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Macroeconomics,9780130348258

Macroeconomics

by ;
Edition:
1st
ISBN13:

9780130348258

ISBN10:
0130348252
Format:
Paperback
Pub. Date:
1/1/2006
Publisher(s):
Prentice Hall
List Price: $132.67

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Summary

Where are you headed? &No matter what your career, you will need to understand how economic forces affect you and your work. &Hubbard/O'Brien, Macroeconomics 1/e gives you the motivation and the tools to understand those forces. &You're on your way.

Table of Contents

Preface vi
Acknowledgments xx
Part 1: Introduction
Economics: Foundations and Models
2(30)
What Happens When U.S. Firms Move to China?
2(19)
Building a Foundation: Economics and Individual Decisions
5(1)
People Are Rational
5(1)
People Respond to Economic Incentives
5(1)
Optimal Decisions Are Made at the Margin
5(1)
Solved Problem 1-1: Apple Computer Makes a Decision at the Margin
6(1)
The Economic Problem That Every Society Must Solve
7(1)
What Goods and Services Will Be Produced?
7(1)
How Will the Goods and Services Be Produced?
7(1)
Who Will Receive the Goods and Services Produced?
7(1)
Centrally Planned Economies versus Market Economies
8(1)
The Modern ``Mixed'' Economy
8(1)
Efficiency and Equity
9(1)
Economic Models
10(1)
The Role of Assumptions in Economic Models
10(1)
Forming and Testing Hypotheses in Economic Models
10(1)
Making the Connection 1-1: When Economists Disagree: A Debate over Outsourcing
11(1)
Normative and Positive Analysis
12(1)
Microeconomics and Macroeconomics
13(1)
``Don't Let This Happen To You!'' Don't Confuse Positive Analysis with Normative Analysis
13(1)
A Preview of Important Economic Terms
14(1)
Conclusion
15(1)
An Inside Look: How Does Economic Growth in China Affect Other Countries?
16(2)
Summary
18(1)
Key Terms
18(1)
Review Questions
19(1)
Problems and Applications
19(2)
Appendix: Using Graphs and Formulas
21(11)
Graphs of One Variable
22(1)
Graphs of Two Variables
23(1)
Slopes of Lines
23(1)
Taking Into Account More Than Two Variables on a Graph
24(1)
Positive and Negative Relationships
25(1)
Slopes of Nonlinear Curves
25(3)
Formulas
28(1)
Formula for a Percentage Change
28(1)
Formulas for the Areas of a Rectangle and a Triangle
28(1)
Summary of Using Formulas
29(1)
Problems and Applications
29(3)
Trade-offs, Comparative Advantage, and the Market System
32(30)
Managers Making Choices at BMW
32(30)
Production Possibilities Frontiers and Real-World Trade-offs
34(1)
Graphing the Production Possibilities Frontier
34(2)
Solved Problem 2-1: Drawing a Production Possibilities Frontier for Rosie's Boston Bakery
36(2)
Making the Connection 2-1: Trade-offs and Tsunami Relief
38(1)
Increasing Marginal Opportunity Costs
38(1)
Economic Growth
39(1)
Trade
40(1)
Specialization and Gains from Trade
40(2)
Absolute Advantage versus Comparative Advantage
42(2)
``Don't Let This Happen To You!'' Don't Confuse Absolute Advantage and Comparative Advantage
44(1)
Comparative Advantage and the Gains from Trade
44(1)
Solved Problem 2-2: Comparative Advantage and the Gains from Trade
44(2)
The Market System
46(1)
The Circular Flow of Income
46(2)
The Gains from Free Markets
48(1)
The Market Mechanism
48(1)
Making the Connection 2-2: Story of the Market System in Action: ``I, Pencil''
49(1)
The Role of the Entrepreneur
50(1)
The Legal Basis of a Successful Market System
50(1)
Making the Connection 2-3: Property Rights in Cyberspace: Napster, Kazaa, and iTunes
51(2)
Conclusion
53(1)
An Inside Look: Choosing the Production Mix at BMW
54(8)
Where Prices Come From: The Interaction of Demand and Supply
62(34)
How Hewlett-Packard Manages the Demand for Printers
62(34)
The Demand Side of the Market
64(1)
The Demand of an Individual Buyer
64(1)
Demand Schedules and Demand Curves
64(1)
Individual Demand and Market Demand
65(1)
The Law of Demand
66(1)
What Explains the Law of Demand?
