Macroeconomics

Description

Understand macroeconomic theory, research and policy with Greg Mankiw’s trademark clarity. About this Book Cover Page Inside Front Cover Half Title Page Title Page Copyright Page About the Author Dedication Brief Contents Contents Media and Resources from Worth Publishers Preface Accessibility Chapter 1: The Science of Macroeconomics 1-1 What Macroeconomists Study 1-2 How Economists Think Theory as Model Building The Use of Multiple Models Prices: Flexible Versus Sticky Microeconomic Thinking and Macroeconomic Models 1-3 How This Book Proceeds Chapter 1 End of Chapter Chapter 1 Summary Chapter 1 Key Concepts Chapter 1 Questions for Review Chapter 1 Problems and Applications Answers to Quick Quiz Chapter 2: The Data of Macroeconomics 2-1 Measuring the Value of Economic Activity: Gross Domestic Product Income, Expenditure, and the Circular Flow Rules for Computing GDP Real GDP Versus Nominal GDP The GDP Deflator Chain-Weighted Measures of Real GDP The Components of Expenditure Other Measures of Income Seasonal Adjustment 2-2 Measuring the Cost of Living: The Consumer Price Index The Price of a Basket of Goods How the CPI Compares to the GDP and PCE Deflators Does the CPI Overstate Inflation? 2-3 Measuring Joblessness: The Unemployment Rate The Household Survey The Establishment Survey 2-4 Conclusion: From Economic Statistics to Economic Models Chapter 2 End of Chapter Chapter 2 Summary Chapter 2 Key Concepts Chapter 2 Questions for Review Chapter 2 Problems and Applications Answers to Quick Quiz Chapter 3: National Income: Where It Comes From and Where It Goes 3-1 What Determines the Total Production of Goods and Services? The Factors of Production The Production Function The Supply of Goods and Services 3-2 How Is National Income Distributed to the Factors of Production? Factor Prices The Decisions Facing a Competitive Firm The Firm’s Demand for Factors The Distribution of National Income The Cobb–Douglas Production Function 3-3 What Determines the Demand for Goods and Services? Consumption Investment Government Purchases 3-4 What Brings the Supply and Demand for Goods and Services into Equilibrium? Equilibrium in the Market for Goods and Services: The Supply and Demand for the Economy’s Output Equilibrium in Financial Markets: The Supply and Demand for Loanable Funds Changes in Saving: The Effects of Fiscal Policy Changes in Investment Demand 3-5 Conclusion Chapter 3 End of Chapter Chapter 3 Summary Chapter 3 Key Concepts Chapter 3 Questions for Review Chapter 3 Problems and Applications Answers to Quick Quiz Chapter 3 Appendix: The Growing Gap Between Rich and Poor A Rising Capital Share The Race Between Education and Technology Globalization The Evolving Role of Marriage The Policy Questions Chapter 4: The Monetary System: What It Is and How It Works 4-1 What Is Money? The Functions of Money The Types of Money The Development of Fiat Money How the Quantity of Money Is Controlled How the Quantity of Money Is Measured 4-2 The Role of Banks in the Monetary System 100-Percent-Reserve Banking Fractional-Reserve Banking Bank Capital, Leverage, and Capital Requirements 4-3 How Central Banks Influence the Money Supply A Model of the Money Supply The Instruments of Monetary Policy Problems in Monetary Control 4-4 Conclusion Chapter 4 End of Chapter Chapter 4 Summary Chapter 4 Key Concepts Chapter 4 Questions for Review Chapter 4 Problems and Applications Answers to Quick Quiz Chapter 5: Inflation: Its Causes, Effects, and Social Costs 5-1 The Quantity Theory of Money Transactions and the Quantity Equation From Transactions to Income The Money Demand Function and the Quantity Equation The Assumption of Constant Velocity Money, Prices, and Inflation 5-2 Seigniorage: The Revenue from Creating Money 5-3 Inflation and Interest Rates Two Interest Rates: Real and Nominal The Fisher Effect Two Real Interest Rates: Ex Ante and Ex Post 5-4 The Nominal Interest Rate and the Demand for Money The Cost of Holding Money Future Money and Current Prices 5-5 The Social Costs of Inflation The Layperson’s View and the Classical