The Second Edition of Frank/Bernanke continues to offer students and instructors the strengths that made the First Edition a success.

• An Emphasis on Core Principles: A few core principles do most of the work in economics. By focusing on these principles, the text assures that students leave the course with a deep mastery of them. In contrast, traditional encyclopedic texts so overwhelm students with detail that they often leave the course with little useful working knowledge at all.
• Economic Naturalism Introduced in Micro: Bob Frank and Ben Bernanke's ultimate goal is to produce "economic naturalists" -people who see each human action as the result of an implicit or explicit cost-benefit calculation. The economic naturalist sees mundane details of ordinary existence in a new light and becomes actively engaged in the attempt to understand them.

• Why don't auto manufacturers make cars without heaters?
• Why are whales, but not chickens, threatened with extinction?
• Why do movie theaters give student discounts on the price of admission but not on the price of popcorn?

• Economic Naturalism Expanded in Macro: This feature, arguably more applied in nature in macroeconomics, still involves an explicit or implicit cost-benefit calculation. In macro the economic naturalist might ask the following:

• Why was the U. S. able to experience rapid growth and low inflation? in the latter part of the 1990s?
• What caused the 2001 recession in the United States?
• How did the Fed react to recession and the terror attacks in 2001?

• Active Learning Stressed: The only way to lean to hit an overhead smash in tennis or to speak a foreign language is through repeated practice. The same is true for learning economics. Thus, the authors consistently introduce new ideas in the context of simple examples and then follow them with applications showing how they work in familiar settings. And frequently, the text poses exercises that both test and reinforce the understanding of these ideas. The end-of-chapter questions and problems are carefully crafted to help students internalize and extend core concepts. Students are prepared to apply the important concepts to solve "economic riddles" drawn from the real world.
• Well-Known Authors: Robert Frank and Ben Bernanke are renowned experts in their fields (micro and macro, respectively). Frank's research has looked at rivalry and cooperation in economic and social behavior. He is the author of a best-selling intermediate economics text, Microeconomics and Behavior, (McGraw-Hill/Irwin), and has published such award-winning books as The Winner-Take-All-Society and Luxury Fever. Bernanke is the co-author of a best-selling intermediate macroeconomics text and has done significant research on the causes of the Great Depression, the role of financial markets and institutions in the business cycle, and measuring the effects of monetary policy on the economy. He was just appointed to the Federal Reserve Board of Governors under Alan Greenspan.
• Modern Microeconomics: Economic surplus, introduced in Chapter 1 and applied repeatedly thereafter, is more fully developed here than in any other text. This concept underlies the argument for economic efficiency as an important social goal. Rather than speak of tradeoffs between efficiency and other goals, the authors stress that maximizing economic surplus facilitates the achievement of all goals. The tendency to ignore opportunity costs, the tendency not to ignore sunk costs, and the tendency to confuse average and marginal costs and benefits-common decision pitfalls, identified by 2002 Nobel Laureate Daniel Kahneman and others-are introduced early in Chapter 1. The book devotes a chapter to the economics of information, making available in intuitively accessible form key insights that earned the 2001 Nobel Prize in economics for George Akerlof, Joseph Stiglitz, and Michael Spence.
• Modern Macroeconomics: Recent developments have renewed interest in cyclical fluctuations while still paying attention tosuch long-run issues as growth, productivity, the evolution of real wages, and capital formation. Thus, we offer the following organization

• A 5-chapter treatment of long-run issues prior to an analysis of short-run fluctuations followed by a modern treatment of short-term fluctuations and stabilization policy, emphasizing the important distinction between short- and long-run behavior of the economy.
• Consistent with both media reporting and recent research on the central bank reaction function, we treat the interest rate rather than the money supply as the instrument of Fed policy.
• The analysis of aggregate demand and aggregate supply relates output to inflation, rather than to the price level, sidestepping the necessity of a separate derivation of the link between the output gap and inflation.
• This book places a heavy emphasis on globalization, starting with an analysis of its effects on real wage inequality and progressing to such issues as the benefits of trade, the causes and effects of protectionism, the role of capital flows in domestic capital formation, the link between exchange rates and monetary policy, and the sources of speculative attacks on currencies.

• Web site: Developed by Scott Simkins of North Carolina A & T State University, an expert in the growing field of Economics education on the World Wide Web. The ambitious web site contains a host of features that will enhance the principles classroom, including dynamic graphs, video lectures, e-mail updates, microeconomic experiments, current news articles, information about the text, an eLearning session, and more.

