Macroeconomics in Context, First Edition

Macroeconomics in Context, First Edition Table of Contents Preface Sample Course Outlines Part One The Context for Economic Analysis Chapter 1 Economic Activity in Context 1 What is Macroeconomics About? 2 Macroeconomic Goals 2.1 Living Standards 2.2 Stability and Security 2.3 Sustainability 3 Macroeconomics in Context 3.1 The Classical Period 3.2 The Great Depression, Keynes, and Monetarism 3.3 Synthesizing Classical and Keynesian Economics 3.4 Subsequent Challenges 3.5 Macroeconomics for the Twenty-First Century Chapter 2 Useful Tools and Concepts 1 Our Tools for Understanding 1.1 Empirical Investigation 1.2 Theoretical Investigation 1.3 Historical Investigation 2 Economic Tradeoffs 2.1. Abundance and Scarcity 2.2 Society’s Production Possibilities Frontier 2.3 Tradeoffs Over Time 3 The Role of Markets 3.1 The Meaning of Markets 3.2 The Basic Neoclassical Model 3.3 The Advantages of Markets 3.4 The Institutional Requirements of Markets 3.5 The Limitations of Markets Chapter 3 What Economies Do 1 Introducing the Four Essential Economic Activities 1.1 Resource Maintenance 1.2 Production 1.3 Distribution 1.4 Consumption

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2 Resource Maintenance: Attending to the Asset Base of the Macroeconomy 2.1 Stocks versus Flows 2.3. Renewable Resources, Nonrenewable Resources, and Sustainability 3 Distribution: Who Gets What, and How? 3.1 Labor and Capital Incomes 3.2 Transfers and Taxes 3.3 The Distribution of Income 3.4 Measuring Inequality 3.5 Income Inequality Over Time 3.6 Wealth Inequality 4 The Three Spheres of Economic Activity 4.1 The Core Sphere 4.2 The Public-Purpose Sphere 4.3 The Business Sphere 4.4 A Comparative Note: Less Industrialized Economies Chapter 4 Supply and Demand 1 Markets and Macroeconomics 1.1 Classicals and Keynesians 1.2 A Particular Kind of Market 2 The Theory of Supply 2.1 The Supply Schedule and Curve 2.2 Changes in Supply 3 The Theory of Demand 3.1 The Demand Schedule and Curve 3.2 Changes in Demand 4 The Theory of Market Adjustment 4.1 Surplus, Shortage, and Equilibrium 4.2 Shifts in Supply and Demand 4.3 Elasticities 5 Macroeconomics and the Dynamics of Real World Markets 5.1 When Price Adjustments are Slow 5.2 When Prices Swing Too Much 5.3 From Microeconomics to Macroeconomics? Part Two Macroeconomic Basics Chapter 5 Macroeconomic Measurement: The Current Approach 1 Measuring a Country’s Aggregate Behavior 2 The National Accounts and Their Conventions 2.1 Conventions about Sectors 2.2 Conventions about Capital Stocks 2.3 Conventions about Investment 3 Gross Domestic Product: What It Represents 3.1 The Definition of Gross Domestic Product 3.2 The Three Approaches to Measuring GDP An Introduction 2

4 Gross Domestic Product: Calculating Its Value 4.1 The Product Approach 4.2 The Spending Approach 4.3 The Income Approach 5 Growth, Price Changes, and Real GDP 5.1 Calculating GDP Growth Rates 5.2 Nominal vs. Real GDP 5.3 Calculating Real GDP 5.4 Price Indexes and Inflation Rates 5.5 Growth and Growth Rates 6 Savings, Investment, and Trade 6.1 The Relationship of Savings, Investment, and Trade 6.2 Financing Spending 6.3 Net National Production and Saving 7 Gross Domestic Product in the Traditional Macroeconomic Model Appendix: Chained Dollar Real GDP Chapter 6 Macroeconomic Measurement: Environmental and Social Dimensions 1 New Understandings for the Twenty-First Century 2 Accounting for the Environment 2.1 Physical Accounts 2.2 Natural Assets and the National Accounts 2.3 National Accounts and What Nature Produces 2.4 The Problem of Valuation 2.5 Making Changes Satellite Accounts 3 Measuring Household Production 3.1 The History of Exclusion 3.2 Time Use Surveys 3.3 Methods of Valuing Household Production 3.4 Making Changes 4 Measuring Economic Well-Being 4.1 Does Output Measure Well-Being? 4.2 Example: The Genuine Progress Indicator 4.3 Example: The Human Development Index 4.4 The Future of Macroeconomic Indicators Chapter 7 Employment and Unemployment 1 Measuring Employment and Unemployment 1.1 Who is “Employed”? 1.2 Measuring Unemployment 1.3 How People Enter and Exit Unemployment 1.4 Discouraged Workers and Underemployment 2 Types of Unemployment 2.1 Frictional Unemployment 2.2 Structural Unemployment 2.3 Cyclical Unemployment 3