Response The Costs of Expected Inflation The Costs of Unexpected Inflation One Benefit of Inflation 5-6 Hyperinflation The Costs of Hyperinflation The Causes of Hyperinflation 5-7 Conclusion: The Classical Dichotomy Chapter 5 End of Chapter Chapter 5 Summary Chapter 5 Key Concepts Chapter 5 Questions for Review Chapter 5 Problems and Applications Answers to Quick Quiz Chapter 6: The Open Economy 6-1 The International Flows of Capital and Goods The Role of Net Exports International Capital Flows and the Trade Balance International Flows of Goods and Capital: An Example The Irrelevance of Bilateral Trade Balances 6-2 Saving and Investment in a Small Open Economy Capital Mobility and the World Interest Rate Why Assume a Small Open Economy? The Model How Policies Influence the Trade Balance Evaluating Economic Policy 6-3 Exchange Rates Nominal and Real Exchange Rates The Real Exchange Rate and the Trade Balance The Determinants of the Real Exchange Rate How Policies Influence the Real Exchange Rate The Effects of Trade Policies The Determinants of the Nominal Exchange Rate The Special Case of Purchasing-Power Parity 6-4 Conclusion: The United States as a Large Open Economy Chapter 6 End of Chapter Chapter 6 Summary Chapter 6 Key Concepts Chapter 6 Questions for Review Chapter 6 Problems and Applications Answers to Quick Quiz Chapter 6 Appendix: The Large Open Economy Net Capital Outflow The Model Policies in the Large Open Economy Conclusion Chapter 7: Unemployment and the Labor Market 7-1 Job Loss, Job Finding, and the Natural Rate of Unemployment 7-2 Job Search and Frictional Unemployment Causes of Frictional Unemployment Public Policy and Frictional Unemployment 7-3 Real-Wage Rigidity and Structural Unemployment Minimum-Wage Laws Unions and Collective Bargaining Efficiency Wages 7-4 Labor-Market Experience: The United States The Duration of Unemployment Variation in the Unemployment Rate Across Demographic Groups Transitions into and out of the Labor Force 7-5 Labor-Market Experience: Europe The Rise in European Unemployment Unemployment Variation Within Europe The Rise of European Leisure 7-6 Conclusion Chapter 7 End of Chapter Chapter 7 Summary Chapter 7 Key Concepts Chapter 7 Questions for Review Chapter 7 Problems and Applications Answers to Quick Quiz Chapter 8: Capital Accumulation as a Source of Growth 8-1 The Basic Solow Model The Supply and Demand for Goods Growth in the Capital Stock and the Steady State Approaching the Steady State: A Numerical Example How Saving Affects Growth 8-2 The Golden Rule Level of Capital Comparing Steady States Finding the Golden Rule Steady State: A Numerical Example The Transition to the Golden Rule Steady State 8-3 Conclusion Chapter 8 End of Chapter Chapter 8 Summary Chapter 8 Key Concepts Chapter 8 Questions for Review Chapter 8 Problems and Applications Answers to Quick Quiz Chapter 9: Population Growth and Technological Progress 9-1 Population Growth in the Solow Model The Steady State with Population Growth The Effects of Population Growth Alternative Perspectives on Population Growth 9-2 Technological Progress in the Solow Model The Efficiency of Labor The Steady State with Technological Progress The Effects of Technological Progress 9-3 Beyond the Solow Model: Endogenous Growth Theory The Basic Model A Two-Sector Model The Microeconomics of Research and Development The Process of Creative Destruction 9-4 Conclusion Chapter 9 End of Chapter Chapter 9 Summary Chapter 9 Key Concepts Chapter 9 Questions for Review Chapter 9 Problems and Applications Answers to Quick Quiz Chapter 10: Growth Empirics and Policy 10-1 From Growth Theory to Growth Empirics Balanced Growth Convergence Factor Accumulation Versus Production Efficiency 10-2 Accounting for the Sources of Economic Growth Increases in the Factors of Production Technological Progress The Sources of Growth in the United States The Solow Residual in the Short Run 10-3 Policies to Promote Growth Evaluating the Rate of Saving Changing the Rate of Saving Allocating the Economy’s Investment Establishing the Right Institutions Supporting