66(1)
Holding Everything Else Constant: The Ceteris Paribus Condition
67(1)
Variables That Shift Market Demand
68(1)
Making the Connection 3-1: Why Supermarkets Need to Understand Substitutes and Complements
69(1)
Making the Connection 3-2: Companies Respond to a Growing Hispanic Population
70(2)
A Change in Demand versus a Change in Quantity Demanded
72(1)
Making the Connection 3-3: Estimating the Demand for Printers at Hewlett-Packard
72(1)
The Supply Side of the Market
73(1)
Supply Schedules and Supply Curves
73(1)
Individual Supply and Market Supply
74(1)
The Law of Supply
74(1)
Variables That Shift Supply
75(1)
A Change in Supply versus a Change in Quantity Supplied
76(1)
Market Equilibrium: Putting Demand and Supply Together
77(1)
How Markets Eliminate Surpluses and Shortages
78(1)
Demand and Supply Both Count
79(1)
Solved Problem 3-1: Demand and Supply Both Count: A Tale of Two Letters
80(1)
The Effect of Demand and Supply Shifts on Equilibrium
81(1)
The Effect of Shifts in Supply on Equilibrium
81(1)
Making the Connection 3-4: The Falling Price of Large Flat-Screen Televisions
82(1)
The Effect of Shifts in Demand on Equilibrium
83(1)
The Effect of Shifts in Demand and Supply over Time
84(1)
Solved Problem 3-2: High Demand and Low Prices in the Lobster Market?
85(1)
Shifts in a Curve versus Movements along a Curve
86(1)
``Don't Let This Happen To You!'' Remember: A Change in a Good's Price Does Not Cause the Demand or Supply Curve to Shift
87(1)
Conclusion
87(1)
An Inside Look: Hewlett-Packard Cuts PC Prices to Sell More Printers
88(8)
Economic Efficiency, Government Price Setting, and Taxes
96(34)
Should the Government Control Apartment Rents?
96(29)
Consumer Surplus and Producer Surplus
98(1)
Consumer Surplus
99(1)
Making the Connection 4-1: The Consumer Surplus from Satellite Television
100(1)
Producer Surplus
101(1)
What Consumer Surplus and Producer Surplus Measure
101(1)
The Efficiency of Competitive Markets
102(1)
Marginal Benefit Equals Marginal Cost in Competitive Equilibrium
102(1)
Economic Surplus
103(1)
Deadweight Loss
103(1)
Economic Surplus and Economic Efficiency
104(1)
Government Intervention in the Market: Price Floors and Price Ceilings
104(1)
Price Floors: The Example of Agricultural Markets
105(1)
Making the Connection 4-2: Price Floors in Labor Markets: The Minimum Wage
106(1)
Price Ceilings: The Example of Rent Controls
107(1)
``Don't Let This Happen To You!'' Don't Confuse ``Scarcity'' with a ``Shortage''
108(1)
Black Markets
109(1)
Solved Problem 4-1: What's the Economic Effect of a ``Black Market'' for Apartments?
109(1)
Making the Connection 4-3: Does Holiday Gift Giving Have a Deadweight Loss?
110(1)
The Results of Government Intervention: Winners, Losers, and Inefficiency
111(1)
Positive and Normative Analysis of Price Ceilings and Price Floors
111(1)
The Economic Impact of Taxes
112(1)
The Effect of Taxes on Economic Efficiency
112(1)
Tax Incidence: Who Actually Pays a Tax?
112(2)
Solved Problem 4-2: When Do Consumers Pay All of a Sales Tax Increase?
114(2)
Making the Connection 4-4: Is the Burden of the Social Security Tax Really Shared Equally between Workers and Firms?
116(1)
Conclusion
117(1)
An Inside Look: Dealing with Rent Control
118(7)
Appendix: Quantitative Demand and Supply Analysis
125(5)
Demand and Supply Equations
125(1)
Calculating Consumer Surplus and Producer Surplus
126(2)
Review Questions
128(1)
Problems and Applications
129(1)
Part 2: Firms in the Domestic and International Economies
Firms, the Stock Market, and Corporate Governance
130(32)
Google: From Dorm Room to Wall Street
130(22)
Types of Firms
132(1)
Who Is Liable? Limited and Unlimited Liability
132(1)
Making the Connection 5-1: What's in a ``Name''? Lloyd's of London Learns about Unlimited Liability the Hard Way
133(1)
Corporations Earn the Majority of Revenue and Profits
134(1)
The Structure of Corporations and the Principal-Agent Problem
134(1)
Corporate Structure and Corporate Governance
134(1)
Solved Problem 5-1: Does the Principal-Agent Problem Also Apply to the Relationship between Managers and Workers?
