Macroeconomic Essentials, 4e

Understanding Economics in the News

by Kennedy, Prag

| ISBN: 9780262339421 | Copyright 2017

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Contents (pg. v)
Preface (pg. xiii)
1 Introduction (pg. 1)
1.1 Media Economics (pg. 2)
1.2 Up-and-Down Economics (pg. 3)
1.3 Policy Evaluation (pg. 4)
1.4 A Picture Can Be Worth a Thousand Words (pg. 4)
1.5 Pragmatic Economics (pg. 5)
1.6 Really Important Macroeconomic Ideas (pg. 5)
Chapter Summary (pg. 9)
2 The Market Model (pg. 11)
2.1 Demand (pg. 12)
2.2 Supply (pg. 12)
2.3 The Market (pg. 14)
2.4 The Market Model and News: Necessary Curve Shifting (pg. 15)
2.5 Media Examples (pg. 18)
2.6 Macroeconomic Markets (pg. 19)
2.7 Picturing the Macroeconomic Markets (pg. 20)
2.8 A “Big Picture” for Macroeconomics (pg. 22)
3 Measuring GDP and Inflation (pg. 25)
3.1 What Is GDP? (pg. 26)
3.2 Estimating GDP (pg. 28)
3.3 GDP as Gross Deceptive Product (pg. 30)
3.4 Real versus Nominal GDP (pg. 34)
3.5 Measuring Inflation (pg. 35)
3.6 The Costs of Inflation (pg. 40)
Media Illustrations (pg. 42)
Chapter Summary (pg. 43)
Formula Definitions (pg. 44)
Media Exercises (pg. 44)
Numerical Exercises (pg. 48)
Appendix 3.1 Measuring GDP by Adding Up Incomes (pg. 51)
4 Unemployment (pg. 53)
4.1 Defining and Measuring Unemployment (pg. 54)
4.2 The Employment/Unemployment Connection (pg. 56)
4.3 What Is Full Employment? (pg. 58)
4.4 The Cost of Unemployment (pg. 62)
Media Illustrations (pg. 65)
Chapter Summary (pg. 66)
Formula Definitions (pg. 66)
Media Exercises (pg. 67)
Numerical Exercises (pg. 72)
5 Aggregate Demand and the Keynesian Model (pg. 75)
5.1 Aggregate Demand (pg. 76)
5.2 Determining National Income (pg. 77)
5.3 The Multiplier (pg. 80)
5.4 Do We Want a Big Multiplier? (pg. 83)
5.5 Inventories and Forecasting (pg. 88)
5.6 Policy Implications (pg. 89)
5.7 Deficit Spending (pg. 91)
5.8 Aggregate Demand and Aggregate Supply: A First Look (pg. 92)
Media Illustrations (pg. 95)
Chapter Summary (pg. 98)
Formula Definition (pg. 98)
Media Exercises (pg. 99)
Numerical Exercises (pg. 105)
Appendix 5.1 Macroeconomics before Keynes: The Classical School (pg. 108)
Appendix 5.2 The Circular Flow of Income (pg. 110)
Appendix 5.3 The 45-Degree Line Diagram (pg. 110)
Appendix 5.4 Deriving Aggregate Demand and Aggregate Supply (pg. 112)
6 Supply-Side and Related Models (pg. 117)
6.1 The Micro Foundations of Macro Model (pg. 118)
6.2 Supply Shocks: A First Look (pg. 120)
6.3 The Micro Foundations Model and Employment (pg. 121)
6.4 Government Spending in the Micro Foundations Model (pg. 121)
6.5 Taxes and Distortions (pg. 124)
6.6 The Micro Foundations Model and Money (pg. 126)
6.7 Aggregate Supply and Aggregate Demand with Supply Shocks (pg. 126)
6.8 The Multiplier Reconsidered (pg. 128)
6.9 Full Employment, Aggregate Demand and Aggregate Supply, and the World Today (pg. 130)
Media Illustrations (pg. 131)
Chapter Summary (pg. 132)
Media Exercises (pg. 133)
7 Growth and Productivity (pg. 137)
