Rent 9780132226455 | Principles of Macroeconomics | Case, Karl E.; Fair, Ray C.; Oster, Sharon @knetbooks.com

Summary Table of Contents

Target Market: for the 1 semester principles of macroeconomics course. One of the all time best-sellers, this text is widely used because of its careful, streamlined, and intuitive chapter organization. The Keynesian Cross is an integral part of this text. Case & Fair believe strongly, that a text should use the Keynesian Cross carefully and systematically, to build up to the AD/AS model. One of the great benefits of this approach, is that students won't mistakenly apply what they learned about simple demand and supply to aggregate demand & sup... MORE

Preface	p. xvii
Introduction to Economics	p. 1
The Scope and Method of Economics	p. 1
Why Study Economics?	p. 2
To Learn a Way of Thinking	p. 2
To Understand Society	p. 4
News Analysis: Economics and Global Affairs in 2005	p. 5
To Understand Global Affairs	p. 6
To Be an Informed Voter	p. 6
The Scope of Econom... MOREics	p. 7
Microeconomics and Macroeconomics	p. 8
The Diverse Fields of Economics	p. 8
Further Exploration: The Fields of Economics	p. 9
The Method of Economics	p. 10
Theories and Models	p. 11
Economic Policy	p. 14
An Invitation	p. 16
Summary	p. 16
Review Terms and Concepts	p. 16
Problem Set	p. 17
How to Read and Understand Graphs	p. 17
The Economic Problem: Scarcity and Choice	p. 25
Scarcity, Choice, and Opportunity Cost	p. 26
Scarcity and Choice in a One-Person Economy	p. 26
News Analysis Opportunity Costs and Internships	p. 27
Scarcity and Choice in an Economy of Two or More	p. 28
The Production Possibility Frontier	p. 31
Comparative Advantage and the Gains from Trade	p. 36
The Economic Problem	p. 39
Economic Systems	p. 39
Command Economies	p. 39
Laissez-Faire Economies: The Free Market	p. 40
Mixed Systems, Markets, and Governments	p. 41
Looking Ahead	p. 42
Summary	p. 42
Review Terms and Concepts	p. 43
Problem Set	p. 43
Demand, Supply, and Market Equilibrium	p. 47
Firms and Households: The Basic Decision-Making Units	p. 48
Input Markets and Output Markets: The Circular Flow	p. 48
Demand in Product/Output Markets	p. 50
Changes in Quantity Demanded Versus Changes in Demand	p. 51
Price and Quantity Demanded: The Law of Demand	p. 51
Other Determinants of Household Demand	p. 54
Shift of Demand versus Movement Along a Demand Curve	p. 56
From Household Demand to Market Demand	p. 57
Supply in Product/Output Markets	p. 59
Price and Quantity Supplied: The Law of Supply	p. 60
Other Determinants of Supply	p. 61
Shift of Supply versus Movement along a Supply Curve	p. 62
From Individual Supply to Market Supply	p. 63
Market Equilibrium	p. 64
Excess Demand	p. 65
Excess Supply	p. 66
Changes in Equilibrium	p. 67
Demand and Supply in Product Markets: A Review	p. 70
Looking Ahead: Markets and the Allocation of Resources	p. 70
News Analysis: Mad Cow Disease Cuts Demand for Cattle in 2005	p. 71
Summary	p. 72
Review Terms and Concepts	p. 73
Problem Set	p. 73
Demand and Supply Applications	p. 77
The Price System: Rationing and Allocating Resources	p. 77
Price Rationing	p. 77
Constraints on the Market and Alternative Rationing Mechanisms	p. 79
News Analysis: Hurricane Katrina and Gasoline Prices in 2005	p. 83
Prices and the Allocation of Resources	p. 84
Price Floors	p. 84
Supply and Demand Analysis: An Oil Import Fee	p. 85
