Welcome to the seventeenth edition of Economics and the companion editions, Macroeconomics and Microeconomics, the best-selling economics textbook in the world. An estimated 13 million students worldwide have now used this book. Economics has been adapted into Australian and Canadian editions and translated into Italian, Russian, Chinese, French, Spanish, Portuguese, and other languages. We are pleased that Economics continues to meet the market test: nearly one-out-of-four students in principles courses used the sixteenth edition.

A Note about the Cover

The seventeenth edition cover includes a photograph of a staircase in the Musée des Beaux-Arts in Nancy, France. The photo is a metaphor for the step-by-step approach that we use to present basic economic principles. It also represents the simplicity, beauty, and power of basic economic models. Our goal is to entice the student to walk up the staircase. The floors above contain hundreds of years of accumulated economic knowledge, a portion of which we have captured here for you.

Fundamental Objectives

We have three main goals for Economics:

• Help the beginning student master the principles essential for understanding the economizing problem, specific economic issues, and the policy alternatives.
• Help the student understand and apply the economic perspective and reason accurately and objectively about economic matters.
• Promote a lasting student interest in economics and the economy.

What's New and Improved?

One of the benefits of writing a successful text is the opportunity to revise—to delete the outdated and install the new, to rewrite misleading or ambiguous statements, to introduce more relevant illustrations, to improve the organizational structure, and to enhance the learning aids. A chapter-by-chapter list of changes is available at our website, www.mcconnell17.com. The more significant changes include the following.

New Analysis of Monetary Policy
We have revised the discussion of monetary policy to help the student understand the Federal Reserve Board's focus on the Federal funds rate, and how changes in that rate affect other interest rates and the overall economy. In “Interest Rates and Monetary Policy” (Chapter 14), we demonstrate how the Fed targets a specific federal funds rate and then uses open-market operations to drive the rate to that level and hold it there (see Figure 14.3). This new analysis will help students interpret the news as it relates to Fed announcements about the Federal funds rates.

Chapter-Level Learning Objectives
Several learning objectives have been included on the first page of each chapter. After reading a chapter, students should have mastered these core concepts. Questions in Test Banks I and II are organized according to these learning objectives.

Worked Problems
We continue to integrate the book and our website with in-text web buttons that direct readers to website content. Specifically, we have added a third web button consisting of a set of 50 worked problems. Written by Norris Peterson of Pacific Lutheran University, these pieces consist of side-by-side computational questions and the computational procedures used to derive the answers. In essence, they extend the textbook's explanations involving computations—for example, of real GDP, real GDP per capita, the unemployment rate, the inflation rate, per-unit production costs, economic profit, and more. From a student perspective, they provide “cookbook” help for problem solving.

This new content joins two carryover web buttons from the prior edition. “Interactive Graphs” (developed under the supervision of Norris Peterson) depict over 30 major graphs and instruct students to shift the curves, observe the outcomes, and derive relevant generalizations. “Origins of the Idea” are brief histories (written by Randy Grant of Linfield College ) of 70 major ideas identified in the book. Students find it interesting to learn about the economists who first developed ideas such as opportunity costs, equilibrium price, the multiplier, comparative advantage, and elasticity.

Two New Internet Chapters
Two new Internet chapters, along with an existing web chapter, are available for free use at our website, www.mcconnell17.com. The first of these, “Financial Economics” (Chapter 14Web), examines ideas such as compound interest, present value, arbitrage, risk, diversification, and the risk-return relationship. The second new chapter, “Resource and Energy Economics” (Chapter 27Web) is particularly timely. It covers topics such as the optimal rate of extraction, resource substitution, resource sustainability, oil prices, and alternative energy sources.

The two new Internet chapters were written by Sean Flynn. Sean is an important new member of the McConnell and Brue author team. He did his undergraduate work at USC, obtained his PhD from the University of California-Berkeley (2002), and teaches at Vassar College. He is the author of the best-selling Economics for Dummies. We are very excited to have Sean on the authorship team, since he shares our desire to present economics in a way that is understandable to all.

The third Internet chapter, “The Economics of Developing Countries” (16Web), is updated and available for instructors and students who have a special interest in that topic. Developing economies are often in the news and many college students have a keen interest in them.

The three web chapters have the same design, color, and features as regular book chapters, are readable in Adobe Acrobat format, and can be printed if desired. All are supported by the Study Guide,Test Banks, and other supplements to the book.

