Additional Information
Book Details
Abstract
Macroeconomicstraces the history, evolution, and challenges of Keynesian economics, presenting a comprehensive, detailed, and unbiased view of modern macroeconomic theory.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Contents | 9 | ||
| Preface | 17 | ||
| PART ONE: INTRODUCTION AND MEASUREMENT | 21 | ||
| CHAPTER 1 Introduction | 22 | ||
| 1.1 What is Macroeconomics? | 22 | ||
| 1.2 Post–World War II U.S. Economic Performance | 23 | ||
| Output | 23 | ||
| Unemployment | 24 | ||
| Inflation | 25 | ||
| Inflation and Unemployment | 26 | ||
| The U.S. Federal Budget and Trade Deficits | 27 | ||
| 1.3 Central Questions in Macroeconomics | 30 | ||
| Instability of Output | 30 | ||
| Movements in the Inflation Rate | 30 | ||
| The Output–Inflation Relationship | 30 | ||
| Growth Slowdown and Turnaround? | 31 | ||
| Implications of Deficits and Surpluses | 31 | ||
| 1.4 Conclusion | 32 | ||
| CHAPTER 2 Measurement of Macroeconomic Variables | 33 | ||
| 2.1 The National Income Accounts | 33 | ||
| 2.2 Gross Domestic Product | 34 | ||
| Currently Produced | 34 | ||
| Final Goods and Services | 34 | ||
| Evaluated at Market Prices | 35 | ||
| 2.3 National Income | 38 | ||
| 2.4 Personal and Disposable Personal Income | 39 | ||
| 2.5 Some National Income Accounting Identities | 41 | ||
| 2.6 Measuring Price Changes: Real versus Nominal GDP | 42 | ||
| Real GDP in Prices from a Base Year | 43 | ||
| Chain-Weighted Real GDP | 44 | ||
| 2.7 The Consumer Price Index and the Producer Price Index | 45 | ||
| 2.8 Measures of Cyclical Variation in Output | 46 | ||
| 2.9 Conclusion | 47 | ||
| Perspectives 2.1 What GDP Is Not | 37 | ||
| Perspectives 2.2 National Income Accounts for England and Wales in 1688 | 40 | ||
| Perspectives 2.3 Dating Business Cycles | 46 | ||
| PART TWO: CLASSICAL ECONOMICS AND THE KEYNESIAN REVOLUTION | 49 | ||
| CHAPTER 3 Classical Macroeconomics (I): Output and Employment | 50 | ||
| 3.1 The Starting Point | 50 | ||
| 3.2 The Classical Revolution | 51 | ||
| 3.3 Production | 52 | ||
| 3.4 Employment | 55 | ||
| Labor Demand | 55 | ||
| Labor Supply | 57 | ||
| 3.5 Equilibrium Output and Employment | 59 | ||
| The Determinants of Output and Employment | 60 | ||
| Factors That Do Not Affect Output | 64 | ||
| 3.6 Conclusion | 65 | ||
| Perspectives 3.1 Real Business Cycles: A First Look | 65 | ||
| CHAPTER 4 Classical Macroeconomics (II): Money, Prices, and Interest | 67 | ||
| 4.1 The Quantity Theory of Money | 67 | ||
| The Equation of Exchange | 67 | ||
| The Cambridge Approach to the Quantity Theory | 69 | ||
| The Classical Aggregate Demand Curve | 70 | ||
| 4.2 The Classical Theory of the Interest Rate | 72 | ||
| 4.3 Policy Implications of the Classical Equilibrium Model | 76 | ||
| Fiscal Policy | 76 | ||
| Monetary Policy | 81 | ||
| 4.4 Conclusion | 81 | ||
| Perspectives 4.1 Money in Hyperinflations | 72 | ||
| Perspectives 4.2 Supply-Side Economics—A Modern Classical View | 80 | ||
| CHAPTER 5 The Keynesian System (I): The Role of Aggregate Demand | 83 | ||
| 5.1 The Problem of Unemployment | 83 | ||
| 5.2 The Simple Keynesian Model: Conditions for Equilibrium Output | 86 | ||
| 5.3 The Components of Aggregate Demand | 90 | ||
| Consumption | 90 | ||
| Investment | 92 | ||
| Government Spending and Taxes | 94 | ||
| 5.4 Determining Equilibrium Income | 94 | ||
| 5.5 Changes in Equilibrium Income | 97 | ||
| 5.6 Fiscal Stabilization Policy | 102 | ||
| 5.7 Exports and Imports in the Simple Keynesian Model | 104 | ||
| 5.8 Conclusion | 106 | ||
| Perspectives 5.1 Macroeconomic Controversies | 86 | ||