135(1)
How Firms Raise Funds
136(1)
Sources of External Funds
136(1)
Stock and Bond Markets Provide Capital---and Information
137(1)
``Don't Let This Happen To You!'' When Google Shares Change Hands, Google Doesn't Get the Money
138(1)
Making the Connection 5-2: Following General Electric's Stock and Bond Prices in the Financial Pages
139(1)
Using Financial Statements to Evaluate a Corporation
140(1)
Making the Connection 5-3: A Bull in China's Financial Shop
141(1)
The Income Statement
142(1)
The Balance Sheet
143(1)
Understanding the Business Scandals of 2002
143(1)
Solved Problem 5-2: What Makes a Good Board of Directors?
144(1)
Conclusion
145(1)
An Inside Look: Google's Initial Public Offering
146(6)
Appendix: Tools to Analyze Firms' Financial Information
152(10)
Using Present Value to Make Investment Decisions
152(2)
Solved Problem 5A-1: How to Receive Your Contest Winnings
154(1)
Using Present Value to Calculate Bond Prices
155(1)
Using Present Value to Calculate Stock Prices
155(1)
A Simple Formula for Calculating Stock Prices
156(1)
Going Deeper into Financial Statements
157(1)
Analyzing Income Statements
157(1)
Analyzing Balance Sheets
158(4)
Comparative Advantage and the Gains from International Trade
162(40)
Sugar Quota Drives U.S. Candy Manufacturers Overseas
162(33)
An Overview of International Trade
164(1)
The Importance of Trade to the U.S. Economy
164(1)
U.S. International Trade in a World Context
165(1)
Making the Connection 6-1: Has Outsourcing Hurt the U.S. Economy?
166(1)
Comparative Advantage: The Basis of All Trade
167(1)
A Brief Review of Comparative Advantage
167(1)
Comparative Advantage in International Trade
167(1)
The Gains from Trade
168(1)
Increasing Consumption through Trade
169(1)
Solved Problem 6-1: The Gains from Trade
170(2)
Why Don't We See Complete Specialization?
172(1)
Does Anyone Lose as a Result of International Trade?
172(1)
``Don't Let This Happen To You!'' Remember That Trade Creates Both Winners and Losers
173(1)
Where Does Comparative Advantage Come From?
173(1)
Making the Connection 6-2: Why Is Dalton, Georgia, the Carpet-Making Capital of the World?
174(1)
Comparative Advantage Over Time: The Rise and Fall---and Rise---of the U.S. Consumer Electronics Industry
174(1)
Government Policies That Restrict Trade
175(2)
Tariffs
177(1)
Quotas
178(1)
Measuring the Economic Impact of the Sugar Quota
179(1)
Solved Problem 6-2: Measuring the Economic Effect of a Quota
179(2)
The High Cost of Preserving Jobs with Tariffs and Quotas
181(1)
Gains from Unilateral Elimination of Tariffs and Quotas
181(1)
Other Barriers to Trade
182(1)
The Argument over Trade Policies and Globalization
182(1)
Why Do Some People Oppose the World Trade Organization?
182(1)
Making the Connection 6-3: The Unintended Consequences of Banning Goods Made with Child Labor
183(2)
Making the Connection 6-4: Has NAFTA Helped or Hurt the U.S. Economy?
185(1)
Dumping
186(1)
Positive versus Normative Analysis (Once Again)
187(1)
Conclusion
187(1)
An Inside Look: The United States and Australia Reduce Trade Barriers
188(7)
Appendix: Multinational Firms
195(7)
Multinational Firms
195(1)
A Brief History of Multinational Enterprises
195(1)
Strategic Factors in Moving from Domestic to Foreign Markets
196(2)
Making the Connection 6A-1: Have Multinational Corporations Reduced Employment and Lowered Wages in the United States?
198(1)
Challenges to U.S. Firms in Foreign Markets
199(1)
Competitive Advantages of U.S. Firms
199(3)
Part 3: Macroeconomic Foundations and Long-Run Growth
GDP: Measuring Total Production and Income
202(26)
Increases in GDP Spur Hiring at Freightliner
202(26)
Gross Domestic Product Measures Total Production
205(1)
Measuring Total Production: Gross Domestic Product
205(1)
Solved Problem 7-1: Calculating GDP
206(1)
Production, Income, and the Circular Flow Diagram
207(1)
Components of GDP
208(1)
``Don't Let This Happen To You!'' Remember What Economists Mean by ``Investment''
209(1)
Making the Connection 7-1: Spending on Homeland Security
209(1)
An Equation for GDP and Some Actual Values
210(1)
Measuring GDP by the Value Added Method
211(1)
Does GDP Measure What We Want It to Measure?
212(1)
Shortcomings in GDP as a Measure of Total Production
212(1)
Making the Connection 7-2: How the Underground Economy Hurts Developing Countries
213(1)
Shortcomings of GDP as a Measure of Well-Being
214(1)
Making the Connection 7-3: Did World War II Bring Prosperity?
