Macroeconomics : principles, problems and policies /

By: McConnell, Campbell R [author]
Contributor(s): Brue, Stanley L. [author]
Publisher: Boston : McGraw-Hill / Irwin, [2005]Copyright date: c2005Edition: Sixteenth editionDescription: xxiii, 399 [34] p. : color illustrations, maps ; 25 cmContent type: text Media type: unmediated Carrier type: volumeISBN: 0072875577; 9780072875577Subject(s): Macroeconomics. DDC classification: 339
Contents:
pt. 1. An introduction to economics and the economy -- To the student -- 1. The nature and method of economics -- The economic perspective -- Scarcity and choice -- Rational behavior -- Marginalism : benefits and costs -- Consider this : free for all? -- Why study economics? -- Economics for citizenship -- Professional and personal applications -- Economic methodology -- Theoretical economics -- Policy economics -- Macroeconomics and microeconomics -- Macroeconomics -- Microeconomics -- Positive and normative economics -- Pitfalls to sound reasoning -- Biases -- Loaded terminology -- Definitions -- Fallacy of composition -- Causation fallacies -- A look ahead -- Last word : fast-food lines : an economic perspective -- Appendix chapter 1 : Graphs and their meaning -- Construction of a graph -- Direct and inverse relationships -- Dependent and independent variables -- Other things equal -- Slope of a line -- Vertical intercept -- Equation of a linear relationship -- Slope of a nonlinear curve -- 2. The economizing problem -- The foundation of economics -- Unlimited wants -- Scarce resources -- Economics : employment and efficiency -- Full employment : using available resources -- Full production : using resources efficiently -- Production possibilities table -- Production possibilities curve -- Law of Increasing opportunity cost -- Allocative efficiency revisited -- Unemployment, growth, and the future -- Unemployment and productive inefficiency -- A growing economy -- A qualification : international trade -- Examples and applications -- Consider this : a matter of degrees : is college worth the cost? -- Economic systems -- The market system -- The command system -- The circular flow model -- Last word : September 11, 2001, and the war on terrorism -- 3. Individual markets : demand and supply -- Markets -- Demand -- Law of demand -- The demand curve -- Market demand -- Change in demand -- Changes in quantity demanded -- Supply -- Law of supply -- The supply curve -- Determinants of supply -- Changes in supply -- Changes in quantity supplied -- Supply and demand : market equilibrium -- Surpluses -- Shortages -- Equilibrium price and quantity -- Rationing function of prices -- Changes in supply, demand, and equilibrium -- A reminder : "other things equal" -- Consider this : the cutting edge -- Application : government-set prices -- Price ceilings and shortages -- Price floors and surpluses -- Last word : ticket scalping : a bum rap? -- 3Web. Applications and extensions of supply and demand analysis (Web chapter, www.mcconnell16.com) -- Changes in supply and demand -- Lettuce -- American flags -- Pink salmon -- Gasoline -- Sushi -- Preset prices -- Olympic figure skating finals -- Olympic curling preliminaries -- Consider this : taking back a "gift" -- Nonpriced goods :the American bison -- Consumer and producer surplus -- Consumer surplus -- Producer surplus -- Efficiency revisited -- Efficiency losses -- Last word : efficiency gains from generic drugs -- 4. The market system -- Characteristics of the market system -- Private property -- Freedom of enterprise and choice -- Self-interest -- Competition -- Markets and prices -- Reliance on technology and capital goods -- Specialization -- Use of money -- Active, but limited, government -- The market system at work -- What will be produced? -- How will the goods and services be produced? -- Who will get the goods and services? -- How will the system accommodate change? -- Consider this : McHits and McMisses -- Competition and the "invisible hand" -- Last word : shuffling the deck -- 5. The U.S. economy : private and public sectors -- Households as income receivers -- The functional distribution of income -- The personal distribution of income -- Households as spenders -- Personal taxes -- Personal saving -- Personal consumption expenditures -- The business population -- Legal forms of businesses -- Advantages and disadvantages -- The principal-agent problem -- The public sector : government's role -- Providing the legal structure -- Maintaining competition -- Redistributing income -- Reallocating Resources -- Promoting stability -- Government's role : a qualification -- Consider this : street entertainers -- The circular flow revisited -- Government finance -- Government purchases and transfers -- Federal finance -- Federal expenditures -- Federal tax revenues -- State and local finance -- State finances -- Local finances -- Fiscal federalism -- Last word : the financing of corporations -- 6. The United States in the global economy -- International linkages -- The United States and world trade -- Volume and pattern -- Rapid trade growth -- Participants in international trade -- Specialization and comparative advantage -- Basic principle -- Comparative costs -- Terms of trade -- Gains from specialization and trade -- The foreign exchange market -- Dollar-yen market -- Changing rates : depreciation and appreciation -- Consider this : a ticket to ride -- Government and trade -- Trade impediments and subsidies -- Why government trade interventions? -- Costs to society -- Multilateral trade