a Pro-growth Culture Encouraging Technological Progress 10-4 Conclusion Chapter 10 End of Chapter Chapter 10 Summary Chapter 10 Key Concept Chapter 10 Questions for Review Chapter 10 Problems and Applications Answers to Quick Quiz Chapter 11: Introduction to Economic Fluctuations 11-1 The Facts About the Business Cycle GDP and Its Components Unemployment and Okun’s Law Leading Economic Indicators 11-2 Time Horizons in Macroeconomics How the Short Run and the Long Run Differ The Model of Aggregate Supply and Aggregate Demand 11-3 Aggregate Demand The Quantity Equation as Aggregate Demand Why the Aggregate Demand Curve Slopes Downward Shifts in the Aggregate Demand Curve 11-4 Aggregate Supply The Long Run: The Vertical Aggregate Supply Curve The Short Run: The Horizontal Aggregate Supply Curve From the Short Run to the Long Run 11-5 Stabilization Policy Shocks to Aggregate Demand Shocks to Aggregate Supply 11-6 The Covid-19 Recession of 2020 Modeling the Shutdown The Policy Response The Recovery and the Road Ahead 11-7 Conclusion Chapter 11 End of Chapter Chapter 11 Summary Chapter 11 Key Concepts Chapter 11 Questions for Review Chapter 11 Problems and Applications Answers to Quick Quiz Chapter 12: Aggregate Demand I: Building the IS–LM Model 12-1 The Goods Market and the IS Curve The Keynesian Cross 12-2 The Money Market and the LM Curve The Theory of Liquidity Preference Income, Money Demand, and the LM Curve How Monetary Policy Shifts the LM Curve 12-3 Conclusion: The Short-Run Equilibrium Chapter 12 End of Chapter Chapter 12 Summary Chapter 12 Key Concepts Chapter 12 Questions for Review Chapter 12 Problems and Applications Answers to Quick Quiz Chapter 13: Aggregate Demand II: Applying the IS–LM Model 13-1 Explaining Fluctuations with the IS–LM Model How Fiscal Policy Shifts the IS Curve and Changes the Short-Run Equilibrium How Monetary Policy Shifts the LM Curve and Changes the Short-Run Equilibrium The Interaction Between Monetary and Fiscal Policy Shocks in the IS–LM Model What Is the Fed’s Policy Instrument—The Money Supply or the Interest Rate? 13-2 IS–LM as a Theory of Aggregate Demand From the IS–LM Model to the Aggregate Demand Curve The IS–LM Model in the Short Run and Long Run 13-3 The Great Depression The Spending Hypothesis: Shocks to the IS Curve The Money Hypothesis: A Shock to the LM Curve The Money Hypothesis Again: The Effects of Falling Prices Could the Depression Happen Again? The Liquidity Trap and Unconventional Monetary Policy 13-4 Conclusion Chapter 13 End of Chapter Chapter 13 Summary Chapter 13 Key Concepts Chapter 13 Questions for Review Chapter 13 Problems and Applications Answers to Quick Quiz Chapter 14: The Open Economy Revisited: The Mundell–Fleming Model and the Exchange-Rate Regime 14-1 The Mundell–Fleming Model The Key Assumption: Small Open Economy with Perfect Capital Mobility The Goods Market and the IS* Curve The Money Market and the LM* Curve Putting the Pieces Together 14-2 The Small Open Economy Under Floating Exchange Rates Fiscal Policy Monetary Policy Trade Policy 14-3 The Small Open Economy Under Fixed Exchange Rates How a Fixed-Exchange-Rate System Works Fiscal Policy Monetary Policy Trade Policy Policy in the Mundell–Fleming Model: A Summary 14-4 Interest Rate Differentials Country Risk and Exchange-Rate Expectations Differentials in the Mundell–Fleming Model 14-5 Should Exchange Rates Be Floating or Fixed? Pros and Cons of Different Exchange-Rate Systems Speculative Attacks, Currency Boards, and Dollarization The Impossible Trinity 14-6 From the Short Run to the Long Run: The Mundell–Fleming Model with a Changing Price Level 14-7 A Concluding Reminder Chapter 14 End of Chapter Chapter 14 Summary Chapter 14 Key Concepts Chapter 14 Questions for Review Chapter 14 Problems and Applications Answers to Quick Quiz Chapter 14 Appendix: A Short-Run Model of the Large Open Economy Fiscal Policy Monetary Policy A Rule of Thumb Chapter 15: Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment 15-1 The Basic Theory of Aggregate Supply The Sticky-Price Model An Alternative Theory: