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b r i e f c o n t e n t s
Preface xv Part 5 money and PriCes in THe

About the Authors xxvi long run 219
Acknowledgments xxvii chapter 10 The Monetary System 221
chapter 11 Money Growth and Inflation 245
Part 1 inTroduCTion 1
Part 6 THe maCroeConomiCs of oPen
chapter 1 Ten Principles of Economics 3 eConomies 271
chapter 2 Thinking Like an Economist 21
Appendix Graphing: A Brief Review 39 chapter 12 Open-Economy Macroeconomics: Basic
chapter 3 Interdependence and the Gains Concepts 273
from Trade 49 chapter 13 A Macroeconomic Theory of the Small
Open Economy 303
Part 2 suPPly and demand: How markeTs

work 65 Part 7 sHorT-run eConomiC
fluCTuaTions 331
chapter 4 The Market Forces of Supply
and Demand 67 chapter 14 Aggregate Demand and Aggregate
Appendix The Mathematics of Market Supply 333
Equilibrium 92 chapter 15 The Influence of Monetary and Fiscal
Policy on Aggregate Demand 375
chapter 16 The Short-Run Tradeoff between Inflation
Part 3 THe daTa of maCroeConomiCs 97 and Unemployment 417
chapter 5 Measuring a Nation’s Income 99
chapter 6 Measuring the Cost of Living 123 Part 8 final THougHTs 449
chapter 17 Five Debates over Macroeconomic
Part 4 THe real eConomy in THe Policy 451
long run 139
chapter 7 Production and Growth 141
chapter 8 Saving, Investment, and the Financial
System 167 Glossary 473
chapter 9 Unemployment and Its Natural Rate 193
Index 477
vi nel
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t a b l e o f c o n t e n t s
Preface xv Principle #10: Society Faces a Short-Run Tradeoff

How the Book Is Organized xv between Inflation and Unemployment 14
Walk-Through xviii FYI: How to Read This Book 15
New in This Sixth Canadian Edition xxi Conclusion 16
Ancillaries xxiii Summary 17
About the Authors xxvi
Key Concepts 17
Acknowledgments xxvii
Questions for Review 17
Problems and Applications 18
chapter 2
THinking like an eConomisT 21
Learning Objectives 21
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The Economist as Scientist 22
The Scientific Method: Observation, Theory,
and More Observation 22
Part 1 The Role of Assumptions 23
Economic Models 24
inTroduCTion 1 Our First Model: The Circular-Flow Diagram 24
Our Second Model: The Production Possibilities
Frontier 26
Microeconomics and Macroeconomics 29
chapter 1
Ten PrinCiPles of eConomiCs 3 The Economist as Policy Adviser 30
Learning Objectives 3 Positive versus Normative Analysis 30
Economists in Ottawa 31
How People Make Decisions 4 Why Economists’ Advice Is Not Always Followed 32
Principle #1: People Face Tradeoffs 4
Principle #2: The Cost of Something Why Economists Disagree 33
Is What You Give Up to Get It 5 Differences in Scientific Judgments 33
In The news: Olympic Lineups and Opportunity Cost 6 Differences in Values 33
Principle #3: Rational People Think at the Margin 7 Perception versus Reality 34
Principle #4: People Respond to Incentives 8 In The news: Environmental Economists 35
How People Interact 9 Let’s Get Going 36

Principle #5: Trade Can Make Everyone Better Off 9 Summary 37
Principle #6: Markets Are Usually a Good Way to
Key Concepts 37
Organize Economic Activity 10
FYI: Adam Smith and the Invisible Hand 11 Questions for Review 37
Principle #7: Governments Can Sometimes Improve Problems and Applications 37
Market Outcomes 12
Appendix Graphing: A Brief Review 39
Graphs of a Single Variable 39
How the Economy as a Whole Works 13
Graphs of Two Variables: The Coordinate System 39
Principle #8: A Country’s Standard of Living Depends on
Curves in the Coordinate System 40
Its Ability to Produce Goods and Services 13
Slope 44
Principle #9: Prices Rise When the Government
Cause and Effect 45
Prints Too Much Money 14
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viii table of contents
chapter 3 Markets and Competition 68

inTerdePendenCe and THe gains from Trade 49 What Is a Market? 68
Learning Objectives 49 What Is Competition? 68
A Parable for the Modern Economy 50 Demand 69

Production Possibilities 50 The Demand Curve: The Relationship between
Specialization and Trade 52 Price and Quantity Demanded 69
Market Demand versus Individual Demand 70
Shifts in the Demand Curve 71
Comparative Advantage: The Driving Force of Specialization 53
CAse sTUDY: Two Ways to Reduce the Quantity of
Absolute Advantage 55
Smoking Demanded 74
Opportunity Cost and Comparative Advantage 55
Comparative Advantage and Trade 56
FYI: The Legacy of Adam Smith and David Ricardo 57 Supply 75
The Price of Trade 57 The Supply Curve: The Relationship between
In The news: Does Free Trade Create Jobs? 58 Price and Quantity Supplied 75
Market Supply versus Individual Supply 76
Shifts in the Supply Curve 77
Applications of Comparative Advantage 59
Should Sidney Crosby Shovel His Own Sidewalk? 59
Should Canada Trade with Other Countries? 60 Supply and Demand Together 79
Equilibrium 79
Conclusion 61
Three Steps to Analyzing Changes in Equilibrium 81
Summary 61 In The news: Supply, Demand, and Technology 86
Key Concepts 62 Conclusion: How Prices Allocate Resources 87
Questions for Review 62 Summary 88
Problems and Applications 62 Key Concepts 88
Appendix The Mathematics of Market Equilibrium 92
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Part 3
Part 2 THe daTa of maCroeConomiCs 97
suPPly and demand:
How markeTs work 65
chapter 5
measuring a naTion’s inCome 99
chapter 4 Learning Objectives 99
THe markeT forCes of suPPly and demand 67
Learning Objectives 67 The Economy’s Income and Expenditure 100
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table of contents ix
The Measurement of Gross Domestic Product 102 Real and Nominal Interest Rates 132
“GDP Is the Market Value . . .” 102 CAse sTUDY: Interest Rates in the Canadian Economy 134
“. . . Of All . . .” 102 Conclusion 135
“. . . Final . . .” 103 Summary 136
“. . . Goods and Services . . .” 103
Key Concepts 136
“. . . Produced . . .” 103
“. . . Within a Country . . .” 103 Questions for Review 136
“. . . In a Given Period of Time” 104 Problems and Applications 137
FYI: Other Measures of Income 104
The Components of GDP 105

Consumption 105
Investment 106
Government Purchases 106
Net Exports 106
CAse sTUDY: The Components of Canadian GDP 107
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Real versus Nominal GDP 108
A Numerical Example 108
The GDP Deflator 110
CAse sTUDY: Real GDP over Recent History 111
CAse sTUDY: GDP, GNP, and Foreign Ownership 112
Part 4
THe real eConomy
GDP and Economic Well-Being 114 in THe long run 139
CAse sTUDY: Measuring Economic Well-Being in
Canada 115
CAse sTUDY: International Differences in GDP and the
Quality of Life 117 chapter 7
In The news: Identifying the 1 Percent 118 ProduCTion and growTH 141
Conclusion 120 Learning Objectives 141
Summary 120
Key Concepts 120 Economic Growth around the World 142
Questions for Review 121 FYI: Are You Richer Than the Richest
American? 144
Productivity: Its Role and Determinants 144
Why Productivity Is So Important 144
How Productivity Is Determined 145
chapter 6 FYI: The Production Function 147
measuring THe CosT of living 123 CAse sTUDY: Are Natural Resources a Limit to Growth? 148
Economic Growth and Public Policy 149
The Consumer Price Index 124 The Importance of Saving and Investment 149
How the Consumer Price Index Is Calculated 124 Diminishing Returns and the Catch-Up Effect 149
FYI: What Is in the CPI’s Basket? 126 Investment from Abroad 151
Problems in Measuring the Cost of Living 127 Education 152
The GDP Deflator versus the Consumer Price Index 128 Health and Nutrition 153
In The news: Promoting Human Capital 154
Correcting Economic Variables for the Effects of Property Rights and Political Stability 155
Inflation 130 Free Trade 156
Dollar Figures from Different Times 130 Research and Development 157
FYI: The Bank of Canada’s Inflation Calculator 131 In The news: One Economist’s Answer 157
CAse sTUDY: Mr. Index Goes to Hollywood 131 CAse sTUDY: Productivity Slowdowns and
Indexation 131 Speedups 159
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x table of contents
Population Growth 161 Job Search 204

