Macroeconomic Theory: A Short Course: A Short Course

by Michl,Thomas R.

• ISBN13: 9780765611420
• ISBN10: 0765611422
• Format: Paperback
• Copyright: 2002-10-31
• Publisher: Routledge

Summary

Macroeconomic Theory: A Short Course presents all the key topics in intermediate-level macroeconomic theory, using linear versions of the standard models. The concise presentation allows instructors the time for outside readings and projects, perhaps to introduce students to intellectual controversies or applications. The discussion opens the possibility that the standard models are incomplete, challenging students to form their own opinions about, for example, the existence of a unique natural rate of unemployment. The key chapter on inflation replaces the standard assumption of monetary targeting with a central bank reaction function, which makes the treatment of monetary policy both more realistic and modern. Other chapters explore the open economy under fixed and floating exchange rates, the classical growth model, and the Solow-Swan growth model. Classroom-tested problems and a mathematical appendix supplement the chapters. Book jacket.

Author Biography

Thomas R. Michl is Professor of Economics at Colgate University

Table of Contents

Preface	xi
Macroeconomic Accounting	1	(20)
Output and income	1	(3)
Income and expenditure	4	(3)
Saving and investment	7	(1)
Accounting in an open economy	8	(1)
Stocks and flows	9	(1)
The money supply	10	(4)
Interlocking balance sheets	10	(3)
The money multiplier	13	(1)
The equation of exchange	14	(1)
The Marshallian short run	15	(1)
Components of a macroeconomic model	16	(5)
Prices and Output	21	(8)
Price setting	21	(3)
Costs of production	22	(1)
Demand for output of the firm	23	(1)
Endogenous and exogenous variables	24	(1)
Production levels	24	(2)
Aggregate price, output, and employment	26	(3)
Keynesian Theory	29	(20)
Components of aggregate demand	29	(3)
Consumption	29	(1)
Investment	30	(1)
Government	31	(1)
Theories of consumption and investment	32	(1)
Aggregate demand	33	(1)
Equilibrium in the product market	34	(1)
The multiplier	35	(1)
The Keynesian cross	35	(1)
Investment-saving equilibrium	36	(1)
Dynamics	37	(2)
Comparative equilibrium analysis	39	(6)
Fiscal policy	39	(3)
The paradox of thrift	42	(2)
Balanced budget multiplier	44	(1)
Marginal propensity to invest	45	(1)
Limitations of the Keynesian model	46	(3)
The IS Curve	49	(10)
Interest rate effects on aggregate demand	49	(5)
Visualizing the IS Curve	49	(3)
Deriving the IS curve	52	(2)
Properties of the IS curve	54	(5)
Fiscal policy	54	(1)
The slope of the IS curve	54	(5)
The LM Curve	59	(16)
Money and bonds	59	(4)
Money	59	(1)
Bonds	60	(1)
Portfolio choice	61	(2)
The demand for money	63	(2)
The supply of money	65	(1)
Asset market equilibrium	66	(2)
Income variations and the interest rate	68	(2)
Visualizing the LM curve	69	(1)
Deriving the LM curve	69	(1)
Properties of the LM curve	70	(3)
Monetary policy	70	(1)
The slope of the LM curve	70	(1)
The interest sensitivity of money demand	71	(2)
Whose perspective?	73	(2)
The IS-LM Model	75	(18)
The IS-LM equations	75	(1)
Dynamics in the IS-LM model	76	(3)
Fiscal policy	79	(5)
Fiscal policy effectiveness and the LM curve	81	(2)
Fiscal policy effectiveness and the IS curve	83	(1)
Monetary policy	84	(3)
Monetary policy effectiveness and the IS curve	85	(1)
Monetary policy effectiveness and the LM curve	85	(1)
Monetary policy and the yield curve	86	(1)
Monetary policy targets	86	(1)
Policy mix	87	(1)
The paradox of thrift	88	(1)
Policy objectives	89	(4)
The Aggregate Demand Curve	93	(8)
Visualizing the AD curve	93	(2)
Deriving the AD curve	95	(1)
Properties of the AD curve	96	(1)
Policy changes and AD	96	(1)
