Economics

Title
Contents
Part I INTRODUCTION: THINKING LIKE AN ECONOMIST
	1 Economics and Economic Reasoning
		What Economics Is
			Scarcity
				Modern Economics
		A Guide to Economic Reasoning
			Marginal Costs and Marginal Benefits
				Economics and Passion
				Opportunity Cost
				Economic and Market Forces
		Economic Terminology
		Economic Insights
			The Invisible Hand Theorem
				Economic Theory and Stories
				Microeconomics and Macroeconomics
		Economic Institutions
		Economic Policy Options
			Objective Policy Analysis
				Policy and Social and Political Forces
		Conclusion
	2 The Production Possibility Model, Trade, and Globalization
		The Production Possibilities Model
			A Production Possibility Curve for an Individual
				Increasing Marginal Opportunity Cost
				Comparative Advantage
				Efficiency
				Distribution and Productive Efficiency
				Examples of Shifts in the PPC
		Trade and Comparative Advantage
			Markets, Specialization, and Growth
				The Benefits of Trade
				Comparative Advantage and the Combined PPC
				U.S. Textile Production and Trade
				Outsourcing, Trade, and Comparative Advantage
		Conclusion
		Appendix A Graphish: The Language of Graphs
	3 Economic Institutions
		The U.S. Economy in Historical Perspective
			How Markets Work
				What’s Good about the Market?
				Capitalism and Socialism
				Evolving Economic Systems
		The U.S. Economy
			Business
				Households
				Government
		Global Institutions
			Global Corporations
				Coordinating Global Issues
		Conclusion
		Appendix A: The History of Economic Systems
	4 Supply and Demand
		Demand
			The Law of Demand
				The Demand Curve
				Shifts in Demand versus Movements along a Demand Curve
				Shift Factors of Demand
				A Review
				The Demand Table
				From a Demand Table to a Demand Curve
				Individual and Market Demand Curves
		Supply
			The Law of Supply
				The Supply Curve
				Shifts in Supply versus Movements along a Supply Curve
				Shift Factors of Supply
				A Review
				The Supply Table
				From a Supply Table to a Supply Curve
				Individual and Market Supply Curves
		The Interaction of Supply and Demand
			Equilibrium
				What Equilibrium Isn’t
				Political and Social Forces and Equilibrium
				Shifts in Supply and Demand
		The Limitations of Supply/Demand Analysis
		Conclusion
	5 Using Supply and Demand
		Real-World Supply and Demand Applications
			The Price of a Foreign Currency
				A Review
		Government Intervention in the Market
			Price Ceilings
				Price Floors
				Excise Taxes
				Quantity Restrictions
				Third-Party-Payer Markets
		Conclusion
		Appendix A: Algebraic Representation of Supply, Demand, and Equilibrium
	6 Thinking Like a Modern Economist
		The Nature of Economists’ Models
			Scientific Engineering Models
				Behavioral and Traditional Building Blocks
				Behavioral Economic Models
				The Advantages and Disadvantages of Modern Traditional and Behavioral Models
		Types of Models
			Behavioral and Traditional Informal (Heuristic) Models
				Empirical Models
				The Role of Formal Models
		What Difference Does All This Make to a Policy?
		Conclusion
Part II MICROECONOMICS
	Section I The Power of Traditional Economic Models
		7 Describing Supply and Demand: Elasticities
			Price Elasticity
				What Information Price Elasticity Provides
				Classifying Demand and Supply as Elastic or Inelastic
				Elasticity Is Independent of Units
			Calculating Elasticities
				Other Examples
			Elasticity and Supply and Demand Curves
				Elasticity Is Not the Same as Slope
					Elasticity Changes along Straight-Line Curves
			Substitution and Elasticity
				Substitution and Demand
					Substitution and Supply
					How Substitution Factors Affect Specific Decisions
					Empirical Estimates of Elasticities of Demand and Supply
			Elasticity, Total Revenue, and Demand
				Total Revenue along a Demand Curve
					Elasticity of Individual and Market Demand
			Other Elasticity Concepts
				Income Elasticity of Demand
					Cross-Price Elasticity of Demand
					Some Examples
			The Power of Supply/Demand Analysis
				When Should a Supplier Not Raise Price?
					Elasticity and Shifting Supply and Demand
			Conclusion
		8 Taxation and Government Intervention
			Producer and Consumer Surplus
			Burden of Taxation
				Who Bears the Burden of a Tax?