Conclusion: The Importance of Long-Run Growth 163 Why Some Frictional Unemployment Is Inevitable 204
Summary 164 Public Policy and Job Search 205
Employment Insurance 205
Key Concepts 164
Minimum-Wage Laws 207
Unions and Collective Bargaining 209
The Economics of Unions 209
chapter 8 FYI: Who Earns the Minimum Wage? 210
Are Unions Good or Bad for the Economy? 211
saving, invesTmenT, and THe finanCial sysTem 167
The Theory of Efficiency Wages 212
Worker Health 212
Financial Institutions in the Canadian Economy 168
Worker Turnover 212
Financial Markets 169
Worker Effort 213
FYI: How to Read the Newspaper’s Stock Tables 171
Worker Quality 213
Financial Intermediaries 172
CAse sTUDY: Henry Ford and the Very Generous
Summing Up 173
$5-a-Day Wage 213
Conclusion 214
Saving and Investment in the National Income Accounts 173
FYI: Minimum, Efficiency, and Living Wages 215
FYI: Financial Institutions in Crisis 174
Some Important Identities 175 Summary 216
The Meaning of Saving and Investment 177 Key Concepts 216
The Market for Loanable Funds 178 Problems and Applications 217
Supply and Demand for Loanable Funds 178
Policy 1: Saving Incentives 180
Policy 2: Investment Incentives 182
Policy 3: Government Budget Deficits and Surpluses 183
CAse sTUDY: The Accumulation of Government
Debt in Canada 186
FYI: How Large Is Government Debt? 188
Conclusion 189
Summary 190
Key Concepts 190
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chapter 9
Part 5
unemPloymenT and iTs naTural raTe 193
Learning Objectives 193 money and PriCes
in THe long run 219
Identifying Unemployment 194
How Is Unemployment Measured? 194
CAse sTUDY: Labour-Force Participation of Men
and Women in the Canadian Economy 198 chapter 10
Does the Unemployment Rate Measure THe moneTary sysTem 221
What We Want It To? 199 Learning Objectives 221
How Long Are the Unemployed without Work? 200
Why Are There Always Some People Unemployed? 201 The Meaning of Money 222
FYI: A Tale of Two Recessions 203 The Functions of Money 222
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table of contents xi
The Kinds of Money 223 Menu Costs 262

In The news: The History of Money 224 Relative-Price Variability and the Misallocation
Money in the Canadian Economy 225 of Resources 262
FYI: Credit Cards, Debit Cards, and Money 226 Inflation-Induced Tax Distortions 263
CAse sTUDY: Where Is All the Currency? 227 Confusion and Inconvenience 264
A Special Cost of Unexpected Inflation: Arbitrary
The Bank of Canada 228 Redistributions of Wealth 265
The Bank of Canada Act 228 Inflation Is Bad, but Deflation May Be Worse 266
Monetary Policy 229 CAse sTUDY: Money Growth, Inflation, and
the Bank of Canada 266
Commercial Banks and the Money Supply 230 Conclusion 268
The Simple Case of 100 Percent-Reserve Banking 230 Summary 268
Money Creation with Fractional-Reserve Banking 231 Key Concepts 269
The Money Multiplier 232 Questions for Review 269
Bank Capital, Leverage, and the Financial Crisis
of 2007–09 233
The Bank of Canada’s Tools of Monetary Control 235
Problems in Controlling the Money Supply 238
FYI: The Bank of Canada’s Response to the 2007–09
Financial Crisis 239
CAse sTUDY: Bank Runs and the Money Supply 240
Conclusion 241
Summary 242
Key Concepts 242
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chapter 11
money growTH and inflaTion 245
Learning Objectives 245 Part 6
THe maCroeConomiCs
The Classical Theory of Inflation 246 of oPen eConomies 271
The Level of Prices and the Value of Money 246
Money Supply, Money Demand, and Monetary
Equilibrium 247
The Effects of a Monetary Injection 249 chapter 12
A Brief Look at the Adjustment Process 250 oPen-eConomy maCroeConomiCs:
The Classical Dichotomy and Monetary
Neutrality 251
BasiC ConCePTs 273
Velocity and the Quantity Equation 253
CAse sTUDY: Money and Prices during
Hyperinflations 254 The International Flows of Goods and Capital 274
The Inflation Tax 256 The Flow of Goods: Exports, Imports, and
The Fisher Effect 257 Net Exports 274
In The news: A Recipe for Economic Disaster 258 CAse sTUDY: The Increasing Openness of the Canadian
Economy 275
In The news: Breaking Up the Chain of Production 277
The Costs of Inflation 259
The Flow of Financial Resources: Net Capital
A Fall in Purchasing Power? The Inflation
Outflow 278
Fallacy 260
The Equality of Net Exports and Net Capital Outflow 279
Shoeleather Costs 261
FYI: The Current Account Balance 281
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xii table of contents
Saving, Investment, and Their Relationship to the How Policies and Events Affect a Small Open
International Flows 281 Economy 314
Summing Up 283 FYI: Negative Values of Net Capital Outflow 314
CAse sTUDY: Saving, Investment, and Net Capital Increase in World Interest Rates 315
Outflow of Canada 283 Government Budget Deficits and Surpluses 316
Trade Policy 318
The Prices for International Transactions: Political Instability and Capital Flight 321
Real and Nominal Exchange Rates 286 In The news: The Open-Economy Trilemma 324
Nominal Exchange Rates 286 Conclusion 326
Real Exchange Rates 287 Summary 327
FYI: The Value of the Canadian Dollar 288 Key Concepts 327
FYI: The Euro 291
A First Theory of Exchange-Rate Determination: Purchasing-
Power Parity 292
The Basic Logic of Purchasing-Power Parity 292
Implications of Purchasing-Power Parity 293
CAse sTUDY: The Nominal Exchange Rate during a
Hyperinflation 294
Limitations of Purchasing-Power Parity 294
CAse sTUDY: The Hamburger Standard 296
Interest Rate Determination in a Small Open Economy with
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Perfect Capital Mobility 297
A Small Open Economy 297
Perfect Capital Mobility 298
Limitations to Interest Rate Parity 298
Part 7
Conclusion 299
sHorT-run eConomiC
Summary 300
Key Concepts 300 fluCTuaTions 331
chapter 14
aggregaTe demand and aggregaTe suPPly 333
chapter 13 Three Key Facts about Economic Fluctuations 334