Consolidated Chapters
With overwhelming support of reviewers, we have consolidated the first two chapters of the prior edition into a single chapter, “Limits, Alternatives, and Choices” (Chapter 1). This new chapter quickly and directly moves the student into the subject matter of economics, demonstrating its methodology. This consolidation has the side-benefit of reducing Part I (the common chapters in Economics,Macroeconomics, and Microeconomics ) from six chapters to five.

We also combined the prior edition's separate chapters on fiscal policy and the public debt into a single chapter, “Fiscal Policy, Deficits, and Debt” (Chapter 11). The topics are closely related, and consolidation integrates them smoothly.

Consumer Surplus, Producer Surplus, and Deadweight Loss Analysis
Our previous chapter on elasticity is now “Extensions of Demand and Supply Analysis” (Chapter 18). Along with elasticity, this chapter introduces consumer surplus, producer surplus, and deadweight loss. These topics appear again in the pure competition and pure monopoly chapters. Knowing that some instructors do not want to cover deadweight loss analysis, we have taken care to present the ideas in a way that will enable instructors to skip these insertions.

New and Relocated “Consider This” and “Last Word” Boxes
Our “Consider This” boxes are used to provide analogies, examples, or stories that help drive home central economic ideas in a student-oriented, real-world manner. For instance, the idea of trade secrets is described with the story of “cat gut” and violin strings, while McDonald's “McHits” and “McMisses” demonstrate the idea of consumer soveriegnty. These brief vignettes, each accompanied by a photo, illustrate key points in a lively, colorful, and easy-to-remember way.

New “Consider This” boxes includes such disparate topics as fast food lines (Chapter 1), the economics of war (Chapter 1), “buying American” (Chapter 2), ticket scalping (Chapter 3), salsa and coffee beans (Chapter 3), unprincipled agents (Chapter 4), a CPA and a house painter (Chapter 5), high European unemployment rates (Chapter 7), the Fed as a sponge (Chapter 14), returns on ethical investing (Chapter 14Web), women and economic growth (Chapter 16), waste-to-oil conversion methods (Chapter 27Web), art for art's sake (Chapter 28), and the hedging of risk in agriculture (Chapter 31).

Our “Last Word” pieces are lengthier applications and case studies located toward the end of each chapter. In this edition, we have included photos to pique student interest. New and relocated Last Words include those on pitfalls to sound economic reasoning (Chapter 1), a market for human organs (Chapter 3), the long-run problem of financing Social Security (Chapter 4), the diminishing impact of oil prices on the overall economy (Chapter 10), the relative performance of index funds versus actively managed funds (Chapter 14Web), a supply-side anecdote on who gets tax cuts (Chapter 15), economic growth in China (Chapter 16), efficiency gains from entry (Chapter 21), and mandatory health insurance (Chapter 33).

Contemporary Discussions and Examples
The seventeenth edition rerferences and discusses many current topics. Examples include the economics of the war in Iraq, China's rapid growth rate, large Federal budget deficits, the Doha Round, recent Fed monetary policy, the debate over inflation targeting, the productivity acceleration, the recent profit paths of Wal-Mart and General Motors, rapidly expanding and disappearing U.S. jobs, rising oil prices, recent antitrust actions, farm subsidy programs, welfare caseloads, prescription drug coverage under Medicare, Health Savings Accounts (HSAs), immigration impacts, large U.S. trade deficits, offshoring of American jobs, and many more.

Distinguishing Features

Comprehensive Explanations at an Appropriate Level
Economics is comprehensive, analytical, and challenging yet fully accessible to a wide range of students. The thoroughness and accessibility enable instructors to select topics for special classroom emphasis with confidence that students can read and comprehend other independently assigned material in the book. Where needed, an extra sentence of explanation is provided. Brevity at the expense of clarity is false economy.

Fundamentals of the Market System
Many economies throughout the world are making difficult transitions from planning to markets. Our detailed description of the institutions and operation of the market system in Chapter 2 is even more relevant than before. We pay particular attention to property rights, entrepreneurship, freedom of enterprise and choice, competition, and the role of profits because these concepts are often misunderstood by beginning students.

Early and Full Integration of International Economics
We give the principles and institutions of the global economy early treatment. Chapter 5 examines the growth of world trade and its major participants, specialization and comparative advantage, the foreign exchange market, tariffs and subsidies, and various trade agreements. This strong introduction to international economics permits “globalization” of later discussions in both the macro and the micro chapters. Then, we delve into the more difficult, graphical analysis of international trade and finance in the Chapters 35 and 36.

Early and Extensive Treatment of Government
Government is an integral component of modern capitalism. This book introduces the economic functions of government early and accords them systematic treatment in Chapter 4. Chapter 28 examines government and market failure in further detail, and Chapter 29 looks at salient facets of public choice theory and taxation. Both the macro and the micro sections of the text include issue- and policy-oriented chapters.

