Preface -- Acknowledgments -- Reference -- Contents -- Acronyms -- Part I Building Blocks -- 1 The Economy in the World -- 1.1 The History of Pasta -- 1.2 The Economic Perspective -- 1.3 Macroeconomics vs. Microeconomics -- 1.4 What Is an Economy For? -- 1.5 What Economics Actually Measures -- 1.6 A Look Ahead -- Problems -- References -- 2 Resources and Economic Processes -- 2.1 Ecosystems and Resource Use -- 2.2 Gradients -- 2.3 Renewable vs. Exhaustible Resources -- 2.4 Major Types of Renewable Resources -- 2.5 The Rational Use of Exhaustible Resources -- 2.6 Technology and Resource Use -- Problems -- References -- 3 Key Variables. 3.1 GDP3.1.1 Don't Double-Count -- 3.1.2 GDP, Value Added, and Resources -- 3.1.3 What GDP Isn't -- 3.2 Resource Use -- 3.2.1 Aggregate Energy Use -- 3.2.2 Ecological Footprints -- 3.3 Inflation -- 3.3.1 Price Indexes -- 3.3.2 Applying a Price Index -- 3.3.3 Calculating Inflation -- 3.4 Unemployment -- 3.5 Interest Rates -- 3.5.1 Real vs. Nominal Interest -- 3.6 Foreign Affairs -- 3.6.1 Interpreting the Balance of Payments -- 3.7 Exchange Rates -- 3.7.1 Exchange Rates and Interest Rates -- 3.7.2 Exchange Rates and the Overall Investment Climate -- Appendix: Price Indexes -- Appendix: Real and Nominal Interest Rates. Appendix: Real Exchange RatesAppendix: Data Links -- Problems -- References -- Part II The Long-Run Model -- 4 Labor, Resources, and the Production Function -- 4.1 Overview -- 4.2 The Production Function -- 4.2.1 Diminishing Marginal Product -- 4.2.2 Output, Value, and GDP -- 4.2.3 Graphical Presentation -- 4.3 Labor Demand -- 4.4 Labor Supply -- 4.5 Resource Markets -- 4.5.1 Resource Supply -- 4.5.2 Resource Use -- 4.5.3 The Biosphere's Absorptive Capacity -- 4.6 The Cobb-Douglas Function -- 4.7 The Per-Worker Production Function -- Appendix: Summary of Terminology -- Appendix: Why K? Why N? Why A? Why Z? Appendix: Treatment in Calculus and AlgebraDiminishing MPK and MPN -- Constant Returns to Scale -- Problems -- References -- 5 The Composition of Output -- 5.1 Introduction -- 5.2 Components of Aggregate Demand -- 5.3 Consumption -- 5.4 Investment -- 5.5 Government Expenditure -- 5.6 Net Exports -- 5.7 Real Exchange Rates -- Appendix: Summary of Terminology -- Appendix: Unintended Investment -- Appendix: Alternative Consumption Functions -- Problems -- References -- 6 The Long-Run Model (The Classical World) -- 6.1 Overview -- 6.2 Labor-Market Equilibrium -- 6.3 Equilibrium Output -- 6.4 Markets Work Well. 6.4.1 The Real Wage Will Adjust6.4.2 What's Made Is Sold -- 6.5 What Changes Output -- 6.6 Real-Nominal Divide -- 6.7 Money and Prices -- 6.8 Interest Rates -- 6.9 Policy Implications -- 6.9.1 The Problem of Recession -- 6.10 Growth, the Long-Run Model, and Potential Output -- Appendix: What Is ``Nominal Output''? -- Appendix: Taxes and the Effect on Wages -- Problems -- References -- 7 Growth with Abundant Resources -- 7.1 Introduction -- 7.2 Capital and Investment -- 7.3 Resources -- 7.4 Labor Force -- 7.5 Diminishing Returns to Capital -- 7.6 Innovation -- 7.7 Convergence -- 7.8 Mechanics of Growth -- 7.9 Institutions.