					Tax Incidence and Current Policy Debates
			Government Intervention
				Government Intervention as Implicit Taxation
					Rent Seeking, Politics, and Elasticities
			Conclusion
		9 International Trade Policy, Comparative Advantage, and Outsourcing
			Patterns of Trade
				Increasing but Fluctuating World Trade
					Differences in the Importance of Trade
					What and with Whom the United States Trades
					Debtor and Creditor Nations
			The Principle of Comparative Advantage
				The Gains from Trade
					Dividing Up the Gains from Trade
			Comparative Advantage in Today’s Economy
				Other Sources of U.S. Comparative Advantage
					Some Concerns about the Future
			Varieties of Trade Restrictions
				Tariffs and Quotas
					Voluntary Restraint Agreements
					Embargoes
					Regulatory Trade Restrictions
					Nationalistic Appeals
			Reasons for Trade Restrictions
				Unequal Internal Distribution of the Gains from Trade
					Haggling by Companies over the Gains from Trade
					Haggling by Countries over Trade Restrictions
					Specialized Production
					Macroeconomic Aspects of Trade
					National Security
					International Politics
					Increased Revenue Brought in by Tariffs
			Why Economists Generally Oppose Trade Restrictions
				Free Trade Increases Total Output
					International Trade Provides Competition
					Restrictions Based on National Security Are Often Abused or Evaded
					Trade Restrictions Are Addictive
			Institutions Supporting Free Trade
			Conclusion
	Section II Choice and Decision Making
		10 The Logic of Individual Choice: The Foundation of Supply and Demand
			Utility Theory and Individual Choice
				Total Utility and Marginal Utility
				Diminishing Marginal Utility
			Rational Choice and Marginal Utility
				Some Choices
				The Principle of Rational Choice
				Simultaneous Decisions
			Maximizing Utility and Equilibrium
				An Example of Maximizing Utility
				Extending the Principle of Rational Choice
			Rational Choice and the Laws of Demand and Supply
				The Law of Demand
				Income and Substitution Effects
				The Law of Supply
				Opportunity Cost
			Applying Economists’ Theory of Choice to the Real World
				The Cost of Decision Making
				Given Tastes
				Utility Maximization
			Conclusion
			Appendix A: Indifference Curve Analysis
		11 Game Theory, Strategic Decision Making, and Behavioral Economics
			Game Theory and the Economic Way of Thinking
				The Flexibility of Game Theory
				Game Theory and Economic Modeling
			The Game Theory Framework
			The Prisoner’s Dilemma
				Dominant Strategies and Nash Equilibrium
			An Overview of Game Theory as a Tool in Studying Strategic Interaction
				Some Specific Games
				Strategies of Players
			Informal Game Theory and Modern Behavioral Economics
				Informal Game Theory
				Real-World Applications of Informal Game Theory
				An Application of Game Theory: Auction Markets
			Behavioral Economics and Game Theory
				Games and Perceptions of Fairness
				Loss Aversion and Incorrect Inference
				Framing Effects
				Behavioral Economics and the Traditional Model
				The Importance of the Traditional Model: Money Is Not Left on the Table
			Conclusion
	Section III Production and Cost Analysis
		12 Production and Cost Analysis I
			The Role of the Firm
				Firms Maximize Profit
			The Production Process
				The Long Run and the Short Run
				Production Tables and Production Functions
				The Law of Diminishing Marginal Productivity
			The Costs of Production
				Fixed Costs, Variable Costs, and Total Costs
				Average Total Cost, Average Fixed Cost, and Average Variable Cost
				Marginal Cost
			Graphing Cost Curves
				Total Cost Curves
				Average and Marginal Cost Curves
				Downward-Sloping Shape of the Average Fixed Cost Curve
				The U Shape of the Average Cost Curves
				The Relationship between the Marginal Productivity and Marginal Cost Curves
				The Relationship between the Marginal Cost and Average Cost Curves
			Intermission
		13 Production and Cost Analysis II
			Making Long-Run Production Decisions
			Technical Efficiency and Economic Efficiency
			Determinants of the Shape of the Long-Run Cost Curve
				Economies of Scale
