon the others. The responsibility for the
maintenance of family standing, financial, social, moral, is
interlocking. The old question: “Am I my brother’s keeper?” was
never asked under a colder compulsion to return an affirmative
answer: yes, because he is a fellow director on the board.
I have said nothing about the daughter, Dorothy, and will only say
that her rôle in the novel is important. It is enough, I think, to indicate
the largeness and the serious character of The Inverted Pyramid,
and to hail it as a sign that Mr. Sinclair will give us other books as
good or even better, to stand with this, his finest so far.
Susan Ertz’s Nina is at once more brilliant and more profound than
her Madame Claire (a novel which sells better today than when it
was first published). Nina is the study of a girl whose love, once
given, cannot be revoked by any act or will of her own. Brought up
by her aunt, Nina Wadsworth falls in love with Morton Caldwell,
adopted as a boy by that same aunt. Morton is extraordinarily
handsome, good-hearted, and hopelessly susceptible to women.
Tony Fielding has the qualities of fidelity and devotion which Morton
lacks. Henri Bouvier, the son of a French family in England, is a
playmate in childhood. Miss Ertz deals directly only with Nina and
Morton after their marriage; what has gone before is cleverly
reflected in the scenes put before the reader. As in Madame Claire, a
delightful feature is the points of view from which the story is told.
Much of it is seen through the eyes of Henri, grown to manhood,
French in his ideas, sophisticated, and almost equally sympathetic
and discreet. His comments, both spoken and unspoken, are
delicious. They do much to enliven a situation at bottom profoundly
tragic by reason of Morton’s limitations as a husband and Nina’s
tenacious love.
The novel is as unusual as it is competent, and the unusualness
springs from the author’s competence. And when I say competence,
I am not thinking only of the writing, which is admirable, but of the
wisdom in human nature which underlies the tale. Every woman will
be charmed with this novel because it is veracious in its feminine
psychology, as most novels by men are not—and as most novels by
women would be if women could avoid sentimentality as cleanly as
Miss Ertz does. Yes, women will be engrossed by Nina because they
will find in it those accents and indications which are their tests of the
reality of men and women in intimate relation to each other,
especially in the relations of love and marriage.
The depths of feminine psychology have been delicately sounded
many times by Robert Hichens, whose new novel, After the Verdict,
is of great length and painstaking detail. Here also we have an
extremely dramatic story. Clive Baratrie, as the story opens, is on
trial for the murder of Mrs. Sabine, a woman older than himself with
whom he had a prolonged affair that began when Clive was a patient
in her nursing home after the war. The young man is engaged to
marry Vivian Denys, a girl of his own age, a splendid, fresh, outdoor
person and one of the best tennis players in England. Miss Denys
has stuck to Clive through his ordeal, and after his acquittal they are
married. Clive’s mother, who lives to see him acquitted and for some
time afterward, is the only other person of first importance in the 500-
odd pages.
Is Clive guilty or innocent? He has been acquitted, true. And if
innocent, of what avail to him? Must not his whole life be lived under
the dark shadow of the crime? Must he not suffer as surely one way
as the other? One goes four-fifths of the way through this novel in a
state of tortured suspense. One does not know what to think as to
Clive’s guilt or innocence, nor is there a definite clue in his uncertain
behavior. The fact, when revealed, stuns by its impact. Mr. Hichens
tells me that he had long had it in mind to study a man resting under
the cloud of a murder charge; but he had another and greater thing
in mind. “I wanted,” he says, “to show that in such a marriage as
Clive’s and Vivian’s an absolute sincerity must exist between the two
people.” But it is the studies of the women in After the Verdict which
will impress and entrance the reader.
SUSAN ERTZ
 Ruth Comfort Mitchell, whose popular novels have been of a light
character, has also been led to a study of a woman capable of
ordering her world and ruling it. The title of her new novel, A White
Stone, is from the second half of the seventeenth verse in the Book
of Revelation: “To him that overcometh will I give to eat of the hidden
manna, and will give him a white stone, and in the stone a new name
written, which no man knoweth saving he that receiveth it.” To Joyce
Evers, the white stone at first was her diamond engagement ring.
Later it is the great rock on the mountain where she takes her woes
for quieting and consolation. It is long before she finds the unseen,
intangible white stone of the mystical passage. A homely little girl,
she had been the center of a marvelous romance when Duval, one
of the world’s great pianists, asked her to marry him. In the chapters
which show the gradual increase in Joyce of that power which is to
be her salvation, Ruth Comfort Mitchell has done much abler work
than in any story of hers before. Two somewhat unusual characters
—Hannah Hills Blade, a novelist, and Chung, a Chinese servant—do
a good deal to differentiate A White Stone from the run of novels.
Chung is picturesque and is an excellent example of a certain fresh
invention which is felt throughout the book. There is a strongly-
written love story.