a maCroeConomiC THeory of THe small Fact 1: Economic Fluctuations Are Irregular
oPen eConomy 303 and Unpredictable 334
Learning Objectives 303 Fact 2: Most Macroeconomic Quantities Fluctuate
Together 336
Fact 3: As Output Falls, Unemployment Rises 336
Supply and Demand for Loanable Funds and
for Foreign-Currency Exchange 304
Explaining Short-Run Economic Fluctuations 336
The Market for Loanable Funds 305
The Assumptions of Classical Economics 337
The Market for Foreign-Currency Exchange 308
The Reality of Short-Run Fluctuations 337
FYI: Purchasing-Power Parity as a
In The news: The Social Influences of Economic
Special Case 311
Downturns 338
The Model of Aggregate Demand and Aggregate Supply 339
Equilibrium in the Small Open Economy 311
Net Capital Outflow: The Link between the The Aggregate-Demand Curve 340
Two Markets 311 Why the Aggregate-Demand Curve Slopes
Simultaneous Equilibrium in Two Markets 312 Downward 341
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table of contents xiii
Why the Aggregate-Demand Curve Might Shift 343 A Formula for the Spending Multiplier 393
CAse sTUDY: Housing Wealth 344 Other Applications of the Multiplier Effect 395
The Crowding-Out Effect on Investment 395
The Aggregate-Supply Curve 347 Open-Economy Considerations 397
Why the Aggregate-Supply Curve Is Vertical in the Changes in Taxes 403
Long Run 347 Deficit Reduction 403
Why the Long-Run Aggregate-Supply Curve Might FYI: How Fiscal Policy Might Affect Aggregate
Shift 348 Supply 404
Using Aggregate Demand and Aggregate Supply
to Depict Long-Run Growth and Inflation 350 Using Policy to Stabilize the Economy 405
Why the Aggregate-Supply Curve Slopes Upward The Case for Active Stabilization Policy 405
in the Short Run 352 The Case against Active Stabilization Policy 405
Why the Short-Run Aggregate-Supply Curve Automatic Stabilizers 406
Might Shift 355 A Flexible Exchange Rate as an Automatic Stabilizer 407
CAse sTUDY: The Recession of 2008–09 (Again) 408
Two Causes of Economic Fluctuations 356
The Effects of a Shift in Aggregate Demand 357 A Quick Summary 410
FYI: Monetary Neutrality Revisited 360 FYI: Interest Rates in the Long Run and the Short Run 412
CAse sTUDY: Big Shifts in Aggregate Demand: Two Conclusion 413
Depressions and World War II 361 Summary 414
CAse sTUDY: The Recession of 2008–09 364
Key Concepts 415
The Effects of a Shift in Aggregate Supply 365
CAse sTUDY: Oil and the Economy 368 Questions for Review 415
FYI: The Origins of Aggregate Demand and Aggregate Problems and Applications 415
Supply 369
Conclusion 371
Summary 371
Key Concepts 372 chapter 16
Questions for Review 372 THe sHorT-run Tradeoff BeTween inflaTion
Problems and Applications 372 and unemPloymenT 417
The Phillips Curve 418

Origins of the Phillips Curve 418
chapter 15 Aggregate Demand, Aggregate Supply, and the
THe influenCe of moneTary and Phillips Curve 419
fisCal PoliCy on aggregaTe demand 375
Learning Objectives 375 Shifts in the Phillips Curve: The Role of Expectations 421
The Long-Run Phillips Curve 421
How Monetary Policy Influences Aggregate Demand 376 The Meaning of “Natural” 424
The Theory of Liquidity Preference 377 Reconciling Theory and Evidence 424
The Downward Slope of the Aggregate-Demand The Short-Run Phillips Curve 425
Curve 382 The Natural Experiment for the Natural-Rate
Changes in the Money Supply 383 Hypothesis 427
Open-Economy Considerations 384
FYI: The Zero Lower Bound 389 Shifts in the Phillips Curve: The Role of Supply
CAse sTUDY: Why Central Banks Watch the Stock Shocks 428
Market (and Vice Versa) 390
The Cost of Reducing Inflation 432
How Fiscal Policy Influences Aggregate Demand 391 The Sacrifice Ratio 432
Changes in Government Purchases 391 Rational Expectations and the Possibility of Costless
The Multiplier Effect 391 Disinflation 434
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xiv table of contents
FYI: Measuring Expectations of Inflation 435 Pro: Policymakers Should Try to Stabilize the
Disinflation in the 1980s 436 Economy 452
In The news: How to Keep Expected Inflation Low 438 Con: Policymakers Should Not Try to Stabilize the
The Zero-Inflation Target 439 Economy 452
Anchored Expectations 440
The 2008-09 Recession 442 Should Monetary Policy Be Made by an Independent
Looking Ahead 444 Central Bank? 453
Conclusion 445 Pro: Monetary Policy Should Be Made by an
Summary 446 Independent Central Bank 454
Key Concepts 446 Con: Monetary Policy Should Not Be Made by an
Independent Central Bank 455
Should the Central Bank Aim for Zero Inflation? 456
Pro: The Central Bank Should Aim for Zero Inflation 456
Con: The Central Bank Should Not Aim for Zero
Inflation 457
FYI: Price Level Targeting 459
Should Governments Balance Their Budgets? 460

Pro: Governments Should Balance Their Budgets 461
Con: Governments Should Not Balance Their
Budgets 462
FYI: Progress on Debt Reduction? 464
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Should the Tax Laws Be Reformed to Encourage

Saving? 465
Pro: The Tax Laws Should Be Reformed to Encourage
Saving 465
Part 8 Con: The Tax Laws Should Not Be Reformed to
final THougHTs 449 Encourage Saving 467
Conclusion 467
Summary 468
chapter 17 Problems and Applications 469
five deBaTes over maCroeConomiC PoliCy 451
Glossary 473
Should Monetary and Fiscal Policymakers Try to Index 477
Stabilize the Economy? 451
nel
Preface
As soon as we got our hands on the first U.S. edition of Principles of Macroeconomics,
it was clear to us that “this one is different.” If other first-year economics textbooks
are encyclopedias, Gregory Mankiw’s was, and still is, a handbook.
Between us, we have many years of experience teaching first-year economics.
Like many instructors, we found it harder and harder to teach with each new
edition of the thick, standard texts. It was simply impossible to cover all of the
material. Of course, we could have skipped sections, features, or whole chapters,
but then, apart from the sheer hassle of telling students which bits to read and not
to read, and worries about the consistencies and completeness of the remaining
material, we ran the risk of leaving students with the philosophy that what mat-
ters is only what’s on the exam.
We do not believe that the writers of these other books set out with the intention
of cramming so much material into them. It is a difficult task to put together the
perfect textbook—one that all instructors would approve of and that all students
would enjoy using. Therefore, to please all potential users, most of the books end
up covering a wide range of topics. And so the books grow and grow.
Professor Mankiw made a fresh start in the first U.S. edition. He included all
the important topics and presented them in order of importance. And in the sixth
U.S. edition, he has resisted the temptation to add more and more material. We
have, in adapting the text for Canadian students, taken a minimalist approach: “If
it isn’t broken, don’t fix it!” While the book is easily recognizable as Mankiw’s, we
have made changes that increase its relevance to Canadian students. Some of these
changes reflect important differences between the Canadian and U.S. economies.
For example, the Canadian economy is much smaller and more open than the
U.S. economy, and this fact is explicitly recognized in this edition. Other changes
reflect important institutional differences between the two countries, including
the structure of the tax system and the nature of competition policy. Finally, the
Canadian edition focuses on issues and includes examples that are more familiar
and relevant to a Canadian audience.
We would not have agreed to participate in the Canadian edition if we were
not extremely impressed with the U.S. edition. Professor Mankiw has done an
outstanding job of identifying the key concepts and principles that every first-year
student should learn.
It was truly a pleasure to work with such a well-thought-out and well-written
book. We have enjoyed teaching from the earlier Canadian editions and we look
forward to using the sixth Canadian edition. We hope you do, too.
HOW THE BOOK IS ORGANIZED

To write a brief and student-friendly book, Mankiw considered new ways to orga-
nize familiar material. What follows is a whirlwind tour of this text. This tour, we
hope, will give you a sense of how the pieces fit together.
nel xv
xvi Preface
Introductory Material
Chapter 1, “Ten Principles of Economics,” introduces students to the economist’s
view of the world. It previews some of the big ideas that recur throughout
economics, such as opportunity costs, marginal decision making, the role of
incentives, the gain from trade, and the efficiency of market allocations. Throughout
the text an effort is made to relate the discussion back to the ten principles of eco-
nomics introduced in Chapter 1. The interconnections of the material with the ten
principles are clearly identified throughout the text.
Chapter 2, “Thinking Like an Economist,” examines how economists approach
their field of study, discussing the role of assumptions in developing a theory and
introducing the concepts of an economic model. It also discusses the role of econo-
mists in making policy. The appendix to this chapter offers a brief refresher course
on how graphs are used and how they can be abused.
Chapter 3, “Interdependence and the Gains from Trade,” presents the theory
of comparative advantage. This theory explains why individuals trade with their
neighbours, as well as why nations trade with other nations. Much of economics is
about how market forces coordinate many individual production and consump-
tion decisions. As a starting point for this analysis, students see in this chapter
why specialization, interdependence, and trade can benefit everyone.
The Fundamental Tools of Supply and Demand