7.1 The Determinants of Growth (pg. 138)
7.2 The Productivity Growth Process (pg. 144)
7.3 Savings, Investment, and Growth (pg. 146)
7.4 Policy for Growth (pg. 150)
Media Illustrations (pg. 152)
Chapter Summary (pg. 153)
Formula Definitions (pg. 153)
Media Exercises (pg. 154)
Numerical Exercises (pg. 160)
8 The Money Supply (pg. 161)
8.1 What Is Money? (pg. 162)
8.2 Fractional Reserve Banking (pg. 167)
8.3 Controlling the Money Supply (pg. 168)
8.4 The Money Multiplier (pg. 169)
8.5 The Subprime Mortgage Crisis (pg. 172)
Media Illustrations (pg. 174)
Chapter Summary (pg. 175)
Formula Definition (pg. 176)
Media Exercises (pg. 176)
Numerical Exercises (pg. 179)
Appendix 8.1 What Is a Financial Intermediary? (pg. 180)
9 The Monetarist Rule (pg. 183)
9.1 The Quantity Theory (pg. 184)
9.2 The Modern Quantity Theory (pg. 185)
9.3 The Monetarist Rule (pg. 187)
9.4 Seigniorage (pg. 191)
9.5 The Rules versus Discretion Debate (pg. 192)
Media Illustrations (pg. 195)
Chapter Summary (pg. 197)
Formula Definitions (pg. 198)
Rule of Thumb (pg. 198)
Media Exercises (pg. 198)
Numerical Exercises (pg. 205)
Appendix 9.1 Changing Velocity (pg. 208)
10 Monetary Policy and Interest Rates (pg. 211)
10.1 A Multitude of Interest Rates (pg. 212)
10.2 Interest Rates and the Price of Bonds (pg. 213)
10.3 Monetary Policy and Interest Rates (pg. 218)
10.4 The Transmission Mechanism (pg. 219)
10.5 Quantitative Easing (pg. 220)
10.6 Monetary Policy versus Fiscal Policy (pg. 222)
10.7 Expected Inflation and Interest Rates (pg. 223)
10.8 The Real Rate of Interest (pg. 225)
10.9 The Nominal Rate of Interest (pg. 227)
10.10 Policy Implications (pg. 228)
Media Illustrations (pg. 234)
Chapter Summary (pg. 236)
Formula Definitions (pg. 237)
Media Exercises (pg. 237)
Numerical Exercises (pg. 245)
Appendix 10.1 More about Bonds (pg. 246)
11 Government (pg. 249)
11.1 Government Spending: An Overview (pg. 250)
11.2 Public Goods (pg. 250)
11.3 Externalities (pg. 251)
11.4 Among the Flies in the Ointment (pg. 254)
11.5 Income Redistribution (pg. 255)
11.6 Paying for Government: Taxation (pg. 257)
11.7 Paying for Government: Debt (pg. 259)
Media Illustrations (pg. 261)
Chapter Summary (pg. 264)
Media Exercises (pg. 265)
Appendix 11.1 What Is Generational Accounting? (pg. 266)
Appendix 11.2 What Is the Structural Deficit? (pg. 267)
12 The Phillips Curve, Stagflation, and Burst Bubbles (pg. 269)
12.1 Stagflation and the Phillips Curve (pg. 270)
12.2 Policy Implications (pg. 275)
12.3 Fighting Inflation with Recession (pg. 277)
12.4 Explaining Stagflation (pg. 281)
12.5 Bubbles and Burst Bubbles (pg. 283)
Media Illustrations (pg. 285)
Chapter Summary (pg. 287)
Media Exercises (pg. 288)
Numerical Exercises (pg. 297)
Appendix 12.1 The Real Cause of Inflation (pg. 298)
13 International Economics and the Balance of Payments (pg. 303)
13.1 Why Do We Trade? (pg. 304)
13.2 The Balance of Payments (pg. 305)
13.3 Determinants of Foreign Exchange Market Activity (pg. 306)
13.4 The International Economic Accounts (pg. 309)