The Imperfect-Information Model Implications 15-2 Inflation, Unemployment, and the Phillips Curve Deriving the Phillips Curve from the Aggregate Supply Curve Adaptive Expectations and Inflation Inertia Two Causes of Rising and Falling Inflation The Short-Run Tradeoff Between Inflation and Unemployment Disinflation and the Sacrifice Ratio Rational Expectations and the Possibility of Painless Disinflation Hysteresis and the Challenge to the Natural-Rate Hypothesis 15-3 Conclusion Chapter 15 End of Chapter Chapter 15 Summary Chapter 15 Key Concepts Chapter 15 Questions for Review Chapter 15 Problems and Applications Answers to Quick Quiz Chapter 15 Appendix: The Mother of All Models Chapter 16: A Dynamic Model of Economic Fluctuations 16-1 Elements of the Model Output: The Demand for Goods and Services The Real Interest Rate: The Fisher Equation Inflation: The Phillips Curve Expected Inflation: Adaptive Expectations The Nominal Interest Rate: The Monetary-Policy Rule 16-2 Solving the Model The Long-Run Equilibrium The Dynamic Aggregate Supply Curve The Dynamic Aggregate Demand Curve The Short-Run Equilibrium 16-3 Using the Model Long-Run Growth A Shock to Aggregate Supply A Shock to Aggregate Demand A Shift in Monetary Policy 16-4 Two Applications: Lessons for Monetary Policy The Tradeoff Between Output Variability and Inflation Variability The Taylor Principle 16-5 Conclusion: Toward DSGE Models Chapter 16 End of Chapter Chapter 16 Summary Chapter 16 Key Concepts Chapter 16 Questions for Review Chapter 16 Problems and Applications Answers to Quick Quiz Chapter 17: Alternative Perspectives on Stabilization Policy 17-1 Should Policy Be Active or Passive? Lags in the Implementation and Effects of Policies The Difficult Job of Economic Forecasting Ignorance, Expectations, and the Lucas Critique The Historical Record 17-2 Should Policy Be Conducted by Rule or Discretion? Distrust of Policymakers and the Political Process The Time Inconsistency of Discretionary Policy Rules for Monetary Policy 17-3 Conclusion Chapter 17 End of Chapter Chapter 17 Summary Chapter 17 Key Concepts Chapter 17 Questions for Review Chapter 17 Problems and Applications Answers to Quick Quiz Chapter 17 Appendix: Time Inconsistency and the Tradeoff Between Inflation and Unemployment More Problems and Applications Chapter 18: Government Debt and Budget Deficits 18-1 The Size of the Government Debt 18-2 Measurement Problems Problem 1: Inflation Problem 2: Capital Assets Problem 3: Uncounted Liabilities Problem 4: The Business Cycle Summing Up 18-3 The Traditional View of Government Debt 18-4 The Ricardian View of Government Debt The Basic Logic of Ricardian Equivalence Consumers and Future Taxes Making a Choice 18-5 Other Perspectives on Government Debt Balanced Budgets Versus Optimal Fiscal Policy Fiscal Effects on Monetary Policy Debt and the Political Process International Dimensions 18-6 Conclusion Chapter 18 End of Chapter Chapter 18 Summary Chapter 18 Key Concepts Chapter 18 Questions for Review Chapter 18 Problems and Applications Answers to Quick Quiz Chapter 19: The Financial System: Opportunities and Dangers 19-1 What Does the Financial System Do? Financing Investment Sharing Risk Dealing with Asymmetric Information Fostering Economic Growth 19-2 Financial Crises The Anatomy of a Crisis Policy Responses to a Crisis Policies to Prevent Crises 19-3 Conclusion Chapter 19 End of Chapter Chapter 19 Summary Chapter 19 Key Concepts Chapter 19 Questions for Review Chapter 19 Problems and Applications Answers to Quick Quiz Chapter 20: The Microfoundations of Consumption and Investment 20-1 What Determines Consumer Spending? John Maynard Keynes and the Consumption Function Franco Modigliani and the Life-Cycle Hypothesis Milton Friedman and the Permanent-Income Hypothesis Robert Hall and the Random-Walk Hypothesis David Laibson and the Pull of Instant Gratification The Bottom Line on Consumption 20-2 What Determines Investment Spending? The Rental Price of Capital The Cost of Capital The Cost–Benefit Calculus of Investment Taxes and Investment The Stock Market and