Supply and Demand and Market Efficiency	p. 86
Consumer Surplus	p. 87
Producer Surplus	p. 88
Competitive Markets Maximize the Sum of Producer and Consumer Surplus	p. 89
Potential Causes of Deadweight Loss from Under- and Overproduction	p. 89
Further Exploration: The Drug Wars: A Matter of Supply and Demand	p. 90
Looking Ahead	p. 91
Summary	p. 91
Review Terms and Concepts	p. 92
Problem Set	p. 92
Concepts and Problems in Macroeconomics	p. 95
Introduction to Macroeconomics	p. 95
The Roots of Macroeconomics	p. 96
The Great Depression	p. 96
Recent Macroeconomic History	p. 96
Further Exploration: The Great Depression and John Maynard Keynes	p. 97
Macroeconomic Concerns	p. 98
Inflation and Deflation	p. 98
Output Growth: Short Run and Long Run	p. 99
Unemployment	p. 99
Government in the Macroeconomy	p. 100
Fiscal Policy	p. 100
Monetary Policy	p. 100
Further Exploration: Macroeconomic Concerns from the Federal Reserve in 2005	p. 101
Growth Policies	p. 101
The Components of the Macroeconomy	p. 102
The Circular Flow Diagram	p. 102
The Three Market Arenas	p. 103
The Methodology of Macroeconomics	p. 104
Connections to Microeconomics	p. 105
Aggregate Demand and Aggregate Supply	p. 105
The U.S. Economy Since 1900: Trends and Cycles	p. 106
Expansion and Contraction: The Business Cycle	p. 106
The U.S. Economy Since 1970	p. 107
Summary	p. 110
Review Terms and Concepts	p. 110
Problem Set	p. 111
Measuring National Output and National Income	p. 113
Gross Domestic Product	p. 113
Final Goods and Services	p. 114
Exclusion of Used Goods and Paper Transactions	p. 114
Exclusion of Output Produced Abroad by Domestically Owned Factors of Production	p. 115
Calculating GDP	p. 115
The Expenditure Approach	p. 116
Further Exploration GDP: One of the Great Inventions of the 20th Century-Survey of Current Business	p. 118
The Income Approach	p. 120
Nominal versus Real GDP	p. 122
Calculating Real GDP	p. 122
Calculating the GDP Deflator	p. 124
The Problems of Fixed Weights	p. 124
Limitations of the GDP Concept	p. 125
GDP and Social Welfare	p. 125
The Underground Economy	p. 126
Gross National Income Per Capita	p. 126
Looking Ahead	p. 127
Summary	p. 127
Review Terms and Concepts	p. 128
Problem Set	p. 128
Long-Run and Short-Run Concerns: Growth, Productivity, Unemployment, and Inflation	p. 131
Long-Run Output and Productivity Growth	p. 132
Recessions, Depressions, and Unemployment	p. 134
Defining and Measuring Unemployment	p. 135
Components of the Unemployment Rate	p. 136
The Costs of Unemployment	p. 139
News Analysis: Jobs and Hurricanes in 2005	p. 140
The Benefits of Recessions	p. 142
Inflation	p. 143
Defining Inflation	p. 143
Price Indexes	p. 143
The Costs of Inflation	p. 145
Further Exploration: World Economy in Transition: Bias in the US Consumer Price Index-Why It Could Be Important	p. 146
Inflation: Public Enemy Number One?	p. 147
Looking Ahead	p. 148
Summary	p. 148
Review Terms and Concepts	p. 149
Problem Set	p. 149
The Goods and Money Markets	p. 151
Aggregate Expenditure and Equilibrium Output	p. 151
Aggregate Output and Aggregate Income (Y)	p. 152
Income, Consumption, and Saving (Y, C, and S)	p. 153
Explaining Spending Behavior	p. 153
Planned Investment (I)	p. 157
Planned Aggregate Expenditure (AE)	p. 159
Equilibrium Aggregate Output (Income)	p. 160
The Saving/Investment Approach to Equilibrium	p. 163
News Analysis: Inventory Changes Signal Slower Growth	p. 164