				Diseconomies of Scale
				Constant Returns to Scale
				The Importance of Economies and Diseconomies of Scale
			Envelope Relationship
			Entrepreneurial Activity and the Supply Decision
			Using Cost Analysis in the Real World
				Economies of Scope
				Learning by Doing and Technological Change
				Many Dimensions
				Unmeasured Costs
				The Standard Model as a Framework
			Conclusion and a Look Ahead
			Appendix A: Isocost/Isoquant Analysis
	Section IV Market Structure
		14 Perfect Competition
			A Perfectly Competitive Market
				The Necessary Conditions for Perfect Competition
				The Definition of Supply and Perfect Competition
				Demand Curves for the Firm and the Industry
			The Profit-Maximizing Level of Output
				Marginal Revenue
				Marginal Cost
				Profit Maximization: MC 5 MR
				The Marginal Cost Curve Is the Supply Curve
				Firms Maximize Total Profit
				Profit Maximization Using Total Revenue and Total Cost
			Total Profit at the Profit-Maximizing Level of Output
				Determining Profit from a Table of Costs and Revenue
				Determining Profit from a Graph
				The Shutdown Point
			Short-Run Market Supply and Demand
			Long-Run Competitive Equilibrium
			Adjustment from the Short Run to the Long Run
				An Increase in Demand
				Long-Run Market Supply
				An Example in the Real World
			Conclusion
		15 Monopoly
			The Key Difference between a Monopolist and a Perfect Competitor
			A Model of Monopoly
				Determining the Monopolist’s Price and Output Numerically
				Determining the Monopolist’s Price and Output Graphically
				Comparing Monopoly and Perfect Competition
				An Example of Finding Output and Price
			Profits and Monopoly
				A Monopolist Making a Profit
				A Monopolist Breaking Even and Making a Loss
			The Welfare Loss from Monopoly
			The Price-Discriminating Monopolist
			Barriers to Entry and Monopoly
				Natural Ability
				Economies of Scale
				Government-Created Monopolies
			Normative Views of Monopoly
			Government Policy and Monopoly: AIDS Drugs
			Conclusion
			Appendix A: The Algebra of Competitive and Monopolistic Firms
		16 Monopolistic Competition and Oligopoly
			Characteristics of Monopolistic Competition
				Many Sellers
				Product Differentiation
				Multiple Dimensions of Competition
				Ease of Entry of New Firms in the Long Run
			Output, Price, and Profit of a Monopolistic Competitor
				Comparing Monopolistic Competition with Perfect Competition
				Comparing Monopolistic Competition with Monopoly
				Advertising and Monopolistic Competition
			Characteristics of Oligopoly
			Models of Oligopoly Behavior
				The Cartel Model
				The Contestable Market Model
				Comparison of the Contestable Market Model and the Cartel Model
			Classifying Industries and Markets in Practice
				The North American Industry Classification System
				Empirical Measures of Industry Structure
				Conglomerate Firms and Bigness
				Oligopoly Models and Empirical Estimates of Market Structure
			Conclusion
			Appendix A: Game Theory and Oligopoly
	Section V Real-World Competition
		17 Real-World Competition and Technology
			The Goals of Real-World Firms and the Monitoring Problem
				Short-Run versus Long-Run Profit
				The Problem with Profit Maximization
				What Do Real-World Firms Maximize?
			The Lazy Monopolist and X-Inefficiency
				How Competition Limits the Lazy Monopolist
				Motivations for Efficiency Other Than the Profit Incentive
			The Fight between Competitive and Monopolistic Forces
				How Monopolistic Forces Affect Perfect Competition
				Economic Insights and Real-World Competition
				How Competitive Forces Affect Monopoly
				Competition and Natural Monopoly
			How Firms Protect Their Monopolies
				Cost/Benefit Analysis of Creating and Maintaining Monopolies
				Establishing Market Position
				Technology
			Technology, Efficiency, and Market Structure
				Perfect Competition and Technology
				Monopolistic Competition and Technology
				Monopoly and Technology
				Oligopoly and Technology
				Network Externalities, Standards, and Technological Lock-In
			Conclusion
		18 Antitrust Policy and Regulation
			Antitrust Policy: Judgment by Performance or Structure?