iii

In an interesting article on the work of Concha Espina,[60] Mr.

James Fletcher Smith speaks of Dulce Nombre as “such a notable
novel that it cried for instant translation.” The translation has been
accomplished and under the title, The Red Beacon, this impressive
story is now available to English readers. (The Spanish title is the
name of the heroine, simply—Dulce Nombre de Maria, Sweet Name
of Mary, which was shortened by use to Sweet Name.)
Who is Concha Espina? The question does us no credit, but our
general lack of information about European writers makes a brief
answer necessary. Concha Espina was born at Santander, Spain, in
1877. She is therefore of the Northern seaboard and the mountain
country. The Red Beacon, for instance, is laid in the Cantabrian
Mountains. Concha Espina’s title to be considered the foremost
living woman novelist of her country seems to be undisputed.
Possibly her two finest works are The Red Beacon and an earlier
novel, La Esfinga Maragata (The Maragatan Sphinx; it was brought
out in English as Mariflor). Although she has lived for some years in
Madrid, Concha Espina remains unmistakably a Northerner. She
married very young and went to South America (Chile) where affairs
went badly and where she began writing as a newspaper
correspondent to earn money.
The Red Beacon is a dramatic and somewhat tragic story of the
people of her native region. Dulce Nombre, the heroine, is the
daughter of a miller and the godchild of an hidalgo or nobleman,
Nicolas Hornedo. Nicolas’s interest serves to educate her above her
own station but not up to his; yet when she falls in love with a
countryman, a lad named Manuel, Nicolas, distressed, aids a rich
man in buying the young fellow off and getting him out of the country.
The rich man, much older than Dulce Nombre, succeeds in getting
her in marriage. His hope is that she will come to love him, but she
does not. The marriage is the beginning of a long ordeal for the girl,
an ordeal of waiting which nothing can hasten nor prevent. The story
proceeds with well-sustained interest to a crisis supervening some
years later, when with her husband’s death Dulce Nombre is again
confronted with a difficult choice and a situation provocative of final
despair. But happiness is in her destiny; Concha Espina shows us
how it is realized at last.
A story written with an intimate knowledge of the heroine and with
great, though restrained, feeling. It will be of more than ordinary
interest to watch its reception by American readers.