Adjustment to Equilibrium	p. 164
The Multiplier	p. 165
The Multiplier Equation	p. 167
Further Exploration: The Paradox of Thrift	p. 169
The Size of the Multiplier in the Real World	p. 169
The Multiplier in Action: Recovering From the Great Depression	p. 170
Looking Ahead	p. 171
Summary	p. 171
Review Terms and Concepts	p. 171
Problem Set	p. 172
Deriving the Multiplier Algebraically	p. 173
The Government and Fiscal Policy	p. 175
Government in the Economy	p. 176
Government Purchases (G), Net Taxes (T), and Disposable Income (Y[subscript d])	p. 176
Equilibrium Output: Y = C + I + G	p. 178
Fiscal Policy at Work: Multiplier Effects	p. 180
The Government Spending Multiplier	p. 181
The Tax Multiplier	p. 182
The Balanced-Budget Multiplier	p. 184
The Federal Budget	p. 186
The Budget	p. 186
News Analysis: The Effect of a Natural Disaster on Government Spending and Taxation, 2005	p. 187
The Surplus or Deficit	p. 188
The Debt	p. 188
The Economy's Influence on the Government Budget	p. 189
Tax Revenues Depend on the State of the Economy	p. 189
Some Government Expenditures Depend on the State of the Economy	p. 189
Automatic Stabilizers	p. 190
Fiscal Drag	p. 190
Full-Employment Budget	p. 190
Looking Ahead	p. 191
Summary	p. 191
Review Terms and Concepts	p. 192
Problem Set	p. 192
Deriving the Fiscal Policy Multipliers	p. 193
The Case in Which Tax Revenues Depend on Income	p. 194
The Money Supply and the Federal Reserve System	p. 197
An Overview of Money	p. 197
What Is Money?	p. 197
News Analysis: Real Goods as a Store of Value During Inflation	p. 199
Commodity and Fiat Monies	p. 200
Measuring the Supply of Money in the United States	p. 200
The Private Banking System	p. 202
How Banks Create Money	p. 202
A Historical Perspective: Goldsmiths	p. 202
The Modern Banking System	p. 203
The Creation of Money	p. 205
The Money Multiplier	p. 207
The Federal Reserve System	p. 208
Functions of the Federal Reserve	p. 209
News Analysis: Japan's Battle with Deflation	p. 210
The Federal Reserve Balance Sheet	p. 210
How the Federal Reserve Controls the Money Supply	p. 212
The Required Reserve Ratio	p. 212
The Discount Rate	p. 213
Open Market Operations	p. 214
The Supply Curve for Money	p. 217
Looking Ahead	p. 218
Summary	p. 218
Review Terms and Concepts	p. 218
Problem Set	p. 219
Money Demand, the Equilibrium Interest Rate, and Monetary Policy	p. 221
The Demand for Money	p. 221
The Transaction Motive	p. 222
Money Management and the Optimal Balance	p. 222
News Analysis: Money Demand and Interest Rates	p. 224
The Speculation Motive	p. 226
The Total Demand for Money	p. 226
Further Exploration: The Bond Market, the Money Market, and the Speculation Motive	p. 227
Transactions Volume and the Price Level	p. 227
The Determinants of Money Demand: Review	p. 229
The Equilibrium Interest Rate	p. 229
Supply and Demand in the Money Market	p. 230
Changing the Money Supply to Affect the Interest Rate	p. 231
Increases in Y and Shifts in the Money Demand Curve	p. 232
Looking Ahead: The Federal Reserve and Monetary Policy	p. 233
Summary	p. 233
Review Terms and Concepts	p. 234
Problem Set	p. 234
The Various Interest Rates in the U.S. Economy	p. 235
The Demand For Money: A Numerical Example	p. 237
Macroeconomic Analysis	p. 239
Money, the Interest Rate, and Output: Analysis and Policy	p. 239
The Links Between the Goods Market and the Money Market	p. 239
