Macroeconomics

Cover
Title Page
Copyright Page
About the Authors
Brief Contents
Detailed Contents
Preface
Chapter 1: Introduction to Macroeconomics
	1.1 What Macroeconomics is About
		Long-Run Economic Growth
		Business Cycles
		Unemployment
		Inflation
		The International Economy
		Macroeconomic Policy
		Aggregation
	1.2 What Macroeconomists Do
		Macroeconomic Forecasting
		Macroeconomic Analysis
		Macroeconomic Research
		Data Development
			In Touch with Data and Research: Developing and Testing an Economic Theory
	1.3 Why Macroeconomists Disagree
		Classicals Versus Keynesians
		A Unified Approach to Macroeconomics
Chapter 2: The Measurement and Structure of the National Economy
	2.1 National Income Accounting: The Measurement of Production, Income, and Expenditure
		In Touch with Data and Research: The National Income and Product Accounts in Malaysia
		Why the Three Approaches are Equivalent
	2.2 Gross Domestic Product
		The Product Approach to Measuring GDP
			In Touch with Data and Research: Natural Resources, the Environment, and the National Income Accounts
		The Expenditure Approach to Measuring GDP
		The Income Approach to Measuring GDP
	2.3 Saving and Wealth
		Measures of Aggregate Saving
		The Uses of Private Saving
		Relating Saving and Wealth
	2.4 Real GDP, Price Indexes, and Inflation
		Real GDP
		Price Indexes
			In Touch with Data and Research: The Computer Revolution and Chain-Weighted GDP
		In Touch with Data and Research: CPI Inflation Versus Core Inflation
	2.5 Interest Rates
Chapter 3: Productivity, Output, and Employment
	3.1 How Much Does the Economy Produce? the Production Function
		Application: The Production Function and Changes of Productivity in the European Union
		The Shape of the Production Function
		The Marginal Product of Capital
		The Marginal Product of Labor
		Supply Shocks
	3.2 The Demand for Labor
		The Marginal Product of Labor and Labor Demand: An Example
		A Change in the Wage
		The Marginal Product of Labor and the Labor Demand Curve
		Factors That Shift the Labor Demand Curve
		Aggregate Labor Demand
	3.3 The Supply of Labor
		The Income–Leisure Trade-Off
		Real Wages and Labor Supply
		The Labor Supply Curve
		Aggregate Labor Supply
	3.4 Labor Market Equilibrium
		Full-Employment Output
		Application: Output, Employment, and the Real Wage During Oil Price Shocks
	3.5 Unemployment
		Measuring Unemployment
		Changes in Employment Status
			In Touch with Data and Research: Labor Market Data In Kazakhstan
		How Long are People Unemployed?
		Application: Unemployment Duration and the 2007–2009 Recession
		Why There Always are Unemployed People
			In Touch with Data and Research: Alternative Measures of the Unemployment Rate
	3.6 Relating Output and Unemployment: Okun’s law
Appendix 3.A: The Growth Rate Form of Okun’s Law
Chapter 4: Consumption, Saving, and Investment
	4.1 Consumption and Saving
		The Consumption and Saving Decision of an Individual
		Effect of Changes in Current Income
		Effect of Changes in Expected Future Income
		Application: The Idiosyncrasy of Singapore Aggregate Consumption
		Effect of Changes in Wealth
		Effect of Changes in the Real Interest Rate
		Fiscal Policy
			In Touch with Data and Research: Interest Rates
			Application: How Investors Respond to Tax Incentives
	4.2 Investment