| Perspectives 5.2 Fiscal Policy in Practice: Examples from Two Decades | 103 | ||
| CHAPTER 6 The Keynesian System (II): Money, Interest, and Income | 109 | ||
| 6.1 Money in the Keynesian System | 109 | ||
| Interest Rates and Aggregate Demand | 109 | ||
| The Keynesian Theory of the Interest Rate | 112 | ||
| The Keynesian Theory of Money Demand | 114 | ||
| The Effects of an Increase in the Money Supply | 118 | ||
| Going Forward | 118 | ||
| 6.2 The IS–LM Model | 119 | ||
| Money Market Equilibrium: The LM Schedule | 120 | ||
| Product Market Equilibrium: The IS Schedule | 128 | ||
| The IS and LM Schedules Combined | 138 | ||
| 6.3 Conclusion | 139 | ||
| Perspectives 6.1 The Financial Sector in the Keynesian System | 111 | ||
| CHAPTER 7 The Keynesian System (III): Policy Effects in the IS–LM Model | 144 | ||
| 7.1 Factors That Affect Equilibrium Income and the Interest Rate | 144 | ||
| Monetary Influences: Shifts in the LM Schedule | 144 | ||
| Real Influences: Shifts in the IS Schedule | 146 | ||
| 7.2 The Relative Effectiveness of Monetary and Fiscal Policy | 151 | ||
| Policy Effectiveness and the Slope of the IS Schedule | 152 | ||
| Policy Effectiveness and the Slope of the LM Schedule | 155 | ||
| 7.3 Conclusion | 160 | ||
| Perspectives 7.1 The Financial Crisis of 2007–08: An Initial Look | 145 | ||
| Perspectives 7.2 The Monetary–Fiscal Policy Mix: Some Historical Examples | 150 | ||
| Perspectives 7.3 Japan in a Slump and the Liquidity Trap | 160 | ||
| CHAPTER 8 The Keynesian System (IV): Aggregate Supply and Demand | 166 | ||
| 8.1 The Keynesian Aggregate Demand Schedule | 166 | ||
| 8.2 The Keynesian Aggregate Demand Schedule Combined with the Classical Theory of Aggregate Supply | 170 | ||
| 8.3 A Contractual View of the Labor Market | 172 | ||
| Sources of Wage Rigidity | 173 | ||
| A Flexible Price–Fixed Money Wage Model | 174 | ||
| 8.4 Labor Supply and Variability in the Money Wage | 179 | ||
| Classical and Keynesian Theories of Labor Supply | 179 | ||
| The Keynesian Aggregate Supply Schedule with a Variable Money Wage | 181 | ||
| Policy Effects in the Variable-Wage Keynesian Model | 181 | ||
| 8.5 The Effects of Shifts in the Aggregate Supply Schedule | 184 | ||
| Factors That Shift the Aggregate Supply Schedule | 185 | ||
| More Recent Supply Shocks | 189 | ||
| 8.6 Conclusion: Keynes versus the Classics | 190 | ||
| Keynesian Versus Classical Theories of Aggregate Demand | 191 | ||
| Keynesian Versus Classical Theories of Aggregate Supply | 192 | ||
| Keynesian Versus Classical Policy Conclusions | 193 | ||
| Perspectives 8.1 Price and Quantity Adjustment in Great Britain, 1929–36 | 174 | ||
| PART THREE: MACROECONOMIC THEORY AFTER KEYNES | 195 | ||
| CHAPTER 9 The Monetarist Counterrevolution | 196 | ||
| 9.1 Monetarist Propositions | 196 | ||
| 9.2 The Reformulation of the Quantity Theory of Money | 197 | ||
| Money and the Early Keynesians | 198 | ||
| Friedman’s Restatement of the Quantity Theory | 201 | ||
| Friedman’s Monetarist Position | 203 | ||
| 9.3 Fiscal and Monetary Policy | 206 | ||
| Fiscal Policy | 206 | ||
| Monetary Policy | 207 | ||
| The Monetarist Position | 208 | ||
| Contrast with the Keynesians | 208 | ||
| 9.4 Unstable Velocity and the Declining Policy Influence of Monetarism | 209 | ||
| Recent Instability in the Money–Income Relationship | 209 | ||
| Monetarist Reaction | 209 | ||
| 9.5 Conclusion | 210 | ||
| Perspectives 9.1 The Monetarist View of the Great Depression | 200 | ||
| CHAPTER 10 Output, Inflation, and Unemployment: Alternative Views | 212 | ||