The next chapter introduces the basic tools of supply and demand. Chapter 4, “The
Market Forces of Supply and Demand,” develops the supply curve, the demand
curve, and the notion of market equilibrium.
More Macroeconomics
Our overall approach to teaching macroeconomics is to examine the economy
in the long run (when prices are flexible) before examining the economy in the
short run (when prices are sticky). We believe that this organization simplifies
learning macroeconomics for several reasons. First, the classical assumption of
price flexibility is more closely linked to the basic lessons of supply and demand,
which students have already mastered. Second, the classical dichotomy allows
the study of the long run to be broken up into several more easily digested pieces.
Third, because the business cycle represents a transitory deviation from the econ-
omy’s long-run growth path, studying the transitory deviations is more natural
after the long-run equilibrium is understood. Fourth, the macroeconomic theory
of the short run is more controversial among economists than the macroeconomic
theory of the long run. For these reasons, most upper-level courses in macroeco-
nomics now follow this long-run-before-short-run approach; our goal is to offer
introductory students the same advantage.
Returning to the detailed organization, we start the coverage of macroeco-
nomics with issues of measurement. Chapter 5, “Measuring a Nation’s Income,”
discusses the meaning of gross domestic product and related statistics from the
national income accounts. Chapter 6, “Measuring the Cost of Living,” discusses
the measurement and use of the consumer price index.
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Preface xvii
The next three chapters describe the behaviour of the real economy in the long
run. Chapter 7, “Production and Growth,” examines the determinants of the large
variation in living standards over time and across countries. Chapter 8, “Saving,
Investment, and the Financial System,” discusses the types of financial institu-
tions in our economy and examines their role in allocating resources. Chapter 9,
“Unemployment and Its Natural Rate,” considers the long-run determinants of
the unemployment rate, including job search, minimum-wage laws, the market
power of unions, and efficiency wages.
Having described the long-run behaviour of the real economy, the book then
turns to the long-run behaviour of money and prices. Chapter 10, “The Monetary
System,” introduces the economist’s concept of money and the role of the cen-
tral bank in controlling the quantity of money. Chapter 11, “Money Growth and
Inflation,” develops the classical theory of inflation and discusses the costs that
inflation imposes on a society.
The next two chapters present the macroeconomics of open economies,
maintaining the long-run assumptions of price flexibility and full employment.
Chapter 12, “Open-Economy Macroeconomics: Basic Concepts,” explains the
relationship among saving, investment, and the trade balance; the distinction
between the nominal and real exchange rate; and the theory of purchasing-power
parity. Chapter 13, “A Macroeconomic Theory of the Small Open Economy,” pres-
ents a classical model of the international flow of goods and capital. The model
sheds light on various issues, including the link between budget deficits and trade
deficits and the macroeconomic effects of trade policies. Because instructors differ
their emphasis on this material, these chapters are written so that they can be
used in different ways. Some may choose to cover Chapter 12 but not Chapter 13,
others may skip both chapters, and still others may choose to defer the analysis of
open-economy macroeconomics until the end of their courses.
After fully developing the long-run theory of the economy in Chapters 5
through 13, the book turns to explaining short-run fluctuations around the long-
run trend. This organization simplifies teaching the theory of short-run fluctua-
tions because, at this point in the course, students have a good grounding in many
basic macroeconomic concepts. Chapter 14, “Aggregate Demand and Aggregate
Supply,” begins with some facts about the business cycle and then introduces the
model of aggregate demand and aggregate supply. Chapter 15, “The Influence of
Monetary and Fiscal Policy on Aggregate Demand,” explains how policymakers
can use the tools at their disposal to shift the aggregate-demand curve. Chapter 16,
“The Short-Run Tradeoff between Inflation and Unemployment,” explains why
policymakers who control aggregate demand face a tradeoff between inflation
and unemployment. It examines why this tradeoff exists in the short run, why it
shifts over time, and why it does not exist in the long run.
The book concludes with Chapter 17, “Five Debates over Macroeconomic
Policy.” This capstone chapter considers controversial issues facing policymakers:
the proper degree of policy activism in response to the business cycle, the choice
between rules and discretion in the conduct of monetary policy, the desirability of
reaching zero inflation, the importance of reducing the government’s debt, and the
need for tax reform to encourage saving. For each issue, the chapter presents both
sides of the debate and encourages students to make their own judgments.
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xviii Preface
WALK-THROUGH
The purpose of this text is to help students learn the fundamental lessons of eco-
nomics and to show how such lessons can be applied to the world in which they
live. Toward that end, various learning tools recur throughout the book.
Chapter Openers Well- Case studies Economic theory is useful and interesting only
designed chapter openers act as if it can be applied to understanding actual events and policies.
previews that summarize the Updated or replaced with more current Canadian examples, the
major concepts to be learned in numerous case studies apply the theory that has just been
each chapter. developed.
Figures and Tables Colourful and eye-

catching visuals are used to make important
economic points and to clarify Canadian
and other key economic concepts. They have
also proved to be valuable and memorable
teaching aids.
nel
Preface xix
Updated Canadian “In the news” “FYI” Features These features provide addi-
Features One benefit that students gain from tional material “for your information.” Some of
studying economics is a new perspective and them offer a glimpse into the history of economic
greater understanding about news from Canada thought. Others clarify technical issues. Still
and around the world. To highlight this benefit, others discuss supplementary topics that instruc-
excerpts from many Canadian news articles, tors might choose either to discuss or skip in their
including opinion columns written by prominent lectures.
economists, show how basic economic theory can
be applied.
Key Concept Definitions When key concepts

are introduced in the chapter, they are presented
in bold typeface. In addition, their definitions are
placed in the margin and in the “Glossary” at the
back of the book. This treatment helps students
learn and review the material.
QuickQuizzes After each major section,

students are offered a quick quiz to check their
comprehension of what they have just learned. If
students cannot readily answer these quizzes, they
should stop and reread the material before
continuing.
nel
xx Preface
Chapter summaries Each chapter ends with a

brief summary that reminds students of the most
important lessons that they have just learned. Later
in their study, it offers an efficient way to review for
exams.
List of Key Concepts A list of key concepts at

the end of each chapter offers students a way to test
their understanding of the new terms that have been
introduced. Page references are included so that
students can review terms they do not understand in
the original context.
Questions for Review At the end of each chapter

questions for review cover the chapter’s primary les-
sons. Students can use these questions to check their
comprehension and to prepare for exams.
Problems and Applications Each chapter also

contains a variety of problems and applications that
ask students to apply the material they have learned.
Some instructors may use these questions for home-
work assignments. Others may introduce them as a
starting point for classroom discussion.
nel
Preface xxi
NEW IN THIS SIXTH CANADIAN EDITION

The sixth Canadian edition of Principles of Macroeconomics has been carefully revised
to ensure its contents are current and its examples reflect the interests and concerns
of the student market. Responding to reviewer requests for more emphasis on math,
we have added a new appendix “The Mathematics of Market Equilibrium” at the
end of Chapter 4, included more technical questions in the end-of-chapter assign-
ments to raise the difficulty level, and provided online math problems developed
by Hannah Holmes, Subject Matter Coordinator, of McMaster University so stu-
dents can practice their skills (see www.nelson.com/mankiwmacro6e). New topics
discussed in this edition include quantitative easing, the danger of deflation, the
Keystone XL and Northern Gateway oil pipeline projects, liquidity traps, and more.
Sections have been updated to include analysis of financial challenges from 2007–12.
Case Studies have been revised and updated to reflect current world trends. New
FYI and In the News boxes address such issues as debates over government debts,
“living wages,” the role of banks in the recent financial crisis, and the open economy
“trilemma.” Key figures and graphs have been updated throughout the text, and
the illustration program has been refreshed through the replacement of any dated-
looking photographs.
Here is a chapter-by-chapter list of significant changes:
Chapter 1 A new In the News feature discusses the Vancouver Olympic

lineups and opportunity cost.
Chapter 2 A new section has been added on “Why Economists’ Advice Is Not
Always Followed.” In the “Why Economists Disagree” section, a revised table lists
“Propositions about Which Most Economists Agree.”
Chapter 3 The “Applications of Comparative Advantage” section has been

expanded and uses Sidney Crosby as an example. A new In the News feature
questions whether free trade creates jobs.
Chapter 4 A significant addition to this edition is the new appendix “The

