Macroeconomics

by: Hubbard, R. Glenn; O'Brien, Anthony P.

ISBN 13:
9780130348258
ISBN 10:
0130348252
Edition: 1st
Format: Paperback
Copyright: 01/01/2006
Publisher: Pearson College Div
Newer Edition

Note: Not guaranteed to come with supplemental materials (access cards, study guides, lab manuals, CDs, etc.)

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Summary

Where are you headed? &No matter what your career, you will need to understand how economic forces affect you and your work. &Hubbard/O'Brien, Macroeconomics 1/e gives you the motivation and the tools to understand those forces. &You're on your way.

Preface

Acknowledgments

Part 1: Introduction

Economics: Foundations and Models

(30)

What Happens When U.S. Firms Move to China?

(19)

Building a Foundation: Economics and Individual Decisions

(1)

People Are Rational

(1)

People Respond to Economic Incentives

(1)

Optimal Decisions Are Made at the Margin

(1)

Solved Problem 1-1: Apple Computer Makes a Decision at the Margin

(1)

The Economic Problem That Every Society Must Solve

(1)

What Goods and Services Will Be Produced?

(1)

How Will the Goods and Services Be Produced?

(1)

Who Will Receive the Goods and Services Produced?

(1)

Centrally Planned Economies versus Market Economies

(1)

The Modern ``Mixed'' Economy

(1)

Efficiency and Equity

(1)

Economic Models

(1)

The Role of Assumptions in Economic Models

(1)

Forming and Testing Hypotheses in Economic Models

(1)

Making the Connection 1-1: When Economists Disagree: A Debate over Outsourcing

(1)

Normative and Positive Analysis

(1)

Microeconomics and Macroeconomics

(1)

``Don't Let This Happen To You!'' Don't Confuse Positive Analysis with Normative Analysis

(1)

A Preview of Important Economic Terms

(1)

Conclusion

(1)

An Inside Look: How Does Economic Growth in China Affect Other Countries?

(2)

Summary

(1)

Key Terms

(1)

Review Questions

(1)

Problems and Applications

(2)

Appendix: Using Graphs and Formulas

(11)

Graphs of One Variable

(1)

Graphs of Two Variables

(1)

Slopes of Lines

(1)

Taking Into Account More Than Two Variables on a Graph

(1)

Positive and Negative Relationships

(1)

Slopes of Nonlinear Curves

(3)

Formulas

(1)

Formula for a Percentage Change

(1)

Formulas for the Areas of a Rectangle and a Triangle

(1)

Summary of Using Formulas

(1)

Problems and Applications

(3)

Trade-offs, Comparative Advantage, and the Market System

(30)

Managers Making Choices at BMW

(30)

Production Possibilities Frontiers and Real-World Trade-offs

(1)

Graphing the Production Possibilities Frontier

(2)

Solved Problem 2-1: Drawing a Production Possibilities Frontier for Rosie's Boston Bakery

(2)

Making the Connection 2-1: Trade-offs and Tsunami Relief

(1)

Increasing Marginal Opportunity Costs

(1)

Economic Growth

(1)

Trade

(1)

Specialization and Gains from Trade

(2)

Absolute Advantage versus Comparative Advantage

(2)

``Don't Let This Happen To You!'' Don't Confuse Absolute Advantage and Comparative Advantage

(1)

Comparative Advantage and the Gains from Trade

(1)

Solved Problem 2-2: Comparative Advantage and the Gains from Trade

(2)

The Market System

(1)

The Circular Flow of Income

(2)

The Gains from Free Markets

(1)

The Market Mechanism

(1)

Making the Connection 2-2: Story of the Market System in Action: ``I, Pencil''

(1)

The Role of the Entrepreneur

(1)

The Legal Basis of a Successful Market System

(1)

Making the Connection 2-3: Property Rights in Cyberspace: Napster, Kazaa, and iTunes

(2)

Conclusion

(1)

An Inside Look: Choosing the Production Mix at BMW

(8)

Where Prices Come From: The Interaction of Demand and Supply

(34)

How Hewlett-Packard Manages the Demand for Printers

(34)

The Demand Side of the Market

(1)

The Demand of an Individual Buyer

(1)

Demand Schedules and Demand Curves

(1)

Individual Demand and Market Demand

(1)

The Law of Demand

(1)

What Explains the Law of Demand?