Slope of the AD curve	96	(1)
Other factors influencing AD	97	(1)
A preliminary AS-AD model	98	(3)
The Aggregate Supply Curve	101	(16)
Wage setting models	101	(2)
Wage setting under trade unions	102	(1)
Efficiency wage models	102	(1)
The bargained real wage curve	103	(1)
The price-determined real wage	104	(2)
Wage and price setting dynamics	106	(3)
Is there a natural rate of unemployment?	109	(2)
Price expectations	111	(1)
The AS curve	112	(1)
Dynamic properties of the AS curve	113	(4)
The AS-AD Model	117	(14)
Dynamic adjustment in the AS-AD model	117	(3)
Economic policy in the short and long run	120	(1)
Fiscal policy	120	(4)
Monetary policy	124	(2)
Monetary policy under perfect foresight	126	(1)
Paradox of thrift	127	(1)
Strengths and limitations of the AS-AD model	128	(3)
Inflation and Unemployment	131	(24)
The AS curve and inflation	131	(2)
Expectations-augmented Phillips curve	133	(3)
The dynamic aggregate demand curve	136	(1)
Output, unemployment, Okun's Law	137	(1)
The Phillips curve model	138	(2)
Difference form	138	(1)
Level form	139	(1)
Long-run equilibrium	140	(2)
Dynamics of the Phillips curve model	142	(6)
Monetary policy	143	(4)
Fiscal policy	147	(1)
Disinflation and monetary policy	148	(3)
Limitations of the Phillips curve model	151	(4)
A Model with Active Monetary Policy	155	(20)
The real interest rate	155	(1)
The central bank reaction function	156	(1)
The AD curve and the IS-RF model	157	(4)
The IS-RF model	157	(1)
The dynamic AD curve	158	(1)
Visualizing the dynamic AD curve	159	(2)
Target inflation and policy rules	161	(2)
The natural rate of interest	161	(1)
The target inflation rate	161	(1)
Monetary policy rules	162	(1)
The Phillips curve-IS-RF model	163	(1)
Monetary policy	164	(3)
Fiscal policy	167	(1)
Supply shocks	168	(2)
Political economy of the AD curve	170	(5)
Open Economy Basics	175	(18)
The exchange rate	175	(6)
The trade balance	181	(3)
The net export function	181	(1)
Balance of trade	182	(1)
The Marshall-Lerner condition	183	(1)
The balance of payments	184	(1)
Capital mobility	185	(4)
The open economy IS curve	189	(1)
Economies large and small	190	(3)
Fixed Exchange Rates	193	(14)
IS-LM-BP model with fixed rates	193	(1)
Monetary policy	194	(3)
Without sterilization	194	(1)
With sterilization	195	(2)
Fiscal policy	197	(1)
Devaluation and revaluation	198	(3)
The policy mix in an open economy	201	(3)
Pitfalls of devaluation	204	(3)
Flexible Exchange Rates	207	(10)
IS-LM-BP with flexible exchange rates	207	(1)
Monetary policy	208	(3)
Zero capital mobility	208	(1)
Perfect capital mobility	209	(2)
Fiscal policy	211	(2)
Fixed versus flexible regimes	213	(1)
Comments on Mundell-Fleming	214	(3)
The Classical Growth Model	217	(14)
The production function	218	(1)
Wages and profits	219	(1)
Saving and investment	219	(1)
Labor market	220	(3)
Endogenous labor supply	221	(1)
Exogenous labor supply	222	(1)
Classical endogenous growth	223	(1)
Classical exogenous growth	224	(2)
Fiscal policy in the endogenous growth model	226	(2)
Fiscal policy in the exogenous growth model	228	(3)
The Neoclassical Growth Model	231	(12)
The neoclassical production function	231	(2)
Saving and investment	233	(1)
The steady state equilibrium	234	(1)
Solving for the steady state	235	(2)
Comparative dynamics of saving	237	(2)
Visions and divisions in macroeconomic theory	239	(4)
A Mathematical Appendix	243	(8)
Mark-up pricing	243	(1)
A dynamic Keynesian cross model	244	(1)
Matrix solution of the IS-LM Model	245	(1)
Comparative IS-LM equilibrium analysis	246	(2)
Fiscal policy	246	(1)
Monetary Policy	247	(1)
Analysis of the Phillips curve model	248	(1)
The golden rule saving rate	249	(2)
B Answers to Selected Even Problems	251	(8)
Bibliography	259	(4)
Index	263