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Book Details
Abstract
For courses in undergraduate Macroeconomics courses.
A modern approach to teaching macroeconomics
Macroeconomics uses a thoroughly modern approach by building macroeconomic models from microeconomic principles. As such, it is consistent with the way that macroeconomic research is conducted today. This approach allows for deeper insights into economic growth processes and business cycles–the key topics in macroeconomics. An emphasis on microeconomic foundations better integrates the study of macroeconomics with approaches learned in microeconomics and field courses in economics. By following an approach to macroeconomics that is consistent with current macroeconomic research, students become better prepared for advanced study in economics.
The 6th Edition captures the latest developments in macroeconomic thinking, applied to recent economic events and developments in macroeconomic policy. With the financial crisis receding, new challenges that macroeconomists and policymakers currently need to address are covered in the text.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Title Page\r | 1 | ||
| Copyright Page | 2 | ||
| The Pearson Series in Economics | 3 | ||
| Contents | 5 | ||
| Preface | 13 | ||
| PART I Introduction and Measurement Issues | 21 | ||
| Chapter 1 Introduction | 22 | ||
| What Is Macroeconomics? | 23 | ||
| Gross Domestic Product, Economic Growth, and Business Cycles | 23 | ||
| Macroeconomic Models | 29 | ||
| Microeconomic Principles | 31 | ||
| Disagreement in Macroeconomics | 32 | ||
| What Do We Learn from Macroeconomic Analysis? | 33 | ||
| Understanding Recent and Current Macroeconomic Events | 36 | ||
| Chapter Summary | 53 | ||
| Key Terms | 54 | ||
| Questions for Review | 55 | ||
| Problems | 56 | ||
| Working with the Data | 57 | ||
| Chapter 2 Measurement | 58 | ||
| Measuring GDP: The National Income and Product Accounts | 59 | ||
| The Components of Aggregate Expenditure | 66 | ||
| Nominal and Real GDP and Price Indices | 68 | ||
| Problems with Measuring Real GDP and the Price Level | 75 | ||
| Macroeconomics in Action: Comparing Real GDP Across Countries and the Penn Effect | 76 | ||
| Macroeconomics in Action: House Prices and GDP Measurement | 77 | ||
| Savings, Wealth, and Capital | 79 | ||
| Labor Market Measurement | 81 | ||
| Macroeconomics in Action: Alternative Measures of the Unemployment Rate | 82 | ||
| Chapter Summary | 84 | ||
| Key Terms | 84 | ||
| Questions for Review | 86 | ||
| Problems | 86 | ||
| Working with the Data | 89 | ||
| Chapter 3 Business Cycle Measurement | 90 | ||
| Regularities in GDP Fluctuations | 91 | ||
| Comovement | 93 | ||
| Macroeconomics in Action: Economic Forecasting and the Financial Crisis | 94 | ||
| The Components of GDP | 101 | ||
| The Price Level and Inflation | 104 | ||
| Labor Market Variables | 105 | ||
| Macroeconomics in Action: Jobless Recoveries | 108 | ||
| Seasonal Adjustment | 109 | ||
| Macroeconomics in Action: The Great Moderation and the 2008–2009 Recession | 112 | ||
| Comovement Summary | 112 | ||
| Chapter Summary | 113 | ||
| Key Terms | 114 | ||
| Questions for Review | 115 | ||
| Problems | 115 | ||
| Working with the Data | 116 | ||
| PART II Basic Macroeconomic Models: A One-Period Model and Models of Search and Unemployment | 117 | ||
| Chapter 4 Consumer and Firm Behavior: The Work–Leisure Decision and Profit Maximization | 118 | ||
| The Representative Consumer | 119 | ||
| Macroeconomics in Action: How Elastic Is Labor Supply? | 140 | ||
| The Representative Firm | 142 | ||
| Macroeconomics in Action: Henry Ford and Total Factor Productivity | 151 | ||