Mathematics of Market Equilibrium,” which guides the student through the pro-
cess of solving market equilibrium for linear demand and supply curves.
Chapter 5 A new In the News feature asks “Who Are the 1%?” and presents
data showing how the share of total Canadian income received by the richest
1 percent has varied since 1920. The existing case study on foreign investment has
been improved; interest in this topic has grown recently as a result of Chinese
companies purchasing Canadian firms.
Chapter 6 A shorter, straightforward discussion of real and nominal interest

rates includes a change to Figure 6.3 that emphasizes how inflation is the reason
for the difference between them.
Chapter 7 A new In the News feature presents an article by economist Daron

Acemoglu that discusses why some nations thrive while others do not.
nel
xxii Preface
Chapter 8 The existing case study, “The Accumulation of Government Debt in

Canada,” has been improved by comparing government debt in Canada to that in
other countries and by comparing current levels of debt to past values. A new FYI
feature asks “How Large Is Government Debt?” and discusses different ways of
measuring and thinking about it.
Chapter 9 A new FYI feature discusses the idea of a “living wage” and com-
pares it to minimum and efficiency wages. The discussion of Employment
Insurance has been updated to reflect recent changes in legislation.
Chapter 10 A new section takes a closer look at details related to bank capital,
the capital requirements of banks, the concept of leverage, and the role that all of
these played in the 2007–09 financial crisis. The concept of quantitative easing is
also introduced and discussed.
Chapter 11 A new section discusses how deflation may be just as dangerous to

an economy as inflation. New emphasis has been placed on how high rates of
inflation do more than simply cause prices to rise quickly—they also create the
conditions for poverty and international conflicts.
Chapter 13 A new In the News feature discusses the open economy “tri-
lemma” and explains how small open economies like Canada can choose between
only two of the following: using monetary policy to stabilize the economy, fixing
the exchange rate, and allowing financial capital to flow freely into and out of the
economy.
Chapter 14 A new In the News feature discusses the ways in which recessions
have broad impacts beyond those that can be described by unemployment rates
and falling GDP. A new discussion of the Keystone XL and Northern Gateway oil
pipeline projects is included.
Chapter 15 A new FYI feature examines what monetary policy can or cannot
do when nominal interest rates fall close to zero. The concept of the liquidity trap
is discussed, as is the possibility of using quantitative easing.
Chapter 16 A new FYI feature discusses why expectations of inflation are

important and how the Bank of Canada tries to gain insights into what those
expectations are. The discussion of Canada’s experience with inflation and unem-
ployment since 2000 has been completely revised, including three new supporting
figures. The 2008–09 recession and the policy responses to it are discussed in
terms of the Phillips curve.
Chapter 17 A new FYI feature describes price targeting, a new approach to

monetary policy that is currently being considered by the Bank of Canada.
Another new FYI feature discusses how government debt is measured and how
concerns about the size of the debt burden are affected by inflation, population
growth, and economic growth.
nel
Preface xxiii
ANCILLARIES
For the Instructor
The Nelson Education Teaching Advantage (NETA) program delivers research-
based instructor’s resources that promote student engagement and higher-order
thinking to enable the success of Canadian students and educators. Whether
your course is offered in class, online, or both, Nelson is pleased to provide
pedagogically driven, research-based resources to support you. Be sure to visit
Nelson Education’s Inspired Instruction website at www.nelson.com/inspired
to find out more about NETA. Don’t miss the testimonials of instructors who
have used NETA supplements and seen student engagement increase!
The four NETA programs that accompany Principles of Macroeconomics, Sixth
Canadian Edition, are NETA Engagement (the instructor’s manual, including
teaching tips for promoting student engagement), NETA Assessment (for
testing and quizzing), NETA Presentation (for PowerPoint lectures), and NETA
Digital (the framework that underlies all online offerings). Details of the sup-
plements prepared specifically for use with Principles of Macroeconomics follow
the general NETA program notes below (see the heading for the Instructor’s
Resource CD). Instructor supplements can also be downloaded from the dedi-
cated website at www.nelson.com/mankiwmacro6e.
neTA engagement presents materials that help instructors deliver engaging

content and activities to their classes. Instead of instructor’s manuals that regurgi-
tate chapter outlines and key terms from the text, each NETA Enriched Instructor’s
Manual (EIM) provides genuine assistance to teachers. The EIMs answer questions
like What should students learn? Why should students care? What are some common
student misconceptions and stumbling blocks? EIMs not only identify the topics that
cause students the most difficulty, but also describe techniques and resources
to help students master these concepts. Dr. Roger Fisher’s Instructor’s Guide to
Classroom Engagement (IGCE) accompanies every Enriched Instructor’s Manual.
neTA Assessment relates to testing materials. Under NETA Assessment,

Nelson’s authors create multiple-choice questions that reflect research-based best
practices for constructing effective questions and testing not just recall but also
higher-order thinking. Our guidelines were developed by David DiBattista, a 3M
National Teaching Fellow whose recent research as a professor of psychology at
Brock University has focused on multiple-choice testing. All Test Bank authors
receive training at workshops conducted by Prof. DiBattista, as do the copyedi-
tors assigned to each Test Bank. A copy of Multiple Choice Tests: Getting Beyond
Remembering, Prof. DiBattista’s guide to writing effective tests, is included with
every Nelson Test Bank/Computerized Test Bank package.
neTA Presentation has been developed to help instructors make the best use
of PowerPoint® in their classrooms. With a clean and uncluttered design devel-
oped by Maureen Stone of StoneSoup Consulting, NETA Presentation features
slides with improved readability, more multimedia and graphic materials, activi-
ties to use in class, and tips for instructors on the Notes page. A copy of NETA
Guidelines for Classroom Presentations by Maureen Stone is included with each set
of PowerPoint slides.
nel
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of Spellbinders
This ebook is for the use of anyone anywhere in the United States
and most other parts of the world at no cost and with almost no
restrictions whatsoever. You may copy it, give it away or re-use it
under the terms of the Project Gutenberg License included with this
ebook or online at www.gutenberg.org. If you are not located in the
United States, you will have to check the laws of the country where
you are located before using this eBook.
Title: Spellbinders
Author: Margaret Culkin Banning
Release date: December 22, 2023 [eBook #72473]
Language: English
Original publication: NYC: George H. Doran Company, 1922
Credits: Chuck Greif and the Online Distributed Proofreading Team

at https://www.pgdp.net (This file was produced from
images generously made available by The Internet Archive)
*** START OF THE PROJECT GUTENBERG EBOOK

SPELLBINDERS ***
SPELLBINDERS
—————
MARGARET CULKIN BANNING
SPELLBINDERS
BY
MARGARET CULKIN BANNING
AUTHOR OF “HALF LOAVES,” “THIS MARRYING,” ETC.
NEW YORK
GEORGE H. DORAN COMPANY
COPYRIGHT, 1922,
BY GEORGE H. DORAN COMPANY
COPYRIGHT, 1922, BY THE METROPOLITAN PUBLICATIONS, INC.
SPELLBINDERS. II
PRINTED IN THE UNITED STATES OF AMERICA
TO MY FATHER
WILLIAM E. CULKIN
WHO HAS TAUGHT ME OF POLITICS