3 Theories of Unemployment 3.1 The Classical Theory of Unemployment 3.2 Imperfect Labor Markets 3.3 Unemployment and Aggregate Demand 3.4 Is There a “Natural” Rate of Unemployment? 4 Employment, Unemployment, and Well-Being 4.1 The Changing Labor Force 4.2 The Changing Nature of Work 4.3 Concluding Thoughts Chapter 8 The Structure of the United States Economy 1 The Three Major Productive Sectors in an Economy 2 Natural Resources: The Primary Sector 2.1 The Food System 2.2 The Energy System 2.3 Other Primary Industries 3 The Production of Goods: The Secondary Sector 3.1 Construction and Housing 3.2 Manufacturing 3.3 Where Have All the Manufacturing Jobs Gone? 4 Production of Services: The Tertiary Sector 4.1 Human Services 4.2 Financial and Insurance Services 4.3 Retail Services 4.4 Concluding Thoughts Appendix: The Tertiary Sector in the Overall Macro Context Part Three Macroeconomic Theory and Policy Chapter 9 Aggregate Demand and Economic Fluctuations 1 The Business Cycle 1.1 What Happens During the Business Cycle 1.2 A Stylized Business Cycle 1.3 The Downturn Side of the Story 2 Macroeconomic Modeling and Aggregate Demand 2.1 Simplifying Assumptions 2.2 Output, Income, and Aggregate Demand 2.3 The Problem of Leakages 2.4 The Classical Solution to Leakages

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3 The Keynesian Model 3.1 Consumption 3.2 Investment 3.3 The Aggregate Demand Schedule 3.4 The Possibility of Unintended Investment 3.5 Movement to Equilibrium in the Keynesian Model 3.6 The Problem of Persistent Unemployment 3.7 The Multiplier 4 Concluding Thoughts Appendix: An Algebraic Approach to the Multiplier Chapter 10 Fiscal Policy 1 The Role of Government Spending and Taxes 1.1 A Change in Government Spending 1.2 Taxes and Transfer Payments 1.3 Expansionary and Contractionary Fiscal Policy 2 Budgets, Deficits, and Policy Issues 2.1 The Government Budget Surplus and Deficit 2.2 Automatic Stabilizers 2.3 Discretionary Policy 2.4 Balanced Budgets and Deficit Spending 3 The International Sector 3.1 Exports and Imports 3.2 A Complete Macroeconomic Model with Trade Appendix: More Algebraic Approaches to the Multiplier Chapter 11 Money and Monetary Policy 1 Why Money? 1.1 Money and Aggregate Demand 1.2 “Running the Printing Press” 1.3 Deflation and Financial Crises 2 What is Money? 2.1 The Roles of Money 2.2 Types of Money 2.3 Measures of Money 3 The Banking System 3.1 Private Banks 3.2 The Federal Reserve System 3.3 The Creation of Money and Credit 3.4 Other Monetary Policy Tools 4 The Theory of Money, Interest Rates, and Aggregate Demand 4.1 The Federal Funds Rate and Other Interest Rates 4.2 Interest Rates and Investment 4.3 Monetary Policy and Aggregate Demand 4.4 The Fed and Investment, 2000–07