(1)

Holding Everything Else Constant: The Ceteris Paribus Condition

(1)

Variables That Shift Market Demand

(1)

Making the Connection 3-1: Why Supermarkets Need to Understand Substitutes and Complements

(1)

Making the Connection 3-2: Companies Respond to a Growing Hispanic Population

(2)

A Change in Demand versus a Change in Quantity Demanded

(1)

Making the Connection 3-3: Estimating the Demand for Printers at Hewlett-Packard

(1)

The Supply Side of the Market

(1)

Supply Schedules and Supply Curves

(1)

Individual Supply and Market Supply

(1)

The Law of Supply

(1)

Variables That Shift Supply

(1)

A Change in Supply versus a Change in Quantity Supplied

(1)

Market Equilibrium: Putting Demand and Supply Together

(1)

How Markets Eliminate Surpluses and Shortages

(1)

Demand and Supply Both Count

(1)

Solved Problem 3-1: Demand and Supply Both Count: A Tale of Two Letters

(1)

The Effect of Demand and Supply Shifts on Equilibrium

(1)

The Effect of Shifts in Supply on Equilibrium

(1)

Making the Connection 3-4: The Falling Price of Large Flat-Screen Televisions

(1)

The Effect of Shifts in Demand on Equilibrium

(1)

The Effect of Shifts in Demand and Supply over Time

(1)

Solved Problem 3-2: High Demand and Low Prices in the Lobster Market?

(1)

Shifts in a Curve versus Movements along a Curve

(1)

``Don't Let This Happen To You!'' Remember: A Change in a Good's Price Does Not Cause the Demand or Supply Curve to Shift

(1)

Conclusion

(1)

An Inside Look: Hewlett-Packard Cuts PC Prices to Sell More Printers

(8)

Economic Efficiency, Government Price Setting, and Taxes

(34)

Should the Government Control Apartment Rents?

(29)

Consumer Surplus and Producer Surplus

(1)

Consumer Surplus

(1)

Making the Connection 4-1: The Consumer Surplus from Satellite Television

100

(1)

Producer Surplus

101

(1)

What Consumer Surplus and Producer Surplus Measure

101

(1)

The Efficiency of Competitive Markets

102

(1)

Marginal Benefit Equals Marginal Cost in Competitive Equilibrium

102

(1)

Economic Surplus

103

(1)

Deadweight Loss

103

(1)

Economic Surplus and Economic Efficiency

104

(1)

Government Intervention in the Market: Price Floors and Price Ceilings

104

(1)

Price Floors: The Example of Agricultural Markets

105

(1)

Making the Connection 4-2: Price Floors in Labor Markets: The Minimum Wage

106

(1)

Price Ceilings: The Example of Rent Controls

107

(1)

``Don't Let This Happen To You!'' Don't Confuse ``Scarcity'' with a ``Shortage''

108

(1)

Black Markets

109

(1)

Solved Problem 4-1: What's the Economic Effect of a ``Black Market'' for Apartments?

109

(1)

Making the Connection 4-3: Does Holiday Gift Giving Have a Deadweight Loss?

110

(1)

The Results of Government Intervention: Winners, Losers, and Inefficiency

111

(1)

Positive and Normative Analysis of Price Ceilings and Price Floors

111

(1)

The Economic Impact of Taxes

112

(1)

The Effect of Taxes on Economic Efficiency

112

(1)

Tax Incidence: Who Actually Pays a Tax?

112

(2)

Solved Problem 4-2: When Do Consumers Pay All of a Sales Tax Increase?

114

(2)

Making the Connection 4-4: Is the Burden of the Social Security Tax Really Shared Equally between Workers and Firms?

116

(1)

Conclusion

117

(1)

An Inside Look: Dealing with Rent Control

118

(7)

Appendix: Quantitative Demand and Supply Analysis

125

(5)

Demand and Supply Equations

125

(1)

Calculating Consumer Surplus and Producer Surplus

126

(2)

Review Questions

128

(1)

Problems and Applications

129

(1)

Part 2: Firms in the Domestic and International Economies

Firms, the Stock Market, and Corporate Governance

130

(32)

Google: From Dorm Room to Wall Street

130

(22)

Types of Firms

132

(1)

Who Is Liable? Limited and Unlimited Liability

132

(1)

Making the Connection 5-1: What's in a ``Name''? Lloyd's of London Learns about Unlimited Liability the Hard Way

133

(1)

Corporations Earn the Majority of Revenue and Profits

134

(1)

The Structure of Corporations and the Principal-Agent Problem

134

(1)

Corporate Structure and Corporate Governance

134

(1)

Solved Problem 5-1: Does the Principal-Agent Problem Also Apply to the Relationship between Managers and Workers?

135

(1)

How Firms Raise Funds

136

(1)

Sources of External Funds

136

(1)

Stock and Bond Markets Provide Capital---and Information

137

(1)

``Don't Let This Happen To You!'' When Google Shares Change Hands, Google Doesn't Get the Money

138

(1)

Making the Connection 5-2: Following General Electric's Stock and Bond Prices in the Financial Pages

139

(1)

Using Financial Statements to Evaluate a Corporation

140

(1)

Making the Connection 5-3: A Bull in China's Financial Shop

141

(1)

The Income Statement

142

(1)

The Balance Sheet

143

(1)

Understanding the Business Scandals of 2002

143

(1)

Solved Problem 5-2: What Makes a Good Board of Directors?