Step-by-Step, Two-Path Macro
We systematically present macroeconomics by:

• Examining the National Income and Product Accounts and previewing economic growth, unemployment, and inflation
• Discussing three key macro relationships
• Presenting the aggregate expenditures model (AE model) in a single chapter
• Developing the aggregate demand–aggregate supply model (AD-AS model)
• Using the AD-AS model to discuss fiscal policy
• Introducing monetary considerations into the AD-AS model
• Using the AD-AS model to discuss monetary policy
• Extending the AD-AS model to include both short-run and long-run aggregate supply
• Applying the “extended AD-AS model” to macroeconomic instability, economic growth, and disagreements on macro theory and policy.

We have organized Chapters 8, 9, and 10 to provide two alternative paths through macro. We know that nearly all instructors like to cover somewhere in their macro course the basic relationships between income and consumption, the real interest rate and investment, and changes in spending and changes in output (the multiplier, conceptually presented).  All of these topics are found in Chapter 8, “Basic Macroeconomic Relationships.” The instructor can proceed from Chapter 8 directly to either Chapter 9 “The Aggregate Expenditures Model” or Chapter 10, “Aggregate Demand and Aggregate Supply.” This organization allows those instructors who prefer not to teach the equilibrium AE model to skip it without loss of continuity. As before, the remainder of the macro is AD-AS based.

Emphasis on Technological Change and Economic Growth
This edition continues to emphasize economic growth. Chapter 1 uses the production possibilities curve to show the basic ingredients of growth. Chapter 7 explains how growth is measured and presents the facts of growth. Chapter 16 discusses the causes of growth, looks at productivity growth, and addresses some controversies surrounding economic growth. Chapter 7's Last Word examines the rapid economic growth in China. Chapter 16Web focuses on developing countries and the growth obstacles they confront. Chapter 24 provides an explicit and cohesive discussion of the microeconomics of technological advance, including topics such as invention, innovation, and diffusion; start-up firms; R&D decision making; market structure and R&D effort; and creative destruction.

Stress on the Theory of the Firm
We have given much attention to microeconomics in general and to the theory of the firm in particular, for two reasons. First, the concepts of microeconomics are difficult for most beginning students; abbreviated expositions usually compound these difficulties by raising more questions than they answer. Second, we wanted to couple analysis of the various market structures with a discussion of the impact of each market arrangement on price, output levels, resource allocation, and the rate of technological advance.

Focus on Economic Policy and Issues
For many students, the macro chapters on fiscal policy, monetary policy, and public debt and the micro chapters on antitrust, agriculture, income inequality, labor issues, and health care are where the action is centered. We guide that action along logical lines through the application of appropriate analytical tools. In the micro, we favor inclusiveness; instructors can effectively choose two or three chapters from Part 9.

Integrated Text and Website
Economics and its website are highly integrated through in-text web buttons, web-based end-of-chapter questions, bonus web chapters, multiple-choice self-tests at the website, online newspaper articles, math notes, and other features. Our website is part and parcel of our student learning package, customized to the book.

Organizational Alternatives

Although instructors generally agree as to the content of principles of economics courses, they sometimes differ as to how to arrange the material. Economics includes 10 parts, and thus provides considerable organizational flexibility. We chose to move from macroeconomics to microeconomics because that is the course sequence at the majority of colleges and universities. The introductory material of Part 1, however, can be followed immediately by the microanalysis of Parts 6 and 7. Similarly, the two-path macro enables covering the full aggregate expenditures model or advancing directly from the basic macro relationships chapter to the AD-AS model.

Some instructors will prefer to intersperse the microeconomics of Parts 6 to 8 with the problems chapters of Part 9. Chapter 31 on agriculture may follow Chapter 21 on pure competition; Chapter 30 on antitrust and regulation may follow Chapters 22 through 24 on imperfect competition models and technological advance. Chapter 34 on labor market issues (unions, discrimination, and immigration) may follow Chapter 26 on wages; and Chapter 32 on income inequality may follow Chapters 26 and 27 on distributive shares of national income.

Instructors who teach the typical two-semester course and feel comfortable with the book's organization will find that, by putting Parts 1 to 5 in the first semester and Parts 6 to 10 in the second, the material is divided logically between the two semesters. For those instructors who choose to emphasize international economics, Parts 1 to 5 and 10 may be treated the first semester, and Parts 6 to 9 during the second.