| 10.1 The Natural Rate Theory | 212 | ||
| 10.2 Monetary Policy, Output, and Inflation: Friedman’s Monetarist View | 213 | ||
| Monetary Policy in the Short Run | 214 | ||
| Monetary Policy in the Long Run | 216 | ||
| 10.3 A Keynesian View of the Output–Inflation Trade-Off | 219 | ||
| The Phillips Curve: A Keynesian Interpretation | 219 | ||
| Stabilization Policies for Output and Employment: The Keynesian View | 222 | ||
| 10.4 Evolution of the Natural Rate Concept | 223 | ||
| Determinants of the Natural Rate of Unemployment | 223 | ||
| Time-Varying Natural Rates of Unemployment | 224 | ||
| Explaining Changing Natural Rates of Unemployment | 225 | ||
| Recent Trends | 226 | ||
| 10.5 Conclusion | 226 | ||
| CHAPTER 11 New Classical Economics | 228 | ||
| 11.1 The New Classical Position | 228 | ||
| A Review of the Keynesian Position | 229 | ||
| The Rational Expectations Concept and Its Implications | 229 | ||
| New Classical Policy Conclusions | 234 | ||
| 11.2 A Broader View of the New Classical Position | 237 | ||
| 11.3 The Keynesian Countercritique | 238 | ||
| The Question of Persistence | 239 | ||
| The Extreme Informational Assumptions of Rational Expectations | 240 | ||
| Auction Market versus Contractual Views of the Labor Market | 241 | ||
| 11.4 Conclusion | 243 | ||
| Perspectives 11.1 U.S. Stock Prices: Rational Expectations or Irrational Exuberance? | 236 | ||
| Perspectives 11.2 The Great Depression: New Classical Views | 242 | ||
| CHAPTER 12 Real Business Cycles and New Keynesian Economics | 246 | ||
| 12.1 Real Business Cycle Models | 246 | ||
| Central Features of Real Business Cycle Models | 246 | ||
| A Simple Real Business Cycle Model | 247 | ||
| Effects of a Positive Technology Shock | 249 | ||
| Macroeconomic Policy in a Real Business Cycle Model | 250 | ||
| Questions about Real Business Cycle Models | 252 | ||
| Concluding Comment | 254 | ||
| 12.2 New Keynesian Economics | 254 | ||
| Sticky Price (Menu Cost) Models | 255 | ||
| Efficiency Wage Models | 257 | ||
| Insider–Outsider Models and Hysteresis | 259 | ||
| 12.3 Conclusion | 261 | ||
| Perspectives 12.1 Robert Lucas and Real Business Cycle Theory | 251 | ||
| Perspectives 12.2 Labor Market Flows | 253 | ||
| Perspectives 12.3 Are Prices Sticky? | 257 | ||
| CHAPTER 13 Macroeconomic Models: A Summary | 263 | ||
| 13.1 Theoretical Issues | 263 | ||
| 13.2 Policy Issues | 266 | ||
| 13.3 Consensus as Well as Controversy | 267 | ||
| 13.4 Macroeconomics Going Forward | 268 | ||
| PART FOUR: OPEN ECONOMY MACROECONOMICS | 271 | ||
| CHAPTER 14 Exchange Rates and the International Monetary System | 272 | ||
| 14.1 The U.S. Balance of Payments Accounts | 272 | ||
| The Current Account | 273 | ||
| The Financial Account | 274 | ||
| Statistical Discrepancy | 274 | ||
| Official Reserve Transactions | 274 | ||
| 14.2 Exchange Rates and the Market for Foreign Exchange | 276 | ||
| Demand and Supply in the Foreign Exchange Market | 277 | ||
| Exchange Rate Determination: Flexible Exchange Rates | 279 | ||
| Exchange Rate Determination: Fixed Exchange Rates | 280 | ||
| 14.3 The Current Exchange Rate System | 283 | ||
| Exchange Rate Arrangements | 283 | ||
| How Much Managing? How Much Floating? | 285 | ||
| The Breakdown of the Bretton Woods System | 285 | ||
| 14.4 Advantages of Alternative Exchange Rate Regimes | 286 | ||
| Advantages of Exchange Rate Flexibility | 286 | ||
| Arguments for Fixed Exchange Rates | 290 | ||
| 14.5 Exchange Rates in the Floating Rate Period | 292 | ||
| The Dollar in Decline, 1976–80 | 292 | ||
| The Dollar in the 1980s | 295 | ||
