Principles of Macroeconomics

Cover (Principles of Macroeconomics)......Page 1
Title Page......Page 2
Copyright......Page 3
Brief Contents......Page 4
Contents......Page 6
Preface......Page 20
Acknowledgments......Page 34
About the Authors......Page 39
Part I - Introduction......Page 42
1 - Five Foundations of Economics......Page 43
What Is Economics?......Page 45
What Are Five Foundations of Economics?......Page 46
Conclusion......Page 59
2 - Model Building and Gains from Trade......Page 65
How Do Economists Study the Economy?......Page 67
What Is a Production Possibilities Frontier?......Page 72
What Are the Benefits of Specialization and Trade?......Page 78
What Is the Trade off between Having More Now and Having More Later?......Page 85
Conclusion......Page 89
Graphs That Consist of One Variable......Page 96
Graphs That Consist of Two Variables......Page 98
Cautions in Interpreting Numerical Graphs......Page 104
3 - The Market at Work: Supply and Demand......Page 107
What Are the Fundamentals of Markets?......Page 109
What Determines Demand?......Page 112
What Determines Supply?......Page 122
How Do Supply and Demand Interact to Create Equilibrium?......Page 131
Conclusion......Page 134
Appendix 3A: Changes in Both Demand and supply......Page 141
4 - Market Outcomes and Tax Incidence......Page 147
What Are Consumer Surplus and Producer Surplus?......Page 149
When Is a Market Efficient?......Page 155
Why Do Taxes Create Deadweight Loss in Otherwise Efficient Markets?......Page 159
Conclusion......Page 174
5 - Price Controls......Page 181
When Do Price Ceilings Matter?......Page 183
What Effects Do Price Ceilings Have on Economic Activity?......Page 189
When Do Price Floors Matter?......Page 193
What Effects Do Price Floors Have on Economic Activity?......Page 199
Conclusion......Page 206
Part II - Macroeconomic Basics......Page 212
6 - Introduction to Macroeconomics and Gross Domestic Product......Page 213
How Is Macroeconomics Different from Microeconomics?......Page 215
What Does GDP Tell Us about the Economy?......Page 216
How Is GDP Computed?......Page 223
What Are Some Shortcomings of GDP Data?......Page 237
Conclusion......Page 245
7 - Unemployment......Page 251
What Are the Major Reasons for Unemployment?......Page 253
What Can We Learn from the Employment Data?......Page 263
Conclusion......Page 274
8 - The Price Level and Inflation......Page 281
How Is Inflation Measured?......Page 283
What Problems Does Inflation Bring?......Page 298
What Is the Cause of Inflation?......Page 305
Conclusion......Page 308
9 - Savings, Interest Rates,and the Market for Loanable Funds......Page 315
What Is the Loanable Funds Market?......Page 317
What Factors Shift the Supply of Loanable Funds?......Page 323
What Factors Shift the Demand for Loanable Funds?......Page 332
How Do We Apply the Loanable Funds Market Model?......Page 335
Conclusion......Page 339
10 - Financial Markets and Securities......Page 345
How Do Financial Markets Help the Economy?......Page 347
What Are the Key Financial Tools for the Macroeconomy?......Page 350
Conclusion......Page 365
Part III - The Long and Short of Macroeconomics......Page 372
11 - Economic Growth and the Wealth of Nations......Page 373
Why Does Economic Growth Matter?......Page 375
How Do Resources and Technology Contribute to Economic Growth?......Page 388
What Institutions Foster Economic Growth?......Page 396
Conclusion......Page 401
12 - Growth Theory......Page 407
How Do Macroeconomic Theories Evolve?......Page 409
What Is the Solow Growth Model?......Page 411
How Does Technology Affect Growth?......Page 421
Why Are Institutions the Key to Economic Growth?......Page 426
Conclusion......Page 435
13 - The Aggregate Demand–Aggregate Supply Model......Page 441
What Is the Aggregate Demand–Aggregate Supply Model?......Page 443
What Is Aggregate Demand?......Page 444
What Is Aggregate Supply?......Page 453
How Does the Aggregate Demand–Aggregate Supply Model Help Us Understand the Economy?......Page 462
Conclusion......Page 471
14 - The Great Recession, the Great Depression, and Great Macroeconomic Debates......Page 477
Exactly What Happened During the Great Recession and the Great Depression?......Page 479
What Are the Major Debates in Macroeconomics?......Page 491
Conclusion......Page 494
Appendix 14A: The Aggregate Expenditures Model The Components of Aggregate Expenditures......Page 500
What Are the Implications of the AE Model?......Page 510
Conclusion......Page 514
Part IV - Fiscal Policy......Page 518
15 - Federal Budgets: The Tools of Fiscal Policy......Page 519
How Does the Government Spend?......Page 521
How Does the Government Tax?......Page 529
What Are Budget Deficits?......Page 535
Conclusion......Page 544
16 - Fiscal Policy......Page 547
What Is Fiscal Policy?......Page 549
What Are the Shortcomings of Fiscal Policy?......Page 561
What Is Supply-Side Fiscal Policy?......Page 567
Conclusion......Page 573
Part V - Monetary Policy......Page 578
17 - Money and the Federal Reserve......Page 579
What Is Money?......Page 581
How Do Banks Create Money?......Page 587
How Does the Federal Reserve Control the Money Supply?......Page 595
Conclusion......Page 607
18 - Monetary Policy......Page 611
What Is the Effect of Monetary Policy in the Short Run?......Page 613
Why Doesn’t Monetary Policy Always Work?......Page 621
What Is the Phillips Curve?......Page 627
Conclusion......Page 639
Part VI - International Economics......Page 646
19 - International Trade......Page 647
Is Globalization for Real?......Page 649
How Does International Trade Help the Economy?......Page 655
What Are the Effects of Tariffs and Quotas?......Page 661
Conclusion......Page 670
20 - International Finance......Page 675
Why Do Exchange Rates Rise and Fall?......Page 677
What Is Purchasing Power Parity?......Page 690
What Causes Trade Deficits?......Page 694
Conclusion......Page 707
Glossary......Page 712
Credits......Page 720
Index......Page 724