Pedagogical Aids

Economics is highly student-oriented. The “To the Student” statement at the beginning of Part 1 details the book's many pedagogical aids. The seventeenth edition is also accompanied by a variety of high-quality supplements that help students master the subject and help instructors implement customized courses.

Supplements for Students and Instructors

Study Guide
One of the world's leading experts on economic education, William Walstad of the University of Nebraska-Lincoln, has prepared the seventeenth edition of the Study Guide. Many students find the Study Guide indispensable. Each chapter contains an introductory statement, a checklist of behavioral objectives, an outline, a list of important terms, fill-in questions, problems and projects, objective questions, and discussion questions.

The Guide comprises a superb “portable tutor” for the principles student. Separate Study Guides are available for the macro and micro paperback editions of the text.

McGraw-Hill's Homework Manager Plus™
Homework Manager is a Web-based supplement that duplicates problem sets directly from the end-of-chapter material in your textbook. Using algorithms to provide a limitless supply of online self-graded assignments and graphing exercises, Homework Manager can be used for practice, homework, and testing.

All assignments can be delivered over the Web and are graded automatically. Instructors can see all of the results stored in a private grade book. Detailed results let you see at a glance how each student does on an assignment or an individual problem. Homework Manager Plus is an extension of McGraw-Hill's popular Homework Manager System. With Homework Manager Plus you get all of the power of Homework Manager with an integrated online version of the text. Students receive one single access code which provides access to all of the resources available through Homework Manager Plus.

Homework Manager Plus is a complete online homework solution, offering online graphing exercises, practice tests correlated with the key Learning Objectives, and full integration for Blackboard and WebCT courses.

Aplia (www.aplia.com/mhhe)
McGraw-Hill/Irwin and Aplia are working together to bring you high quality content and graphing tools in economics.

Aplia provides:

• High quality problem sets
• Detailed news analyses with exercises
• Math tutorials with testing
• Online synchronous experiments

Aplia will help increase student effort and enhance greater understanding and success in the course. This new partnership enables the bundling of Aplia with McGraw-Hill economics textbooks, including the comprehensive Principles texts, one-semester splits, and the Essentials books. An integrated eBook version of the text is included when access to Aplia is purchased as part of a McGraw-Hill package. New Value Editions are also available directly from Aplia, which include a one color version of the complete text accompanied by full access to the Aplia application. The interactive tools and engaging materials are highly correlated to match the language and style of each McGraw-Hill book. Easy to use and setup, these new package options provide professors with even more flexibility and purchasing solutions for their students. To learn more about the McGraw-Hill/Aplia partnership, please visit www.aplia.com.

Online Learning Center (www.mcconnell17.com)
The website accompanying this book contains a host of features. For example, three kinds of highly visible “Web buttons” in the text alert students to points in the book where they can springboard to the website to get more information. Students can test their knowledge of a chapter's concepts with three self-graded multiple-choice quizzes per chapter. The “See the Math” section, written by Professor Norris Peterson, enables students to explore the mathematical details of the concepts in the text. Students can also access the Solman Videos, a set of over 250 minutes of video covering key concepts from the McConnell and Brue text. Created by Paul Solman of The News Hour with Jim Lehrer, the videos cover core economic concepts such as elasticity, deregulation, and perfect competition.

New to the seventeenth edition site:

• Narrated PowerPoint Presentations. Students can view these slides on the site or download the material to their video iPod. The PowerPoints are correlated to the key Learning Objectives for every chapter. (Premuim Content)
• The Solman Videos can also be downloaded to a video iPod or mp3 player. (Premium Content)
• Standard PowerPoint Presentations, answers to Web-Based questions, and self-grading tests—all specific to Economics.
• Three optional web chapters covering “Financial Economics”, “Resource and Energy Economics” and “The Economics of Developing Countries.”

Zinio eBook (www.textbooks.zinio.com)
Experience the speed, convenience, affordability and intelligence of Zinio eBooks. Digital textbooks are exact replicas of the print version, and better. They are easy to navigate, allowing you to flip back and forth between pages, with continual access to the Table of Contents with a tool bar button to jump directly to a chapter, topic, or page of interest. The Smart Zoom button allows you to easily zoom in and out, taking full advantage of crisp text and high resolution diagrams and images. Rich media offers an experience beyond simply reading, with flash, video, and audio. Embedded web links also allow you to learn more about topics of interest and when finished, you are returned to exactly where you were in the book. Find relevant information quickly and easily with the Search function that allows you get information on specific topics, phrases, and key words. You can write electronic notes with the Zinio annotation tool as well as highlight important topics. You can also print sections in high resolution and full color. Digital textbooks will become part of your lifestyle! The Zinio reader automatically saves your textbook in your own personal library on your computer. Textbooks can be easily referenced at any time, anywhere. To learn more or to download a free sample, visit www.textbooks.zinio.com.