Investment, the Interest Rate, and the Goods Market	p. 240
Money Demand, Aggregate Output (Income), and the Money Market	p. 242
Combining the Goods Market and the Money Market	p. 244
Expansionary Policy Effects	p. 244
News Analysis: Interest Rates and Housing	p. 247
Contractionary Policy Effects	p. 249
The Macroeconomic Policy Mix	p. 250
Other Determinants of Planned Investment	p. 250
Looking Ahead: The Price Level	p. 251
Summary	p. 251
Review Terms and Concepts	p. 252
Problem Set	p. 252
The Is-Lm Diagram	p. 253
Aggregate Demand, Aggregate Supply, and Inflation	p. 257
The Aggregate Demand Curve	p. 257
Deriving the Aggregate Demand Curve	p. 258
The Aggregate Demand Curve: A Warning	p. 259
Other Reasons for a Downward-Sloping Aggregate Demand Curve	p. 260
Aggregate Expenditure and Aggregate Demand	p. 261
Shifts of the Aggregate Demand Curve	p. 261
The Aggregate Supply Curve	p. 263
The Aggregate Supply Curve: A Warning	p. 263
Aggregate Supply in the Short Run	p. 264
Shifts of the Short-Run Aggregate Supply Curve	p. 266
The Equilibrium Price Level	p. 268
The Long-Run Aggregate Supply Curve	p. 269
Potential GDP	p. 269
Aggregate Demand, Aggregate Supply, and Monetary and Fiscal Policy	p. 271
Long-Run Aggregate Supply and Policy Effects	p. 272
News Analysis: A New Federal Reserve Chairman Nominated in 2005	p. 273
Further Exploration: The Simple "Keynesian" Aggregate Supply Curve	p. 274
Causes of Inflation	p. 274
Inflation Versus Sustained Inflation: A Reminder	p. 274
Demand-Pull Inflation	p. 275
Cost-Push, or Supply-Side, Inflation	p. 275
Expectations and Inflation	p. 276
Money and Inflation	p. 277
Sustained Inflation as a Purely Monetary Phenomenon	p. 278
Looking Ahead	p. 278
Summary	p. 279
Review Terms and Concepts	p. 280
Problem Set	p. 280
The Labor Market, Unemployment, and Inflation	p. 281
The Labor Market: Basic Concepts	p. 281
The Classical View of the Labor Market	p. 282
News Analysis: Employment and Unemployment at the End of 2005	p. 284
The Classical Labor Market and the Aggregate Supply Curve	p. 284
The Unemployment Rate and the Classical View	p. 285
Explaining the Existence of Unemployment	p. 286
Sticky Wages	p. 286
Efficiency Wage Theory	p. 287
Imperfect Information	p. 287
Minimum Wage Laws	p. 288
An Open Question	p. 288
The Short-Run Relationship Between The Unemployment Rate and Inflation	p. 288
The Phillips Curve: A Historical Perspective	p. 290
Aggregate Supply and Aggregate Demand Analysis and the Phillips Curve	p. 292
Expectations and the Phillips Curve	p. 293
Is There a Short-Run Trade-Off Between Inflation and Unemployment?	p. 293
The Long-Run Aggregate Supply Curve, Potential GDP, and the Natural Rate of Unemployment	p. 294
The Nonaccelerating Inflation Rate of Unemployment (NAIRU)	p. 295
Looking Ahead	p. 296
Summary	p. 297
Review Terms and Concepts	p. 297
Problem Set	p. 298
Macroeconomic Issues and Policy	p. 299
Time Lags Regarding Monetary and Fiscal Policy	p. 299
Stabilization: "The Fool in the Shower"	p. 299
Recognition Lags	p. 301
Implementation Lags	p. 301
Response Lags	p. 302
Monetary Policy	p. 303
Controlling the Interest Rate	p. 303
The Fed's Response to the State of the Economy	p. 304
Monetary Policy Since 1990	p. 305
Inflation Targeting	p. 308
Fiscal Policy: Deficit Targeting	p. 309
News Analysis: Will the New Fed Chair Change to Inflation Targeting in 2006?	p. 310