| Theory Confronts the Data: Total Factor Productivity and the U.S. Aggregate Production Function | 152 | ||
| Chapter Summary | 156 | ||
| Key Terms | 156 | ||
| Questions for Review | 157 | ||
| Problems | 158 | ||
| Working with the Data | 160 | ||
| Chapter 5 A Closed-Economy One-Period Macroeconomic Model | 162 | ||
| Government | 163 | ||
| Competitive Equilibrium | 164 | ||
| Optimality | 170 | ||
| Working with the Model: The Effects of a Change in Government Purchases | 177 | ||
| Working with the Model: A Change in Total Factor Productivity | 179 | ||
| Theory Confronts the Data: Government Spending in World War II | 180 | ||
| Theory Confronts the Data: Total Factor Productivity and Real GDP | 186 | ||
| Macroeconomics in Action: Government Expenditures and the American Recovery and Reinvestment Act of 2009 | 187 | ||
| A Distorting Tax on Wage Income, Tax Rate Changes, and the Laffer Curve | 191 | ||
| A Model of Public Goods: How Large Should the Government Be? | 197 | ||
| Chapter Summary | 202 | ||
| Key Terms | 202 | ||
| Questions for Review | 203 | ||
| Problems | 204 | ||
| Working with the Data | 206 | ||
| Chapter 6 Search and Unemployment | 207 | ||
| Labor Market Facts | 208 | ||
| Macroeconomics in Action: Unemployment and Employment in the United States and Europe | 214 | ||
| A One-Sided Search Model of Unemployment | 216 | ||
| A Two-Sided Model of Search and Unemployment | 225 | ||
| Working with the Two-Sided Search Model | 233 | ||
| Macroeconomics in Action: Unemployment Insurance and Incentives | 236 | ||
| Theory Confronts the Data: Productivity, Unemployment, and Real GDP in the United States and Canada: The 2008–2009 Recession | 242 | ||
| Macroeconomics in Action: The Natural Rate of Unemployment and the 2008–2009 Recession | 244 | ||
| Chapter Summary | 246 | ||
| Key Terms | 247 | ||
| Questions for Review | 247 | ||
| Problems | 248 | ||
| Working with the Data | 249 | ||
| PART III Economic Growth | 251 | ||
| Chapter 7 Economic Growth: Malthus and Solow | 252 | ||
| Economic Growth Facts | 254 | ||
| The Malthusian Model of Economic Growth | 259 | ||
| The Solow Model: Exogenous Growth | 269 | ||
| Theory Confronts the Data: The Solow Growth Model, Investment Rates, and Population Growth | 283 | ||
| Macroeconomics in Action: Resource Misallocation and Total Factor Productivity | 285 | ||
| Macroeconomics in Action: Recent Trends in Economic Growth in the United States | 286 | ||
| Growth Accounting | 289 | ||
| Macroeconomics in Action: Development Accounting | 294 | ||
| Chapter Summary | 296 | ||
| Key Terms | 297 | ||
| Questions for Review | 297 | ||
| Problems | 298 | ||
| Working with the Data | 300 | ||
| Chapter 8 Income Disparity Among Countries and Endogenous Growth | 301 | ||
| Convergence | 302 | ||
| Theory Confronts the Data: Is Income Per Worker Converging in the World? | 307 | ||
| Macroeconomics in Action: Measuring Economic Welfare: Per Capita Income, Income Distribution, Leisure, and Longevity | 308 | ||
| Endogenous Growth: A Model of Human Capital Accumulation | 310 | ||
| Macroeconomics in Action: Education and Growth | 319 | ||
| Chapter Summary | 320 | ||
| Key Terms | 321 | ||
| Questions For Review | 321 | ||
| Problems | 321 | ||
| Working with the Data | 323 | ||
| PART IV Savings, Investment, and Government Deficits | 325 | ||
| Chapter 9 A Two-Period Model: The Consumption–Savings Decision and Credit Markets | 326 | ||
| A Two-Period Model of the Economy | 328 | ||
| Theory Confronts the Data: Consumption Smoothing and the Stock Market | 345 | ||
| The Ricardian Equivalence Theorem | 357 | ||
| Macroeconomics in Action: Default on Government Debt | 363 | ||
| Chapter Summary | 365 | ||
| Key Terms | 366 | ||