AND PHILOSOPHY
CONTENTS
CHAPTER PAGE
I AT THE BROWNLEYS’ 11
II FREDA 30
III ON THE STUMP 36
IV CITY MICE 45
V A HUSBAND 64
VI MARGARET 76
VII AN UGLY GLIMPSE 87
VIII ADVENTURE 97
IX WORK FOR FREDA 108
X THE CLEAN WIND 116
XI NEWSPAPER CUTS 126
XII GREGORY LECTURES 135
XIII LIFE ENTRUSTED 141
XIV WHAT WAS TO BE EXPECTED 152
XV THE CONVENTION 174
XVI MR. SABLE STARTS SOMETHING 188
XVII GAGE FINISHES IT 207
XVIII IN HOSPITAL 220
XIX MENTAL SURGERY 229
XX BARBARA BREAKS LOOSE 243
XXI WALTER’S SOLUTION 259
XXII THE MOURNERS 272
XXIII RESPITE 278
SPELLBINDERS
CHAPTER I
AT THE BRONWLEYS’
G AGE FLANDON put his wife’s fur cloak around her and stood back,
watching her as she took a final glance into the long mirror in the hall.
“I’m quite excited,” she said. “Margaret always excites me and I do
want you to meet her. She really must come to stay with us, Gage.”
“If you like. I’m not so keen.”
“Afraid of strong-minded women?”
“It’s not their strong minds I’m afraid of, Helen.”
“Their alluring personalities?” She slipped an arm into his and led him to
the door.
“Not even that. Their horrible consciousness—self-consciousness. Their
nervousness. Their aggressiveness. Most of all, I hate the idea of their effect
on you.”
“You sound as if whole cohorts of strong-minded rapacious women were
storming the city instead of one old college friend of mine come to bolster
up the fortunes of your own political party.”
Flandon helped her into the automobile.
“You know what I mean,” he said briefly.
He stayed silent and Helen Flandon left him to it. But even in the
darkness of the car he could feel her excitement and his own irritation at it
bothered him. There was no reason, he told himself, to have conceived this
prejudice against this friend of Helen’s, this Margaret Duffield. Except that
he had heard so much about her. Except that she was always being quoted
to him, always writing clever letters to his wife, producing exactly that
same nervous excitement which characterized her mood to-night. An
unhealthy mood. He hated fake women, he told himself angrily, and was
angry at himself for his prejudice.
“It’s too bad to drag you out to meet her. But I couldn’t go to the
Brownleys’, of all places, alone, could I?”
“Of course not. I don’t mind coming. I want to see Brownley anyway. I
don’t mind meeting your friend, Helen. Probably I’ll like her. But I don’t
like to see you excited and disturbed as she always makes you. Even in
letters.”
“Nonsense.”
“No—quite true. You’re not real. You begin by wondering whether
you’ve kept up to the college standard of women again. You wonder if
you’ve gone to seed and begin worrying about it. You get different. Even to
me.”
“How foolish, Gage.”
Her voice was very sweet and she slipped along the seat of the car until
she was pressed close beside him. He turned her face up to his.
“I don’t care what the rest of the fool women do, Helen. But I do so love
you when you’re real—tangible—sweet.”
“I’m always real, about five pounds too tangible and invariably sweet.”
“You’re utterly unreliable, anyway. You promised me you’d keep clear
of this political stuff at least for a while. You quite agreed with me that you
were not the kind of person for it. Then along comes this Duffield woman
to stir up things and you forget everything you said to me and are off in
Mrs. Brownley’s train.”
“I’m not in anybody’s train, Gage.” Mrs. Flandon straightened up. “And
I don’t intend to be in anybody’s train. But it’s a different thing to show
decent interest in what other women are thinking and doing. Perhaps you
don’t want me to read the newspapers either.”
“I merely want you to be consistent. I don’t want you to be one of these
—”
“Fake women,” supplied his wife. “You repeat yourself badly, dear.”
Entering the Brownley drawing-room a few minutes after his wife, Gage
found no difficulty in picking out the object of his intended dislike. She was
standing beside Helen and looked at him straightly at his entrance with a
level glance such as used to be the prerogative of men alone. He had only a
moment to appraise her as he crossed the room. Rather prettier—well, he
had been warned of that, she had carried the famous Daisy Chain in college,
—cleverly dressed, like his own wife, but a trifle more eccentric perhaps in
what she was wearing. Not as attractive as Helen—few women were that
and they usually paled a little beside her charm. A hard line about her
mouth—no, he admitted that it wasn’t hard—undeveloped perhaps. About
Helen’s age—she looked it with a certain fairness—about thirty-one or two.
She met him with the same directness with which she had regarded him,
giving him her hand with a charming smile which seemed to be deliberately
purged of coquetry and not quite friendly, he felt, though that, he quickly
told himself, must be the reflection of his own mood.
“And how do you find Helen?” he asked her.
“Very beautiful—very dangerous, as usual.”
“Dangerous?”
“Helen is always dangerous. She uses her power without directing it.”
He had a sense of relief. That was what he had been feeling for. That was
the trouble with Helen. But on that thought came quickly irritation at the
personal comment, at the divination of the woman he disapproved of.
“It is sometimes a relief,” he said, “to find some woman who is not
deliberately directing her powers.”
“You make my idea crystallize into an ugly thought, Mr. Flandon. It’s
hardly fair.”
There she was, pulling him into heavy argument. He felt that he had
been awkward and that it was entirely her fault. He took refuge in the
commonplaces of gallantry.
“Ugly thoughts are impossible in some company. You’re quite mistaken
in my meaning.”
She smiled, a half amused smile which did not so much reject his
compliment as show him how impervious she was to such things.
Deliberately she turned to Helen who had been enveloped by the ponderous
conversation of the host. Mr. Brownley liked to talk to Helen and Helen was
giving him that absorbed attention which she usually gave to any man.
Gage and Margaret joined them, and as if she wondered at the brevity of
their initial exchange, Helen gave them a swift glance.
“Well,” she said, “have the feminist and the anti-feminist found peace in
each other?”
“She refuses to be complimented,” grinned Gage, rather sheepishly,
immensely grateful to Helen for making a joke of that momentary
antagonism.
“Have women given up their liking for compliments?” Mr. Brownley
beamed upon them beneficently, quite conscious of his ability to remain
gallant in his own drawing-room. “Not these women surely.”
Gage flushed a little. It was almost what he himself had said. It had been
his tone.
“We have been given so much more than compliments, Mr. Brownley,”
said Margaret Duffield, “that they seem a little tasteless after stronger
food.”
“Not tasteless to most of us. Perhaps to a few, like Margaret. But most of
us, men and women, will like them as long as we have that passion for
appearing to ourselves as we would like to be and not as we are.”
Over recovered ease of manner, Gage smiled at Helen. She had taken
that up neatly. She had penetration, not a doubt of it. Why did she try then
to subordinate herself to these other women, people like this Duffield girl,
these arrogant spinsters? He greeted his hostess, who came from the library,
where a group of people were already settled about the card tables.
“Will you make a fourth with the Stantons and Emily Haight, please,
Gage? You like a good game and Emily can furnish it.”
Mrs. Brownley was a tall, elaborately marcelled woman of about fifty.
Handsome, people said, as they do say it of a woman who commands their
eyes even when the sex attraction has gone. She had the ease of a woman
whose social position is of long standing, the graciousness of one who has
nothing to gain and the slight aggressiveness of one who has much to
bestow. Gage liked her. He remembered distinctly the time of her reign as
one of the “younger matrons”—he had been a boy home from college
when, at thirty-five, Mrs. Brownley, successfully the mother of two
children, was dominating the gayety of the city’s social life. Just as now—
her hair gray and marcelled, and her dancing vivacity cleverly changed into
an eagerness of interest in “welfare work” or “civic activity”—she released
energies more in keeping with her age.
“I’ll go anywhere you want me to,” he said, “I’ll play checkers or casino.
I’ll do anything—except talk to feminist females.”
“Well, Emily’s surely no feminist—go along then—”
It was a very small party, a dinner of ten to which the Flandons had not
been able to come because of a late afternoon meeting at Gage’s office. So
he and Helen had come along later, informally, to meet the guest of honor,
now sitting with Helen on a divan, out of the range of the card players.
“Have you begun operations yet?” Helen was asking.
“Oh, no. It’s a very vague job I have and you mustn’t expect too much. I
am not supposed to interfere with any local activities—just lend a hand in
getting new women interested, speaking a bit, that sort of thing, rousing up
women like you who ought to be something more than agreeable
dilettantes.”
“If I’m agreeable—” began Helen.
“I won’t be put off. You write that nonsense in your letters. Why aren’t
you interested in all this?”
“I truly am. Very noticeably. I’m secretary to this and treasurer to that—
all the women’s things in town. On boards of directors—no end.”
“And you care about them as much as your tone shows. Are you
submerged in your husband then?”
“He’d love to hear you say that. Love you for the suspicion and hate you
for the utterance. No—hardly submerged. He’s a very fascinating person
and I’d go almost any lengths—but hardly submerged. Where did you get
the word anyway? Ultra-modern for subjugated? Gage is good to me. Lets
me go and come, unchallenged—doesn’t read my letters—”
“Stop being an idiot. I’m not insinuating things against Gage. What I’m
trying to find out is what you are interested in.”
“I’m interested in so many things I couldn’t begin to tell you.
Psychoanalysis—novels—penny lunches—you—Mrs. Brownley’s career as
a politician—my beloved babies—isn’t that enough?”
“I’m not at all sure that it is enough.”
“Well, then you shall find me a new job and I’ll chuck the old ones. Tell
me about yourself. I hardly had a chance to hear the other day. So the great
Harriet Thompson sent you out to inspire the Middle West with love of the
Republican party? It’s hardly like you, Margaret, to be campaigning for
anything so shopworn as the Republican party.”
“I do that on the side. What I do primarily is to stir up people to believe
in women—especially women in women.”
“Then you don’t believe in the G. O. P.”
“I’m not a campaign speaker, Helen. I’m an organizer. Of course I think
I’d rather have the Republicans in than the Democrats for certain obvious
reasons but if you mean that I think the Republican candidate will be a
Messiah—I don’t. Gage is a Republican—how about you?”
“Half Republican—half Socialist.”
“The extent of your Socialism is probably a subscription to a couple of
magazines.”
“About.”
“You ought to focus on something, I think.”
“Go on. It does me good. After years of hearing mouthing nonsense,”
Helen spoke with sudden heat, “of hearing people say ‘How wonderful you
are, Mrs. Flandon’ and ‘How do you manage to do so much, Mrs.
Flandon?’ and all sorts of blithering compliments, it’s wonderful to listen to
you. Though I’m not sure I could focus if I wanted to—at least for any
definite period. I do, for a while, and then I swing back to being very
desperately married or extremely interested in something else. You can’t put
Gage in a corner like some husbands, you know, Margaret.”
“I should imagine not.”
“Suppose,” said Mrs. Brownley, coming up to them, now that her other
guests were disposed of, “that we have a little talk while the others are busy
and plan our work a little. You don’t really mean to carry Miss Duffield off,
do you, Helen?”
“I must, Mrs. Brownley. I’ve been trying for years to get this young
woman to visit me and, now that she is in the city, I couldn’t let her stay
with any one else. I didn’t have any idea that she was going to be the
organizer sent by the Women’s Republican Committee.”
“I wouldn’t have been sent either, if Mrs. Thompson hadn’t been
dreadfully short of workers. But she was, and I know her very well and
though she knows I only go with her part way, I promised to do the best I
could to organize things for her and get the women interested, even if I
couldn’t speak in behalf of the party and its candidates. You see, Mrs.
Brownley, we’ve done so much organization for suffrage work among
women that it comes pretty naturally to us to do this other work, just as it
does to you.”
Mrs. Brownley nodded.
“You’ll be an immense help, Miss Duffield. What I had sketchily
planned was a series of small meetings in the city, lasting over a period of a
couple of weeks and then a big rally of all the women. You assure yourself
of your audience for the big meeting by working up the small ones.”
“We must have some good speakers,” said Margaret, “I am sure the
National Committee will send us those from time to time.”
“The heavy work will be in the country districts.”
“I suppose so. The women there will have to be rounded up and we
should have some women of influence from the country districts to work
with us. Can you find some?”
“There are some,” answered Mrs. Brownley, “who’ve done a good deal
of club work. There’s a Mrs. Ellsmith and there’s a new district chairman
for the Federated Clubs who seems to be a bright little woman—a Mrs. Eric
Thorstad. She comes from Mohawk, about seventy miles out of the city. It’s
a Normal School town, quite a little center for the surrounding villages. We
might write to her.”
“We ought to see her,” answered Margaret, “it works better. The more
personal contact you get with the women now, the better. Why can’t we go
to Mohawk—is that what you called it?—and some of the surrounding
towns and do a little rounding up?”
“We could—very easily. Mr. Brownley would let us have the Etta—
that’s the special car on his railroad which runs through all that country.”
“I think it would be better not. That identifies us too much, if you don’t
mind my saying it, with the railroad. No—let’s take the regular trains. And
make this person come with us to do a little talking.” She indicated Helen
with a laugh.
“I’ll come,” said Helen, “of course.”
She sat back, as Margaret Duffield went on talking in her deft, sure way,
outlining the work to be done. It seemed to Helen that Margaret had hardly
changed in eight years. She had been just like this in college, eager,
competent, doing things for suffrage, talking feminism. Well, so had Helen,
herself. But something had changed her point of view subtly. Was it being
married, she wondered? She couldn’t rouse her enthusiasms really over all
this woman business any more. Was it laziness? Was it lack of inspiration?
Had she been making too many concessions to Gage’s ideas? She must
have Margaret at her house. She wanted to see her and Gage in action. How
they would row! She laughed a little to herself, thinking of Gage. The warm
little feeling crept over her that always returned as she thought of him. How
foolish Margaret was to miss all that—living with a man. Suddenly she felt
expanded, experienced. She wanted to do something to show that all her
discontents had vanished. She had been nervous and dissatisfied since
Margaret had come. Well, she had come, and Helen had measured herself
up beside her, fearful of shrinkage in her own stature. What was it that to-
night had reassured her, made her feel that Margaret had not really gone
beyond her, that she was not really jealous of Margaret’s kind of life?
The others were still talking of projected trips into the country. “Let’s go
then,” said Helen, leaning forward, “and get them so stirred up that we
leave all the old farmers gasping. Let’s start a rebellion of country women.
Let’s get them thinking!”
Margaret stared at her.
“That sounds more like you!” she exclaimed.
“I’m full of energy,” said Helen, on her feet now. “Margaret, you must
come to my house within three days or I’ll send a policeman for you. And
now I’m going to break up Gage’s bridge game.”
She could break it up. Gage was immediately conscious of her. As she
sat beside him, pretending quiet and interest, he could feel that she was
neither quiet nor interested. He was pleased that she had broken away from
the Duffield girl to come to him. He wanted to acknowledge it. To throw
down his cards and put his arms about her. Since he couldn’t do that he kept
on thinking of it.
“You bring us bad luck, Mrs. Flandon,” said Gage’s partner, with a
flavor of tartness.
She rose again, laying her hand lightly on her husband’s shoulder.
“Driven away from the serious minded everywhere. If I go into the
music room and shut the door tightly, may I play?”
That she knew would disturb Gage too. And she couldn’t help disturbing
him. She would play the things that held especial meanings for him and her.
She would play the things which she had used to play in college for
Margaret on Sunday evenings, set her by the ears too, startle her out of her
seriousness as she had used to startle her. She would arouse in Margaret
some of those emotions which couldn’t be dead. She would find out if she
had those emotions still.
Then over the first notes she forgot what she meant to do. She was alone
with herself—she had forgotten the others. And because she had forgotten,
the things happened to the others as she had meant them to happen. Gage,
bidding deliberately to make his hand the dummy, left the card table and
outside the door of the music room found Margaret, also listening. They
took refuge in immediate conversation.
“So she keeps up her music,” said Margaret.
“Yes. She works several hours a day. And we have an excellent teacher
out here in the wilderness.”
With a formal excuse, he returned to his bridge game.
II
At midnight Mrs. Brownley broke up the bridge by summoning the