The Effects of Spending Cuts on the Deficit	p. 310
Economic Stability and Deficit Reduction	p. 312
Summary	p. 313
Fiscal Policy Since 1990	p. 313
Summary	p. 316
Review Terms and Concepts	p. 316
Problem Set	p. 316
The Stock Market and the Economy	p. 319
Stocks and Bonds	p. 319
Bonds	p. 319
Stocks	p. 320
Further Exploration: Reading a Bond Table	p. 321
Further Exploration: Reading the Stock Pages	p. 322
Determining the Price of a Stock	p. 322
The Stock Market Since 1948	p. 323
Stock Market Effects on the Economy	p. 325
The Crash of October 1987	p. 325
The Boom of 1995-2000	p. 326
Fed Policy and the Stock Market	p. 330
The Post-Boom Economy	p. 330
News Analysis: Housing Wealth in 2006	p. 331
Summary	p. 332
Review Terms and Concepts	p. 332
Problem Set	p. 332
Household and Firm Behavior in the Macroeconomy: A Further Look	p. 335
Households: Consumption and Labor Supply Decisions	p. 335
The Keynesian Theory of Consumption: A Review	p. 335
The Life-Cycle Theory of Consumption	p. 336
News Analysis: A New Pattern of Consumption and Income, 1946-1947	p. 338
The Labor Supply Decision	p. 338
Interest Rate Effects on Consumption	p. 340
Government Effects on Consumption and Labor Supply: Texes and Transfers	p. 341
A Possible Employment Constraint on Households	p. 341
A Summary of Household Behavior	p. 342
The Household Sector Since 1970	p. 343
Firms: Investment and Employment Decisions	p. 345
Expectations and Animal Spirits	p. 347
Excess Labor and Excess Capital Effects	p. 348
Inventory Investment	p. 349
A Summary of Firm Behavior	p. 350
The Firm Sector Since 1970	p. 350
Productivity and the Business Cycle	p. 353
The Relationship Between Output and Unemployment	p. 354
The Size of the Multiplier	p. 355
Summary	p. 356
Review Terms and Concepts	p. 357
Problem Set	p. 358
Long-Run Growth	p. 359
The Growth Process: From Agriculture to Industry	p. 359
The Sources of Economic Growth	p. 361
An Increase in Labor Supply	p. 361
Increases in Physical Capital	p. 363
Increases in Human Capital	p. 364
Increases in Productivity	p. 364
Growth and Productivity in the United States	p. 365
Sources of Growth in the U.S. Economy: 1929-1982	p. 366
Labor Productivity: 1952 I-2003 II	p. 367
Economic Growth and Public Policy	p. 368
Suggested Public Policies	p. 368
News Analysis: Productivity Gains in Health Care	p. 369
Further Exploration: Can We Really Measure Productivity Changes?	p. 370
Growth Policy: A Long-Run Proposition	p. 371
The Pros and Cons of Growth	p. 372
The Progrowth Argument	p. 372
The Antigrowth Argument	p. 373
Summary: No Right Answer	p. 375
Summary	p. 375
Review Terms and Concepts	p. 376
Problem Set	p. 376
Debates in Macroeconomics: Monetarism, New Classical Theory, and Supply-Side Economics	p. 379
Keynesian Economics	p. 379
Monetarism	p. 380
The Velocity of Money	p. 380
The Quantity Theory of Money	p. 381
Inflation as a Purely Monetary Phenomenon	p. 382
The Keynesian/Monetarist Debate	p. 383
New Classical Macroeconomics	p. 384
The Development of New Classical Macroeconomics	p. 384
News Analysis: Inflation and Money Supply in Latin America	p. 385
Rational Expectations	p. 385
Evaluating Rational-Expectations Theory	p. 388
Real Business Cycle Theory	p. 388
Supply-Side Economics	p. 389
Evaluating Supply-Side Economics	p. 390
Testing Alternative Macroeconomic Models	p. 391
Summary	p. 392
Review Terms and Concepts	p. 392
Problem Set	p. 393
The World Economy	p. 395