			History of U.S. Antitrust Laws
				The Sherman Antitrust Act
				The Standard Oil and American Tobacco Cases: Judging Market Competitiveness by Performance
				The Clayton Act and the Federal Trade Commission Act
				The ALCOA Case: Judging Market Competitiveness by Structure
				Judging Markets by Structure and Performance: The Reality
				Recent Antitrust Enforcement
			Three Modern Antitrust Cases
				The IBM Case
				The AT&T Case
				The Microsoft Case
				Google, the Internet, and Microsoft
				Assessment of U.S. Antitrust Policy
			Mergers, Acquisitions, and Takeovers
				Acquisitions and Takeovers
				Mergers
				Recent Merger Activity and Deacquisitions
				Assessment of Mergers and Acquisitions
			International Competition and Antitrust Policy in Other Countries
				European Antitrust Policy
				Globalization and Antitrust in the Future
				Sovereign Wealth Funds
			Regulation, Government Ownership, and Industrial Policies
				Regulation
				Government Ownership
				Industrial Policies
			Conclusion
	Section VI Factor Markets
		19 Work and the Labor Market
			The Supply of Labor
				Real Wages and the Opportunity Cost of Work
				The Supply of Labor and Nonmarket Activities
				Income Taxation, Work, and Leisure
				The Elasticity of the Supply of Labor
				Immigration and the International Supply of Labor
			The Derived Demand for Labor
				Factors Influencing the Elasticity of Demand for Labor
				Labor as a Factor of Production
				Shift Factors of Demand
			The Role of Other Forces in Wage Determination
			Imperfect Competition and the Labor Market
				Monopsony
				Union Monopoly Power
				Bilateral Monopoly
			Political and Social Forces and the Labor Market
				Fairness and the Labor Market
				Job Discrimination and the Labor Market
				The Evolution of Labor Markets
			Conclusion: The Labor Market and You
			Appendix A: Derived Demand
		20 Who Gets What? The Distribution of Income
			Ways of Considering the Distribution of Income
				The Lorenz Curve
				U.S. Income Distribution over Time
			Defining Poverty
				The Official Definition of Poverty
				Debates about the Definition of Poverty
				The Costs of Poverty
			Social and Economic Mobility
			International Dimensions of Income Inequality
				Comparing Income Distribution across Countries
				Income Distribution among Countries
				The Total Amount of Income in Various Countries
			The Distribution of Wealth
				A Lorenz Curve of the Distribution of Wealth
				How Much Wealth Do the Wealthy Have?
			Socioeconomic Dimensions of Income Inequality
				Income Distribution According to Socioeconomic Characteristics
				Income Distribution According to Class
			Income Distribution and Fairness
				Philosophical Debates about Equality and Fairness
				Fairness and Equality
				Fairness as Equality of Opportunity
			The Problems of Redistributing Income
				Three Important Side Effects of Redistributive Programs
				Politics, Income Redistribution, and Fairness
			Income Redistribution Policies
				Taxation to Redistribute Income
				Expenditure Programs to Redistribute Income
				How Successful Have Income Redistribution Programs Been?
			Conclusion
	Section VII Applying Economic Reasoning to Policy
		21 Market Failure versus Government Failure
			Market Failures
			Externalities
				A Negative Externality Example
				A Positive Externality Example
			Alternative Methods of Dealing with Externalities
				Direct Regulation
				Incentive Policies
				Voluntary Reductions
				The Optimal Policy
			Public Goods
				Excludability and the Costs of Pricing
			Informational Problems
				Policies to Deal with Informational Problems
			Government Failure and Market Failures
			Conclusion
			21W Politics and Economics: The Case of Agricultural Markets
		22 Behavioral Economics and Modern Economic Policy
			Behavioral Economic Policy in Perspective
				Behavioral Economics and Economic Engineering
				Modern Economists as Reverse Engineers
				Economists as Mechanism Design Engineers
				Behavioral Economics and Mechanism Design
			Policy Implications of Traditional Economics
			Choice Architecture and Behavioral Economic Policy
				Nudge Policy and Libertarian Paternalism
				When Are Nudges Needed?