Tobin’s q Financing Constraints The Bottom Line on Investment 20-3 Conclusion: The Key Role of Expectations Chapter 20 End of Chapter Chapter 20 Summary Chapter 20 Key Concepts Chapter 20 Questions for Review Chapter 20 Problems and Applications Answers to Quick Quiz Epilogue: What We Know, What We Don’t The Four Most Important Lessons of Macroeconomics Lesson 1: In the long run, a country’s capacity to produce goods and services determines the standard of living of its citizens. Lesson 2: In the short run, aggregate demand influences the amount of goods and services that a country produces. Lesson 3: In the long run, the rate of money growth determines the rate of inflation, but it does not affect the rate of unemployment. Lesson 4: In the short run, policymakers who control monetary and fiscal policy face a tradeoff between inflation and unemployment. The Four Most Important Unresolved Questions of Macroeconomics Question 1: How should policymakers try to promote growth in the economy’s natural level of output? Question 2: What is the best way to stabilize the economy? Question 3: How costly is inflation, and how costly is reducing inflation? Question 4: Are government budget deficits a big problem? Conclusion Glossary Index Notes Last Book Page Inside Back Cover Back Cover Extended Descriptions A page of text is shown describing the utility of the Achieve Essentials system for Macroeconomics A screenshot shows a quiz from the LearningCurve engine A graph is shown that depicts the Equilibrium real exchange rate with associated explanatory text A screenshot shows text on the left half and a snapshot of a video on the right half A screenshot shows a graph with associated text under the heading, “Economic Growth I – End of Chapter Problem.” A line graph depicts the Real G D P per person in the U S Economy from 1900 to 2019. Specific periods are highlighted as well A line graph depicts the inflation rate percentage in the U S Economy from 1900 to 2019. Specific periods are highlighted as well A line graph depicts the Unemployment Rate percent in the U S Economy from 1900 to 2019. Specific periods are highlighted as well A graph depicts a simple model of supply and demand of pizza Two graphs, titled “(a) A Shift in Demand” and “(b) A Shift in Supply” plots Price of pizzas versus Quantity of pizza A circular flow diagram depicts the flows between firms and households A graph depicts three measures of inflation, “C P I”, “G D P deflator”, “P C E deflator” A pie-chart titled “Population 259.8 million (16 years and older)”, depict the three groups of population A graph depicts Labor-force participation rates for Men and Women from 1950 to 2019 A circular flow chart depicts the flow of dollars through the economy A graph plots “Factor price” versus “Quantity of factor” A graph is shown that depicts a production function A graph depicts the marginal production of a labor schedule A graph plots the ratio of labor income to total income A graph depicts the consumption function A graph represents an investment function A graph represents saving, investment, and interest rate A graph is shown representing a reduction in saving A graph represents an increase in the demand for investment A graph represents an increase in investment demand when saving depends on the interest rate A graph depicting inequality in income A graph represents Monetary base by plotting “Monetary base” versus “Year” A scatterplot depicts money growth and inflation A scatterplot plots “Inflation rate” versus “Growth in money supply”, depicting the inflation and money growth A graph depicts inflation and nominal interest rates between 1954 and 2019 A scatterplot depicts the nominal interest rate and inflation rate among the different countries, out of which 9 countries are highlighted A flow chart depicts the relationships among money, prices, and interest rates A cartoon is drawn showing a hotdog stand and two women walked away from it talking. A sign on the stand reads, “Hot Dogs, 25 dollars.” A double bar graph depicts imports and exports as a percentage of output