144

(1)

Conclusion

145

(1)

An Inside Look: Google's Initial Public Offering

146

(6)

Appendix: Tools to Analyze Firms' Financial Information

152

(10)

Using Present Value to Make Investment Decisions

152

(2)

Solved Problem 5A-1: How to Receive Your Contest Winnings

154

(1)

Using Present Value to Calculate Bond Prices

155

(1)

Using Present Value to Calculate Stock Prices

155

(1)

A Simple Formula for Calculating Stock Prices

156

(1)

Going Deeper into Financial Statements

157

(1)

Analyzing Income Statements

157

(1)

Analyzing Balance Sheets

158

(4)

Comparative Advantage and the Gains from International Trade

162

(40)

Sugar Quota Drives U.S. Candy Manufacturers Overseas

162

(33)

An Overview of International Trade

164

(1)

The Importance of Trade to the U.S. Economy

164

(1)

U.S. International Trade in a World Context

165

(1)

Making the Connection 6-1: Has Outsourcing Hurt the U.S. Economy?

166

(1)

Comparative Advantage: The Basis of All Trade

167

(1)

A Brief Review of Comparative Advantage

167

(1)

Comparative Advantage in International Trade

167

(1)

The Gains from Trade

168

(1)

Increasing Consumption through Trade

169

(1)

Solved Problem 6-1: The Gains from Trade

170

(2)

Why Don't We See Complete Specialization?

172

(1)

Does Anyone Lose as a Result of International Trade?

172

(1)

``Don't Let This Happen To You!'' Remember That Trade Creates Both Winners and Losers

173

(1)

Where Does Comparative Advantage Come From?

173

(1)

Making the Connection 6-2: Why Is Dalton, Georgia, the Carpet-Making Capital of the World?

174

(1)

Comparative Advantage Over Time: The Rise and Fall---and Rise---of the U.S. Consumer Electronics Industry

174

(1)

Government Policies That Restrict Trade

175

(2)

Tariffs

177

(1)

Quotas

178

(1)

Measuring the Economic Impact of the Sugar Quota

179

(1)

Solved Problem 6-2: Measuring the Economic Effect of a Quota

179

(2)

The High Cost of Preserving Jobs with Tariffs and Quotas

181

(1)

Gains from Unilateral Elimination of Tariffs and Quotas

181

(1)

Other Barriers to Trade

182

(1)

The Argument over Trade Policies and Globalization

182

(1)

Why Do Some People Oppose the World Trade Organization?

182

(1)

Making the Connection 6-3: The Unintended Consequences of Banning Goods Made with Child Labor

183

(2)

Making the Connection 6-4: Has NAFTA Helped or Hurt the U.S. Economy?

185

(1)

Dumping

186

(1)

Positive versus Normative Analysis (Once Again)

187

(1)

Conclusion

187

(1)

An Inside Look: The United States and Australia Reduce Trade Barriers

188

(7)

Appendix: Multinational Firms

195

(7)

Multinational Firms

195

(1)

A Brief History of Multinational Enterprises

195

(1)

Strategic Factors in Moving from Domestic to Foreign Markets

196

(2)

Making the Connection 6A-1: Have Multinational Corporations Reduced Employment and Lowered Wages in the United States?

198

(1)

Challenges to U.S. Firms in Foreign Markets

199

(1)

Competitive Advantages of U.S. Firms

199

(3)

Part 3: Macroeconomic Foundations and Long-Run Growth

GDP: Measuring Total Production and Income

202

(26)

Increases in GDP Spur Hiring at Freightliner

202

(26)

Gross Domestic Product Measures Total Production

205

(1)

Measuring Total Production: Gross Domestic Product

205

(1)

Solved Problem 7-1: Calculating GDP

206

(1)

Production, Income, and the Circular Flow Diagram

207

(1)

Components of GDP

208

(1)

``Don't Let This Happen To You!'' Remember What Economists Mean by ``Investment''

209

(1)

Making the Connection 7-1: Spending on Homeland Security

209

(1)

An Equation for GDP and Some Actual Values

210

(1)

Measuring GDP by the Value Added Method

211

(1)

Does GDP Measure What We Want It to Measure?

212

(1)

Shortcomings in GDP as a Measure of Total Production

212

(1)

Making the Connection 7-2: How the Underground Economy Hurts Developing Countries

213

(1)

Shortcomings of GDP as a Measure of Well-Being

214

(1)

Making the Connection 7-3: Did World War II Bring Prosperity?

