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Easy Economics: A Visual Guide to What You Need to Know


An Entertaining Visual Guide to the Basics of the Dismal Science

Let's face it. Economics can be a really big bore, but we need a decent understanding of it to survive in this age of economic uncertainty.

Unlike other economics book you may have seen, Easy Economics isn't packed with reams of text or stacks of numbers. It is filled with informative illustrations and easy-to-understand content that makes exploring the subject enjoyable.

Easy Economics brings you quickly up to speed on those things you need and ought to know and does so through a collection of frequently asked questions and answers.

Among the many questions it answers are

  • What causes a recession?

  • How do we end one?

  • How long can a bust last?

  • What caused the financial crisis of 2007–2009?

  • What is fiscal policy?

  • What is the difference between debt and deficit?

  • Is globalization good or bad?

  • How does trade affect inflation?

Entertaining and informative, this book answers many of the most frequently asked questions on the subject of economics—plus plenty more that you never knew to ask.

Although they didn't know each other at the time, Leonard Wolfe and Lee Smith were both students at Yale together: Smith as an undergraduate, and Wolfe as a graduate student. Eventually they worked together at Fortune, where Wolfe was an art director and Smith a senior writer/editor who served as Fortune's bureau chief in both Tokyo and Washington.

Stephen Buckles, who served as the book's economics consultant, has had a distinguished career in economics education and currently teaches economics at Vanderbilt University.

Roy Doty, whose charming illustrations grace these pages, is considered one of this country's finest cartoonists, and his work has appeared in almost every major publication in America.

Chapter 1: MONEY page 10
It's fairy dust, but because we believe in it, it works

What happened before there was money?
When did barter become popular?
Isn't barter an awkward way to trade?
How did traders get around that complication?
When did coins appear?
Who decides what money is?
When did paper money begin?
What did early Americans use for money?
How did we get to the dollar bill?
If it isn't backed by gold, what makes the dollar mighty?
When did checking accounts start?
Why did electronic money catch on?
Will paper money disappear?
Whatever happened to barter?

Chapter 2: BOOMS & BUSTS page 42
As smart as they are, the pros can't remove all the bone-rattling bumps

What do the experts mean when they say the economy is doing well or is doing poorly?
What makes up the GDP?
What makes the GDP grow?
When is the economy booming?
Why is overheating bad?
What's productivity?
How does an overheated economy cool down?
Is that what causes a recession?
What is deflation?
How do you end a recession?
How long can a bust last?

Chapter 3: TAXING & SPENDING page 66
Policy makers often argue over which is a better steering wheel

What is fiscal policy?
Who controls tax policy?
Where do taxes come from?
How come the rich get away without paying taxes?
What's a flat tax?
What's a consumption tax?
Who decides how to spend money?
How can government spending increase GDP and employment?
Does it work?
Can government cut taxes to speed up the economy?
Can government increase taxes to slow down the economy?
What's the bottom line? Are government spending and taxing good ways to fix a troubled economy?

Chapter 4: GETTING INTO DEBT page 92
It’s been around from the beginning, but the cause has become more worrisome

What’s the difference between deficit and debt?
How can the U.S. spend more money than it takes in?
Should the government ever borrow?
When is borrowing wrong?
How much debt is too much?
How long can the U.S. get away with this?
Do we need a balanced budget amendment to the Constitution?
So how do we get out of this mess?
What are entitlements?
So will Social Security be eliminated?

Chapter 5: THE FED page 114
This very powerful institution performs a kind of magic

If the Federal Reserve can't prevent banking failures, who needs it?
So what does the Fed do?
What's monetary policy?
Why not just make as much money available as people want?
How does the Fed set monetary policy?
How does the Fed increase and decrease the amount of money available in the economy?
Where does the Fed get the money to buy bonds?
So the Fed doesn't print money?
How does the Fed destroy money?
But where does it go?
How does the Fed's buying bonds on Wall Street increase the amount of money in the pockets of ordinary consumers and businesses?
Does the Fed's selling government bonds on Wall Street decrease the amount of money in the pockets of ordinary consumers and businesses?
How does the Fed influence interest rates?
What's the Fed funds rate?
Does the Fed have any control over rates on longer loans, such as car loans and mortgages?

Chapter 6: HIGH-FLYING FINANCE page 174
The Wall Street elite can make the planet tremble

Who were the first financiers?
How did Wall Street and big-time finance get started?
How do big companies finance themselves today?
How do new high-tech companies get financed?
What caused the financial crisis of 2007-2009?
What is leverage?
How do you "short" a stock?
What are hedge funds?
What are private equity funds?
What are derivatives?
Why do derivatives have a bad name?
What's a speculative bubble?

Chapter 7: GLOBALIZATION page 202
Nowhere to hide: Everywhere is connected to everywhere else

What is globalization?
Can Americans own and operate companies overseas?
What are financial and capital flows?
Is globalization good or bad?
How does trade affect inflation?
What is the balance of trade?
Must a country be in balance with every trading partner?
What happens when a country runs a trade deficit?
What is the balance of payments?
Is it bad for a country when its currency is cheap?
Do countries manipulate currencies to keep them cheap?
What does the World Trade Organization do?
What's the World Bank?
What's the International Monetary Fund?
What is the G-20?
What is the World Economic Forum?

Ripples and Waves page 236
What happens next? How to anticipate the possible consequences of economic events

Key Words and Phrases page 240
A glossary to help you understand a complex economic world

Index page 250