				Two Types of Nudges
				The Problem of Deciding on and Implementing Nudges
				Distinguishing a Nudge from a Push
			The Behavioral and Traditional Economic Policy Frames
			Concerns about Behavioral Economic Policies
				Very Few Policies Meet the Criterion of Libertarian Paternalism
				Designing Helpful Policies Is Complicated
				It Isn’t Clear Government Knows Better
				Government Policy May Make the Situation Worse
			Conclusion: A Changing View of Economists: From Pro-market Advocates to Economic Engineers
		23 Microeconomic Policy, Economic Reasoning, and Beyond
			Economists’ Differing Views about Social Policy
				How Economists’ Value Judgments Creep into Policy Proposals
				The Need for a Worldview
			Agreement among Economists about Social Policy
			Economists’ Cost/Benefit Approach to Government Regulation
				The Value of Life
				Comparing Costs and Benefits of Different Dimensions
				Putting Cost/Benefit Analysis in Perspective
				The Problem of Other Things Changing
				The Cost/Benefit Approach in Context
			Failure of Market Outcomes
				Distribution
				Consumer Sovereignty and Rationality Problems
				Inalienable Rights
			Government Failure
			Conclusion
Part III MACROECONOMICS
	Section I Macroeconomic Problems
		24 Economic Growth, Business Cycles, Unemployment, and Inflation
			Two Frameworks: The Long Run and the Short Run
			Growth
				Global Experiences with Growth
				The Prospect for Future U.S. Growth
				The Benefits and Costs of Growth
			Business Cycles
				The Phases of the Business Cycle
				Why Do Business Cycles Occur?
				Leading Indicators
			Unemployment
				Unemployment as a Social Problem
				Unemployment as Government’s Problem
				Why the Target Rate of Unemployment Changed
				Whose Responsibility Is Unemployment?
				How Is Unemployment Measured?
				Unemployment and Potential Output
				Microeconomic Categories of Unemployment
			Inflation
				Measurement of Inflation
				Real and Nominal Concepts
				Expected and Unexpected Inflation
				Costs of Inflation
			Conclusion
		25 Measuring the Aggregate Economy
			Aggregate Accounting
				Calculating GDP
				The Components of GDP
				Two Things to Remember about GDP
				Calculating GDP: Some Examples
				Some Complications
				Calculating Aggregate Income
				Equality of Aggregate Income and Aggregate Production
			Using GDP Figures
				Comparing GDP among Countries
				Economic Welfare over Time
				Real and Nominal GDP
			Some Limitations of Aggregate Accounting
				GDP Measures Market Activity, Not Welfare
				Measurement Errors
				Misinterpretation of Subcategories
				Genuine Progress Indicator
			Conclusion
	Section II The Macroeconomic Framework
		26 Growth, Productivity, and the Wealth of Nations
			General Observations about Growth
				Growth and the Economy’s Potential Output
				The Importance of Growth for Living Standards
				Markets, Specialization, and Growth
				Economic Growth, Distribution, and Markets
				Per Capita Growth
			The Sources of Growth
				Growth-Compatible Institutions
				Investment and Accumulated Capital
				Available Resources
				Technological Development
				Entrepreneurship
				Turning the Sources of Growth into Growth
				Empirical Estimates of Factor Contribution to Growth
			The Production Function and Theories of Growth
				Describing Production Functions
				The Standard Theory of Growth—the Classical Growth Model
				The Convergence Debate
				New Growth Theory
				Growth Policies
			Conclusion
		27 The Aggregate Demand/Aggregate Supply Model
			The Historical Development of Modern Macro
				Classical Economists
				The Layperson’s Explanation for Unemployment
				The Essence of Keynesian Economics
			The AS/AD Model
			The Aggregate Demand Curve
				The Slope of the AD Curve
				Dynamic Price Level Adjustment Feedback Effects
				Shifts in the AD Curve
			The Short-Run Aggregate Supply Curve
				The Slope of the SAS Curve
				Shifts in the SAS Curve
			The Long-Run Aggregate Supply Curve
				A Range for Potential Output and the LAS Curve
				Shifts in the LAS Curve
			Equilibrium in the Aggregate Economy
				Integrating the Short-Run and Long-Run Frameworks
				The AS/AD Model and Dynamic Feedback Effects
				Aggregate Demand Policy
				Some Additional Policy Examples
			Why Macro Policy Is More Complicated Than the AS / AD Model Makes It Look
			Conclusion
		28 The Multiplier Model