214(1)
Real GDP versus Nominal GDP
215(1)
Calculating Real GDP
215(1)
Solved Problem 7-2: Calculating Real GDP
216(1)
Comparing Real GDP and Nominal GDP
217(1)
Making the Connection 7-4: How Freightliner Uses Forecasts of GDP
218(1)
The GDP Deflator
218(1)
Other Measures of Total Production and Total Income
219(1)
Gross National Product (GNP)
219(1)
Net National Product (NNP)
220(1)
National Income
220(1)
Personal Income
220(1)
Disposable Personal Income
220(1)
Conclusion
221(1)
An Inside Look: Movements in Canadian GDP
222(6)
Unemployment and Inflation
228(32)
Lucent Technologies Deals with Unemployment and Inflation
228(32)
Measuring the Unemployment Rate and the Labor Force Participation Rate
230(1)
The Household Survey
230(2)
Solved Problem 8-1: What Happens If You Include the Military?
232(1)
Problems with Measuring the Unemployment Rate
233(1)
Trends in Labor Force Participation
233(1)
Making the Connection 8-1: What Explains the Increase in ``Kramers''?
234(1)
Unemployment Rates for Demographic Groups
235(1)
How Long Are People Usually Unemployed?
235(1)
The Establishment Survey: Another Measure of Employment
236(1)
Job Creation and Job Destruction Over Time
237(1)
Types of Unemployment
237(1)
Frictional Unemployment and Job Search
238(1)
Structural Unemployment
239(1)
Cyclical Unemployment
239(1)
Full Employment
239(1)
Making the Connection 8-2: How Should We Categorize the Unemployment at Lucent Technologies?
240(1)
Explaining Unemployment
240(1)
Government Policies and the Unemployment Rate
240(2)
Labor Unions
242(1)
Efficiency Wages
242(1)
Making the Connection 8-3: Why Did Henry Ford Pay His Workers Twice as Much as Other Car Manufacturers?
243(1)
Measuring Inflation
243(1)
The Consumer Price Index
244(1)
Is the CPI Accurate?
245(1)
``Don't Let This Happen To You!'' Don't Miscalculate the Inflation Rate
246(1)
The Producer Price Index
247(1)
Using Price Indexes to Adjust for the Effects of Inflation
247(1)
Solved Problem 8-2: Calculating Real Average Hourly Earnings
248(1)
Falling Real Wages at Lucent
249(1)
Real versus Nominal Interest Rates
249(2)
Does Inflation Impose Costs on the Economy?
251(1)
Inflation Affects the Distribution of Income
251(1)
The Problem with Anticipated Inflation
251(1)
Making the Connection 8-4: Why a Lower Inflation Rate Is Like a Tax Cut for Lucent's Bondholders
252(1)
The Problem with Unanticipated Inflation
253(1)
Conclusion
253(1)
An Inside Look: Managers and Workers at Boeing Negotiate Wages
254(6)
Economic Growth, the Financial System, and Business Cycles
260(32)
Growth and the Business Cycle at the Ford Motor Company
260(32)
Long-Run Economic Growth Is the Key to Rising Living Standards
262(2)
Making the Connection 9-1: The Connection between Economic Prosperity and Health
264(1)
Calculating Growth Rates and the Rule of 70
265(1)
What Determines the Rate of Long-Run Growth?
266(1)
Solved Problem 9-1: The Role of Technological Change in Growth
267(1)
Making the Connection 9-2: What Explains Rapid Economic Growth in Botswana?
268(1)
Potential Real GDP
269(1)
Saving, Investment, and the Financial System
270(1)
An Overview of the Financial System
270(2)
The Macroeconomics of Saving and Investment
272(1)
The Market for Loanable Funds
273(1)
Making the Connection 9-3: Ebenezer Scrooge: Accidental Promoter of Economic Growth?
274(3)
Solved Problem 9-2: How Would a Consumption Tax Affect Saving, Investment, the Interest Rate, and Economic Growth?
277(1)
The Business Cycle
278(1)
Some Basic Business Cycle Definitions
278(1)
Making the Connection 9-4: Who Decides If the Economy Is in a Recession?
278(1)
What Happens during a Business Cycle?
279(3)
``Don't Let This Happen To You!'' Don't Confuse the Price Level and the Inflation Rate
282(3)
Why Is the Economy More Stable?
285(1)
Conclusion
285(1)
An Inside Look: Growth and the Chinese Automobile Industry
286(6)
Long-Run Economic Growth: Sources and Policies
292(36)
The Chinese Economic Miracle
292(36)
Economic Growth Over Time and Around the World
294(1)
Economic Growth from 1,000,000 B.C. to the Present
294(1)
Making the Connection 10-1: Why Was England First?
