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Tables of Contents for Macroeconomics
Chapter/Section Title
Page #
Page Count
To the Instructor
xvi
To the Student
xxiv
PART ONE INTRODUCTION AND MEASUREMENT
1
62
What Is Macroeconomics?
3
25
How Macroeconomics Affects Our Everyday Lives
3
2
Defining Macroeconomics
5
1
Business Cycles, Inflation, and ``Natural Real GDP''
6
5
Case Study: A Century of Business Cycles
11
2
Macroeconomics in the Short Run and Long Run
13
2
The Six Macroeconomic Puzzles
15
7
Taming Business Cycles: Stabilization Policy
22
1
The ``Internationalization'' of Macroeconomics
23
5
International Perspective: How Does U.S. Economic Performance Rank?
24
4
The Measurement of Income, Prices, and Unemployment
28
35
Why We Care About Income
28
1
The Circular Flow of Income and Expenditure
28
2
What Transactions Should Be Included in Income and Expenditure?
30
2
Components of Expenditure
32
8
Where to Find the Numbers: A Guide to the Data
34
6
A Summary of Types of Spending
40
1
How Much Income Flows from Business Firms to Households?
40
6
International Perspective: Saving, Investment, and Government Deficits Around the World
44
2
Nominal GDP, Real GDP, and the GDP Deflator
46
2
How Nominal GDP is Split Between Inflation and Changes in Real GDP
48
6
Do Government Price Indexes Overstate Inflation?
52
2
Measuring Unemployment
54
2
Case Study: Unemployment and the Output Ratio
56
7
PART TWO INCOME, INTEREST RATES, POLICY, AND THE GLOBAL ECONOMY
63
128
The Simple Keynesian Theory of Income Determination
65
28
Business Cycles, Unemployment, and Income Determination
65
1
Planned Expenditure
66
5
Case Study: U.S. Consumption and Saving Behavior
71
1
The Economy In and Out of Equilibrium
71
7
The Multiplier Effect
78
2
Recessions and Fiscal Policy
80
4
Effects of Tax Changes Multiplier
84
4
International Perspective: Why Higher Income Raises the Trade Deficit
87
1
International Trade, Net Exports, and the Multiplier
88
5
The IS-LM Model
93
30
Introduction
93
1
Interest Rates and Rates of Return
94
1
The Relation of Autonomous Planned Spending to the Interest Rate
95
4
The IS Curve
99
6
How Interest Rates Affect House Sales
100
3
Learning About Diagrams: The IS Curve
103
2
Why People Use Money
105
2
Income, the Interest Rate, and the Demand for Money
107
2
The LM Curve
109
3
The IS Curve Meets the LM Curve
112
2
Learning About Diagrams: The LM Curve
113
1
Monetary Policy in Action
114
2
How Fiscal Expansion Can ``Crowd Out'' Investment
116
7
International Perspective: How Japan Uses Fiscal Policy
118
5
Monetary Policy, Fiscal Policy, and the Government Budget
123
31
Introduction
123
1
Strong and Weak Effects of Monetary Policy
124
3
Strong and Weak Effects of Fiscal Policy
127
2
Case Study: How Large Are Actual Multipliers?
129
2
The Fiscal-Monetary Policy Mix
131
3
The Pervasive Effects of the Government Budget Deficit
134
1
Case Study: The U.S. Government Budget Deficit in Historical Perspective
135
2
Structural and Cyclical Budget Deficits
137
5
National Saving and the Consequences of Budget Deficits
142
4
International Perspective: Budget Deficits and National Saving Around the World
144
2
Conclusion: The Role of Monetary and Fiscal Policy
146
8
Appendix to Chapter 5: The Elementary Algebra of the IS-LM Curve
150
4
International Trade, Exchange Rates, and Macroeconomic Policy
154
37
Introduction
154
1
Foreign Trade, the Balance of Payments, and International Indebtedness
155
4
Exchange Rates
159
1
The Market for Foreign Exchange
160
4
Nominal and Real Exchange Rates in the Long Run
164
5
International Perspective: Big Mac Meets PPP
166
3
Exchange Rate Systems
169
3
Case Study: The Exchange Rate of the Dollar Since 1970
172
2
Determinants of Net Exports
174
3
The Real Exchange Rate and Interest Rate
177
4
The IS-LM Model in a Small Open Economy
181
4
Capital Mobility and Exchange Rates in a Large Open Economy
185
2
Conclusion: How Should Policymakers React to Exchange Rate Movements?
187
4
PART THREE AGGREGATE DEMAND, AGGREGATE SUPPLY, AND INFLATION
191
78
Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy
193
33
The Role of Aggregate Demand and Supply
193
1
Flexible Prices and the AD Curve
194
1
Shifting the Aggregate Demand Curve with Monetary and Fiscal Policy
195
4
Learning about Diagrams: The AD Curve
197
2
Alternative Shapes of the Short-Run Aggregate Supply Curve
199
1
The Aggregate Supply Curve When the Nominal Wage Rate is Constant
200
2
How the Wage Rate Is Set
202
4
Learning about Diagrams: The SAS Curve
203
3
Fiscal and Monetary Expansion in the Short and Long Run
206
5
International Perspective: How Do Labor Markets Differ in the United States and Japan?