214

(1)

Real GDP versus Nominal GDP

215

(1)

Calculating Real GDP

215

(1)

Solved Problem 7-2: Calculating Real GDP

216

(1)

Comparing Real GDP and Nominal GDP

217

(1)

Making the Connection 7-4: How Freightliner Uses Forecasts of GDP

218

(1)

The GDP Deflator

218

(1)

Other Measures of Total Production and Total Income

219

(1)

Gross National Product (GNP)

219

(1)

Net National Product (NNP)

220

(1)

National Income

220

(1)

Personal Income

220

(1)

Disposable Personal Income

220

(1)

Conclusion

221

(1)

An Inside Look: Movements in Canadian GDP

222

(6)

Unemployment and Inflation

228

(32)

Lucent Technologies Deals with Unemployment and Inflation

228

(32)

Measuring the Unemployment Rate and the Labor Force Participation Rate

230

(1)

The Household Survey

230

(2)

Solved Problem 8-1: What Happens If You Include the Military?

232

(1)

Problems with Measuring the Unemployment Rate

233

(1)

Trends in Labor Force Participation

233

(1)

Making the Connection 8-1: What Explains the Increase in ``Kramers''?

234

(1)

Unemployment Rates for Demographic Groups

235

(1)

How Long Are People Usually Unemployed?

235

(1)

The Establishment Survey: Another Measure of Employment

236

(1)

Job Creation and Job Destruction Over Time

237

(1)

Types of Unemployment

237

(1)

Frictional Unemployment and Job Search

238

(1)

Structural Unemployment

239

(1)

Cyclical Unemployment

239

(1)

Full Employment

239

(1)

Making the Connection 8-2: How Should We Categorize the Unemployment at Lucent Technologies?

240

(1)

Explaining Unemployment

240

(1)

Government Policies and the Unemployment Rate

240

(2)

Labor Unions

242

(1)

Efficiency Wages

242

(1)

Making the Connection 8-3: Why Did Henry Ford Pay His Workers Twice as Much as Other Car Manufacturers?

243

(1)

Measuring Inflation

243

(1)

The Consumer Price Index

244

(1)

Is the CPI Accurate?

245

(1)

``Don't Let This Happen To You!'' Don't Miscalculate the Inflation Rate

246

(1)

The Producer Price Index

247

(1)

Using Price Indexes to Adjust for the Effects of Inflation

247

(1)

Solved Problem 8-2: Calculating Real Average Hourly Earnings

248

(1)

Falling Real Wages at Lucent

249

(1)

Real versus Nominal Interest Rates

249

(2)

Does Inflation Impose Costs on the Economy?

251

(1)

Inflation Affects the Distribution of Income

251

(1)

The Problem with Anticipated Inflation

251

(1)

Making the Connection 8-4: Why a Lower Inflation Rate Is Like a Tax Cut for Lucent's Bondholders

252

(1)

The Problem with Unanticipated Inflation

253

(1)

Conclusion

253

(1)

An Inside Look: Managers and Workers at Boeing Negotiate Wages

254

(6)

Economic Growth, the Financial System, and Business Cycles

260

(32)

Growth and the Business Cycle at the Ford Motor Company

260

(32)

Long-Run Economic Growth Is the Key to Rising Living Standards

262

(2)

Making the Connection 9-1: The Connection between Economic Prosperity and Health

264

(1)

Calculating Growth Rates and the Rule of 70

265

(1)

What Determines the Rate of Long-Run Growth?

266

(1)

Solved Problem 9-1: The Role of Technological Change in Growth

267

(1)

Making the Connection 9-2: What Explains Rapid Economic Growth in Botswana?

268

(1)

Potential Real GDP

269

(1)

Saving, Investment, and the Financial System

270

(1)

An Overview of the Financial System

270

(2)

The Macroeconomics of Saving and Investment

272

(1)

The Market for Loanable Funds

273

(1)

Making the Connection 9-3: Ebenezer Scrooge: Accidental Promoter of Economic Growth?

274

(3)

Solved Problem 9-2: How Would a Consumption Tax Affect Saving, Investment, the Interest Rate, and Economic Growth?

277

(1)

The Business Cycle

278

(1)

Some Basic Business Cycle Definitions

278

(1)

Making the Connection 9-4: Who Decides If the Economy Is in a Recession?

278

(1)

What Happens during a Business Cycle?

279

(3)

``Don't Let This Happen To You!'' Don't Confuse the Price Level and the Inflation Rate

282

(3)

Why Is the Economy More Stable?

285

(1)

Conclusion

285

(1)

An Inside Look: Growth and the Chinese Automobile Industry

286

(6)

Long-Run Economic Growth: Sources and Policies

292

(36)

The Chinese Economic Miracle

292

(36)

Economic Growth Over Time and Around the World

294

(1)

Economic Growth from 1,000,000 B.C. to the Present

294

(1)

Making the Connection 10-1: Why Was England First?

295

(1)

Small Differences in Growth Rates Are Important

296

(1)

``Don't Let This Happen To You!'' Don't Confuse Average Annual Percentage Change with Total Percentage Change

297

(1)

Why Do Growth Rates Matter?

297

(1)

Making the Connection 10-2: The Benefits of an Earlier Start: Standards of Living in China and Japan

297

(1)

``The Rich Get Richer and . . .''