295(1)
Small Differences in Growth Rates Are Important
296(1)
``Don't Let This Happen To You!'' Don't Confuse Average Annual Percentage Change with Total Percentage Change
297(1)
Why Do Growth Rates Matter?
297(1)
Making the Connection 10-2: The Benefits of an Earlier Start: Standards of Living in China and Japan
297(1)
``The Rich Get Richer and . . .''
298(1)
What Determines How Fast Economies Grow?
298(2)
The Per-Worker Production Function
300(1)
Which Is More Important for Economic Growth: More Capital or Technological Change?
301(1)
Technological Change: The Key to Sustaining Economic Growth
301(1)
Making the Connection 10-3: Why Did the Soviet Union's Economy Fail?
302(1)
Solved Problem 10-1: Using the Economic Growth Model to Analyze the Failure of the Soviet Union's Economy
303(1)
Endogenous Growth Theory
304(1)
Joseph Schumpeter and Creative Destruction
305(1)
Economic Growth in the United States
306(1)
Economic Growth in the United States Since 1950: Fast, Then Slow, Then Fast Again
306(1)
What Caused the Productivity Slowdown of 1973--1995?
307(1)
The Productivity Boom: Are We in a ``New Economy''?
308(1)
Why Has Productivity Growth Been Faster in the United States than in Other Countries?
309(2)
Why Isn't the Whole World Rich?
311(1)
Catch-up: Sometimes, But Not Always
312(2)
Solved Problem 10-2: The Economic Growth Model's Predictions of Catch-up
314(1)
Why Don't More Low-Income Countries Experience Rapid Growth?
315(2)
The Benefits of Globalization
317(1)
Making the Connection 10-4: Globalization and the Spread of Technology in Bangladesh
318(1)
Growth Policies
319(1)
Enhancing Property Rights and the Rule of Law
319(1)
Improving Health and Education
320(1)
Policies with Respect to Technology
320(1)
Policies with Respect to Saving and Investment
320(1)
Is Economic Growth Good or Bad?
321(1)
Conclusion
321(1)
An Inside Look: India Achieves Growth through Efficiency and Globalization
322(6)
Part 4: Short-Run Flucuations
Output and Expenditure in the Short Run
328(42)
Demand Forecasts Backfire at Cisco Systems
328(40)
The Aggregate Expenditure Model
330(1)
Aggregate Expenditure
330(1)
The Difference between Planned Investment and Actual Investment
331(1)
Macroeconomic Equilibrium
331(1)
Adjustments to Macroeconomic Equilibrium
332(1)
Determining the Level of Aggregate Expenditure in the Economy
333(1)
Consumption
333(3)
The Relationship between Consumption and National Income
336(2)
Income, Consumption, and Saving
338(1)
Solved Problem 11-1: Calculating the Marginal Propensity to Consume and the Marginal Propensity to Save
339(1)
Planned Investment
340(1)
Making the Connection 11-1: Cisco Rides the Roller Coaster of Information Technology Spending
341(1)
Government Purchases
342(1)
Net Exports
342(2)
Graphing Macroeconomic Equilibrium
344(4)
Showing a Recession on the 45°-Line Diagram
348(1)
The Important Role of Inventories
349(1)
Making the Connection 11-2: Business Attempts to Control Inventories, Then . . . and Now
349(1)
A Numerical Example of Macroeconomic Equilibrium
350(1)
``Don't Let This Happen To You!'' Don't Confuse Aggregate Expenditure with Consumption Spendin
351(1)
Solved Problem 11-2: Determining Macroeconomic Equilibrium
351(1)
The Multiplier Effect
352(2)
Making the Connection 11-3: The Multiplier in Reverse: The Great Depression of the 1930s
354(2)
A Formula for the Multiplier
356(1)
Summarizing the Multiplier Effect
357(1)
Solved Problem 11-3: Using the Multiplier Formula
357(2)
The Aggregate Demand Curve
359(1)
Conclusion
360(2)
An Inside Look:: Expenditure in Japan Soars, Nudging Up GDP
362(6)
The Algebra of Macroeconomic Equilibrium
368(1)
Appendix: The Algebra of Macroeconomic Equilibrium
368(2)
Aggregate Demand and Aggregate Supply Analysis
370(36)
Caterpillar Recovers Slowly from the 2001 Recession
370(33)
Aggregate Demand
372(1)
Why Is the Aggregate Demand Curve Downward Sloping?