| The Dollar in Recent Years | 297 | ||
| 14.6 Global Trade Imbalances | 298 | ||
| Implication of Some Identities | 299 | ||
| 14.7 Conclusion | 301 | ||
| Perspectives 14.1 U.S. Current Account Deficits—Problems and Prospects | 275 | ||
| Perspectives 14.2 Currency Boards and Dollarization | 284 | ||
| Perspectives 14.3 The Euro | 297 | ||
| Perspectives 14.4 The Euro Area Sovereign Debt Crisis | 300 | ||
| CHAPTER 15 Monetary and Fiscal Policy in the Open Economy | 303 | ||
| 15.1 The Mundell–Fleming Model | 303 | ||
| 15.2 Imperfect Capital Mobility | 306 | ||
| Policy Under Fixed Exchange Rates | 306 | ||
| Policy Under Flexible Exchange Rates | 309 | ||
| 15.3 Perfect Capital Mobility | 311 | ||
| Policy Effects Under Fixed Exchange Rates | 312 | ||
| Policy Effects Under Flexible Exchange Rates | 314 | ||
| 15.4 Conclusion | 317 | ||
| Perspectives 15.1 The Saving–Investment Correlation Puzzle | 316 | ||
| PART FIVE: ECONOMIC POLICY | 319 | ||
| CHAPTER 16 Money, the Banking System, and Interest Rates | 320 | ||
| 16.1 The Definition of Money | 320 | ||
| The Functions of Money | 320 | ||
| Components of the Money Supply | 321 | ||
| 16.2 Interest Rates and Financial Markets | 322 | ||
| 16.3 The Federal Reserve System | 323 | ||
| The Structure of the Central Bank | 323 | ||
| Federal Reserve Influence on Money and Credit | 323 | ||
| The Tools of Federal Reserve Control | 325 | ||
| 16.4 Bank Reserves, Deposits, and Bank Credit | 328 | ||
| A Model of Deposit Creation | 329 | ||
| Deposit Creation: More General Cases | 333 | ||
| Open-Market Operations and the Federal Funds Rate | 335 | ||
| Deposit and Credit Creation (or Lack Thereof) in the Financial Crisis | 335 | ||
| 16.5 Conclusion | 338 | ||
| Perspectives 16.1 The Money Supply during the Great Depression and the Recent Recession | 336 | ||
| CHAPTER 17 Optimal Monetary Policy | 339 | ||
| 17.1 The Monetary Policymaking Process | 340 | ||
| 17.2 Competing Strategies: Targeting Monetary Aggregates or Interest Rates | 342 | ||
| Targeting Monetary Aggregates | 342 | ||
| Targeting Interest Rate | 342 | ||
| 17.3 Money versus Interest Rate Targets in the Presence of Shocks | 343 | ||
| Implications of Targeting a Monetary Aggregate | 343 | ||
| Implications of Targeting the Interest Rate | 346 | ||
| 17.4 The Relative Merits of the Two Strategies | 350 | ||
| The Sources of Uncertainty and the Choice of a Monetary Policy Strategy | 350 | ||
| Other Considerations: Credibility and Managing Expectations | 350 | ||
| 17.5 The Evolution of Federal Reserve Strategy | 351 | ||
| 1970–79: Targeting the Federal Funds Rate | 351 | ||
| 1979–82: Targeting Monetary Aggregates | 351 | ||
| 1982–2008: A Gradual Return to Federal Funds Rate Targeting | 352 | ||
| 1994–2012: A Move toward Greater Transparency | 352 | ||
| 2008–2012: Confronting the Zero-Bound Problem | 354 | ||
| 17.6 Changes in Central Bank Institutions: Recent International Experience | 354 | ||
| The Time Inconsistency Problem | 355 | ||
| Other Arguments for Inflation Targeting | 356 | ||
| 17.7 Conclusion | 358 | ||
| Perspectives 17.1 Central Bank Independence and Economic Performance | 341 | ||
| Perspectives 17.2 The Taylor Rule | 353 | ||
| Perspectives 17.3 Inflation Targeting in Practice: The New Zealand Experiment, 1989–2012 | 354 | ||
| Perspectives 17.4 Inflation Targeting for the United States: Three Influential Views and a Look to the Future | 357 | ||
| CHAPTER 18 Fiscal Policy | 360 | ||
| 18.1 The Goals of Macroeconomic Policy | 360 | ||
| 18.2 The Goals of Macroeconomic Policymakers | 361 | ||