298

(1)

What Determines How Fast Economies Grow?

298

(2)

The Per-Worker Production Function

300

(1)

Which Is More Important for Economic Growth: More Capital or Technological Change?

301

(1)

Technological Change: The Key to Sustaining Economic Growth

301

(1)

Making the Connection 10-3: Why Did the Soviet Union's Economy Fail?

302

(1)

Solved Problem 10-1: Using the Economic Growth Model to Analyze the Failure of the Soviet Union's Economy

303

(1)

Endogenous Growth Theory

304

(1)

Joseph Schumpeter and Creative Destruction

305

(1)

Economic Growth in the United States

306

(1)

Economic Growth in the United States Since 1950: Fast, Then Slow, Then Fast Again

306

(1)

What Caused the Productivity Slowdown of 1973--1995?

307

(1)

The Productivity Boom: Are We in a ``New Economy''?

308

(1)

Why Has Productivity Growth Been Faster in the United States than in Other Countries?

309

(2)

Why Isn't the Whole World Rich?

311

(1)

Catch-up: Sometimes, But Not Always

312

(2)

Solved Problem 10-2: The Economic Growth Model's Predictions of Catch-up

314

(1)

Why Don't More Low-Income Countries Experience Rapid Growth?

315

(2)

The Benefits of Globalization

317

(1)

Making the Connection 10-4: Globalization and the Spread of Technology in Bangladesh

318

(1)

Growth Policies

319

(1)

Enhancing Property Rights and the Rule of Law

319

(1)

Improving Health and Education

320

(1)

Policies with Respect to Technology

320

(1)

Policies with Respect to Saving and Investment

320

(1)

Is Economic Growth Good or Bad?

321

(1)

Conclusion

321

(1)

An Inside Look: India Achieves Growth through Efficiency and Globalization

322

(6)

Part 4: Short-Run Flucuations

Output and Expenditure in the Short Run

328

(42)

Demand Forecasts Backfire at Cisco Systems

328

(40)

The Aggregate Expenditure Model

330

(1)

Aggregate Expenditure

330

(1)

The Difference between Planned Investment and Actual Investment

331

(1)

Macroeconomic Equilibrium

331

(1)

Adjustments to Macroeconomic Equilibrium

332

(1)

Determining the Level of Aggregate Expenditure in the Economy

333

(1)

Consumption

333

(3)

The Relationship between Consumption and National Income

336

(2)

Income, Consumption, and Saving

338

(1)

Solved Problem 11-1: Calculating the Marginal Propensity to Consume and the Marginal Propensity to Save

339

(1)

Planned Investment

340

(1)

Making the Connection 11-1: Cisco Rides the Roller Coaster of Information Technology Spending

341

(1)

Government Purchases

342

(1)

Net Exports

342

(2)

Graphing Macroeconomic Equilibrium

344

(4)

Showing a Recession on the 45°-Line Diagram

348

(1)

The Important Role of Inventories

349

(1)

Making the Connection 11-2: Business Attempts to Control Inventories, Then . . . and Now

349

(1)

A Numerical Example of Macroeconomic Equilibrium

350

(1)

``Don't Let This Happen To You!'' Don't Confuse Aggregate Expenditure with Consumption Spendin

351

(1)

Solved Problem 11-2: Determining Macroeconomic Equilibrium

351

(1)

The Multiplier Effect

352

(2)

Making the Connection 11-3: The Multiplier in Reverse: The Great Depression of the 1930s

354

(2)

A Formula for the Multiplier

356

(1)

Summarizing the Multiplier Effect

357

(1)

Solved Problem 11-3: Using the Multiplier Formula

357

(2)

The Aggregate Demand Curve

359

(1)

Conclusion

360

(2)

An Inside Look:: Expenditure in Japan Soars, Nudging Up GDP

362

(6)

The Algebra of Macroeconomic Equilibrium

368

(1)

Appendix: The Algebra of Macroeconomic Equilibrium

368

(2)

Aggregate Demand and Aggregate Supply Analysis

370

(36)

Caterpillar Recovers Slowly from the 2001 Recession

370

(33)

Aggregate Demand

372

(1)

Why Is the Aggregate Demand Curve Downward Sloping?

373

(1)

Shifts of the Aggregate Demand Curve versus Movements Along It

374

(1)

``Don't Let This Happen To You!'' Be Clear Why the Aggregate Deman d Curve Is Downward Sloping

374

(1)

The Variables that Shift the Aggregate Demand Curve

375

(1)

Making the Connection12-1: The Effect of Exchange Rates on Caterpillar's Sales

376

(1)

Solved Problem 12-1: Movements Along the Aggregate Demand Curve versus Shifts of the Aggregate Demand Curve

377

(1)

Aggregate Supply

378

(1)

The Long-Run Aggregate Supply Curve

378

(2)

The Short-Run Aggregate Supply Curve

380

(1)

Shifts of the Short-Run Aggregate Supply Curve versus Movements Along It

381

(1)

Variables that Shift the Short-Run Aggregate Supply Curve

382

(1)

Macroeconomic Equilibrium in the Long Run and the Short Run

383

(1)

Recessions, Expansions, and Supply Shocks

384

(4)

A Dynamic Aggregate Demand and Aggregate Supply Model

388

(1)

What is the Usual Cause of Inflation?