NEW AND VARIED FICTION

A Conqueror Passes, by Larry Barretto. An after the war story—
perhaps the best of them all—showing the reactions in business and
social life of the returned soldier, restless, discontented, missing the
excitement and tension of war. Told without either hysterics or
despairing cynicism. A noteworthy book and a first novel by a writer
who deserves close attention.
The Book of Blanche, by Dorothy Richardson. The love story, half
earthly, half spiritual, of a beautiful violinist and a hospital surgeon;
unique for its word pictures of the psychic phenomena of
anæsthesia, and introducing a new American novelist of brilliance.
 Blue Blood, by Owen Johnson. The story of a reckless society girl
who sold herself to save her father’s honor—then waited in
suspense for the order to deliver herself.
Pandora Lifts the Lid, by Christopher Morley and Don Marquis. An
extravagant, light romance which opens with the kidnapping of six
daughters of the rich from a girl’s seminary on Long Island and
continues with a dashing yacht.
Semi-Attached, by Anne Parrish. A more serious novel than A
Pocketful of Poses, but told with the same lively sense of the
humorous moments in life. The story of a delightful girl who had to
be converted to the idea of marriage.
The Show-Off, by William Almon Wolff, from the play by George
Kelly. Aubrey Piper, the show-off, with his wing collar and bow tie,
flower in his button-hole and patent leather shoes, is a character who
will appeal universally because we all know him and laugh at him in
everyday life. A realistic American novel, a satire that is full of humor
and pathos.
Rôles, by Elizabeth Alexander. What happened when a
discontented wealthy young wife changed places with her double, a
hard-working actress—the kind of story one reads at a sitting,
anxious to find out “how it will all come out,” and very much surprised
by the dénouement. Witty.
Deep in the Hearts of Men, by Mary E. Waller. A story of the
deeper human interests, especially of a man’s coming into spiritual
light out of darkness, its scenes laid chiefly in a New Hampshire
manufacturing town and the coal fields of West Virginia.
Tomorrow and Tomorrow, by Stephen McKenna. A novel of
English inner political circles after the war, in which some of the
characters of the author’s famous novel, Sonia, make their final
appearance.
Humdrum House? by Maximilian Foster. An exciting mystery story
with both serious and farcical complications. You won’t, however, for
a considerable time know which is which!
 The Brute, by W. Douglas Newton. A mystery-adventure story of
rapid movement with scenes in South America and a beautiful and
wealthy English girl as the heroine. By a novelist who writes with
more than ordinary skill in characterization.
The Thirteenth Letter, by Natalie Sumner Lincoln. Opens with a
strange midnight marriage followed soon by a mysterious murder,
and centers around the disappearance of a famous diamond worth
$250,000. The author is an experienced hand in stories of this type,
and the final solution depends upon a remarkable cipher.
The Laughing Rider, by Laurie Yorke Erskine. William O’Brien
Argent, otherwise Smiling Billy Argent, is the central figure of this
romantic adventure story which runs from the Texas plains to the
Canadian Northwest.
A City Out of the Sea, by Alfred Stanford. The story of Michael
Ballard, who is a lawyer for the people of New York’s waterfront, and
who is attached to them because he finds them “hard and fair and
wild.” His growth through certain violent episodes until the love of a
beautiful woman matures his personality and power as an artist is
the theme. The novel is the work of a young writer whose work is
stamped with distinction. The story suggests Jack London, but is
written with more finesse if with no less power.
Cuddy of the White Tops, by Earl Chapin May. An exhilarating tale
of a college boy who discovers, on his father’s death, that the family
fortune is all invested in a circus. He quits college and takes charge
of the show—and finds he has a three-ring performance on his
hands. Good love story.
After Harvest, by Charles Fielding Marsh. An English love story of
the wind-swept Norfolk country, contrasting with, but of the same
type as, Sheila Kaye-Smith’s Sussex stories. In Priscilla, John Thirtle
of Brent Fen Farm, and the shepherd, Reuben Gladden, the author
exhibits something common to all humanity and clearly expressed in
the simple lives and deep passions of country folk.
Many Waters, by Elinor Chipp. A love story of present-day New
England which begins when Marian Pritchard, Mark Wetherell, and
Donald Callender are playmates. Marian, however, and Mark as well
have a great ordeal to undergo before achieving mutual happiness.
The Quenchless Light, by Agnes C. Laut. A novel based on the
lives of the Christian Apostles, vividly written, and of the general type
of Sienkiewicz’s Quo Vadis and F. Marion Crawford’s Via Crucis.
Low Bridge and Punk Pungs, by Sam Hellman. Mirth-provoking
stories for bridge fiends and mah-jongg fans by the newest popular
American humorist. With pictures by Tony Sarg.
 11. Cosmo Hamilton’s Unwritten
History
i
Cosmo! He meets ’em one and all,
The Douglas Fairbanks in his hall,
The Lloyd George in his den!
Cosmo! He meets ’em low and high;
He holds ’em with his glittering eye
And draws ’em with his pen.