		The Desired Capital Stock
		Changes in the Desired Capital Stock
		Application: Measuring the Effects of Taxes on Investment
		From the Desired Capital Stock to Investment
		Investment in Inventories and Housing
			In Touch with Data and Research: Investment and the Stock Market
	4.3 Goods Market Equilibrium
		The Saving–Investment Diagram
		Application: Macroeconomic Consequences of the Boom and Bust in Stock Prices
Appendix 4.A: A Formal Model of Consumption and Saving
Chapter 5: Saving and Investment in the Open Economy
	5.1 Balance of Payments Accounting
		The Current Account
			In Touch with Data and Research: The Balance of Payments Accounts in Malaysia
		The Financial Account
		The Relationship between the Current Account and the Financial Account
		Net Foreign Assets and the Balance of Payments Accounts
		Application: The United States as International Debtor
	5.2 Goods Market Equilibrium in an Open Economy
	5.3 Saving and Investment in a Small Open Economy
		The Effects of Economic Shocks in a Small Open Economy
	5.4 Saving and Investment in Large Open Economies
	Application: The Impact of Globalization on High-Income Economies
	Application: Recent Trends in the U.S. Current Account Deficit
	5.5 Fiscal Policy and the Current Account
		The Critical Factor: The Response of National Saving
		The Government Budget Deficit and National Saving
		Application: The Twin Deficits
Chapter 6: Long-Run Economic Growth
	6.1 The Sources of Economic Growth
		Growth Accounting
		Application: The Post-1973 Slowdown in Productivity Growth
	6.2 Long-Run Growth: The Solow Model
		Setup of the Solow Model
		The Fundamental Determinants of Long-Run Living Standards
		Application: The Growth of China
	6.3 Endogenous Growth Theory
	6.4 Government Policies to Raise Long-Run Living Standards
		Policies to Affect the Saving Rate
		Policies to Raise the Rate of Productivity Growth
Chapter 7: The Asset Market, Money, and Prices
	7.1 What is Money?
		In Touch with Data and Research: Money in a Prisoner-of-War Camp
		The Functions of Money
			In Touch with Data and Research: The Monetary Aggregates
			In Touch with Data and Research: The Effect of Dollarization on the United States and Other Nations
	7.2 Portfolio Allocation and the Demand for Assets
		Expected Return
		Risk
		Liquidity
		Time to Maturity
		Types of Assets and their Characteristics
			In Touch with Data and Research: Capital Flows and Property Prices
		Asset Demands
	7.3 The Demand for Money
		The Price Level
		Real Income
		Interest Rates
		The Money Demand Function
		Other Factors Affecting Money Demand
		Velocity and the Quantity Theory of Money
	7.4 Asset Market Equilibrium
		Asset Market Equilibrium: An Aggregation Assumption
			Unknown
				Asset Market Equilibrium: An Aggregation Assumption
		The Asset Market Equilibrium Condition
	7.5 Money Growth and Inflation
		Application: Money Growth and Inflation in European Countries in Transition
		The Inflation Rate and the Nominal Interest Rate
Chapter 8: Business Cycles
	8.1 What is a Business Cycle?
	8.2 The American Business Cycle: The Historical Record
		The Pre–World War I Period
		The Great Depression and World War II
		Post–World War II U.S. Business Cycles
		The “Long Boom”
		The Great Recession
		Have American Business Cycles Become Less Severe?