389

(1)

The Slow Recovery from the Recession of 2001

389

(2)

Making the Connection 2-2: Does Rising Productivity Growth Reduce Employment?

391

(2)

The More Rapid Recovery of 2003--2004

393

(1)

Solved Problem 12-2: Showing the Oil Shock of 1974--1975 on a Dynamic Aggregate Demand and Aggregate Supply Graph

394

(1)

Conclusion

395

(1)

An Inside Look: Construction Company Komatsu Benefits from Exports to China

396

(7)

Appendix: Macroeconomic Schools of Thought

403

(3)

The Monetarist Model

403

(1)

The New Classical Model

404

(1)

The Real Business Cycle Model

404

(1)

Making the Connection 12A-1: Karl Marx: Capitalism's Severest Critic

405

(1)

Part 5: Monetary and Fiscal Policy

Money, Banks, and the Federal Reserve System

406

(32)

McDonald's Money Problems in Argentina

406

(32)

What is Money and Why Do We Need It?

408

(1)

Barter and the Invention of Money

408

(1)

Making the Connection 13-1: Money in a World War II Prisoner-of-War Camp

409

(1)

The Functions of Money

409

(1)

What Can Serve as Money?

410

(2)

Making the Connection 13-2: Money without a Government? The Strange Case of the Iraqi Dinar

412

(1)

How Do We Measure Money Today?

412

(1)

M1: The Narrowest Definition of the Money Supply

413

(1)

M2: A Broader Definition of Money

414

(1)

``Don't Let This Happen To You!'' Don't Confuse Money with Income or Wealth

414

(1)

Solved Problem 13-1: The Definitions of M1 and M2

415

(1)

What About Credit Cards and Debit Cards?

415

(1)

How Do Banks Create Money?

415

(1)

Bank Balance Sheets

416

(1)

``Don't Let This Happen To You!'' Know When a Checking Account Is an Asset and When It Is a Liability

416

(1)

Using T-Accounts to Show How a Bank Can Create Money

417

(2)

The Simple Deposit Multiplier

419

(1)

Solved Problem 13-2: Showing How Banks Create Money

420

(3)

The Federal Reserve System

423

(1)

Making the Connection 13-3: The 2001 Bank Panic in Argentina

423

(1)

The Organization of the Federal Reserve System

424

(1)

How the Federal Reserve Manages the Money Supply

424

(3)

Putting It All Together: Decisions of the Nonbank Public, Banks, nd the Fed

427

(1)

The Quantity Theory of Money

427

(1)

Connecting Money and Prices: The Quantity Equation

427

(1)

The Quantity Theory Explanation of Inflation

428

(1)

High Rates of Inflation

429

(1)

High Inflation in Argentina

429

(1)

Making the Connection 13-4: The German Hyperinflation of the Early 1920s

430

(1)

Conclusion

431

(1)

An Inside Look: Does Using the Dollar Destabalize Latin American Countries?

432

(6)

Monetary Policy

438

(34)

Why Did Homebuilder Toll Brothers, Inc., Prosper During the 2001 Recession?

438

(34)

What Is Monetary Policy?

440

(1)

The Goals of Monetary Policy

440

(1)

The Money Market and the Fed's Choice of Targets

441

(1)

Monetary Policy Targets

442

(1)

The Demand for Money

442

(1)

Shifts in the Money Demand Curve

443

(1)

How the Fed Manages the Money Supply: A Quick Review

444

(1)

Equilibrium in the Money Market

444

(2)

Solved Problem 14-1: The Relationship between Treasury Bill Prices and Their Interest Rates

446

(1)

A Tale of Two Interest Rates

447

(1)

Choosing a Monetary Policy Target

447

(1)

The Importance of the Federal Funds Rate

448

(1)

Monetary Policy and Economic Activity

449

(1)

How Interest Rates Affect Aggregate Demand

449

(1)

Making the Connection 14-1: Was There a Housing Market ``Bubble'' in the Early 2000s?

450

(1)

The Effects of Monetary Policy on Real GDP and the Price Level

451

(2)

Can the Fed Eliminate Recessions?

453

Making the Connection 14-2: The Fed Responds to the Terrorist Attacks of September 11, 2001

452

(2)

Making the Connection 14-3: Why Was Monetary Policy Ineffective in Japan?