			Aggregate Production
			Aggregate Expenditures
				Autonomous and Induced Expenditures
			Determining the Equilibrium Level of Aggregate Income
				The Multiplier Equation
				The Multiplier Process
				The Circular Flow Model and the Intuition behind the Multiplier Process
			The Multiplier Model in Action
				The Steps of the Multiplier Process
				Examples of the Effect of Shifts in Aggregate Expenditures
			Fiscal Policy in the Multiplier Model
				Fighting Recession: Expansionary Fiscal Policy
				Fighting Inflation: Contractionary Fiscal Policy
				Using Taxes Rather Than Expenditures as the Tool of Fiscal Policy
			Limitations of the Multiplier Model
				The Multiplier Model Is Not a Complete Model of the Economy
				Shifts Are Sometimes Not as Great as the Model Suggests
				Fluctuations Are Sometimes Greater Than the Model Suggests
				The Price Level Will Often Change in Response to Shifts in Demand
				People’s Forward-Looking Expectations Make the Adjustment Process Much More Complicated
				Shifts in Expenditures Might Reflect Desired Shifts in Supply and Demand
				Expenditures Depend on Much More Than Current Income
			Conclusion
			Appendix A: An Algebraic Presentation of the Expanded Multiplier Model
			Appendix B: The Multiplier Model and the AS/AD Model
		29 Thinking Like a Modern Macroeconomist
			Why It Is important to Know about Modern Macro Theory
			Engineering Models and Scientific Models
				Standard Models as Engineering Models and the Modern Model as a Scientific Model
				Engineering and Scientific Models Are Different Models
			From the Keynesian Revolution to Modern Macro Models
				The Emergence of the Keynesian Model
				A Model without Microfoundations
				Microfoundations and New Classical Macroeconomics
			A Beginner’s Guide to the DSGE Model
				A Single Immortal Consumer–Worker–Owner
				A Perfectly Conventional Time-Additive Utility Function
				Perfect Foresight or Rational Expectations
				Universal Price-Taking Behavior
			Policy Implications of the DSGE Model
				The Ricardian Equivalence Problem
				The Time-Inconsistency/Credibility Problem
				The Lucas Critique Problem
			How Relevant Are the Problems?
			Modern Macroeconomic Policy and the Collapse of the Tacoma Narrows Bridge
			The Complexity Approach to Macro: The Future of Modern Macro
			The Underlying Dynamic Assumptions of the Standard, DSGE, and Complex Systems Models
				The Standard Macro Model: Backward-Looking Expectations
				The DSGE Model: Rational Expectations
				Complex Systems Models: Smart People with Less-Than-Perfect Foresight
				Macroeconomics, Learning, and Behavioral Economics
			Agent-Based Computational Economic Models of the Macroeconomy
				The Limits of ACE Models
				Choosing the Right Model
			Conclusion
				Summary, Key Terms, Questions and Exercises, Questions from Alternative Perspectives, Issues to Ponder, Answers to Margin Questions 699–
	Section III Finance, Money, and the Economy
		30 The Financial Sector and the Economy
			Why Is the Financial Sector Important to Macro?
			The Role of Interest Rates in the Financial Sector
			The Definition and Functions of Money
				The U.S. Central Bank: The Fed
				Functions of Money
			Alternative Measure of Money
				M 1
				M 2
				Distinguishing between Money and Credit
			Banks and the Creation of Money
				How Banks Create Money
				The Money Multiplier
				Endogenous Money and Credit
				Faith as the Backing of Our Money Supply
			The Demand for Money and the Role of the Interest Rate
				Why People Hold Money
				Equilibrium in the Money Market
				The Many Interest Rates in the Economy
			Conclusion
			Appendix A: A Closer Look at Financial Assets and Liabilities
		31 Monetary Policy
			How Monetary Policy Works in the Models
			How Monetary Policy Works in Practice
				Monetary Policy and the Fed
				The Conduct of Monetary Policy
				The Fed Funds Market
			The Complex Nature of Monetary Policy
				The Taylor Rule
				Quantitative Easing
				Maintaining Policy Credibility
			Conclusion
		32 Financial Crises, Panics, and Macroeconomic Policy
			Why Are Financial Panics Scary?
			The Great Depression
				The Stock Market Crash of 1929
				The Financial Meltdown
			Understanding the 2008 Financial Crisis
				Stage 1: The Bubble Forms
				Stage 2: The Bubble Bursts
				Stage 3: Financial Meltdown and Possible Depression
			How Do Economies Get Out of a Financial Crisis?
