Contents
Preface: To the Student iii
Part VIII The Data of Macroeconomics 1(471)
Chapter 23
Measuring a Nation¡¯s Income 3(473)
23-1 The Economy¡¯s Income and Expenditure 4(474)
23-2 The Measurement of GDP 6(476)
23-2a ¡°GDP Is the Market Value . . .¡± 6(476)
23-2b ¡°. . . of All . . .¡± 6(476)
23-2c ¡°. . . Final . . .¡± 6(476)
23-2d ¡°. . . Goods and Services . . .¡± 7(477)
23-2e ¡°. . . Produced . . .¡± 7(477)
23-2f ¡°. . . Within a Country . . .¡± 7(477)
23-2g ¡°. . . In a Given Period of Time.¡± 7(477)
FYI: Other Measures of Income 8(478)
23-3 The Components of GDP 9(479)
23-3a Consumption 9(479)
23-3b Investment 9(479)
IN the News: Sex, Drugs, and GDP 10(480)
23-3c Government Purchases 10(480)
23-3d Net Exports 10(480)
Case Study: The Components of U.S. GDP 11(481)
23-4 Real versus Nominal GDP 12(482)
23-4a A Numerical Example 12(482)
23-4b The GDP Deflator 14(484)
Case Study: A Half Century of Real GDP 15(485)
IN the News: Gauging the High-Tech Economy 16(486)
23-5 Is GDP a Good Measure of Economic Well-Being 16(486)
IN the News: Measuring Macroeconomic Well-Being
18(488)
Case Study: International Differences in GDP and the Quality of Life 20(490)
23-6 Conclusion 21(491)
Summary 22(492)
Key Concepts 22(492)
Questions for Review 22(492)
Problems and Applications 23(493)
Chapter 24
Measuring the Cost of Living 25(495)
24-1 The Consumer Price Index 26(496)
24-1a How the CPI Is Calculated 26(496)
FYI: What¡¯s in the CPI¡¯s Basket 28(498)
24-1b Problems in Measuring the Cost of Living 29(499)
IN the News: Monitoring Inflation in the Internet Age 30(500)
24-1c The GDP Deflator versus the Consumer Price Index 32(502)
24-2 Correcting Economic Variables for the Effects of
Inflation 33(503)
24-2a Dollar Figures from Different Times 33(503)
FYI: Mr. Index Goes to Hollywood 34(504)
Case Study: Regional Differences in the Cost of Living 35(505)
24-2b Indexation 36(506)
24-2c Real and Nominal Interest Rates 36(506)
Case Study: Interest Rates in the U.S. Economy 38(508)
24-3 Conclusion 38(508)
Summary 40(510)
Key Concepts 40(510)
Questions for Review 40(510)
Problems and Applications 41(511)
Part IX The Real Economy
in the Long Run 43(513)
Chapter 25
Production and Growth 45(515)
25-1 Economic Growth around the World 46(516)
25-2 Productivity: Its Role and Determinants 48(518)
25-2a Why Productivity Is So Important 48(518)
FYI: Are You Richer Than the Richest American 48(518)
25-2b How Productivity Is Determined 49(519)
FYI: A Picture Is Worth a Thousand Statistics 50(520)
FYI: The Production Function 53(523)
Case Study: Are Natural Resources a Limit to Growth 54(524)
25-3 Economic Growth and Public Policy 55(525)
25-3a Saving and Investment 55(525)
25-3b Diminishing Returns and the Catch-Up Effect 55(525)
25-3c Investment from Abroad 57(527)
25-3d Education 58(528)
25-3e Health and Nutrition 58(528)
25-3f Property Rights and Political Stability 59(529)
25-3g Free Trade 60(530)
25-3h Research and Development 61(531)
ASK THE EXPERTS: Innovation and Growth 61(531)
IN the News: Curmudgeon versus Optimist 62(532)
25-3i Population Growth 64(534)
IN the News: Using Experiments to Evaluate Aid 66(536)
25-4 Conclusion: The Importance of Long-Run Growth 68(538)
Summary 69(539)
Key Concepts 69(539)
Questions for Review 69(539)
Problems and Applications 70(540)
Chapter 26
Saving, Investment, and the Financial System 71(541)