for different countries in year 2018 A graph depicts saving and investment in a small open economy A graph depicts a fiscal expansion at home A graph depicts a fiscal expansion abroad A graph depicts a shift in investment in a small open economy Two graphs, titled “(a) The U S Trade Balance” and “(b) U S Saving and Investment” depicts the trade balance, saving and investment A graph depicts “Real exchange rate and net exports” A graph depicts the determination of real exchange rate A graph depicts the impact of expansionary fiscal policy at home A graph depicts the impact of expansionary fiscal policy abroad A graph depicts the impact of an increase in investment demand on the real exchange rate A graph depicts a protectionist trade policy A scatterplot depicts the relationship between inflation and the nominal exchange rate A graph depicts purchasing power parity A graph depicts relation between net capital outflow and interest rate Two graphs titled “(a) The Closed Economy” and “(b) The Small Open Economy with Perfect Capital Mobility” A graph depicts the market for loanable funds in the open economy A graph depicts the market for foreign currency exchange in largeopen economy Three graphs titled, “(a) The Market for Loanable Funds”, “(b) Net Capital Outflow” and “(c) The Market for Foreign Exchange”, depicts the equilibrium in the large open economy Three graphs titled, “(a) The Market for Loanable Funds”, “(b) Net Capital Outflow”, and “(c) The Market for Foreign Exchange”, depicts a reduction in national saving in the large open economy Three graphs titled, “(a) The Market for Loanable Funds”, “(b) Net Capital Outflow”, and “(c) The Market for Foreign Exchange”, depicts an increase in investment demand in the large open economy Three graphs titled, “(a) The Market for Loanable Funds”, “(b) Net Capital Outflow”, and “(c) The Market for Foreign Exchange”, depicts an import restriction in the large open economy Three graphs titled, “(a) The Market for Loanable Funds”, “(b) Net Capital Outflow”, and “(c) The Market for Foreign Exchange”, depicts a fall in the net capital outflow in the large open economy A graph depicts the unemployment rate and natural rate of unemployment in U S A circular flow chart depicts transitions between employment and unemployment A graph depicts how real-wage rigidity leads to job rationing A graph depicts median duration of unemployment A graph depicts four curves representing unemployment in four largest countries in Europe A graph depicts three curves representing annual hours worked per person in U S, Germany, and France A line graph depicts the production function A line graph depicts the relationship between output, consumption, and investment A graph plots represents Investment, depreciation, and the steady state A graph plots depicts the impact of increase in the saving rate A graph depicts the steady-state consumption A graph is shown representing the saving rate and the golden rule A graph depicts the impact of reducing saving when capital is more than in the golden rule steady state A graph depicts the impact of reducing saving when capital is less than in the golden rule steady state A graph plots depicts population growth in the Solow model A graph depicts the impact of population growth A scatterplot represents International evidence on the solow model A graph depicts Technological progress and the Solow Growth Model A graph represents growth in output and the Solow residual A cartoon depicts two men talking to each other, one man is wearing a hat and the other man is holding a hat in his hand. The text at the bottom reads, “Well, so long Eddie, the recession’s over.” A graph depicts “Real G D P growth”, “Average G D P growth” and “Recession” Two graphs titled, “(a) Growth in Consumption” and “(b) Growth in Investment”, depicts growth in consumption and investment A graph depicts “Unemployment rate” A scatterplot depicts “Okun’s Law” A graph depicts an aggregate demand curve Two graphs, titled “(a) Inward Shifts in the Aggregate Demand Curve” and “(b) Outward Shifts in the Aggregate