Macroeconomics

PrefaceAcknowledgmentsPart One: The Economic Way of Thinking—An Introduction Chapter 1 The Economic Approach What Is Economics About? The Economic Way of Thinking Positive Economics Normative Economics Pitfalls of Positive Economics What Do Economists Do? Outstanding Economist: Adam Smith (1723-1790) and the Historical Roots of Economics Myths of Economics: "Economic Analysis Assumes that People Act Only Out of Selfish Motives. It Rejects the Humanitarian Side of Humankind." Chapter 2 Some Tools of the Economist Opportunity Cost Is the Highest Valued Opportunity Lost The Production Possibilities Curve Trade Tips and Comparative Advantage Three Economizing Decisions Facing All Nations: What, How, and for Whom? Two Methods of Making Decisions-The Market and Government Planning Outstanding Economists: David Ricardo (1772-1823) and the Early Followers of Smith Myths of Economics: "In Exchange, when Someone Gains, Someone Else must Lose. Trading is a Zero-Sum Game." Chapter 3 Supply, Demand, and the Market Process Scarcity Necessitates Rationing Consumer Choice and the Law of Demand Producer Choice and the Law of Supply Markets and the Coordination of Supply and Demand Shifts in Demand and Advice on How to Pass Your First Economics Exam Shifts in Supply Time and the Adjustment Process Repealing the Laws of Supply and Demand The Communicating, Coordinating, and Motivating Functions of the Market Outstanding Economist: Alfred Marshall (1842-1924) Myths of Economics: "Rent Controls are an Effective Method of Ensuring Adequate Housing at a Price the Poor can Afford." Chapter 4 A Bird's-Eye View of the Public Sector Ideal Economic Efficiency Why Might the Invisible Hand Fail? Government—A Potential Vehicle for Gain Redistribution—Dividing the Economic Pie The Market and the Public Sector—Two Methods of Economic Organization Conflicts between Good Economics and Good Politics Outstanding Economist: James Buchanan (1919- ) Chapter 5 Taxes and Government Spending What Do Federal, State, and Local Governments Buy? How Big Is Government? The Growth of Government Taxes to Pay for a Growing Government Politics, Tax Incidence, and the Structure of Taxes Who Pays the Tax Bill? The Taxes Paid in Other Countries Taxes and Politics—A Final Word Myths of Economics: "The Growth of the Federal Government has been the Major Source of Government Expansion."Part Two: Macroeconomics Chapter 6 Taking the Nation's Economic Pulse The Concept of the GNP The Circular Flow of Expenditures and Resource Costs Two Ways of Measuring GNP The Expenditure Approach The Resource Cost-Income Approach Gross National Product or Gross National Cost? Five Problems with GNP as a Measuring Rod What GNP Does Not Measure The Great Contribution of GNP Other Related Income Measures The Real Income-Real Output Link Outstanding Economist: Simon Kuznets (1901- ) Perspectives in Economics: Beyond the GNP-Pioneering Research on the Measurement of Economic Welfare Chapter 7 Unemployment, Inflation, and Business Cycles Micro- and Macroeconomics Swings in the Economic Pendulum Three Different Views of the Business Cycle Employment Fluctuations in a Dynamic Economy What Is Full Employment? A Closer Look at the Employment Statistics The Economics of Inflation The Cost of Inflation Myths of Economics: "Unemployed Resources would not Exist if the Economy were Operating Efficiently." Chapter 8 Aggregate Equilibrium and a Simple Keynesian Model Tools of the Modern Keynesian Analysis Saving, Investment, and the Circular Flow Analysis Keynes and the Views of Classical Economists The Determinants of Consumption The Determinants of Investment Equilibrium and the Keynesian Model Leakages and Injections—Another Way of Looking at Equilibrium The Major Message of Keynes Outstanding Economist: John Maynard Keynes (1883-1946) Chapter 9 The Multiplier, the Accelerator, and a Keynesian View of the Business Cycle The Multiplier Principle The Paradox of Thrift Business Pessimism—A Self-Fulfilling Prophecy Investment Instability and the Accelerator A Keynesian View of the Business Cycle Investment and the Cycle Chapter 10 Fiscal Policy The Birth of Real-World Keynesian Fiscal Policy Fiscal Policy for Dealing with a Recession Fiscal Policy for Dealing with Inflation The Balanced-Budget Multiplier-The Simple Keynesian Model Adding Realism to the Keynesian Multiplier Analysis A Simple Verbal Explanation of Why Fiscal Policy Works during Normal Times The Central Idea of Fiscal Policy The Full-Employment Budget Concept The Practical Limitations of Real-World Fiscal Policy Has Real-World Fiscal Policy Had a Stabilizing Effect? Automatic Stabilizers Outstanding Economist: Charles L. Schultze (1924- ) Perspectives in Economics: Fact and Fiction about the National Debt Chapter 11 Money and the Banking System What Is Money? The Business of Banking Fractional Reserve Goldsmithing Fractional Reserve Banking The Federal Reserve System How the Fed Controls Our Money Supply The Fed and the Treasury Dynamics of Monetary Policy Chapter 12 Money, Employment, Inflation, and a More Complete Keynesian Model The Demand for and