iPod Content
Harness the power of one of the most popular technology tools students use today–the Apple iPod. Our innovative approach enables students to download audio and video presentations right into their iPod and take learning materials with them wherever they go. This makes review and study time as easy as putting on headphones. Visit www.mcconnell17.com to learn more details on available iPod content–and enhance your learning experience today. (Premium Content)

McGraw-Hill PrepCenter™
The innovative McGraw-Hill PrepCenter™ offers a dynamic web-based solution for managing all of the digital assets that accompany the McConnell and Brue textbook. The PrepCenter serves as a digital locker for your course materials, enabling you to consolidate the resources you need into readily accessible folders that are hosted in a secure and easy to use online environment. To learn more about McGraw-Hill's PrepCenter™ please visit http://prepcenter.mhhe.com/.

McGraw-Hill's Enhanced Cartridges ™
Enhanced WebCT and Balckboard course cartridges allow instructors to manage their course and administer online examinations. Some of the new features of McGraw-Hill's Study Space include:

• Pre-Test and Post-Test question banks: administer comprehensive and chapter specific pre and post tests to evaluate student understanding. Pre and Post-Test questions are tied to the chapter learning objectives and AACSB guidelines.
• Question feedback: answer feedback directs students back to the text for concept review. Feedback comments are linked to the Narrated PowerPoint presentations by Learning Objective.
• Administer tests and quizzes online: you decide how students are tested. Select the questions, time limit, and feedback options.
• Narrated PowerPoint Presentations. Students can view these slides on the site or download the material to their video iPod. The PowerPoints are correlated to the key Learning Objectives for every chapter.
• The Solman Videos can also be downloaded to a video iPod or mp3 player.
• Flashcards enhance practice and preparation.

Instructor's Manual
Randy Grant of Linfield College has revised and updated the Instructor's Resource Manual.

The revised IM includes:

• Chapter summaries
• Listings of “what's new” in each chapter
• Teaching tips and suggestions
• Learning objectives
• Chapter outlines
• Data and visual aid sources with suggestions for classroom use
• Extra questions and problems
• End-of-chapter correlation guides mapping content to the learning objectives and important AACSB standards.

The Instructor's Manual is available in hard copy, or in electronic format on the Instructor's Resource CD-ROM as well as the Instructor's Side of the Online Learning Center.

Instructor's Resource CD-ROM
This CD contains everything the instructor needs, including PowerPoint slides, all of the charts and figures from the text, Test Banks I and III, and the Instructor's Manual.

Three Test Banks
Test Bank I contains about 6300 multiple-choice and true-false questions, most of which were written by the text authors. Instructor's Manual author Randy Grant has revised Test Bank I for the 17 th edition. Test Bank II also contains around 6300 multiple-choice and true-false questions, written by William Walstad. All Test Bank I and II questions are organized by Learning Objective, type, level of difficulty, relevant text page number, and general AACSB classifications. Test Bank III contains more than 600 pages of short-answer questions and problems created in the style of the book's end-of-chapter questions. Test Bank III can be used to construct student assignments or design essay and problem exams. Suggested answers to the essay and problem questions are included. In all, more than 12,500 questions give instructors maximum testing flexibility while ensuring the fullest possible text correlation.

Test Banks I and II are available in computerized EZ Test versions, as well as in MS Word. EZ Test allows professors to create multiple versions of the same test by scrambling questions and answer choices. The EZ Test software will meet the various needs of the widest spectrum of computer users. Test Bank III is available in printed and MS Word formats.

Classroom Performance Systems by eInstruction
This is a revolutionary system that brings ultimate interactivity to the classroom. CPS is a wireless response system that gives you immediate feedback from every student in the class. CPS units include easy-to-use software for creating and delivering questions and assessments to your class. With CPS you can ask subjective and objective questions. Then every student responds with their individual, wireless response pad, providing instant results. CPS is the perfect tool for engaging students while gathering important assessment data.

• Instructor's can access eInstruction questions in two formats — CPS and PowerPoint. Motivate student preparation, interactivity, and active learning with these lecture-formatted questions.

Color Transparencies
There are more than 200 new full-color transparencies for the seventeenth edition. They encompass all the figures appearing in Economics. Additionally, the figures and tables from the text are found on the Instructor's Resource CD-ROM.