373(1)
Shifts of the Aggregate Demand Curve versus Movements Along It
374(1)
``Don't Let This Happen To You!'' Be Clear Why the Aggregate Deman d Curve Is Downward Sloping
374(1)
The Variables that Shift the Aggregate Demand Curve
375(1)
Making the Connection12-1: The Effect of Exchange Rates on Caterpillar's Sales
376(1)
Solved Problem 12-1: Movements Along the Aggregate Demand Curve versus Shifts of the Aggregate Demand Curve
377(1)
Aggregate Supply
378(1)
The Long-Run Aggregate Supply Curve
378(2)
The Short-Run Aggregate Supply Curve
380(1)
Shifts of the Short-Run Aggregate Supply Curve versus Movements Along It
381(1)
Variables that Shift the Short-Run Aggregate Supply Curve
382(1)
Macroeconomic Equilibrium in the Long Run and the Short Run
383(1)
Recessions, Expansions, and Supply Shocks
384(4)
A Dynamic Aggregate Demand and Aggregate Supply Model
388(1)
What is the Usual Cause of Inflation?
389(1)
The Slow Recovery from the Recession of 2001
389(2)
Making the Connection 2-2: Does Rising Productivity Growth Reduce Employment?
391(2)
The More Rapid Recovery of 2003--2004
393(1)
Solved Problem 12-2: Showing the Oil Shock of 1974--1975 on a Dynamic Aggregate Demand and Aggregate Supply Graph
394(1)
Conclusion
395(1)
An Inside Look: Construction Company Komatsu Benefits from Exports to China
396(7)
Appendix: Macroeconomic Schools of Thought
403(3)
The Monetarist Model
403(1)
The New Classical Model
404(1)
The Real Business Cycle Model
404(1)
Making the Connection 12A-1: Karl Marx: Capitalism's Severest Critic
405(1)
Part 5: Monetary and Fiscal Policy
Money, Banks, and the Federal Reserve System
406(32)
McDonald's Money Problems in Argentina
406(32)
What is Money and Why Do We Need It?
408(1)
Barter and the Invention of Money
408(1)
Making the Connection 13-1: Money in a World War II Prisoner-of-War Camp
409(1)
The Functions of Money
409(1)
What Can Serve as Money?
410(2)
Making the Connection 13-2: Money without a Government? The Strange Case of the Iraqi Dinar
412(1)
How Do We Measure Money Today?
412(1)
M1: The Narrowest Definition of the Money Supply
413(1)
M2: A Broader Definition of Money
414(1)
``Don't Let This Happen To You!'' Don't Confuse Money with Income or Wealth
414(1)
Solved Problem 13-1: The Definitions of M1 and M2
415(1)
What About Credit Cards and Debit Cards?
415(1)
How Do Banks Create Money?
415(1)
Bank Balance Sheets
416(1)
``Don't Let This Happen To You!'' Know When a Checking Account Is an Asset and When It Is a Liability
416(1)
Using T-Accounts to Show How a Bank Can Create Money
417(2)
The Simple Deposit Multiplier
419(1)
Solved Problem 13-2: Showing How Banks Create Money
420(3)
The Federal Reserve System
423(1)
Making the Connection 13-3: The 2001 Bank Panic in Argentina
423(1)
The Organization of the Federal Reserve System
424(1)
How the Federal Reserve Manages the Money Supply
424(3)
Putting It All Together: Decisions of the Nonbank Public, Banks, nd the Fed
427(1)
The Quantity Theory of Money
427(1)
Connecting Money and Prices: The Quantity Equation
427(1)
The Quantity Theory Explanation of Inflation
428(1)
High Rates of Inflation
429(1)
High Inflation in Argentina
429(1)
Making the Connection 13-4: The German Hyperinflation of the Early 1920s
430(1)
Conclusion
431(1)
An Inside Look: Does Using the Dollar Destabalize Latin American Countries?
432(6)
Monetary Policy
438(34)
Why Did Homebuilder Toll Brothers, Inc., Prosper During the 2001 Recession?
438(34)
What Is Monetary Policy?
440(1)
The Goals of Monetary Policy
440(1)
The Money Market and the Fed's Choice of Targets
441(1)
Monetary Policy Targets
442(1)
The Demand for Money
442(1)
Shifts in the Money Demand Curve
443(1)
How the Fed Manages the Money Supply: A Quick Review
444(1)
Equilibrium in the Money Market
444(2)
Solved Problem 14-1: The Relationship between Treasury Bill Prices and Their Interest Rates
446(1)
A Tale of Two Interest Rates
447(1)
Choosing a Monetary Policy Target
447(1)
The Importance of the Federal Funds Rate
448(1)
Monetary Policy and Economic Activity
449(1)
How Interest Rates Affect Aggregate Demand
449(1)
Making the Connection 14-1: Was There a Housing Market ``Bubble'' in the Early 2000s?
450(1)
The Effects of Monetary Policy on Real GDP and the Price Level
451(2)
Can the Fed Eliminate Recessions?
453
Making the Connection 14-2: The Fed Responds to the Terrorist Attacks of September 11, 2001
452(2)
Making the Connection 14-3: Why Was Monetary Policy Ineffective in Japan?