The Second Edition builds on these strengths from the First Edition by adding these improvements:

• Introductory Material Shortened and Refined: The material from the First Edition's Chapters 1 and 2 has been reworked and condensed into one chapter in an effort to launch these important concepts as clearly and efficiently as possible. From the very beginning, the focus is on how rational people make choices among alternative courses of action.
• Separate Chapter on Elasticity Added: The material covered in this chapter (Chapter 4) was covered in parts of two separate chapters in the first edition (Chapters 5 and 6). The new combined streamlines the presentation by making use of definitions and formulas common to both the supply and demand sides. The chapteralso adds several new applications and graphical summaries of key relationships.
• Cost Curve Coverage Added: Responding to reviewer feedback, the authors have added an introduction to average total cost and average variable cost curves in Chapter 6. Taking great pains to make the presentation as simple and uncluttered as possible, no single diagram ever portrays more than three cost curves at once, and most employ only two. This treatment remains faithful the authors' belief that a full-blown treatment of production functions and cost curves is ill advised at the principles level, while providing teachers with greater flexibility. For example, it enables instructors to discuss a firm's shut down condition graphically and to portray profits and losses graphically. It also facilitates an enriched discussion of the invisible hand process by which profit and loss signals drive resource allocation in competitive markets (Chapter 8).
• Strategic Theory Accessible: Chapter 10, "Thinking Strategically," includes many examples of how simple elements of game theory can be used not only to illuminate the interactions among oligopolists and other imperfectly competitive firms, but also to shed light on common patterns of human social interaction. This chapter...

• opens with an account of how the producers of a Robert DeNiro film lost several hundred thousand dollars by having already shot most of the film before negotiating with a singer slated to appear in the final scene.
• introduces the important Nash Equilibrium concept (as portrayed in A Beautiful Mind) through a series of intuitively accessible examples.
• includes an extended discussion of the important prisoner's dilemma and strategies that have been developed for solving it.
• deals with ultimatum bargaining games and unselfish human behavior

• More Streamlined Discussion of Labor Markets and Income Redistribution: Frank and Bernanke's Chapter 13 now contains material from the chapters on "Labor Markets" [13] and "Income Redistribution" [16] in the First Edition. The new chapter is half the combined length of the earlier chapters, accomplished in part by eliminating examples, in part by trimming topic coverage. Sections on monopsony and comparable worth from the original Chapter 13 and sections on utilitarianism, tax policy and occupational choice, progressive consumption taxation, and redistribution and cost-benefit analysis from the original Chapter 16 have been deleted.
• Early Chapter on International Trade: The first edition had a brief section on international trade at the end of Chapter 3 on comparative advantage. This material has been expanded to an entire chapter [16] on trade. (A version of this same chapter will also appear in each split.) Because international trade involves important micro principles and policy issues, students will benefit greatly from this expanded coverage earlier in the book.
• Long-Run Coverage Expanded: Chapter 23 of the first edition dealt with financial markets, money, and the Fed; and capital flows was dealt with as part of a later, international chapter. Because of the importance of these topics, the authors have, in this edition, expanded that material into two long-run chapters that are now titled Money, Prices, and the Federal Reserve [23] and Financial Markets and International Capital Flows [24].
• Short-Run Coverage More Accessible: Economic concepts are a more streamlined, providing a smoother flow of economic reasoning for students. Concepts can be reinforced with a more mathematical presentation from chapter appendices. There are new Economic Naturalists (ENs) that help students better understand how policymakers react to changes in economic conditions. These ENs allow students to more effectively bridge the gap between theory and practice. There is a complete graphical/verbal discussion of the key economic concepts in each chapter for instructors who want to focus on a nonmathematical presentation. However, the appendices provide a full algebraic treatment of the chapter concepts.

Students are provided with a clear, consistent framework for understanding modern economic theory and policymaking. They systematically develop a powerful model for understanding a wide range of short-run issues that are relevant in today's economy. Updated examples in each chapter are both topical and effective at illustrating key points. Each chapter provides students with examples and hands-on exercises to promote practice with key concepts and the workings of the short-run model. This hands-on approach to learning helps students better understand how economic policy affects interest rates, inflation, unemployment, exchange rates, and output and gets students more engaged in the learning process. Chapter-by-chapter benefits:

• The development of the Keynesian cross in Chapter 26 places more emphasis on graphs and verbal explanations, with an optional mathematical treatment in the appendix. The new presentation makes it easier for students to understand the basic economic concepts underlying the short-run model.
• Chapter 27 continues to focus on the Federal Reserve's use of the interest rate as the primary policy tool, allowing students to more easily relate economic concepts to real-world macroeconomic policy decisions reported in the news.
• The AD/AS model is developed systematically in Chapter 28 (based on concepts introduced in Chapters 26 and 27) using a graphical/verbal approach, allowing students to better understand the linkages among economic theory, real-world macroeconomic behavior, and macroeconomic policymaking. Again, an algebraic treatment of material in this chapter is provided in the appendix.

• Modern International Finance: Chapter 29 focuses on a particularly important variable in international economics, the exchange rate. The exchange rate plays a key role in determining patterns of trade. And furthermore, the type of exchange rate systems a country adopts has important implications for the effectiveness of its macroeconomic policies.