26-1 Financial Institutions in the U.S. Economy 72(542)
26-1a Financial Markets 72(542)
26-1b Financial Intermediaries 74(544)
FYI: Key Numbers for Stock Watchers 75(545)
26-1c Summing Up 76(546)
26-2 Saving and Investment in the National Income
Accounts 77(547)
26-2a Some Important Identities 77(547)
26-2b The Meaning of Saving and Investment 79(549)
26-3 The Market for Loanable Funds 79(549)
26-3a Supply and Demand for Loanable Funds 80(550)
26-3b Policy 1: Saving Incentives 81(551)
26-3c Policy 2: Investment Incentives 83(553)
26-3d Policy 3: Government Budget Deficits and Surpluses 84(554)
ASK THE EXPERTS: Fiscal Policy and Saving 85(555)
Case Study: The History of U.S. Government Debt 86(556)
FYI: Financial Crises 88(558)
26-4 Conclusion 88(558)
Summary 89(559)
Key Concepts 90(560)
Questions for Review 90(560)
Problems and Applications 90(560)
Part X Money and Prices in the Long Run 91(601)
Chapter 29
The Monetary System 93(603)
29-1 The Meaning of Money 94(604)
29-1a The Functions of Money 95(605)
29-1b The Kinds of Money 95(605)
IN the News: Why Gold 96(606)
29-1c Money in the U.S. Economy 97(607)
Case Study: Where Is All the Currency 98(608)
FYI: Why Credit Cards Aren¡¯t Money 99(609)
29-2 The Federal Reserve System 99(609)
29-2a The Fed¡¯s Organization 99(609)
29-2b The Federal Open Market Committee 100(610)
29-3 Banks and the Money Supply 101(611)
29-3a The Simple Case of 100 Percent Reserve Banking 101(611)
29-3b Money Creation with Fractional Reserve Banking 102(612)
29-3c The Money Multiplier 103(613)
29-3d Bank Capital, Leverage, and the Financial Crisis
of 2008¨C2009 105(615)
29-4 The Fed¡¯s Tools of Monetary Control 106(616)
29-4a How the Fed Influences the Quantity of Reserves 107(617)
29-4b How the Fed Influences the Reserve Ratio 108(618)
29-4c Problems in Controlling the Money Supply 109(619)
Case Study: Bank Runs and the Money Supply 109(619)
IN the News: A Trip to Jekyll Island 110(620)
29-4d The Federal Funds Rate 111(621)
29-5 Conclusion 112(622)
Summary 113(623)
Key Concepts 114(624)
Questions for Review 114(624)
Problems and Applications 114(624)
Chapter 30
Money Growth and Inflation 117(627)
30-1 The Classical Theory of Inflation 119(629)
30-1a The Level of Prices and the Value of Money 119(629)
30-1b Money Supply, Money Demand, and Monetary Equilibrium 120(630)
30-1c The Effects of a Monetary Injection 121(631)
30-1d A Brief Look at the Adjustment Process 122(632)
30-1e The Classical Dichotomy and Monetary Neutrality 123(633)
30-1f Velocity and the Quantity Equation 124(634)
Case Study: Money and Prices during Four
Hyperinflations 126(636)
30-1g The Inflation Tax 127(637)
FYI: Hyperinflation in Zimbabwe 128(638)
30-1h The Fisher Effect 129(639)
30-2 The Costs of Inflation 130(640)
30-2a A Fall in Purchasing Power The Inflation Fallacy 131(641)
30-2b Shoeleather Costs 131(641)
30-2c Menu Costs 132(642)
30-2d Relative-Price Variability and the Misallocation of Resources 132(642)
30-2e Inflation-Induced Tax Distortions 133(643)
30-2f Confusion and Inconvenience 134(644)
30-2g A Special Cost of Unexpected Inflation: Arbitrary Redistributions of Wealth 135(645)
30-2h Inflation Is Bad, but Deflation May Be Worse 136(646)
Case Study: The Wizard of Oz and the Free-Silver
Debate 136(646)
30-3 Conclusion 137(647)
Summary 139(649)