International Trade, Comparative Advantage, and Protectionism	p. 395
Trade Surpluses and Deficits	p. 396
The Economic Basis for Trade: Comparative Advantage	p. 396
Absolute Advantage versus Comparative Advantage	p. 397
Terms of Trade	p. 401
Exchange Rates	p. 402
The Sources of Comparative Advantage	p. 404
The Heckscher-Ohlin Theorem	p. 405
Other Explanations for Observed Trade Flows	p. 405
Trade Barriers: Tariffs, Export Subsidies, and Quotas	p. 405
News Analysis: New Trade Agreement with Central American and the Dominican Republic-2005	p. 408
Free Trade or Protection?	p. 409
The Case for Free Trade	p. 409
The Case for Protection	p. 410
Further Exploration: A Petition	p. 412
An Economic Consensus	p. 413
Summary	p. 413
Review Terms and Concepts	p. 415
Problem Set	p. 415
Open-Economy Macroeconomics: The Balance of Payments and Exchange Rates	p. 417
The Balance of Payments	p. 418
The Current Account	p. 419
The Capital Account	p. 420
The United States as a Debtor Nation	p. 421
Equilibrium Output (Income) in an Open Economy	p. 422
The International Sector and Planned Aggregate Expenditure	p. 422
Imports and Exports and the Trade Feedback Effect	p. 424
Import and Export Prices and the Price Feedback Effect	p. 425
The Open Economy with Flexible Exchange Rates	p. 426
The Market for Foreign Exchange	p. 426
Factors That Affect Exchange Rates	p. 429
The Effects of Exchange Rates on the Economy	p. 432
News Analysis: The Dollar, China, and Trade in 2006	p. 434
An Interdependent World Economy	p. 436
Summary	p. 436
Review Terms and Concepts	p. 437
Problem Set	p. 437
World Monetary Systems Since 1900	p. 438
Globalization	p. 443
The Global Circular Flow	p. 443
A Brief History of Economic Globalization	p. 445
The Benefits and Costs of Globalization	p. 446
The Free-Trade Debate Revisited	p. 446
Trade, Growth, and Poverty	p. 448
The Globalization of Labor Markets: The Economics of Immigration and Outsourcing	p. 449
Capital Mobility	p. 452
News Analysis: Outsourcing Is Not Just Customer Service Reps in India	p. 453
Public Policy and Globalization	p. 454
Global Externalities and Public Goods	p. 454
Nongovernmental Organizations and International Economics: The Washington Consensus	p. 455
Globalization, Capitalism, and Democracy	p. 456
A Final Word	p. 457
Summary	p. 457
Review Terms and Concepts	p. 458
Problem Set	p. 458
Economic Growth in Developing and Transitional Economies	p. 459
Life in the Developing Nations: Population and Poverty	p. 460
Economic Development: Sources and Strategies	p. 461
The Sources of Economic Development	p. 462
Strategies for Economic Development	p. 463
News Analysis: Trade and Development in Africa-2003	p. 466
Growth versus Development: The Policy Cycle	p. 467
Issues in Economic Development	p. 467
Population Growth	p. 468
Developing-Country Debt Burdens	p. 470
Economies in Transition	p. 471
Political Systems and Economic Systems: Socialism, Capitalism, and Communism	p. 472
Central Planning Versus the Market	p. 473
The End of the Soviet Union	p. 474
The Transition to a Market Economy	p. 474
Six Basic Requirements for Successful Transition	p. 474
News Analysis: Russia's Economy in 2005	p. 475
Summary	p. 479
Review Terms and Concepts	p. 480
Problem Set	p. 480
Glossary	p. G-1
Solutions to Even-Numbered Problems	p. S-1
Index	p. I-1
Photo Credits	P-1
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