Supply of Money Interest Rates and Investment Expansionary and Restrictive Monetary Policy How Monetary Policy Works-The Keynesian View The Evolution of Keynesian Thought The Basic Propositions of the Modern Keynesian View Did Macropolicy Cause the Inflation of the 1970s? Outstanding Economist: Paul Samuelson (1915- ) Perspectives in Economics: Will There Ever Be Another Great Depression? Yes Will There Ever Be Another Great Depression? No Addendum: Tax Cuts, Supply-Side Fiscal Policy, and the Work-Leisure Substitution Effect Chapter 13 The Monetarist Challenge to the Keynesian View Historical Background on the Importance of Money The Modern Monetarist View-Money Matters Most The Impact of Money-The Monetarist View The Basic Propositions of Monetarism Constant Rate of Monetary Growth—The Monetarist View of Proper Policy Monetarists—Past and Future Outstanding Economist: Milton Friedman (1912- ) Chapter 14 Unemployment, Inflation, and the Limits of Macropolicy Monetary and Fiscal Policies—A Consensus View The Phillips Curve—The Dream and the Reality The Shifting of the Real-World Phillips Curve The Long-Run Phillips Curve The Economics of Inflation The Economics of Cost-Push Inflation The Great Inflation (1967-Present)-A Closer Look Stop—Go Policy and the Racheting Upward of the Rate of Inflation Myths of Economics: Two Popular Myths of Inflation Chapter 15 Instability, Stagflation, and the Direction of Macroeconomics The Economics of Discretionary Macropolicy The Failure of Macroeconomists Stabilization Policy and Macropolicy Rules Putting the Rates of Unemployment and Growth of the 1970s into Perspective The Natural Rate of Unemployment during the 1980s The New Microapproach to Macroeconomic Problems Macroeconomics in the 1980s Outstanding Economist: Martin Feldstein (1939- ) Perspectives in Economics: The Economics of Constitutional Amendments Limiting Spending and Mandating a Balanced BudgetPart Three: International Economics and Comparative Systems Chapter 16 Gaining from International Trade The Composition of the International Sector Why Is There Trade between Nations? The Export-Import Link Supply, Demand, and International Trade Tariffs and Quotas Why Industries Are on the Dole International Trade, Export Taxes, and the OPEC Cartel Myths of Economics: "Free Trade with Low-Wage Countries such as China and India would Cause the Wages of U.S. Workers to Fall." Chapter 17 International Finance and the Foreign Exchange Market Exchange Rates and the Price of Foreign Goods Balance of Payments and International Exchanges The Determination of Exchange Rates Changing Market Conditions and Exchange Rates The Evolution of International Monetary Arrangements The Current System—A Flexible Rate with Selective Intervention Chapter 18 Economic Development and the Growth of Income Characteristics of Less Developed Countries How Wide Is the Economic Gap between the Developed and Less Developed Nations? Are Growth and Development the Same Thing? The Importance of Small Differences in Rates of Growth Sources of Economic Growth Why Poor Nations Remain Poor Perspectives in Economics: Rich and Poor Nations—Are They Two Worlds Drifting Apart? Chapter 19 Comparative Economic Systems Comparing Capitalism and Socialism Classifying Real-World Economies Common Constraints and the Universality of Economic Tools The Soviet Economy Yugoslavia—Socialism or the Market? The Japanese "Miracle" Outstanding Economist: Karl Marx (1818-1883)Part Four: Public Choice Chapter 20 Problem Areas for the Market External Effects and the Market Market Failure: External Costs External Costs and Property Rights Market Failure: External Benefits and Missed Opportunities Alternative Public Sector Responses to Externalities Should the Government Always Try to Control Externalities? Market Failure: Public Goods Market Failure: Poor Information Outstanding Economist: Allen Kneese (1930- ) Chapter 21 Public Choice and Gaining from Government Voters and the Demand for Political Action Supply, Profits, and the Political Entrepreneur The Opportunity Cost of Government Market Failure and Gaining from Government Gaining from Government Provision of Public Goods Income Redistribution and Public Policy Outstanding Economist: Kenneth Arrow (1921- ) Chapter 22 The Economics of Government Failure Government Failure: Voter Ignorance and Inefficient Public Policy Government Failure: The Special Interest Effect Government Failure: Imprecise Reflection of Consumer Preferences Government Failure: The Shortsightedness Effect Government Failure: Little Entrepreneurial Incentive for Internal Efficiency Is the Economic Analysis of the Public Sector Cynical? Perspectives in Economics: Bureaucracy, Competition, and Improving the Efficiency of Government Perspectives in Economics: Dealing with Special InterestsAppendix A: A Graphic Look at EconomicsAppendix B: Analyzing the Equilibrium Level of Income with EquationsAppendix C: Analyzing Aggregate Equilibrium with the IS-LM ModelAppendix D: Quarterly Economic Indicators, 1965-1979Suggestions for Additional ReadingHints for Answering Discussion QuestionsIndex