				How the Government Responded to the Great Depression
				How the Government Responded to the
				Crisis
				The Problem of Financial Rehabilitation: Facing Withdrawal Pains
				Establishing Appropriate Financial Regulatory Rules
				General Principles of Regulation
			Conclusion
		33 Inflation and the Phillips Curve
			Some Basics about Inflation
				The Distributional Effects of Inflation
				Expectations of Inflation
				Productivity, Inflation, and Wages
			Theories of Inflation
				The Quantity Theory of Money and Inflation
				The Institutional Theory of Inflation
				Demand-Pull and Cost-Push Inflation
			Inflation and Unemployment: The Phillips Curve
				History of the Phillips Curve
				The Long-Run and Short-Run Phillips Curves
				Stagflation and the Phillips Curve
			The Relationship between Inflation and Growth
				Quantity Theory and the Inflation/Growth Trade-Off
				Deflation
				Institutional Theory and the Inflation/Growth Trade-Off
			Conclusion
	Section IV Taxes, Budgets, and Fiscal Policy
		34 Deficits and Debt
			Defining Deficits and Surpluses
				Financing the Deficit
				Arbitrariness of Defining Deficits and Surpluses
				Many Right Definitions
				Deficits and Surpluses as Summary Measures
			Structural and Passive Deficits and Surpluses
			Nominal and Real Deficits and Surpluses
			The Definition of Debt and Assets
				Debt Management
				Difference between Individual and Government Debt
			U.S. Government Deficits and Debt: The Historical Record
				The Debt Burden
				U.S. Debt Relative to Other Countries
				Interest Rates and Debt Burden
				Projections for the Deficit
				Conclusion
			Appendix A: Social Security, Medicare, and Lockboxes
		35 The Modern Fiscal Policy Dilemma
			Classical Economics and Sound Finance
				Ricardian Equivalence Theorem: Deficits Don’t Matter
				The Sound-Finance Precept
			Keynesian Economics and Functional Finance
				Functional Finance
				Functional Finance in Practice
			Building Fiscal Policies into Institutions
				How Automatic Stabilizers Work
				State Government Finance and Procyclical Fiscal Policy
				The Negative Side of Automatic Stabilizers
				Modern Macro Policy Precepts
				Fiscal Policy in 2009 and Beyond
			Conclusion
	Section V International Policy Issues
		36 International Financial Policy
			The Balance of Payments
				The Current Account
				The Financial and Capital Account
			Exchange Rates
				Exchange Rates and the Balance of Payments
				Fundamental Forces Determining Exchange Rates
				Indirect Methods of Influencing Exchange Rates
				Direct Methods of Influencing Exchange Rates
			Purchasing Power Parity and Real Exchange Rates
				Criticisms of the Purchasing Power Parity Method
				Real Exchange Rates
			Advantages and Disadvantages of Alternative Exchange Rate Systems
				Fixed Exchange Rates
				Flexible Exchange Rates
				Partially Flexible Exchange Rates
				Which View Is Right?
			The Euro: A Common Currency for Europe
			Conclusion
			Appendix A: History of Exchange Rate Systems
		37 Macro Policy in a Global Setting
			The Ambiguous International Goals of Macroeconomic Policy
				The Exchange Rate Goal
				The Trade Balance Goal
				International versus Domestic Goals
				Balancing the Exchange Rate Goal with Domestic Goals
			Monetary and Fiscal Policy and the Trade Deficit
				Monetary Policy’s Effect on the Trade Balance
				Fiscal Policy’s Effect on the Trade Balance
			International Phenomena and Domestic Goals
				International Goals and Policy Alternatives
				International Monetary and Fiscal Coordination
				Coordination Is a Two-Way Street
				Crowding Out and International Considerations
			Globalization, Macro Policy, and the U.S. Economy
				International Issues and Macro Policy
				Restoring International Trade Balance to the U.S. Economy
			A Conclusion
		38 Macro Policies in Developing Countries
			Developing Countries in Perspective
				Don’t Judge Society by Its Income Alone
				Some Comparative Statistics on Rich and Poor Nations
			Growth versus Development
				Differing Goals
				Differing Institutions
			Monetary Policy in Developing Countries
				Central Banks Are Less Independent
				Focus on the International Sector and the Exchange Rate Constraint
				The Need for Creativity
			Obstacles to Economic Development
				Political Instability
				Corruption
				Lack of Appropriate Institutions
				Lack of Investment
				Inappropriate Education
				Overpopulation
				Health and Disease
			Mission Impossible
Colloquial Glossary
Photo Credits
Index