Demand Curve” depicts the shift in aggregate demand curve A graph depicts long run aggregate supply curve A graph depicts change in equilibrium due to change in aggregate demand A graph depicts the short-run aggregate supply curve A graph depicts shift in aggregate demand in the short run A graph depicts long run equilibrium A graph depicts reduction in aggregate demand A graph depicts an increase in aggregate demand A graph depicts an adverse supply shock A graph depicts accommodation of an adverse supply shock A graph depicts shifts in aggregate demand A graph depicts the planned-expenditure function A graph depicts the Keynesian Cross A graph depicts the adjustment to equilibrium in the Keynesian Cross A graph depicts an increase in government purchases in the Keynesian Cross A graph depicts a decrease in taxes in the Keynesian Cross A cartoon shows a King’s court, the king is sitting on his throne and another person is sitting in front of him. Two commanders are holding a big map behind him. The text at the bottom reads, “Your Majesty, my voyage will not only forge a new route to the spices of the East but also create over three thousand new jobs.” Three graphs, titled “(a) The Investment Function”, “(b) The Keynesian Cross”, and “(c) The I S Curve” depicts the I S curve Two graphs, titled “(a) The Keynesian Cross” and “(b) The I S Curve” depicts an increase in government purchases and outward shift in I S curve A graph depicts the theory of liquidity preference A graph depicts a reduction in the money supply in the theory of liquidity preference Two graphs, titled “(a) The Market for Real Money Balances” and “(b) The L M Curve”, depicts the derivation of the L M curve Two graphs, titled “(a) The Market for Real Money Balances” and “(b) The L M Curve”, depicts a reduction in the money supply, that shifts the “L M” curve upwards A graph depicts an equilibrium in the I S–L M model A graph depicts an impact of government purchases in the I S-L M model A graph depicts an impact of a decrease in taxes in the I S-L M model A graph depicts an impact of increase in money supply in the I S-L M model Three graphs titled, “(a) Fed Holds Money Supply Constant”, “(b) Fed Holds Interest Rate Constant”, and “(c) Fed Holds Income Constant” shows the tax increase and its impact on the economy A comic strip with four panels is shown Two graphs titled, “(a) The I S–L M Model” and “(b) The Aggregate Demand Curve” depicts the derivation of the aggregate demand curve with the I S-L M model Four graphs depict the effects of expansionary monetary and fiscal policy on aggregate demand with the I S-L M model. The first two graphs are titled, “(a) Expansionary Monetary Policy” and the next two graphs are titled “(b) Expansionary Fiscal Policy” Two graphs titled “(a) The I S–L M Model” and “(b) The Model of Aggregate Supply and Aggregate Demand”, depict the short-run and long-run equilibria A graph depicts the impact of expected deflation in the I S-L M model A graph depicts a comparison of industrial production of the great recession and the great depression Three graphs, titled “(a) The Net-Exports Schedule”, “(b) The Keynesian Cross” and “(c) The I S asterisk Curve” depicts the derivation of the I S asterisk curve Two graphs titled “(a) The L M Curve” and “(b) The L M asterisk Curve” depicts the derivation of the L M asterisk curve A graph depicts the Mundell–Fleming Model A graph depicts the fiscal expansion under floating exchange rate A graph depicts the monetary expansion under floating exchange rates Two graphs titled, “(a) The Shift in the Net-Exports Schedule” and “(b) The Change in the Economy’s Equilibrium” depicts trade restriction under floating exchange rates Two graphs titled, “(a) The Equilibrium Exchange Rate Is Greater Than the Fixed Exchange Rate” and “(b) The Equilibrium Exchange Rate Is Less Than the Fixed Exchange Rate”, depicts the regulation of money supply through fixed exchange rate A graph depicts fiscal expansion under fixed exchange rates A graph depicts monetary expansion under fixed exchange rates A graph depicts the trade