| The Public-Choice View | 361 | ||
| The Partisan Theory | 363 | ||
| Public-Choice Theory: More Recent Developments | 365 | ||
| 18.3 The Federal Budget | 366 | ||
| 18.4 The Economy and the Federal Budget: The Concept of Automatic Fiscal Stabilizers | 369 | ||
| 18.5 Fiscal Policy Controversies: From the Reagan Years to the Present | 373 | ||
| The Pros and Cons of Fiscal Policy Rules | 374 | ||
| What About the Deficit? | 374 | ||
| The Federal Budget in the Late 1990s and into the Twenty-First Century | 376 | ||
| 18.6 Conclusion | 378 | ||
| Perspectives 18.1 Rational Expectations and the Partisan Theory | 364 | ||
| Perspectives 18.2 State and Local Government Finances | 368 | ||
| Perspectives 18.3 Sovereign Debt | 377 | ||
| PART SIX: ECONOMIC GROWTH | 381 | ||
| CHAPTER 19 Policies for Intermediate-Run Growth | 382 | ||
| 19.1 U.S. Economic Growth, 1960–2011 | 383 | ||
| 19.2 The Supply-Side Position | 385 | ||
| Intermediate-Run Output Growth Is Supply Determined | 385 | ||
| Saving and Investment Depend on After-Tax Rates of Return | 386 | ||
| Labor Supply Is Responsive to Changes in the After-Tax Real Wage | 389 | ||
| Government Regulation Contributed to the Slowdown in the U.S. Economic Growth Rate | 391 | ||
| 19.3 The Keynesian Critique of Supply-Side Economics | 391 | ||
| The Supply-Determined Nature of Intermediate-Run Growth | 392 | ||
| Saving and Investment and After-Tax Rates of Return | 392 | ||
| The Effect of Income Tax Cuts on Labor Supply | 392 | ||
| Regulation as a Source of Inflation and Slow Growth | 393 | ||
| 19.4 Growth Policies From Ronald Reagan to Barack Obama | 393 | ||
| Economic Redirection in the Reagan Years | 393 | ||
| Initiatives in the First Bush Administration | 394 | ||
| Growth Policies in the Clinton Administrations | 395 | ||
| Tax Cuts During the Administration of George W. Bush | 395 | ||
| President Obama, the Financial Crisis, and Recession | 397 | ||
| 19.5 Conclusion | 398 | ||
| Perspectives 19.1 Growth and Productivity Slowdowns in Other Industrialized Economies | 384 | ||
| Perspectives 19.2 The Laffer Curve | 390 | ||
| Perspectives 19.3 Equality and Efficiency: The Big Trade-off | 396 | ||
| CHAPTER 20 Long-Run Economic Growth: Origins of the Wealth of Nations | 399 | ||
| 20.1 The Neoclassical Growth Model | 399 | ||
| Growth and the Aggregate Production Function | 399 | ||
| Sources of Growth in the Neoclassical Model | 402 | ||
| 20.2 Recent Developments in the Theory of Economic Growth | 406 | ||
| Endogenous Growth Models | 406 | ||
| Implications of Endogenous Technological Change | 407 | ||
| Policy Implications of Endogenous Growth | 408 | ||
| 20.3 Intercountry Income Differences | 408 | ||
| 20.4 Conclusion | 412 | ||
| Perspectives 20.1 Growth Accounting for the United States: An Example | 405 | ||
| Perspectives 20.2 Muck, Money, and the Moral Consequences of Economic Growth | 411 | ||
| Glossary | 414 | ||
| A | 414 | ||
| B | 414 | ||
| C | 414 | ||
| D | 414 | ||
| E | 415 | ||
| F | 415 | ||
| G | 415 | ||
| H | 415 | ||
| I | 415 | ||
| L | 416 | ||
| M | 416 | ||
| N | 416 | ||
| O | 416 | ||
| P | 417 | ||
| Q | 417 | ||
| R | 417 | ||
| S | 417 | ||
| T | 417 | ||
| U | 417 | ||
| V | 417 | ||
| Z | 417 | ||
| Index | 418 | ||
| A | 418 | ||
| B | 418 | ||
| C | 419 | ||
| D | 419 | ||
| E | 420 | ||
| F | 421 | ||
| G | 422 | ||
| H | 422 | ||
| I | 422 | ||
| J | 423 | ||
| K | 424 | ||
| L | 424 | ||
| M | 424 | ||
| N | 426 | ||
| O | 426 | ||
| P | 427 | ||
| Q | 427 | ||
| R | 427 | ||
| S | 428 | ||
| T | 428 | ||
| U | 429 | ||
| V | 429 | ||
| W | 429 | ||
| Z | 429 |