agreements and free-trade zones -- Reciprocal Trade Agreements Act -- General agreement on tariffs and trade -- World Trade Organization -- The European Union -- North American Free Trade Agreement -- Global competition -- Last word : petition of the candlemakers, 1845. pt. 2. Macroeconomic measurement and basic concepts -- 7. Measuring domestic output and national income -- Assessing the economy's performance -- Gross domestic product -- A monetary measure -- Avoiding multiple counting -- GDP excludes nonproduction transactions -- Two ways of looking at GDP : spending and income -- The expenditures approach -- Personal consumption expenditures (C) -- Gross private domestic investment (Ig) -- Government purchases (G) -- Net exports (Xn) -- Putting it all together : GDP = C + Ig + G + Xn -- Consider this : stock answers about flows -- The income approach -- Compensation of employees -- Rents -- Interest -- Proprietors' income -- Corporate profits -- From national income to GDP -- Other national accounts -- Net domestic product -- National income -- Personal income -- Disposable income -- The circular flow revisited -- Nominal GDP versus real GDP -- Adjustment process in a one-product economy -- An alternative method -- Real-world considerations and data -- Shortcomings of GDP -- Nonmarket activities -- Leisure -- Improved product quality -- The underground economy -- GDP and the environment -- Composition and distribution of output -- Noneconomic sources of well-being -- Last word : feeding the GDP accounts -- 8. Introduction to economic growth and instability -- Economic growth -- Growth as a goal -- Arithmetic of growth -- Main sources of growth -- Growth in the United States -- Relative growth rates -- The business cycle -- Phases of the business cycle -- Causation : a first glance -- Cyclical impact : Durables and nondurables -- Unemployment -- Measurement of unemployment -- Types of unemployment -- Definition of full employment -- Economic cost of unemployment -- Noneconomic costs -- International comparisons -- Inflation -- Meaning of inflation -- Measurement of inflation -- Facts of inflation -- Types of inflation -- Complexities -- Consider this : clipping coins -- Redistribution effects of inflation -- Who is hurt by inflation? -- Who is unaffected or helped by inflation? -- Anticipated inflation -- Addenda -- Effects of inflation on output -- Cost-push inflation and real output -- Demand-pull inflation and real output -- Hyperinflation and breakdown -- Last word : the stock market and the economy -- 9. Basic macroeconomic relationships -- The income-consumption and income-saving relationships -- The consumption schedule -- The saving schedule -- Average and marginal propensities -- Nonincome determinants of consumption and saving -- Terminology, shifts, and stability -- Consider this : what wealth effect? -- The interest-rate, investment -- Relationship -- Expected rate of return -- The real interest rate -- Investment demand curve -- Shifts of the investment demand curve -- Instability of investment -- The multiplier effect -- Rationale -- The multiplier and the marginal propensities -- How large is the actual multiplier effect? -- Last word : squaring the economic circle. pt. 3. Macroeconomic models and fiscal policy -- 10. The aggregate expenditures model -- Simplifications -- Consumption and investment schedules -- Equilibrium GDP : C + Ig = GDP -- Tabular analysis -- Graphical analysis -- Other features of equilibrium GDP -- Saving equals planned investment -- No unplanned changes in inventories -- Changes in equilibrium GDP and the multiplier -- Adding international trade -- Net exports and aggregate expenditures -- The net export schedule -- Net exports and equilibrium GDP -- International economic linkages -- Adding the public sector -- Government purchases and equilibrium GDP -- Taxation and equilibrium GDP -- Equilibrium versus full-employment GDP -- Recessionary gap -- Application : the U.S. recession of 2001 -- Inflationary gap -- Application : U.S. inflation in the late 1980s -- Limitations of the model -- Last word : Say's law, the Great Depression, and Keynes -- 11. Aggregate demand and aggregate supply -- Aggregate demand -- Aggregate demand curve -- Determinants of aggregate demand -- Aggregate supply -- Aggregate supply in the long run -- Aggregate supply in the short run -- Determinants of aggregate supply -- Equilibrium and changes in equilibrium -- Increases in AD : demand-pull inflation -- Decreases in AD : recession and cyclical unemployment -- Decreases in AS : cost-push inflation -- Increases in AS : full employment with price-level stability -- Consider this : ratchet effect -- Last word : why is unemployment in Europe so high? -- Appendix chapter 11 : the relationship of the aggregate demand curve to the aggregate expenditures model -- Deriving the aggregate demand curve from the aggregate expenditures model -- Aggregate demand shifts and the aggregate expenditures model -- 12. Fiscal policy -- Legislative mandates -- Fiscal policy and the AD-AS model -- Expansionary fiscal policy -- Contractionary fiscal policy -- Financing of deficits and disposing of surpluses -- Policy options : G or T -- Built-in stability -- Automatic or built-in stabilizers -- Evaluating fiscal policy -- Full-employment budget -- Recent U.S. fiscal policy -- Problems, criticisms, and complications -- Problems of timing -- Political considerations -- Future policy reversals -- Offsetting state and local finance -- Crowding-out effect -- Fiscal policy in the