players to the dining room where there were iced drinks and sandwiches.
Mrs. Brownley did that sort of thing extremely well. Men used to say with
gratitude that she knew enough not to keep them up all night, and her
informal buffet suppers closed the evening comfortably for them. It was a
“young” crowd to-night—not young according to the standards of the
débutante Brownleys but people between thirty and forty. The Stantons,
whom everybody had everywhere because they were good company and
perfectly fitting in any group. Emily Haight, who had become ash-blond
and a little caustic with the decreasing possibilities of a good marriage but
whom every one conceded had a good mind, who “read everything” and
played a master hand of bridge. She had sat next to Walter Carpenter at
dinner, as she inevitably was placed when they were in the same company,
because they had known each other so well and long and because it seemed
to be in the back of people’s mind that steady propinquity ought to produce
results in emotion. He was quite the person for Emily—about her age, well-
to-do, popular, keen-minded. But to-night at dinner he had devoted himself
almost pointedly to Margaret Duffield. They had rallied him afterwards at
the card table about his sudden interest in feminism and he had smiled his
self-controlled smile and let them have their joke. He had played cards with
Jerrold Haynes, another of Mrs. Brownley’s “intellectuals,” who had
written a book once, and had it published (though never another), and who
managed to concoct, with the help of Helen Flandon, almost all the clever
remarks which were au courant in their particular circle. He and Carpenter
had tried to make Margaret play bridge but she had told them that she
couldn’t, reducing them to a three-handed game which they were ready to
abandon at twelve o’clock.
Jerrold went as usual to Helen’s side. There was a friendship between
them which bathed in a kind of half-serious worship on his part and a
bantering comradeship on hers. They sat together in a corner of the long,
oak-paneled dining room and made conversation about the others,
conversation for the sake of clever words.
“Walter has made his way to the candle flame again. He seems to have
been captured,” said Jerrold.
Helen looked across the room curiously. Gage and Walter were both
talking to Margaret who was standing in a little glow of electric candle
light. Helen remembered that in college Margaret had done her hair that
same way, in a loose knot modeled after some sculptured Psyche.
“Don’t you think she is lovely?” she asked more in comment than
question.
“Do you mean beautiful?”
“Well—what do you think?”
“I don’t quite think of her as a woman.”
“Silly stuff—”
“No, truly. Most women you sense. They either try to use their sex to
allure or impress you or else they repress it for any one of a dozen reasons.
She—somehow seems to lack it.”
“It’s not so easy as that, Jerrold, you phrase-maker. I’ve known her a
long while and I have no idea whether she’s in love, has been in love,
yearns after or fights against it. You guess boldly, but probably not well.”
“Maybe not. You must tell me if I am right and you find it out.”
There was a sound of motors in the drive outside, then high pitched
voices, and Mrs. Brownley went out into the hall.
“Isn’t this early for the youngsters?” asked Gage.
They all laughed but though the conversation went on as before, an
anticipation rested on them all. Against the background of the chattering
voices in the hall, they seemed a little subdued, waiting.
Allison Brownley pushed her escort in. He seemed to be reluctant but
she had her hands on his back and he came through the door, stumbling.
“We can come to the high brow party, can’t we?” cried Allison. “Can’t
we have some food? We’re perfectly starved and there wasn’t a table to be
had at the Rose Garden.”
“I knew you must have been driven out of everywhere to come home
this early,” called Gage, “though of course young men in the banking
business might benefit by somewhat earlier hours.”
The young man laughed awkwardly. He was a rather pale, small young
man, badly dwarfed by Gage’s unusual bulk and suggesting a consciousness
of it when he tried to draw Allison to the other end of the room. But she
preferred Gage for the moment. She was not a pretty girl though she made
that negligible. What was important about her was her vigor and her
insolent youngness. Her hair was cut just below her ears and curled under in
an outstanding shock and her scarlet evening dress and touches of rouge
made Margaret, as she stood beside her, seem paler, older, without vigor.
But she stood there only a moment, poised. Then the others, six of them,
had invaded the dining room. Giggling, spurting into noisy laughter at
unrevealed jokes, eating greedily, separating from the older people as if
nothing in common could be conceived among them, they went to the
farther end of the room, Allison with some youthfully insolent remark
hurled back at Gage.
The others seemed suddenly conscious that it was midnight—the time
when only extreme youth had a right to be enjoying itself. They took upon
themselves the preliminary airs of departure. But Helen, separating herself
from the group, went down the room to the young people.
They had settled into chairs and began to rise a little awkwardly but she
did not let them, sitting down herself on the arm of Allison’s chair and
bending to talk to them all. They burst into gales of laughter at something
she said. Gage and Jerrold watched her from the other end of the room.
It was wonderful, thought Gage, how even beside those young faces, her
beauty stood out as more brilliant. How her hair shone under those soft
lights! How golden, mellow, she was in every gesture!
Jerrold, in need of some one to whom to comment, isolated Margaret.
“Watch your amazing friend,” he said, “those children made us feel old
and stiff muscled. See how she is showing us that they are raw and full of
angles.”
“Is it important?” asked Margaret.
“I suppose not. Except that it is a time when youth seems to be pretty
securely on the throne of things. And I like to see it get a jolt.”
III
All the way home, Gage had wanted to say something to his wife,
something in appreciation of her beauty, something to still somehow the
desire to express his love. As they stood for a moment in their hallway he
sought for but could not find the words. There was in him a conflicting, a
very definite enmity to her consciousness of her powers. He did not want to
increase it. It seemed to him that to have her know her charm meant that she
would lose it. He had seen her lose it so. When he felt that she was
deliberate—
“You were very charming to-night, dearest.”
“The first duty of a woman,” she laughed, “is to be charming, if she
can.”
There it was. She had set him back. He felt it cruelly. Why hadn’t she
simply turned and thanked him, given him the caress he was waiting for?
Why had she made it all what he suspected? She had planned every move.
Probably planning now—he became stubborn, thwarted, angry.
“I didn’t care much for your friend,” he said, lighting his cigarette.
“No? But you won’t mind my having her here.”
“Well, as you know, I’d much prefer not. I don’t think that sort of
woman a healthy influence.”
“And yet you know, Gage, I might be getting a little tired of merely
healthy influences. The change might set me up.”
She too was strangely angry. She had been thrilled all evening by the
thought of this home-coming. She had been saving up emotions to throw
her into Gage’s arms. She wanted to feel—to tell him she loved him. He
was making it impossible.
They stood there, longing for each other, yet on guard mentally, afraid of
the other’s thrust, the other’s mockery.
“Of course I can’t refuse to let you have any friend of yours here at the
house. Only if she comes, I do wish you’d excuse me as much as possible. I

