Macroeconomic Essentials: Understanding Economics in the News

Description

This introductory text offers an alternative to the encyclopedic, technically oriented approach taken by traditional textbooks on macroeconomic principles. Concise and nontechnical but rigorous, its goal is not to teach students to shift curves on diagrams but to help them understand fundamental macroeconomic concepts and their real-world applications. It accomplishes this by providing a clear exposition of introductory macroeconomic theory along with more than 700 one- or two-sentence “news clips,” based on economics media coverage, as illustrations or student exercises. Although the writing is accessible, end-of-chapter questions are challenging, requiring a thorough understanding of related macroeconomic concepts, critical-thinking skills, and an ability to make connections to the real world. This fourth edition has been thoroughly revised and updated, with new material on such topics as aggregate supply and demand, supply-side models, recent issues faced by the Federal Reserve, the role of government, and “burst bubbles.” The more challenging end-of-chapter questions are separated out, and news clip questions have been added that refer to recent events. Optional chapter appendixes offer technical material; other appendixes provide answers to sample exam questions and to even-numbered end-of-chapter questions. Text boxes (“curiosities”) offer short expositions of related topics. The book can be used as a text for principles of macroeconomics and applied macroeconomics courses, as a supplementary text for a traditional macro-principles course, or for MBA macroeconomics courses. Contents......Page 8 Preface......Page 14 Chapter 1. Introduction......Page 18 1.1 Media Economics......Page 19 1.2 Up-and-Down Economics......Page 20 1.4 A Picture Can Be Worth a Thousand Words......Page 21 1.5 Really Important Macroeconomic Ideas......Page 22 Chapter 2. The Basics of Supply and Demand, and a Big Picture......Page 28 2.1 Supply and Demand Diagram......Page 29 2.2 Equilibrium......Page 30 2.3 Shifts in Curves versus Movements along Curves......Page 31 2.4 Media Examples......Page 33 2.5 Macroeconomic Markets......Page 34 2.6 Picturing the Macroeconomic Markets......Page 35 2.7 A “Big Picture” for Macroeconomics......Page 37 Chapter 3. Measuring GDP and Inflation......Page 40 3.1 What Is GDP?......Page 41 3.2 Estimating GDP......Page 43 3.3 GDP as Gross Deceptive Product......Page 45 3.4 Real versus Nominal GDP......Page 48 3.5 Measuring Inflation......Page 50 3.6 The Costs of Infl ation......Page 54 Chapter 4. Unemployment......Page 68 4.1 Defining and Measuring Unemployment......Page 69 4.2 The Employment/Unemployment Connection......Page 72 4.3 What Is Full Employment?......Page 73 4.4 The Cost of Unemployment......Page 75 Chapter 5. The Role of Aggregate Demand......Page 88 5.1 Aggregate Demand......Page 89 5.2 Determining National Income......Page 90 5.3 The Multiplier......Page 92 5.4 How Big Is the Multiplier?......Page 96 5.5 Inventories and Forecasting......Page 101 5.6 Policy Implications......Page 102 5.7 Deficit Spending......Page 104 5.8 Burdening Future Generations......Page 107 Chapter 6. The Supply Side......Page 134 6.1 The Aggregate Supply Curve......Page 135 6.2 The Aggregate Demand Curve......Page 136 6.3 Using the Aggregate-Supply/Aggregate-Demand Diagram......Page 138 6.4 Where Is Full Employment?......Page 139 6.5 Moving into a Boom......Page 140 6.6 Moving into a Recession......Page 143 6.7 Analyzing Supply Shocks......Page 146 6.8 Supply-Side Economics......Page 148 Chapter 7. Growth and Productivity......Page 160 7.1 The Determinants of Growth......Page 161 7.2 The Productivity Growth Process......Page 