restriction under fixed exchange rates A graph depicts the increase in interest rate due to increase in risk premium A cartoon shows four tribal men sitting on the bank of a river and discussing. The text below reads, “Then it’s agreed. Until the dollar firms up, we let the clamshell float.” A triangular diagram depicts the impossible trinity Two graphs titled, “(a) The Mundell–Fleming Model” and “(b) The Aggregate Demand Curve” depict the Mundell–Fleming as a theory of aggregate demand Two graphs titled, “(a) The Mundell–Fleming Model” and “(b) The Model of Aggregate Supply and Aggregate Demand” depicts the short-run and long-run equilibria in a small open economy Three graphs titled, “(a) The I S–L M Model”, “(b) Net Capital Outflow”, and “(c) The Market for Foreign Exchange” depict a short run model of a large open economy Three graphs titled, “(a) The I S–L M Model”, “(b) Net Capital Outflow”, and “(c) The Market for Foreign Exchange” depict fiscal expansion in a large open economy A graph depicts short run aggregate supply curve A graph depicts short run fluctuations due to shift in aggregate demand A graph depicts inflation and unemployment in U S from 1960 to 2019 A graph depicts tradeoff between inflation and unemployment in the short run A graph depicts the low and high expected inflation A flow chart depicts the relation between different models A graph depicts two curves for “Taylor rule” and “Actual rate” A graph depicts the dynamic aggregate supply curve A graph depicts the dynamic aggregate demand curve A graph depicts the short-run equilibrium A graph depicts the impact of long run growth A graph depicts the impact of supply shock on dynamic aggregate supply Five graphs titled, “(a) Supply Shock”, “(b) Output”, “(c) Real Interest Rate”, “(d) Inflation”, and “(e) Nominal Interest Rate”, depict the different responses of supply shock A graph depicts the impact of demand shock Five graphs titled, “(a) Demand Shock”, “(b) Output”, “(c) Real Interest Rate”, “(d) Inflation”, and “(e) Nominal Interest Rate”, depict the different responses of demand shock A graph depicts the impact of reduction in target inflation Five graphs titled, “(a) Inflation Target”, “(b) Output”, “(c) Real Interest Rate”, “(d) Inflation”, and “(e) Nominal Interest Rate”, depicts the impact of the reduction in target inflation Two graphs titled, “(a) D A D Curve Is Flat” and “(b) D A D Curve Is Steep”, depicts the two possible responses to a supply shock A graph depicts the impact of demand shock due to non-compliance of Taylor Principle A cartoon shows a king holding court with his courtiers A graph depicts the “Actual Unemployment Rate” from the year 2007 to 2010 A graph shows the changes in the Policy Uncertainty indices from the year 1985 to the year 2019 A scatter plot depicts average inflation versus the index of central-bank independence for 14 countries A graph shows the change in the Debt G D P ratio over the years from 1791 to 2019 A graph shows the change in the T E D spread, basis points over the years from 2004 to 2020 A flowchart depicts the anatomy of a financial crisis A line graph depicts the Keynesian Consumption function A graph depicts the short-run consumption function and the long-run consumption function A graph depicts the “Life cycle of consumption function” A graph depicts, the shift in consumption function due to changes in wealth A graph depicts the Life Cycle of Consumption, Income, and Wealth A graph depicts the real rental price of the capital stock Two graphs, titled “(a) The Downward-Sloping Investment Function” and “(b) A Shift in the Investment Function”, depict the Investment function A graph shows the percent change in stock prices and the percent change in real G D P over the years from 1980 to 2020 Four line graphs depict Real G D P Growth, Inflation Rate (G D P Deflator), Unemployment Rate, and Nominal Interest Rate (Three-Month Treasury Bills) Four line graphs depict U S Federal Government Budget Deficit, U S Net Exports of Goods and Services, Money Growth (M 2), and U S Trade-Weighted Real Exchange Rate