| Questions for Review | 367 | ||
| Problems | 368 | ||
| Working with the Data | 370 | ||
| Chapter 10 Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security | 371 | ||
| Credit Market Imperfections and Consumption | 373 | ||
| Credit Market Imperfections, Asymmetric Information, and the Financial Crisis | 377 | ||
| Theory Confronts the Data: Asymmetric Information and Interest Rate Spreads | 379 | ||
| Credit Market Imperfections, Limited Commitment, and the Financial Crisis | 380 | ||
| Social Security Programs | 383 | ||
| Theory Confronts the Data: The Housing Market, Collateral, and Consumption | 384 | ||
| Macroeconomics in Action: Social Security and Incentives | 392 | ||
| Chapter Summary | 395 | ||
| Key Terms | 395 | ||
| Questions for Review | 396 | ||
| Problems | 396 | ||
| Working with the Data | 398 | ||
| Chapter 11 A Real Intertemporal Model with Investment | 399 | ||
| The Representative Consumer | 401 | ||
| The Representative Firm | 409 | ||
| Theory Confronts the Data: Investment and the Interest Rate Spread | 419 | ||
| Government | 421 | ||
| Competitive Equilibrium | 422 | ||
| The Equilibrium Effects of a Temporary Increase in G: Stimulus, the Multiplier, and Crowding Out | 434 | ||
| The Equilibrium Effects of a Decrease in the Current Capital Stock K | 437 | ||
| Theory Confronts the Data: Government Expenditure Multipliers in the Recovery from the 2008–2009 Recession | 438 | ||
| The Equilibrium Effects of an Increase in Current Total Factor Productivity z | 441 | ||
| The Equilibrium Effects of an Increase in Future Total Factor Productivity, News About the Future and Aggregate Economic Activity | 443 | ||
| Theory Confronts the Data: News, the Stock Market, and Investment Expenditures | 445 | ||
| Credit Market Frictions and the Financial Crisis | 447 | ||
| Sectoral Shocks and Labor Market Mismatch | 449 | ||
| Theory Confronts the Data: The Behavior of Real GDP, Employment, and Labor Productivity in the 1981–1982 and 2008–2009 Recessions | 452 | ||
| Chapter Summary | 455 | ||
| Key Terms | 457 | ||
| Questions for Review | 457 | ||
| Problems | 458 | ||
| Working with the Data | 460 | ||
| PART V Money and Business Cycles | 461 | ||
| Chapter 12 Money, Banking, Prices, and Monetary Policy | 462 | ||
| What Is Money? | 463 | ||
| A Monetary Intertemporal Model | 465 | ||
| A Level Increase in the Money Supply and Monetary Neutrality | 480 | ||
| Shifts in Money Demand | 484 | ||
| Theory Confronts the Data: Instability in the Money Demand Function | 487 | ||
| Conventional Monetary Policy, the Liquidity Trap, and Unconventional Monetary Policy | 489 | ||
| Macroeconomics in Action: Quantitative Easing in the United States | 492 | ||
| Chapter Summary | 494 | ||
| Key Terms | 494 | ||
| Questions for Review | 495 | ||
| Problems | 496 | ||
| Working with the Data | 497 | ||
| Chapter 13 Business Cycle Models with Flexible Prices and Wages | 498 | ||
| The Real Business Cycle Model | 500 | ||
| A Keynesian Coordination Failure Model | 509 | ||
| Macroeconomics in Action: Business Cycle Models and the Great Depression | 510 | ||
| Macroeconomics in Action: Uncertainty and Business Cycles | 524 | ||
| Chapter Summary | 525 | ||
| Key Terms | 526 | ||
| Questions for Review | 526 | ||
| Problems | 527 | ||
| Working with the Data | 528 | ||
| Chapter 14 New Keynesian Economics: Sticky Prices | 529 | ||
| The New Keynesian Model | 531 | ||
| The Nonneutrality of Money in the New Keynesian Model | 533 | ||
| The Role of Government Policy in the New Keynesian Model | 535 | ||
| Macroeconomics in Action: The Timing of the Effects of Fiscal and Monetary Policy | 540 | ||
| The Liquidity Trap and Sticky Prices | 542 | ||