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Preface xv Part 5 money and PriCes in THe

Part 2 suPPly and demand: How markeTs

Preface xv Principle #10: Society Faces a Short-Run Tradeoff

How People Interact 9 Let’s Get Going 36

chapter 3 Markets and Competition 68

A Parable for the Modern Economy 50 Demand 69

The Components of GDP 105

Population Growth 161 Job Search 204

The Kinds of Money 223 Menu Costs 262

Interest Rate Determination in a Small Open Economy with

chapter 13 Three Key Facts about Economic Fluctuations 334

The Phillips Curve 418

Should Governments Balance Their Budgets? 460

Should the Tax Laws Be Reformed to Encourage

HOW THE BOOK IS ORGANIZED

The Fundamental Tools of Supply and Demand

Figures and Tables Colourful and eye-

Key Concept Definitions When key concepts

QuickQuizzes After each major section,

Chapter summaries Each chapter ends with a

List of Key Concepts A list of key concepts at

Questions for Review At the end of each chapter

Problems and Applications Each chapter also

NEW IN THIS SIXTH CANADIAN EDITION

Chapter 1 A new In the News feature discusses the Vancouver Olympic

Chapter 3 The “Applications of Comparative Advantage” section has been

Chapter 4 A significant addition to this edition is the new appendix “The

Chapter 6 A shorter, straightforward discussion of real and nominal interest

Chapter 7 A new In the News feature presents an article by economist Daron

Chapter 8 The existing case study, “The Accumulation of Government Debt in

Chapter 11 A new section discusses how deflation may be just as dangerous to

Chapter 16 A new FYI feature discusses why expectations of inflation are

Chapter 17 A new FYI feature describes price targeting, a new approach to

neTA engagement presents materials that help instructors deliver engaging

neTA Assessment relates to testing materials. Under NETA Assessment,

Author: Margaret Culkin Banning

Release date: December 22, 2023 [eBook #72473]

Original publication: NYC: George H. Doran Company, 1922

Credits: Chuck Greif and the Online Distributed Proofreading Team

*** START OF THE PROJECT GUTENBERG EBOOK

COPYRIGHT, 1922, BY THE METROPOLITAN PUBLICATIONS, INC.

PRINTED IN THE UNITED STATES OF AMERICA

WHO HAS TAUGHT ME OF POLITICS

At midnight Mrs. Brownley broke up the bridge by summoning the

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