454

(1)

Using Monetary Policy to Fight Inflation

454

(2)

Solved Problem 14-2: The Effects of Monetary Policy

456

(1)

A Summary of How Monetary Policy Works

457

(1)

Making the Connection 14-4: Why Does Wall Street Care about Monetary Policy?

458

(1)

``Don't Let This Happen To You!'' Remember That with Monetary Policy It's the Interest Rates---Not the Money---That Counts

459

(1)

Can the Fed Get the Timing Right?

459

(1)

A Closer Look at the Fed's Setting of Monetary Policy Targets

460

(1)

Should the Fed Target the Money Supply?

460

(1)

Why Doesn't the Fed Target Both the Money Supply and the Interest Rate?

461

(1)

The Taylor Rule

461

(1)

Should the Fed Target Inflation?

462

(1)

Is the Independence of the Federal Reserve a Good Idea?

463

(1)

The Case for Fed Independence

464

(1)

The Case against Fed Independence

465

(1)

Conclusion

465

(1)

An Inside Look: Monetary Policy Spurs Housing Boom

466

(6)

Fiscal Policy

472

(42)

A Boon for H&R Block

472

(36)

Fiscal Policy

474

(1)

What Fiscal Policy Is and What It Isn't

474

(1)

Automatic Stabilizers versus Discretionary Fiscal Policy

474

(1)

An Overview of Government Spending and Taxes

475

(1)

Making the Connection 15-1: The Future of Social Security and Medicare

476

(2)

Using Fiscal Policy to Influence Aggregate Demand

478

(1)

Expansionary Fiscal Policy

478

(1)

Contractionary Fiscal Policy

479

(1)

A Summary of How Fiscal Policy Affects Aggregate Demand

479

(1)

``Don't Let This Happen To You!'' Don't Confuse Fiscal Policy and Monetary Policy

480

(1)

The Government Purchases and Tax Multipliers

481

(2)

The Effect of Changes in Tax Rates

483

(1)

Taking Into Account the Effects of Aggregate Supply

483

(1)

The Multipliers Work in Both Directions

483

(1)

Solved Problem 15-1: Fiscal Policy Multipliers

484

(1)

The Limits of Fiscal Policy to Stabalize the Economy

485

(2)

Does Government Spending Reduce Private Spending?

487

(1)

Crowding Out in the Short Run

487

(1)

Crowding Out in the Long Run

488

(1)

Making the Connection 15-2: Limits to Fiscal Policy: Japan in the late 1990s

489

(1)

Deficits, Surpluses, and Federal Government Debt

490

(1)

How the Federal Budget Can Serve as an Automatic Stabilizer

490

(2)

Making the Connection 15-3: Did Fiscal Policy Fail During the Great Depression?

492

(1)

Solved Problem 15-2: The Effect of Economic Fluctuations on the Budget Deficit

493

(1)

Should the Federal Budget Always Be Balanced?

494

(1)

The Federal Government Debt

494

(2)

Is the Government Debt a Problem?

496

(1)

The Effects of Fiscal Policy in the Long Run

496

(1)

The Long-Run Effects of Tax Policy

496

(1)

Tax Simplification

497

(1)

Making the Connection 15-4: Should the United States Adopt the ``Flat Tax''?

498

(1)

The Economic Effect of Tax Reform

499

(1)

How Large Are Supply-Side Effects?

500

(1)

Conclusion

501

(1)

An Inside Look: Tax Receipts Increase in 2005, but Deficit Still Looms Large

502

(6)

Appendix: A Closer Look at the Multiplier

508

(6)

An Expression for Equilibrium Real GDP

508

(1)

A Formula for the Government Purchases Multiplier

509

(1)

A Formula for the Tax Multiplier

510

(1)

The ``Balanced Budget'' Multiplier

510

(1)

The Effects of Changes in Tax Rates on the Multiplier

511

(1)

The Multiplier in an Open Economy

511

(3)

Inflation, Unemployment, and Federal Reserve Policy

514

(30)

Why Does Whirlpool Care About Monetary Policy?

514

(30)

The Discovery of the Short-Run Trade-off between Unemployment and Inflation

516

(1)

Explaining the Phillips Curve with Aggregate Demand and Aggregate Supply Curves

516

(2)

Is the Phillips Curve a Policy Menu?

518

(1)

Solved Problem 16-1: The Policy Menu View of the Phillips Curve

519

(1)

Is the Short-Run Phillips Curve Stable?

519

(1)

The Long-Run Phillips Curve

520

(1)

The Role of Expectations of Future Inflation

520

(2)

Making the Connection 16-1: Do Workers Understand Inflation?

522

(1)

The Short-Run and Long-Run Phillips Curves

522

(1)

Shifts in the Short-Run Phillips Curve

523

(1)

How Does a Vertical Long-Run Phillips Curve Affect Monetary Policy?

524

(1)

Making the Connection 16-2: Does the Natural Rate of Unemployment Ever Change?