13.5 The Twin Deficits (pg. 312)
Media Illustrations (pg. 313)
Chapter Summary (pg. 315)
Media Exercises (pg. 315)
Numerical Exercises (pg. 320)
Appendix 13.1 Trade and Productions: The Principle of Comparative Advantage (pg. 321)
14 Policy in an Open Economy (pg. 325)
14.1 International Imbalance with a Flexible Exchange Rate (pg. 326)
14.2 International Imbalance with a Fixed Exchange Rate (pg. 327)
14.3 International Influence on Fiscal Policy (pg. 328)
14.4 International Influence on Monetary Policy (pg. 330)
14.5 Sterilization Policy (pg. 332)
14.6 Government Influence on the Exchange Rate (pg. 333)
14.7 Fixed versus Flexible Exchange Rates (pg. 334)
Media Illustrations (pg. 336)
Chapter Summary (pg. 338)
Media Exercises (pg. 339)
15 Arbitrage Conditions (pg. 347)
15.1 Arbitrage and the Law of One Price (pg. 348)
15.2 Purchasing Power Parity and Flexible Exchange Rates (pg. 349)
15.3 The PPP Exchange Rate (pg. 353)
15.4 Inflation with a Fixed Exchange Rate (pg. 355)
15.5 Why Are Real Interest Rates Similar in Different Countries? (pg. 356)
15.6 Nominal Interest Rates and Interest Rate Parity (pg. 360)
Media Illustrations (pg. 363)
Chapter Summary (pg. 367)
Definitional Formulas (pg. 367)
Media Exercises (pg. 368)
Numerical Exercises (pg. 376)
Appendix A: Answers to Sample Exam Questions (pg. 381)
Chapter 3: Measuring GDP and Inflation (pg. 381)
Chapter 4: Unemployment (pg. 382)
Chapter 5: Aggregate Demand and the Keynesian Model (pg. 382)
Chapter 6: Supply-Side and Related Models (pg. 383)
Chapter 7: Growth and Productivity (pg. 384)
Chapter 8: The Money Supply (pg. 384)
Chapter 9: The Monetarist Rule (pg. 385)
Chapter 10: Monetary Policy and Interest Rates (pg. 385)
Chapter 11: Government (pg. 386)
Chapter 12: The Phillips Curve, Stagflation, and Burst Bubbles (pg. 387)
Chapter 13: International Economics and the Balance of Payments (pg. 387)
Chapter 14: Policy in an Open Economy (pg. 388)
Chapter 15: Arbitrage Conditions (pg. 388)
Appendix B: Answers to Even-Numbered Exercises (pg. 391)
Chapter 3: Measuring GDP and Inflation (pg. 391)
Chapter 4: Unemployment (pg. 393)
Chapter 5: Aggregate Demand and the Keynesian Model (pg. 395)
Chapter 6: Supply-Side and Related Models (pg. 398)
Chapter 7: Growth and Productivity (pg. 399)
Chapter 8: The Money Supply (pg. 401)
Chapter 9: The Monetarist Rule (pg. 402)
Chapter 10: Monetary Policy and Interest Rates (pg. 405)
Chapter 11: Government (pg. 408)
Chapter 12: The Phillips Curve, Stagflation, and Burst Bubbles (pg. 409)
Chapter 13: International Economics and the Balance of Payments (pg. 412)
Chapter 14: Policy in an Open Economy (pg. 414)
Chapter 15: Arbitrage Conditions (pg. 417)
Glossary (pg. 423)
Index (pg. 441)

Peter Kennedy

The late Peter E. Kennedy was Professor Emeritus of Economics at Simon Fraser University.


Jay Prag

Jay Prag is Clinical Associate Professor at the Drucker School of Management at Claremont Graduate University.


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