Ethan Frome

Revised October 2002

SAM HOUSTON STATE UNIVERSITY

Huntsville, Texas

Correspondence Course Instruction

Economics 230 ‑‑ Introduction to Economics

A Survey of Macro and Micro Economic Theory and Policy

TEXTBOOK: McConnell, Campbell R. and Stanley L. Brue, Economics: Principles, Problems and Policies

(15^th edition), McGraw‑Hill Inc., 2002, ISBN: 0-07-234036-3

GRADER: Dr. Donald Bumpass

Department of Economics & International Business

Smith-Hutson Building

ROOM #210H

Phone 936 294 1268

Fax 936 294 3488

Note: The final examination is a comprehensive examination and will count

a minimum of 75 percent toward the course letter grade.

A schedule of numerical grades and their equivalent letter

grades is contained in this document.

Department of Economics and International Business

Correspondence Division

ECONOMICS 230: INTRODUCTION TO ECONOMICS

Credit Hours: This course is a three (3) hour course.

Textbook: McConnell, Campbell R. and Stanley L. Brue, Economics: Principles, Problems, and Policies (15th

edition), 2002 McGraw‑Hill Inc, ISBN: 0-07-234036-3.

NOTE: This textbook should be the hardcover edition of the book, not the paperback "split".

The split edition DOES NOT contain all of the chapters necessary for this correspondence course.

COURSE OBJECTIVES

To understand the following economic areas:

1. The nature and method of economics;

2. The workings of a modern market economy (microeconomics);

3. The concept, measurement, and behavior of national income (macroeconomics); and

4. The process of economic growth.

DESCRIPTION OF THIS CORRESPONDENCE COURSE

The course is composed of twelve (12) lessons and a final examination to be completed by the student.

The lessons may be answered in handwriting or the answers may be typed. Name, course number, lesson number, and page number of the lesson will appear at the top, right corner of each page of the document that the student turns in for grading.

SUGGESTIONS FOR PROFICIENT LESSON PREPARATION

Above all, the lessons that a student submits for grading should be written in clear, legible, standard English. Question answers are to be concise and complete, reflecting the information and the analysis from the textbook. Answers should not be in the same verbiage used by the textbook author. Students will better retain the information and analysis if answers are composed in the student's "own words”.

In the answers to many of these economic lesson questions, diagrams and graphs are encouraged.

Always remember to label the axis and to explain the schedules on the diagrams.

The length and scope of the student's answer should coincide with the amount of emphasis and attention that is given to the issue in the textbook.

Many lesson questions have two or more parts. The student should make certain that all parts of the question are answered.

LESSON AND COURSE GRADING

At the beginning of each lesson the grade weight per question will be shown (each question worth 10 points, for example). Each separate lesson and the final examination will have a maximum value of 100 points.

The total maximum value of the 12 lessons will be 1200 points. The final examination will have a maximum value of 100 points.

The final examination grade counts for 75 percent of the course letter grade. The final letter grade for the course is assigned according to the schedule below:

100 to 90 = A

89 to 80 = B

79 to 70 = C

69 to 60 = D

Below 59 = F

FINAL EXAMINATION

The final examination is made up of 30 multiple choice (one [1] point each) and ten (10) questions to be answered by written essay. From the ten (10) essay questions, the student will choose seven (7) questions to answer. Each essay will have a maximum value of ten (10) points. The final examination has a maximum score of 100 points and is 75 percent of the course grade.

On the final examination, write the multiple choice question answers in the margin to the immediate left of the question. Print the letter that corresponds to the single best answer. Then answer the seven (7) essay questions. These instructions will be repeated on the final examination.

The student is urged to keep the returned graded lessons and to study those lesson answers in preparation

for the final examination. The student's final examination performance must show sufficient

mastery over the course topics.

COURSE OUTLINE

Economics 230

LESSON NUMBER CHAPTERS ECONOMIC TOPIC

PART I INTRODUCTORY TOPICS

1 1, 2 The Nature and Method of Economics

and The Economizing Problem

2 3,4,5,6 Pure Capitalism and Circular Flow

and Demand and Supply

PART II MACROECONOMICS: A STUDY OF THE NATIONAL ECONOMY

3 7, 8 Measuring Domestic Output and GDP

and Economic Growth

4 10, 11 Aggregate Demand and Supply Agregate Demand and Supply, Fiscal Policy

5 13, 15 Money and Banking, Monetary Policy

6 17, 18 Economic Growth, New Economy

PART III MICROECONOMICS: A STUDY OF THE CONSUMER AND BUSINESS FIRM

7 20 Demand and Supply; Elasticity

8 22 Costs of Production

9 23, 24, 25 Market Structure

10 27, 28 Demand for Labor Resources

11 30, 34 Market Failure, Income Equality

12 37, 38, 39 The Foreign Sector

Please write your name, course number, lesson number, and lesson page number

in the upper right corner of all the pages of your lesson answers.

ECONOMICS 230

LESSON 1

The Nature and Method of Economics and the Economizing Problem

PART I INTRODUCTION

Text Reference: Chapter 1-The Nature and Method of Economics

Chapter 2-The Economizing Problem

Objective: To introduce the discipline of economics and its methodology.

Lesson 1 Essay Questions: (12.5 points each)

1. Write a formal definition of economics. Distinguish between the terms "macroeconomics"

and "microeconomics”.

2. Explain the difference between positive and normative economic statements.

Give an example of a positive economic statement and an example of a normative statement.

3. What is the "scientific method”? Can the scientific method be used in economics?

Is there any limiting factor to the use of scientific method in economics?