	8.3 Business Cycle Facts
		The Cyclical Behavior of Economic Variables: Direction and Timing
		Production
		Expenditure
		Employment and Unemployment
		Average Labor Productivity and the Real Wage
		Money Growth and Inflation
		Financial Variables
		International Aspects of the Business Cycle
			In Touch with Data and Research: Coincident and Leading Indexes
	8.4 Business Cycle Analysis: A Preview
		In Touch with Data and Research: The Seasonal Cycle and the Business Cycle
		Aggregate Demand and Aggregate Supply: A Brief Introduction
Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis
	9.1 The FE Line: Equilibrium in the Labor Market
		Factors That Shift the FE Line
	9.2 The IS Curve: Equilibrium in the Goods Market
		Factors That Shift the IS Curve
	9.3 The LM Curve: Asset Market Equilibrium
		The Interest Rate and the Price of a Nonmonetary Asset
		The Equality of Money Demanded and Money Supplied
		Factors That Shift the LM Curve
	9.4 General Equilibrium in the Complete IS–LM Model
		Applying the IS–LM Framework: A Temporary Adverse Supply Shock
			Application: The Oil Price Shock of 2008
			In Touch with Data and Research: Econometric Models and Macroeconomic Forecasts for Monetary Policy Analysis
	9.5 Price Adjustment and the Attainment of General Equilibrium
		The Effects of a Monetary Expansion
		Classical Versus Keynesian Versions of the IS–LM Model
			Unknown
				Classical Versus Keynesian Versions Of The Is–lm Model
	9.6 Aggregate Demand and Aggregate Supply
		The Aggregate Demand Curve
		The Aggregate Supply Curve
		Equilibrium in the AD–AS Model
		Monetary Neutrality in the AD–AS Model
Appendix 9.A: Worked-Out Numerical Exercise for Solving the IS–LM/AD–AS Model
Appendix 9.B: Algebraic Versions of the IS-LM/AD-AS Model
Chapter 10: Classical Business Cycle Analysis: Market-clearing Macroeconomics
	10.1 The Real Business Cycle Theory
		Application: Calibrating the Business Cycle
	10.2 Fiscal Policy Shocks in the Classical Model
	10.3 Unemployment in the Classical Model
		Jobless Recoveries
	10.4 Money in the Classical Model
		Monetary Policy and the Economy
		Monetary Nonneutrality and Reverse Causation
		The Nonneutrality of Money: Additional Evidence
	10.5 The Misperceptions Theory and the Nonneutrality of Money
		Monetary Policy and the Misperceptions Theory
		Rational Expectations and the Role of Monetary Policy
			In Touch with Data and Research: Are Price Forecasts Rational?
Appendix 10.A: Worked-Out Numerical Exercise for Solving the Classical AD–AS Model with Misperceptions
Appendix 10.B: An Algebraic Version of the Classical AD–AS Model with Misperceptions
Chapter 11: Keynesianism: The Macroeconomics of Wage and Price Rigidity
	11.1 Real-Wage Rigidity
		Some Reasons for Real-Wage Rigidity
		The Efficiency Wage Model
		Wage Determination in the Efficiency Wage Model
		Employment and Unemployment in the Efficiency Wage Model
		Efficiency Wages and the FE Line
			In Touch with Data and Research: Efficiency Wages
	11.2 Price Stickiness
		Sources of Price Stickiness: Monopolistic Competition and Menu Costs
			Unknown
				Sources Of Price Stickiness: Monopolistic Competition And Menu Costs
	11.3 Monetary and Fiscal Policy in the Keynesian Model
		Monetary Policy
		Fiscal Policy
	11.4 The Keynesian Theory of Business Cycles and Macroeconomic Stabilization
		Keynesian Business Cycle Theory
		Macroeconomic Stabilization
		Supply Shocks in the Keynesian Model
			In Touch with Data and Research: DSGE Models and the Classical–Keynesian Debate
Appendix 11.A: Labor Contracts and Nominal-Wage Rigidity
Appendix 11.B: Worked-Out Numerical Exercise for Calculating the Multiplier in a Keynesian Model