525

(1)

Solved Problem 16-2: Changing Views of the Phillips Curve

526

(1)

Expectations of the Inflation Rate

526

(1)

The Effect of Rational Expectations on Monetary Policy

527

(1)

Is the Short-Run Phillips Curve Really Vertical?

528

(1)

Real Business Cycle Models

529

(1)

How the Fed Fights Inflation

530

(1)

The Effect of a Supply Shock on the Phillips Curve

530

(1)

Paul Volcker and Disinflation

531

(1)

``Don't Let This Happen To You!'' Don't Confuse Disinflation with Deflation

532

(1)

Solved Problem 16-3: Using Monetary Policy to Lower the Inflation Rate

532

(2)

Alan Greenspan and the Importance of a Credible Monetary Policy

534

(1)

De-emphasizing the Money Supply

534

(1)

The Importance of Fed Credibility

535

(1)

Monetary Policy Credibility after Greenspan

535

(1)

A Failure of Credibility at the Bank of Japan

536

(1)

Federal Reserve Policy and Whirlpool's ``Pricing Power''

536

(1)

Conclusion

537

(1)

An Inside Look: Wage Rates for Hourly Workers Stagnate

538

(6)

Part 6: The International Economy

Macroeconomics in an Open Economy

544

(28)

Chinese Towels Invade Japan

544

(28)

The Balance of Payments: Linking the United States to the International Economy

546

(1)

The Current Account

546

(1)

The Financial Account

547

(1)

The Capital Account

548

(1)

Why Is the Balance of Payments Always Zero?

549

(1)

Solved Problem 17-1: Understanding the Arithmetic of Open Economies

549

(1)

``Don't Let This Happen To You!'' Don't Confuse the Balance of Trade, the Current Account Balance, and the Balance of Payments

550

(1)

The Foreign Exchange Market and Exchange Rates

551

(1)

Making the Connection 17-1: Exchange Rates in the Financial Pages

551

(1)

Equilibrium in the Market for Foreign Exchange

552

(1)

``Don't Let This Happen To You!'' Don't Confuse What Happens When a Currency Appreciates with What Happens When It Depreciates

553

(1)

How Do Shifts in Demand and Supply Affect the Exchange Rate?

553

(2)

Some Exchange Rates Are Not Determined by the Market

555

(1)

How Movements in the Exchange Rate Affect Exports and Imports

555

(1)

Solved Problem 17-2: Effect of Changing Exchange Rates on the Prices of Imports and Exports

556

(1)

The Real Exchange Rate

556

(1)

The International Sector and National Saving and Investment

557

(1)

Net Exports Equal Net Foreign Investment

557

(1)

Domestic Saving, Domestic Investment, and Net Foreign Investment

558

(1)

Solved Problem 17-3: Arriving at the Saving and Investment Equation

559

(1)

The Effect of a Government Budget Deficit on Investment

560

(1)

Making the Connection 17-2: Why Is the United States Called the ``World's Largest Debtor''?

561

(1)

Monetary Policy and Fiscal Policy in an Open Economy

562

(1)

Monetary Policy in an Open Economy

562

(1)

Fiscal Policy in an Open Economy

563

(1)

Conclusion

563

(1)

An Inside Look: Distorted Price Signals Nurture U.S. Current-Account Deficit

564

(8)

The International Financial System

572

Fluctuating Exchange Rates Push Molson Breweries to Sell the Canadiens

572

(24)

Exchange-Rate Systems

574

(1)

``Don't Let This Happen To You!'' Remember That Modern Currencies Are Fiat Money

575

(1)

The Current Exchange Rate System

575

(1)

The Floating Dollar

575

(1)

Making the Connection 18-1: The Toronto Blue Jays Gain from the Rising Value of the Canadian Dollar

576

(1)

What Determines Exchange Rates in the Long Run?

577

(1)

Making the Connection 18-2: The Big Mac Theory of Exchange Rates

578

(1)

Solved Problem 18-1: Calculating Purchasing Power Parity Exchange Rates Using Big Macs

579

(1)

The Euro

580

(2)

Making the Connection 18-3: The Underground Economy in Europe Surfaces

582

(1)

Pegging Against the Dollar

582

(4)

Making the Connection 18-4: Crisis and Recovery in South Korea

586

(1)

Solved Problem 18-2: Coping with Fluctuations in the Value of the U.S. Dollar

587

(1)

International Capital Markets

588

(1)

Conclusion

589

(1)

An Inside Look: Strong Euro Slashes Profits at Some EU Firms

590

(6)

Appendix: The Gold Standard and the Bretton Woods System

596

The Gold Standard

596

(1)

The End of the Gold Standard

596

(1)

The Bretton Woods System

597

(1)

The Collapse of the Bretton Woods System

598

Glossary

(1)

Company Index

(2)

Subject Index

Credits

Macroeconomics

9780130348258

0130348252

Summary

Table of Contents

Supplemental Materials

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