454(1)
Using Monetary Policy to Fight Inflation
454(2)
Solved Problem 14-2: The Effects of Monetary Policy
456(1)
A Summary of How Monetary Policy Works
457(1)
Making the Connection 14-4: Why Does Wall Street Care about Monetary Policy?
458(1)
``Don't Let This Happen To You!'' Remember That with Monetary Policy It's the Interest Rates---Not the Money---That Counts
459(1)
Can the Fed Get the Timing Right?
459(1)
A Closer Look at the Fed's Setting of Monetary Policy Targets
460(1)
Should the Fed Target the Money Supply?
460(1)
Why Doesn't the Fed Target Both the Money Supply and the Interest Rate?
461(1)
The Taylor Rule
461(1)
Should the Fed Target Inflation?
462(1)
Is the Independence of the Federal Reserve a Good Idea?
463(1)
The Case for Fed Independence
464(1)
The Case against Fed Independence
465(1)
Conclusion
465(1)
An Inside Look: Monetary Policy Spurs Housing Boom
466(6)
Fiscal Policy
472(42)
A Boon for H&R Block
472(36)
Fiscal Policy
474(1)
What Fiscal Policy Is and What It Isn't
474(1)
Automatic Stabilizers versus Discretionary Fiscal Policy
474(1)
An Overview of Government Spending and Taxes
475(1)
Making the Connection 15-1: The Future of Social Security and Medicare
476(2)
Using Fiscal Policy to Influence Aggregate Demand
478(1)
Expansionary Fiscal Policy
478(1)
Contractionary Fiscal Policy
479(1)
A Summary of How Fiscal Policy Affects Aggregate Demand
479(1)
``Don't Let This Happen To You!'' Don't Confuse Fiscal Policy and Monetary Policy
480(1)
The Government Purchases and Tax Multipliers
481(2)
The Effect of Changes in Tax Rates
483(1)
Taking Into Account the Effects of Aggregate Supply
483(1)
The Multipliers Work in Both Directions
483(1)
Solved Problem 15-1: Fiscal Policy Multipliers
484(1)
The Limits of Fiscal Policy to Stabalize the Economy
485(2)
Does Government Spending Reduce Private Spending?
487(1)
Crowding Out in the Short Run
487(1)
Crowding Out in the Long Run
488(1)
Making the Connection 15-2: Limits to Fiscal Policy: Japan in the late 1990s
489(1)
Deficits, Surpluses, and Federal Government Debt
490(1)
How the Federal Budget Can Serve as an Automatic Stabilizer
490(2)
Making the Connection 15-3: Did Fiscal Policy Fail During the Great Depression?
492(1)
Solved Problem 15-2: The Effect of Economic Fluctuations on the Budget Deficit
493(1)
Should the Federal Budget Always Be Balanced?
494(1)
The Federal Government Debt
494(2)
Is the Government Debt a Problem?
496(1)
The Effects of Fiscal Policy in the Long Run
496(1)
The Long-Run Effects of Tax Policy
496(1)
Tax Simplification
497(1)
Making the Connection 15-4: Should the United States Adopt the ``Flat Tax''?
498(1)
The Economic Effect of Tax Reform
499(1)
How Large Are Supply-Side Effects?
500(1)
Conclusion
501(1)
An Inside Look: Tax Receipts Increase in 2005, but Deficit Still Looms Large
502(6)
Appendix: A Closer Look at the Multiplier
508(6)
An Expression for Equilibrium Real GDP
508(1)
A Formula for the Government Purchases Multiplier
509(1)
A Formula for the Tax Multiplier
510(1)
The ``Balanced Budget'' Multiplier
510(1)
The Effects of Changes in Tax Rates on the Multiplier
511(1)
The Multiplier in an Open Economy
511(3)
Inflation, Unemployment, and Federal Reserve Policy
514(30)
Why Does Whirlpool Care About Monetary Policy?
514(30)
The Discovery of the Short-Run Trade-off between Unemployment and Inflation
516(1)
Explaining the Phillips Curve with Aggregate Demand and Aggregate Supply Curves
516(2)
Is the Phillips Curve a Policy Menu?
518(1)
Solved Problem 16-1: The Policy Menu View of the Phillips Curve
519(1)
Is the Short-Run Phillips Curve Stable?
519(1)
The Long-Run Phillips Curve
520(1)
The Role of Expectations of Future Inflation
520(2)
Making the Connection 16-1: Do Workers Understand Inflation?
522(1)
The Short-Run and Long-Run Phillips Curves
522(1)
Shifts in the Short-Run Phillips Curve
523(1)
How Does a Vertical Long-Run Phillips Curve Affect Monetary Policy?