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5 The Theory of Money, Prices, and Inflation 5.1 The Quantity Equation 5.2 Classical Monetary Theory 5.3 Monetarism 5.4 Money and Hyperinflation 5.5 Importing Inflation 6 Complications and Policy Controversies 6.1 The Fed’s Dilemma 6.2 Rules Versus Activism Appendix: More Models and Issues of Monetary Policy Chapter 12 Aggregate Supply, Aggregate Demand, and Inflation: Putting It All Together 1 Inflation and Aggregate Demand Equilibrium 1.1 Deriving the Aggregate Demand Equilibrium Curve 1.2 Shifts of the ADE Curve Spending 1.3 Shifts of the ADE Curve Fed Interest Rate Targets 2 Capacity and the Aggregate Supply Response 2.1 The Aggregate Supply Response Curve 2.2 Shifts of the ASR Curve Inflationary Expectations 2.3 Shifts of the ASR Curve Supply Shocks 3 Putting the ASR/ADE Model to Work 3.1 An Economy in Recession 3.2 An Overheated Economy 3.3 Stagflation 3.4 The Oil Price Shock 3.5 A Hard Line Against Inflation 3.6 Technology and Globalization 4 Competing Theories 4.1 Classical Economics 4.2 Keynesian Macroeconomics 5 Are Stabilization and Sustainability in Conflict? 5.1 Examining Goals and Assumptions 5.2 What Do We Really Want from Employment? 5.3 What Do We Really Want from Production? 5.4 Policies for Stabilization and Sustainability Appendix: More Schools of Macroeconomics Part Four Macroeconomic Issues and Applications Chapter 13 The Global Economy 1 Macroeconomics in a Global Context 1.1 Global Connections 1.2 Major Policy Tools 1.3 Patterns of Trade and Finance 1.4 Controversies about Trade and Finance

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2 The Case for “Free Trade” 2.1 The Ricardian Model 2.2 Other Arguments For Free Trade 2.3 International Trade Agreements 3 Why Nations Often Resist “Free Trade” 3.1 The Health of Nations, Regions, Industries, and Jobs 3.2 Revenue 3.3 Industrial Policy as a Strategy for Growth 3.4 Military and Food Security 3.5 Diversification in an Unpredictable World 3.6 Labor, Environmental, and Safety Standards 3.7 When is Limiting Trade “Unfair”? 4 International Finance 4.1 Purchasing Power Parity 4.2 Foreign Exchange Markets 4.3 Financial Flows and the Balance of Payments 4.4 Monetary Policy in an Open Economy 4.5 Managed versus Flexible Foreign Exchange 4.6 International Financial Institutions Chapter 14 How Economies Grow and Develop 1 The Standard Theory of Economic Growth 1.1 Defining Economic Growth 1.2 Modeling Economic Growth 2 Patterns of Growth and Development 2.1 The Industrial Revolution 2.2 Global Economic Growth in the Twentieth Century 2.3 Growth in Industrialized Countries 2.4 Global Growth and Inequality 2.5 Current Patterns of Growth 3 What Explains the Variety in Growth Experiences? 3.1 Savings and Investment 3.2 Technological Innovation and Entrepreneurship 3.3 Macroeconomic Policy and Trade 3.4 Natural Resources 3.5 Foreign Capital 3.6 Financial, Legal, and Regulatory Institutions 4 Development Policies 4.1 International Aid 4.2 Structural Reforms 4.3 Current Controversies 5 Conclusion: Economic Development in Perspective Chapter 15 Macroeconomic Challenges for the Twenty-First Century 1 Macroeconomic Goals: Looking Forward 2 Macroeconomics and Human Development 7

2.1 Human Development Defined 2.2 The Relationship of Human Development to Economic Development 2.3 Human Development When There is Already “Enough” 2.4 Human Development Goals and Policies 2.5 Whither Human Development? 3 Macroeconomics and Ecological Sustainability 3.1 Major Environmental Issues 3.2 The Relationship between Economic Growth and the Environment 3.3 Policies for Sustainable Development 3.4 Sustainability and Consumption 3.5 Sustainability and Investment 4 Concluding Thoughts Appendix: Demographic Challenges Glossary Index

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