166 7.3 The Role of National Saving......Page 168 7.4 Policy for Growth......Page 172 Chapter 8. The Money Supply......Page 184 8.1 What Is Money?......Page 185 8.2 Fractional Reserve Banking......Page 189 8.3 Controlling the Money Supply......Page 191 8.4 The Money Multiplier......Page 192 8.5 The Subprime Mortgage Crisis......Page 194 Chapter 9. The Monetarist Rule......Page 206 9.1 The Quantity Theory......Page 207 9.2 The Modern Quantity Theory......Page 208 9.3 The Monetarist Rule......Page 211 9.4 Seigniorage......Page 214 9.5 The Rules-versus-Discretion Debate......Page 215 Chapter 10. Monetary Policy and Interest Rates......Page 234 10.1 A Multitude of Interest Rates......Page 235 10.2 Interest Rates and the Price of Bonds......Page 236 10.3 Monetary Policy and Interest Rates......Page 242 10.4 The Transmission Mechanism......Page 243 10.5 Monetary Policy versus Fiscal Policy......Page 245 Chapter 11. Real-versus-Nominal Interest Rates......Page 264 11.1 Expected Inflation......Page 265 11.2 The Real Rate of Interest......Page 266 11.3 The Nominal Rate of Interest......Page 268 11.4 Policy Implications......Page 271 Chapter 12. Stagflation......Page 290 12.1 The Phillips Curve......Page 291 12.2 Policy Implications......Page 295 12.3 Fighting Infl ation with Recession......Page 297 12.4 Wage-Price Controls......Page 302 12.5 Explaining Stagfl ation......Page 303 Chapter 13. The Balance of Payments......Page 324 13.1 The Balance of Payments......Page 325 13.2 Determinants of Foreign Exchange Market Activity......Page 326 13.3 The International Economic Accounts......Page 329 13.4 The Twin Defi cits......Page 332 Chapter 14. Policy in an Open Economy......Page 344 14.1 International Imbalance with a Flexible Exchange Rate......Page 345 14.2 International Imbalance with a Fixed Exchange Rate......Page 347 14.3 International Influence on Fiscal Policy......Page 348 14.4 International Influence on Monetary Policy......Page 349 14.5 Sterilization Policy......Page 351 14.6 Government Influence on the Exchange Rate......Page 352 14.7 Fixed-versus-Flexible Exchange Rates......Page 354 Chapter 15. Purchasing Power Parity......Page 366 15.1 Inflation with a Fixed Exchange Rate......Page 367 15.2 Inflation with a Flexible Exchange Rate......Page 369 15.3 Purchasing Power Parity......Page 371 15.4 The PPP Exchange Rate......Page 374 Chapter 16. Interest-Rate Parity......Page 384 16.1 Why Are Real Interest Rates Similar in Different Countries?......Page 385 16.2 Why Approximately?......Page 386 16.3 Why Not Nominal Interest Rates?......Page 387 Chapter 3: Measuring GDP and Infl ation......Page 400 Chapter 5: The Role of Aggregate Demand......Page 401 Chapter 6: The Supply Side......Page 402 Chapter 8: The Money Supply......Page 403 Chapter 9: The Monetarist Rule......Page 404 Chapter 11: Real-versus-Nominal Interest Rates......Page 405 Chapter 13: The Balance of Payments......Page 406 Chapter 15: Purchasing Power Parity......Page 407 Chapter 16: Interest Rate Parity......Page 408 Chapter 3: Measuring GDP and Inflation......Page 410 Chapter 4: Unemployment......Page 412 Chapter 5: The Role of Aggregate Demand......Page 414 Chapter 6: The Supply Side......Page 418 Chapter 7: Growth and Productivity......Page 419 Chapter 8: The Money Supply......Page 421 Chapter 9: The Monetarist Rule......Page 422 Chapter 10: Monetary Policy and Interest Rates......Page 425 Chapter 11: Real-versus-Nominal Interest Rates......Page 430 Chapter 12: Stagflation......Page 433 Chapter 13: The Balance of Payments......Page 436 Chapter 14: Policy in an Open Economy......Page 438 Chapter 15: Purchasing Power Parity......Page 441 Chapter 16: Interest Rate Parity......Page 443 Glossary......Page 446 Index......Page 464