524(1)
Making the Connection 16-2: Does the Natural Rate of Unemployment Ever Change?
525(1)
Solved Problem 16-2: Changing Views of the Phillips Curve
526(1)
Expectations of the Inflation Rate
526(1)
The Effect of Rational Expectations on Monetary Policy
527(1)
Is the Short-Run Phillips Curve Really Vertical?
528(1)
Real Business Cycle Models
529(1)
How the Fed Fights Inflation
530(1)
The Effect of a Supply Shock on the Phillips Curve
530(1)
Paul Volcker and Disinflation
531(1)
``Don't Let This Happen To You!'' Don't Confuse Disinflation with Deflation
532(1)
Solved Problem 16-3: Using Monetary Policy to Lower the Inflation Rate
532(2)
Alan Greenspan and the Importance of a Credible Monetary Policy
534(1)
De-emphasizing the Money Supply
534(1)
The Importance of Fed Credibility
535(1)
Monetary Policy Credibility after Greenspan
535(1)
A Failure of Credibility at the Bank of Japan
536(1)
Federal Reserve Policy and Whirlpool's ``Pricing Power''
536(1)
Conclusion
537(1)
An Inside Look: Wage Rates for Hourly Workers Stagnate
538(6)
Part 6: The International Economy
Macroeconomics in an Open Economy
544(28)
Chinese Towels Invade Japan
544(28)
The Balance of Payments: Linking the United States to the International Economy
546(1)
The Current Account
546(1)
The Financial Account
547(1)
The Capital Account
548(1)
Why Is the Balance of Payments Always Zero?
549(1)
Solved Problem 17-1: Understanding the Arithmetic of Open Economies
549(1)
``Don't Let This Happen To You!'' Don't Confuse the Balance of Trade, the Current Account Balance, and the Balance of Payments
550(1)
The Foreign Exchange Market and Exchange Rates
551(1)
Making the Connection 17-1: Exchange Rates in the Financial Pages
551(1)
Equilibrium in the Market for Foreign Exchange
552(1)
``Don't Let This Happen To You!'' Don't Confuse What Happens When a Currency Appreciates with What Happens When It Depreciates
553(1)
How Do Shifts in Demand and Supply Affect the Exchange Rate?
553(2)
Some Exchange Rates Are Not Determined by the Market
555(1)
How Movements in the Exchange Rate Affect Exports and Imports
555(1)
Solved Problem 17-2: Effect of Changing Exchange Rates on the Prices of Imports and Exports
556(1)
The Real Exchange Rate
556(1)
The International Sector and National Saving and Investment
557(1)
Net Exports Equal Net Foreign Investment
557(1)
Domestic Saving, Domestic Investment, and Net Foreign Investment
558(1)
Solved Problem 17-3: Arriving at the Saving and Investment Equation
559(1)
The Effect of a Government Budget Deficit on Investment
560(1)
Making the Connection 17-2: Why Is the United States Called the ``World's Largest Debtor''?
561(1)
Monetary Policy and Fiscal Policy in an Open Economy
562(1)
Monetary Policy in an Open Economy
562(1)
Fiscal Policy in an Open Economy
563(1)
Conclusion
563(1)
An Inside Look: Distorted Price Signals Nurture U.S. Current-Account Deficit
564(8)
The International Financial System
572
Fluctuating Exchange Rates Push Molson Breweries to Sell the Canadiens
572(24)
Exchange-Rate Systems
574(1)
``Don't Let This Happen To You!'' Remember That Modern Currencies Are Fiat Money
575(1)
The Current Exchange Rate System
575(1)
The Floating Dollar
575(1)
Making the Connection 18-1: The Toronto Blue Jays Gain from the Rising Value of the Canadian Dollar
576(1)
What Determines Exchange Rates in the Long Run?
577(1)
Making the Connection 18-2: The Big Mac Theory of Exchange Rates
578(1)
Solved Problem 18-1: Calculating Purchasing Power Parity Exchange Rates Using Big Macs
579(1)
The Euro
580(2)
Making the Connection 18-3: The Underground Economy in Europe Surfaces
582(1)
Pegging Against the Dollar
582(4)
Making the Connection 18-4: Crisis and Recovery in South Korea
586(1)
Solved Problem 18-2: Coping with Fluctuations in the Value of the U.S. Dollar
587(1)
International Capital Markets
588(1)
Conclusion
589(1)
An Inside Look: Strong Euro Slashes Profits at Some EU Firms
590(6)
Appendix: The Gold Standard and the Bretton Woods System
596
The Gold Standard
596(1)
The End of the Gold Standard
596(1)
The Bretton Woods System
597(1)
The Collapse of the Bretton Woods System
598
Glossary 1(1)
Company Index 1(2)
Subject Index 3
Credits 1


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