4. What are the economic goals of economic policy in most of the developed economies of the world?

5. Specify and explain the shapes of the marginal benefit and marginal cost curves. If current output Is

such that marginal benefits (MB) exceed marginal costs (MC), should more or fewer resources be

allocated? Why?

6. Discuss the purpose of graphic analysis in economics.

What does a line look like on a graph representing two variables that are directly related?

Show a line representing two variables that are inversely related.

7. Draw and explain the "production possibilities curve". Discuss two (2) economic concepts that can be

illustrated using a production possibilities curve.

8. What is the difference between national economies organized and regulated by a market system

and economies that use a “command-type” (or planning) system?

ECONOMICS 230

LESSON 2

Market Systems, Circular Flow, Demand, and Supply

Text Reference: Chapter 3-Individual Markets

Chapter 4-The Market System

Chapter 5-The U.S. Economy

Chapter 6-The United States in the Global Economy

Objective: To learn about the economic institutions that characterize capitalist economic systems and to discover the technical features of demand and supply.

Lesson 2 Essay Questions: (12.5 points each)

1. With reference to Chapter 3, draw and explain the demand and supply model.

Refer to Key Graph 3‑5 on page 51.

2. What happens when demand increases? What happens when supply increases?

What happens when both demand and supply increase (be careful)?

3. Describe how the United States (a market-oriented economy) answers the four (4) fundamental

questions.

4. What are the three (3) legal forms of business organization? Briefly state the advantages

and disadvantages of each.

5. Describe the most important sources of revenue at the federal, state, and local levels.

What are the most important spending activities at each of these levels?

6. Draw and explain the circular flow model as it is used in Figure 5-6, page 84.

7. What factors account for the rapid growth in world trade since World War II?

8. Describe each of the following:

a. WTO

b. NAFTA

c. GATT

ECONOMICS 230

LESSON 3

National Income, Employment, and Economic Instability

PART II MACROECONOMICS

Text Reference: Chapter 7-Measuring Domestic Output, National Income, and the Price Level

Chapter 8-Economic Growth

Objective: To understand the current methods of measuring the level of and changes in economic activity;

to understand the economic stability problems of unemployment, inflation, and business cycles.

Lesson 3 Essay Questions: (16 2/3 points each)

1. What is the purpose of the National Income and Expenditure accounts? Distinguish between gross private domestic investment and net private domestic investment.

2. Explain the income and the expenditure approach to the measurement of GDP for the United States.

What is the difference between "real GDP" and "money GDP”?

3. Define the term "business cycle”.

Draw a diagram of a business cycle showing output (vertical axis) and time (horizontal axis).

Include on the graph the events called peak, downturn, trough, and recovery.

What are examples of “leading indicators”?

4. What are the causes of labor unemployment?

What are the economic costs of unemployment of resources? Define the term "full employment”.

5. Define “inflation” and “deflation”. What are the economic costs of inflation?

What do changes in the money supply have to do with inflation or deflation?

6. Why is economic growth important?

ECONOMICS 230

LESSON 4

Theories of National Employment

Text Reference: Chapter 11-Aggregate Demand and Aggregate Supply

Chapter 12-Fiscal Policy

Objective: To understand the framework of macroeconomics: Aggregate Demand and Aggregate Supply.

To understand government’s role in developing policies for economic stabilization.

Lesson 4 Essay Questions: (16 2/3 points each)

1. Why is the aggregate demand curve down sloping?

2. Explain the shape of the aggregate supply curve (be sure to account for the horizontal, intermediate, and

vertical ranges of the curve).

3. Use shifts in the aggregate demand (AD) and aggregate supply (AS) curves to explain the U.S. experience of strong economic growth.

4. Why is unemployment in Europe so high?

5. What is the central trust of the Employment Act of 1946?

6. Describe the following concepts:

a. progressive tax system

b. cyclical deficit

c. built-in stabilizers

ECONOMICS 230

LESSON 5

Money and Banking, Monetary Policy

PART II MACROECONOMICS

Text Reference: Chapter 13-Money and Banking

Chapter 15-Monetary Policy

Objective: To understand the functions of money, the structure of the financial system, and the creation of deposits and checking account money.

Lesson 5 Essay Questions: (12 1/2 points each)

1. Define and illustrate the functions of money.

2. What determines the demand for money?

(Hint: Money here is defined as currency and checking account balances, generally known as M1).

3. Describe the financial system in the United States.

4. What is a "balance sheet”? For a commercial bank, what constitutes a bank’s assets and liabilities?

5. Describe the underlying issue covered in the “Last Word” on page 261.

6. Discuss three (3) major tools of monetary policy.

7. What is the basic objective of monetary policy?

8. Discuss the following concepts:

a. easy money policy

b. Federal fund rate

ECONOMICS 230

LESSON 6

Economic Growth, Deficits, and Public Debt

PART II MACROECONOMICS

Text Reference: Chapter 17-Economic Growth and the New Economy

Chapter 18-Deficit, Surpluses and the Public Debt

Objective: To understand the factors that expand an economy’s production capacity over time.

To understand the issues regarding the financing of government.

Lesson 7 Essay Questions: (14 2/7 points each)

1. Why is economic growth important?

2. Explain why a difference between a 2.5 percent (%) and a 3.0 percent (%) annual growth rate

might be important over many years.

3. What are the four supply factors of economic growth?

4. Briefly describe the growth record of the United States. Please use Figure 17-1 in your answer.

5. Discuss the estimates of the relative contribution of these various factors to the U.S. economic growth

from 1929 to 2000.

6. How do you explain the close correlation between changes in the rate of labor productivity growth and

changes in real wages?

7. What are the three major sources of public debt? Why did the federal deficit rise sharply in 1991 to 1993?