Introductory Macroeconomics

I Tools and Problems 1 Macroeconomic Problems What Is Economics? Macroeconomic Goals and Problems The Great Depression The 1940s: War and Inflation The 1950s: Business Cycles The 1960s: The New Economics The Phillips Curve The 1970s: Stagflation What Happened to the Phillips Curve? The 1980s and Beyond Economic Controversy: Another Great Depression? Summary Discussion Questions Test Yourself Suggestions for Further Reading 2 Supply and Demand The Market The Idea of Demand The Demand Curve Shifts in Demand The Idea of Supply The Supply Curve Shifts in Supply The Market at Work Applications of Supply and Demand Inflation: A Preview Review of Market Actions Economic Controversy: Are Price Controls Desirable? Summary Discussion Questions Test Yourself Suggestions for Further Reading 3 The Problem of Unemployment The Unemployment Record The Unemployment Rate Unemployment and the Unemployment Rate Types of Unemployment The Goal of Full Employment How Serious Is the Unemployment Problem? The Labor Market Causes of Unemployment Inflation and Unemployment Economic Controversy: Minimum Wage Summary Discussion Questions Test Yourself Suggestions for Further Reading 4 Understanding Inflation What Is Inflation? The Inflation Record Economic Effects of Inflation The Power of Compound Inflation Coping with Inflation Measuring Inflation Price Index Problems Three Inflation Measures Calculating Real Values Economic Controversy: Inflation or Unemployment? Summary Discussion Questions Test Yourself Suggestions for Further ReadingII A Simple Model of the Economy 5 Measuring Economic Activity Why Measure Economic Activity? Gross National Product Three Views of GNP Take This with a Grain of Salt Real Gross National Product Are We Better Off Today Than in Years Past? Summary Discussion Questions Test Yourself Suggestions for Further Reading 6 Keynesian Aggregate Demand Depression Economics Spending Creates Income Macroeconomic Equilibrium Is Equilibrium Good? What Caused the Great Depression? Depression Economic Policies Inflation and Unemployment Four Components of Aggregate Demand The Aggregate Demand Curve Economic Controversy: Keynes Versus the Classics Summary Discussion Questions Test Yourself Suggestions for Further Reading Appendix: The 45-Degree Model of Circular Flow 7 Aggregate Supply and the Economy Aggregate Supply The Aggregate Supply Curve Shifts in the Aggregate Supply Curve Macroeconomic Equilibrium Adjusting to Equilibrium Leading Indicators Inflation and Unemployment That Old-Time Religion Wage and Price Controls Indexation Increasing Aggregate Supply Winners and Losers from Economic Policies Economic Controversy: Wage and Price Controls Summary Discussion Questions Test Yourself Suggestions for Further Reading 8 Fiscal Policy The Economic Role of Government Tools of Fiscal Policy The Multiplier Analysis Tax and Transfer Multipliers Multipliers and Government Policy Government and the Economy Multipliers in the Real World Government Spending Policies Different Types of Taxes Major United States Taxes The Total Tax Burden Tax Expenditures Automatic Stabilizers Advantages and Disadvantages of Fiscal Policies Deficit Spending and the National Debt Economic Controversy: Supply-Side Summary Discussion Questions Test Yourself Suggestions for Further ReadingIII Money, Credit, and the Economy 9 Money and Banking A Financial Fable The Money Supply Money Substitutes The Interest Rate The Prime Interest Rate Money and Banks Fractional Reserve Banking How Banks Create Money The Fed Open Market Operations Reserve Requirement Policy Discount Rate Policy Economic Controversy: Return to the Gold Standard? Summary Discussion Questions Test Yourself Suggestions for Further Reading 10 Credit Markets and Monetary Policy The Stock Market Commodity Markets Bond Markets Credit Markets The Demand for Credit The Credit Demand Curve The Supply of Credit The Credit Supply Curve The Credit Market at Work The Inflation Premium High Interest Rates and Disintermediation Investment and the Credit Market Monetary Policy The Pros and Cons of Monetary Policy Economic Controversy: Interest Rate Ceilings? Summary Discussion Questions Test Yourself Suggestions for Further Reading 11 Monetary versus Fiscal Policy Fighting Unemployment Policy Options Fighting Inflation Fighting Stagflation Financing Government Spending Reviewing the Alternatives Congress Versus the Fed Economic Controversy: The Independence of the Federal Reserve Summary Discussion Questions Test Yourself Suggestions for Further Reading 12 The Challenge to Keynesian Economics Keynesian Doctrine Monetarist Theory Modern Monetarist Theory Friedman's Policy of Rules The Monetarist Influence Rational Expectations Theory Rational Expectations Policies Disequilibrium Theory Supply-Side Economics Who Is Right Here? Economic Controversy: How Do You Fight Inflation? Summary Discussion Questions Test Yourself Suggestions for Further ReadingIV International Economics 13 International Trade Why Do Nations Trade? The Law of Comparative Advantage Gains from Trade Economic Effects of Trade Comparative Advantage in the Real World Tariffs and Quotas Who Pays the Tariff? Arguments for Tariffs Arguments against Tariffs Customs Unions Balance-of-Payments Accounts Stages in the Balance of Payments Is a Deficit Bad? Economic Controversy: Automobile Import Quotas? Summary Discussion Questions Test Yourself Suggestions for Further Reading 14 The Foreign-Exchange Market The Exchange Rate The Foreign-Exchange Market Demand for Francs Demand for Dollars Games Exchange Rates Play Here Is Demand, Where Is Supply? Exchange-Market Equilibrium The Foreign-Exchange Market at Work The Traveller's Paradox Fixed Exchange Rates Economic Controversy: Flexible or Fixed Exchange Rates? Summary Discussion Questions Test Yourself Suggestions for Further Reading 15 International Economics Trade and the Economy International Credit Movements Eurodollars Economic Policy with Flexible Exchange Rates Economic Lessons for the 1980s Economic Policy with Fixed Exchange Rates Economic Lessons from the 1970s Economic Policy with Intervention Oil and International Economic Policy Interest Rate Wars Economic Controversy: Defending the Dollar Summary Discussion Questions Test Yourself Suggestions for Further Reading 16 Problems, Goals, and Trade-Offs Goal 1: Full Employment Goal 2: Stable Prices Goal 3: Economic Growth Other National Goals International Economic Goals Trade-Offs: Give Up a Goal? Three Questions in Search of an Answer Policy Problems Questions? Answers! Answers? Economic Controversy: Where Are We Going? Summary Discussion Questions Test Yourself Suggestions for Further ReadingSuggestions for Further ReadingGlossaryAnswers to "Test Yourself"Index