208
3
Classical Macroeconomics: The Quantity Theory of Money and the Self-Correcting Economy
211
2
The Keynesian Revolution: The Failure of Self-Correction
213
6
Case Study: What Caused the Great Depression?
219
7
Inflation: Its Causes and Cures
226
43
Introduction
226
1
Real GDP, the Inflation Rate, and the Short-Run Phillips Curve
227
3
The Adjustment of Expectations
230
2
Learning about Diagrams: The Short-Run (SP) and the Long-Run (LP) Phillips Curves
232
1
Nominal GDP Growth and Inflation
232
2
Effects of an Acceleration in Nominal GDP Growth
234
3
Expectations and the Inflation Cycle
237
2
Recession as a Cure for Inflation
239
3
Case Study: Why Inflation Declined in the 1980s and 1990s
242
6
International Perspective: Did Disinflation in Europe Differ from That in the United States?
246
2
The Importance of Supply Disturbances
248
3
The Response of Inflation and Real GDP to a Supply Shock
251
4
Inflation and Output Fluctuations: Recapitulation of Causes and Cures
255
14
Appendix to Chapter 8: The Elementary Algebra of the SP-DG Model
262
7
PART FOUR MACROECONOMICS IN THE LONG RUN: GROWTH AND THE PUBLIC DEBT
269
90
The Theory of Economic Growth
271
31
The Importance of Economic Growth
271
2
Standards of Living as the Consequence of Economic Growth
273
3
International Perspective: The Growth Experience of Seven Countries over the Last Century
274
2
The Production Function and Economic Growth
276
4
Solow's Theory of Economic Growth
280
3
Technology in Theory and Practice
283
3
Puzzles That Solow's Theory Cannot Explain
286
4
Endogenous Growth Theory
290
2
Case Study: The Economic Miracle of the Four Tigers
292
3
Conclusion: Are There Secrets of Growth?
295
7
Appendix to Chapter 9: General Functional Forms and the Production Function
300
2
Explanations of Slow Growth in Productivity and Real Wages
302
31
America's Greatest Economic Problem?
302
1
Concepts of Productivity and the Real Wage
303
2
Case Study: Behavior of Real Wages and Productivity in the United States
305
6
Does Slow Productivity Growth Cause Slow Real Wage Growth, or Vice Versa?
311
3
Sources of Adverse Productivity Shocks
314
5
Can Labor Supply Shifts Contribute an Explanation?
319
4
International Perspective: Is the U.S. Productivity Slowdown Unique?
320
3
The Role of Growing Inequality
323
4
Is Real Wage Stagnation a Figment of Measurement Error?
327
2
Conclusion: What Policies are Available to Boost Growth?
329
4
The Government Budget and the Public Debt
333
26
Introduction: The Debate Over the U.S. Budget Deficit
333
1
Long-Run Effects of Fiscal Policy on Economic Growth and Welfare
334
2
The Future Burden of the Government Debt
336
3
Will the Government Remain Solvent?
339
3
International Perspective: The Debt-GDP Ratio: How Does the United States Compare?
340
2
Case Study: Historical Behavior of the Debt-GDP Ratio Since 1790
342
2
Sources of the Deficits and the Debate Over the Size of Government
344
3
Alternative Views of Fiscal Policy: Supply-Side Economics
347
2
Alternative Views of Fiscal Policy: The Barro-Ricardo Equivalence Theorem
349
2
Pros and Cons of a Balanced Budget Amendment
351
2
Conclusion: The Debate Between the Termites and Pussycats
353
6
PART FIVE STABILIZATION POLICY IN AN OPEN ECONOMY
359
114
The Goals of Stabilization Policy: Low Inflation and Low Unemployment
361
41
The Costs and Causes of Inflation
361
1
Money and Inflation
362
5
International Perspective: Money Growth and Inflation
365
2
Interest Rates and Inflation
367
3
The Government Budget Constraint and the Inflation Tax
370
4
Starting and Stopping a Hyperinflation
374
2
Costs of a Fully Anticipated Inflation: Creeping Inflation versus Hyperinflation
376
4
The Wizard of Oz as a Monetary Allegory
377
3
Indexation and Other Reforms to Reduce the Costs of Inflation
380
3
International Perspective: The Indexed Bond Has Arrived
382
1
Why the Unemployment Rate Cannot Be Reduced to Zero
383
1
Sources of Mismatch Unemployment
384
2
Turnover Unemployment and Job Search
386
3
New Theories to Explain High European Unemployment
389
8
International Perspective: The Divergence of Unemployment Rates in the United States and Europe
390
6
International Perspective: Is a European Expansion Being Stifled by the Drive to Monetary Union?