...

Cosmo! He meets ’em in the flesh!

All his celebrities are fresh!
No has-been like Frank Harris!
He keeps his contacts up to date!
Cosmo! The great and the near-great
From Hollywood to Paris!

—Keith Preston in the Chicago Daily News.

He was the brother to whose early literary success Philip Gibbs

looked up with admiration; while Philip Gibbs grew more and more to
look like an ascetic, “a tired Savonarola,” Cosmo Hamilton (Gibbs)
continued to be impressively good-looking, so that today he is not
infrequently called the handsomest of male authors. And his looks
are no deception, for in ease, urbanity, savoir faire few authors excel
him—perhaps none. He can make an agreeable speech, talk
interestingly, write a play or a novel with dexterity and a finished
effect. It is true that in his lively memoirs, Unwritten History, he has
embedded an occasional groan about the labors of authorship, and
tells of one instance in which an indolent writer was led back to the
paths of virtuous industry. But for all that, in his own case, it has
probably never been as hard work as sometimes it seemed to
himself; while as for anyone else, the association of Cosmo Hamilton
with toil must forever be an act of mental violence.
No! No photograph exists showing him with the dampened towel
binding his brows, the cup of strong black coffee at his lips. It is even
doubtful if, were one produced, any but Sir Arthur Conan Doyle
would accept its authenticity.
The fact that he made a success so young—he was scarcely
twenty-one when his first novel was published—and the fact that this
success was immediately followed by others more marked is, no
doubt, as much responsible as anything. But the feeling that he
managed easily what most men contrive with the most desperate
struggle is not lessened by such words as these of his brother’s:
“Among my literary friends as a young man,” writes Philip Gibbs in
his Adventurers in Journalism,[61] “was, first and foremost—after my
father, who was always inspiring and encouraging—my own brother,
who reached the heights of success (dazzling and marvelous to my
youthful eyes) under the name of Cosmo Hamilton.[62] After various
flights and adventures, including a brief career on the stage, he
wrote a book called Which Is Absurd, and after it had been rejected
by many publishers, placed it on the worst possible terms with Fisher
Unwin. It made an immediate hit, and refused to stop selling. After
that success he went straight on without a check, writing novels,
short stories, and dramatic sketches which established him as a new
humorist, and then, achieving fortune as well as fame, entered the
musical comedy world with ‘The Catch of the Season,’ ‘The Beauty
of Bath,’ and other great successes, which he is still maintaining with
unabated industry and invention. He and I were close ‘pals,’ as we
still remain, and, bad form as it may seem to write about my brother,
I honestly think there are few men who have his prodigality of
imagination, his overflowing storehouse of plots, ideas, and dramatic
situations, his eternal boyishness of heart—which has led him into
many scrapes, given him hard knocks, but never taught him the
caution of age, or moderated his sense of humor—his wildness of
exaggeration, his generous good nature, or the sentiment and
romance which he hides under the laughing mask of a cynic. In
character he and I are poles apart, but I owe him much in the way of
encouragement, and his praise has always been first and
overwhelming when I have made any small success. As a young
man I used to think him the handsomest fellow in England, and I
fancy I was not far wrong.”
COSMO HAMILTON
 Photograph by Lewis Smith, Chicago.

ii
When Cosmo Hamilton was eighteen, he hid himself in Dieppe,
France, for a month. It was necessary to convince his family, and
most particularly his father, that he meant to write and could make
some kind of figure at writing. There, in the Hotel of the Chariot of