| Macroeconomics in Action: New Keynesian Models, the Zero Lower Bound, and Quantitative Easing | 544 | ||
| Criticisms of Keynesian Models | 546 | ||
| Macroeconomics in Action: How Sticky Are Nominal Prices? | 547 | ||
| Chapter Summary | 548 | ||
| Key Terms | 549 | ||
| Questions for Review | 549 | ||
| Problems | 549 | ||
| Working with the Data | 550 | ||
| Chapter 15 Inflation: Phillips Curves and Neo-Fisherism | 551 | ||
| Introduction | 551 | ||
| Inflation in a Basic New Keynesian Model | 554 | ||
| Theory Confronts the Data: The Phillips Curve | 559 | ||
| Macroeconomics in Action: Forward Guidance in the United States after 2008 | 566 | ||
| Neo-Fisherism, and a New Keynesian Rational Expectations (NKRE) Model | 568 | ||
| Chapter Summary | 578 | ||
| Key Terms | 578 | ||
| Questions for Review | 579 | ||
| Problems | 579 | ||
| Working with the Data | 580 | ||
| PART VI International Macroeconomics | 581 | ||
| Chapter 16 International Trade in Goods and Assets | 582 | ||
| A Two-Period Small Open-Economy Model: The Current Account | 584 | ||
| Theory Confronts the Data: Is a Current Account Deficit a Bad Thing? | 588 | ||
| Theory Confronts the Data: Greece and Sovereign Default | 592 | ||
| Production, Investment, and the Current Account | 595 | ||
| Chapter Summary | 601 | ||
| Key Terms | 602 | ||
| Questions for Review | 602 | ||
| Problems | 602 | ||
| Working with the Data | 603 | ||
| Chapter 17 Money in the Open Economy | 604 | ||
| The Nominal Exchange Rate, the Real Exchange Rate, and Purchasing Power Parity | 606 | ||
| Flexible and Fixed Exchange Rates | 607 | ||
| Theory Confronts the Data: The PPP Relationship for the United States and Canada | 608 | ||
| A Monetary Small Open-Economy Model with a Flexible Exchange Rate | 611 | ||
| A Monetary Small Open Economy with a Fixed Exchange Rate | 618 | ||
| Macroeconomics in Action: Sovereign Debt and the EMU | 626 | ||
| Capital Controls | 628 | ||
| Macroeconomics in Action: Do Capital Controls Work in Practice? | 631 | ||
| A New Keynesian Sticky Price Open-Economy Model | 632 | ||
| Chapter Summary | 638 | ||
| Key Terms | 639 | ||
| Questions for Review | 640 | ||
| Problems | 641 | ||
| Working with the Data | 643 | ||
| PART VII Money, Banking, and Inflation | 645 | ||
| Chapter 18 Money, Inflation, and Banking: A Deeper Look | 646 | ||
| Alternative Forms of Money | 647 | ||
| Macroeconomics in Action: Commodity Money and Commodity-Backed Paper Money, Yap Stones, and Playing Cards | 650 | ||
| Money and the Absence of Double Coincidence of Wants: The Role of Commodity Money and Fiat Money | 651 | ||
| Long-Run Inflation in the Monetary Intertemporal Model | 654 | ||
| Macroeconomics in Action: Should the Fed Reduce the Inflation Rate to Zero or Less? | 662 | ||
| Financial Intermediation and Banking | 664 | ||
| Macroeconomics in Action: Banks, Nonbank Financial Intermediaries, Too-Big-to-Fail, and Moral Hazard | 675 | ||
| Macroeconomics in Action: Bank Failures and Banking Panics in the United States and Canada | 678 | ||
| Chapter Summary | 679 | ||
| Key Terms | 680 | ||
| Questions for Review | 681 | ||
| Problems | 681 | ||
| Working with the Data | 683 | ||
| Appendix Mathematical Appendix | 684 | ||
| Chapter 4: Consumer and Firm Behavior | 684 | ||
| Chapter 5 A Closed-Economy One-Period Macroeconomic Model | 688 | ||
| Chapter 6: Search and Unemployment | 692 | ||
| Chapters 7 and 8: Economic Growth | 697 | ||
| Chapter 9 A Two-Period Model | 702 | ||
| Chapter 11: A Real Intertemporal Model with Investment | 706 | ||
| Chapter 12: Money, Banking, Prices, and Monetary Policy | 707 | ||
| Chapter 18: Money, Inflation, and Banking: A Deeper Look | 712 | ||
| Index | 717 |