Appendix 11.C: The Multiplier in the Keynesian Model
Chapter 12: Unemployment and Inflation
	12.1 Unemployment and Inflation: Is There a Trade-Off?
		The Expectations-Augmented Phillips Curve
		The Shifting Phillips Curve
	12.2 Macroeconomic Policy and the Phillips Curve
		In Touch with Data and Research: The Lucas Critique
		The Long-Run Phillips Curve
	12.3 The Problem of Unemployment
		The Costs of Unemployment
		The Long-Term Behavior of the Unemployment Rate
	12.4 The Problem of Inflation
		The Costs of Inflation
			In Touch with Data and Research: Indexed Contracts
	12.5 Fighting Inflation: The Role of Inflationary Expectations
		In Touch with Data and Research: The Sacrifice Ratio
		The U.S. Disinflation of the 1980s and 1990s
Chapter 13: Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy
	13.1 Exchange Rates
		Nominal Exchange Rates
			In Touch with Data and Research: Exchange Rates
		Real Exchange Rates
		Appreciation and Depreciation
		Purchasing Power Parity
		In Touch with Data and Research: McParity
		The Real Exchange Rate and Net Exports
			Application: The Value of the Hong Kong Dollar and Net Exports
	13.2 How Exchange Rates are Determined: A Supply-and-Demand Analysis
		Macroeconomic Determinants of the Exchange Rate and Net Export Demand
	13.3 The IS–LM Model for an Open Economy
		The Open-Economy IS Curve
		Factors That Shift the Open-Economy IS Curve
		The International Transmission of Business Cycles
	13.4 Macroeconomic Policy in an Open Economy with Flexible Exchange Rates
		A Fiscal Expansion
		A Monetary Contraction
	13.5 Fixed Exchange Rates
		Fixing the Exchange Rate
		Monetary Policy and the Fixed Exchange Rate
		Fixed Versus Flexible Exchange Rates
		Currency Unions
		Application: Is Either the United States or Europe an Optimum Currency Area?
Appendix 13.A: Worked-Out Numerical Exercise for the Open-Economy IS–LM Model
Appendix 13.B: An Algebraic Version of the Open-Economy IS–LM Model
Chapter 14: Monetary Policy and the Federal Reserve System
	14.1 Principles of Money Supply Determination
		Open-Market Operations
		The Money Multiplier
		Bank Runs
		Application: The Money Multiplier During Severe Financial Crises
	14.2 Monetary Control in the United States
		The Federal Reserve System
		The Federal Reserve’s Balance Sheet and Open-Market Operations
		Reserve Requirements
		Discount Window Lending
		Application: The Lender of Last Resort
		Interest Rate on Reserves
	14.3 Setting Monetary Policy Targets
		Targeting the Federal Funds Rate
	14.4 Making Monetary Policy in Practice
		Lags in the Effects of Monetary Policy
		Conducting Monetary Policy Under Uncertainty
		Monetary Policy in the Great Recession
		Application: Is There Really a Zero Lower Bound?
	14.5 The Conduct of Monetary Policy: Rules Versus Discretion
		The Monetarist Case for Rules
		Rules and Central Bank Credibility
		The Taylor Rule
		Other Ways to Achieve Central Bank Credibility
Chapter 15: Government Spending and Its Financing
	15.1 The Government Budget: Some Facts and Figures
		Government Outlays
		Taxes
		Deficits and Surpluses
	15.2 Government Spending, Taxes, and the Macroeconomy
		Fiscal Policy and Aggregate Demand
		Government Capital Formation
		Incentive Effects of Fiscal Policy
		Application: Supply-Side Economics
	15.3 Government Deficits and Debt
		The Growth of the Government Debt
		Application: Social Security: How Can it be Fixed?
		The Burden of the Government Debt on Future Generations
		Budget Deficits and National Saving: Ricardian Equivalence Revisited
		Departures from Ricardian Equivalence
			In Touch with Data and Research: Measuring the Impact of Government Purchases on the Economy
	15.4 Deficits and Inflation
		The Deficit and the Money Supply
		Real Seignorage Collection and Inflation
		Application: Quantitative Easing and Inflation
Appendix 15.A: The Debt–GDP Ratio
Appendix A: Some Useful Analytical Tools
	A.1 Functions and Graphs
	A.2 Slopes of Functions
	A.3 Elasticities
	A.4 Functions of Several Variables
	A.5 Shifts of a Curve
	A.6 Exponents
	A.7 Growth Rate Formulas
	Problems
Glossary
Name Index
Subject Index