Key Concepts 139(649)
Questions for Review 139(649)
Problems and Applications 139(649)
Part XII Short-Run Economic Fluctuations 141(699)
Chapter 33
Aggregate Demand and Aggregate
Supply 143(701)
33-1 Three Key Facts about Economic Fluctuations 144(702)
33-1a Fact 1: Economic Fluctuations Are Irregular and Unpredictable 144(702)
33-1b Fact 2: Most Macroeconomic Quantities
Fluctuate Together 146(704)
33-1c Fact 3: As Output Falls, Unemployment Rises 146(704)
33-2 Explaining Short-Run Economic Fluctuations 147(705)
33-2a The Assumptions of Classical Economics 147(705)
33-2b The Reality of Short-Run Fluctuations 147(705)
33-2c The Model of Aggregate Demand and
Aggregate Supply 148(706)
33-3 The Aggregate-Demand Curve 149(707)
33-3a Why the Aggregate-Demand Curve Slopes Downward 149(707)
33-3b Why the Aggregate-Demand Curve Might Shift 152(710)
33-4 The Aggregate-Supply Curve 154(712)
33-4a Why the Aggregate-Supply Curve Is Vertical in the
Long Run 154(712)
33-4b Why the Long-Run Aggregate-Supply Curve
Might Shift 155(713)
33-4c Using Aggregate Demand and Aggregate Supply to Depict Long-Run Growth and Inflation 157(715)
33-4d Why the Aggregate-Supply Curve Slopes Upward
in the Short Run 158(716)
33-4e Why the Short-Run Aggregate-Supply Curve
Might Shift 162(720)
33-5 Two Causes of Economic Fluctuations 163(721)
33-5a The Effects of a Shift in Aggregate Demand 164(722)
FYI: Monetary Neutrality Revisited 166(724)
Case Study: Two Big Shifts in Aggregate Demand:
The Great Depression and World War II 167(725)
Case Study: The Great Recession of 2008¨C2009 168(726)
IN the News: What Have We Learned 170(728)
33-5b The Effects of a Shift in Aggregate Supply 170(728)
Case Study: Oil and the Economy 173(731)
FYI: The Origins of the Model of Aggregate Demand
and Aggregate Supply 174(732)
33-6 Conclusion 175(733)
Summary 176(734)
Key Concepts 176(734)
Questions for Review 177(735)
Problems and Applications 177(735)
Chapter 34
The Influence of Monetary and Fiscal Policy on Aggregate Demand 179(737)
34-1 How Monetary Policy Influences Aggregate Demand 180(738)
34-1a The Theory of Liquidity Preference 181(739)
34-1b The Downward Slope of the Aggregate-Demand
Curve 183(741)
FYI: Interest Rates in the Long Run and the Short Run 184(742)
34-1c Changes in the Money Supply 185(743)
34-1d The Role of Interest-Rate Targets in Fed Policy 187(745)
Case Study: Why the Fed Watches the Stock Market (and Vice Versa) 187(745)
34-1e The Zero Lower Bound 188(746)
34-2 How Fiscal Policy Influences Aggregate Demand 189(747)
34-2a Changes in Government Purchases 189(747)
34-2b The Multiplier Effect 190(748)
34-2c A Formula for the Spending Multiplier 190(748)
34-2d Other Applications of the Multiplier Effect 192(750)
34-2e The Crowding-Out Effect 192(750)
34-2f Changes in Taxes 194(752)
FYI: How Fiscal Policy Might Affect Aggregate Supply 194(752)
34-3 Using Policy to Stabilize the Economy 195(753)
34-3a The Case for Active Stabilization Policy 195(753)
IN the News: How Large Is the Fiscal Policy Multiplier 196(754)
Case Study: Keynesians in the White House 198(756)
ask the experts: Economic Stimulus 198(756)
34-3b The Case against Active Stabilization Policy 198(756)
34-3c Automatic Stabilizers 200(758)
34-4 Conclusion 200(758)
Summary 201(759)
Key Concepts 202(760)
Questions for Review 202(760)
Problems and Applications 202(760)