396
1
Conclusion: Solutions to the Inflation and Unemployment Dilemma
397
5
Money and the Financial Markets
402
34
Money in a World of Many Financial Assets and Liabilities
402
1
Financial Institutions, Markets, and Instruments
403
4
Definitions of Money
407
3
Smart Cards, E-Money, and the Money Supply
410
1
High-Powered Money and Determinants of the Money Supply
410
5
The Fed's Three Tools for Changing the Money Supply
415
4
Theories of the Demand for Money
419
4
Case Study: How Financial Deregulation and Innovation Steepened the IS and LM Curves
423
4
Why the Federal Reserve ``Sets'' Interest Rates
427
9
International Perspective: Where in the World Is All the U.S. Currency?
430
6
The Conduct of Stabilization Policy
436
37
The Central Role of Demand Shocks
436
1
Stabilization Targets and Instruments in the Activists' Paradise
437
5
Rules vs. Activism in a Nutshell: The Optimism-Pessimism Grid
441
1
Policy Rules
442
2
Policy Pitfalls: Lags and Uncertain Multipliers
444
6
Case Study: How Accurate Are Forecasts?
450
3
Case Study: Did the Federal Reserve Pilot a ``Soft Landing''?
453
7
Time Inconsistency, Credibility, and Reputation
460
3
Case Study: Should Monetary Policy Target the Exchange Rate?
463
3
International Perspective: A Single European Currency as a Monetary Policy Rule
464
2
Rules versus Discretion: An Assessment
466
7
PART SIX SOURCES OF INSTABILITY IN THE PRIVATE ECONOMY
473
58
Instability in the Private Economy: Consumption Behavior
475
28
Consumption and Economic Stability
475
1
Case Study: Main Features of U.S. Consumption Data
476
2
Background: The Conflict Between the Time-Series and Cross-Section Evidence
478
3
Forward-Looking Behavior: The Permanent-Income Hypothesis
481
4
Forward-Looking Behavior: The Life-Cycle Hypothesis
485
4
Rational Expectations and Other Amendments to the Simple Forward-Looking Theories
489
6
International Perspective: Why Do Some Countries Save So Much?
492
3
Bequests and Uncertainty
495
2
Case Study: Do Tax Breaks Raise the Saving Rate?
497
3
Consumption and the Case For and Against Activism
500
3
Instability in the Private Economy: Investment
503
28
Investment and Economic Stability
503
1
Case Study: The Historical Instability of Investment
504
2
The Accelerator Hypothesis of Net Investment
506
3
Case Study: The Simple Accelerator and the Postwar U.S. Economy
509
3
The Flexible Accelerator
512
1
The Neoclassical Theory of Investment Behavior
513
3
User Cost and the Role of Monetary and Fiscal Policy
516
4
Tobin's q: Does It Explain Investment Better Than the Accelerator or Neoclassical Theories?
518
2
Business Confidence, Speculation, and Overbuilding
520
4
International Perspective: The Level and Variability of Investment Around the World
522
2
Case Study: Booms and Busts in Commercial Real Estate Construction
524
2
Investment as a Source of Instability of Output and Interest Rates
526
1
Conclusion: Investment and the Case For and Against Activism
527
4
PART SEVEN DEBATES AT THE MACROECONOMIC FRONTIER
531
New Classical Macro Confronts New Keynesian Macro
533
Introduction: Classical and Keynesian Economics, Old and New
533
Imperfect Information and the ``Fooling Model''
534
The Lucas Model and the Policy Ineffectiveness Proposition
537
The Real Business Cycle Model
541
International Perspective: Productivity Fluctuations in the United States and Japan
542
New Classical Macroeconomics: Limitations and Positive Contributions
547
Essential Features of the New Keynesian Economics
550
Why Small Nominal Rigidities Have Large Macroeconomic Effects
552
Coordination Failures and Indexation
555
Long-Term Labor Contracts as a Source of the Business Cycle
557
``Real'' Sources of Wage Stickiness
559
Assessment of the New Keynesian Model
561
Conclusion: Where We Stand
566
The Evolution of Events and Ideas
566
The Reaction of Ideas to Events, 1923--47
567
The Reaction of Ideas to Events, 1947--70
570
The Reaction of Ideas to Events, 1970--97
574
Reaction of Ideas to Events in the World Economy
580
International Perspective: How Does Macroeconomics Differ in the United States and Europe?
582
What We Know About the Six Puzzles
584
Macro Mysteries: Unsettled Issues and Debates
585
Appendixes
A1
A: Time Series Data for the U.S. Economy: 1875--1997
A1
B: International Annual Time Series Data for Selected Countries: 1960--97
A7
C: Data Sources and Methods
A13
Glossary
G1
Index
I1