open economy -- Last word : the leading indicators -- Current thinking on fiscal policy. pt. 4. Money, banking, and monetary policy -- 13. Money and banking -- The functions of money -- The supply of money -- Money definition M1 -- Money definition M2 -- Money definition M3 -- Consider this : are credit cards money? -- What "backs" the money supply? -- Money as debt -- Value of money -- Money and prices -- Stabilization of money's value -- The demand for money -- Transactions demand, Dt -- Asset demand, Da -- Total money demand, Dm -- The money market -- Adjustment to a decline in the money supply -- Adjustment to an increase in the money supply -- The Federal Reserve and the banking system -- Historical background -- Board of Governors -- FOMC -- The 12 Federal Reserve Banks -- Commercial banks and thrifts -- Fed functions and the money supply -- Federal Reserve independence -- Recent developments in money and banking -- The relative decline of banks and thrifts -- Consolidation among banks and thrifts -- Convergence of services provided by financial institutions -- Globalization of Financial Markets -- Electronic Transactions -- Last word : the global greenback -- 14. How banks and thrifts create money -- The balance sheet of a commercial bank -- Prologue : the goldsmiths -- A single commercial bank -- Formation of a commercial bank -- Money-creating transactions of a commercial bank -- Profits, liquidity, and the federal funds market -- The banking system : multiple-deposit expansion -- The banking system's lending potential -- The monetary multiplier -- Some modifications -- Need for monetary control -- Last word : the bank panics of 1930 to 1933 -- 15. Monetary policy -- Consolidated balance sheet of the Federal Reserve Banks -- Assets -- Liabilities -- Tools of monetary policy -- Open-market operations -- The reserve ratio -- The discount rate -- Easy money and tight Money -- Relative importance -- Monetary policy, real GDP, and the price level -- Cause-effect chain -- Effects of an easy money policy -- Effects of a tight money policy -- Monetary policy in action -- The focus on the federal funds rate -- Recent monetary policy -- Problems and complications -- "Artful management" or "inflation targeting"? -- Monetary policy and the international economy -- Consider this : pushing on a string -- The "big picture" -- Last word : for the fed, life is a metaphor. pt. 5. Long-run perspectives and macroeconomic debates -- 16. Extending the analysis of aggregate supply -- From short run to long run -- Short-run aggregate supply -- Long-run aggregate supply -- Equilibrium in the extended AD-AS model -- Applying the extended AD-AS model -- Demand-pull inflation in the extended AD-AS model -- Cost-push inflation in the extended AD-AS model -- Recession and the extended AD-AS model -- The inflation-unemployment relationship -- The Phillips curve -- Aggregate supply shocks and the Phillips curve -- The long-run Phillips curve -- Short-run Phillips curve -- Long-run vertical Phillips curve -- Disinflation -- Taxation and aggregate supply -- Taxes and incentives to work -- Incentives to save and invest -- The Laffer curve -- Criticisms of the Laffer curve -- Rebuttal and evaluation -- Consider this : Sherwood Forest -- Last word : has the impact of oil prices diminished? -- 17. Economic growth -- Ingredients of growth -- Supply factors -- Demand factor -- Efficiency factor -- Production possibilities analysis -- Growth and production possibilities -- Labor and productivity -- Growth in the AD-AS model -- U.S. economic growth rates -- Accounting for growth -- Labor inputs versus productivity -- Technological advance -- Quantity of capital -- Education and training -- Economies of scale and resource allocation -- Other factors -- Consider this : economic growth rates matter! -- The productivity acceleration : a new economy? -- Reasons for the productivity acceleration -- Macroeconomic implications -- Skepticism about permanence -- What can we conclude? -- Is growth desirable and sustainable? -- The antigrowth view -- In defense of economic growth -- Last word : women and economic growth -- 18. Deficits, surpluses, and the public debt -- Deficits, surpluses, and debt : definitions -- Budget philosophies -- Annually balanced budget -- Cyclically balanced budget -- Functional finance -- The public debt : facts and figures -- Causes -- Quantitative aspects -- Social Security considerations -- False concerns -- Bankruptcy -- Burdening future generations -- Substantive issues -- Income distribution -- Incentives -- Foreign-owned public debt -- Crowding out and the stock of capital -- Deficits and surpluses : 1992-2012 -- From deficits to surpluses -- What to do with the surpluses? -- Back to deficits in 2002 -- The Tax cuts of 2003 -- Last word : the long-run fiscal imbalance : Social Security -- 19. Disputes over macro theory and policy -- Some history : classical economics and Keynes -- The classical view -- The Keynesian view -- What causes macro instability? -- Mainstream view -- Monetarist view -- Real-business-cycle view -- Coordination failures -- Does the economy "self-correct"? -- New classical view of self-correction -- Mainstream view of self-correction -- Rules or discretion? -- In support of policy rules -- In defense of discretionary stabilization policy -- Increased Macro stability -- Consider this : on the road again -- Summary of alternative views -- Last word : the Taylor rule : could a robot replace Alan Greenspan? pt. 6. International economics and the world economy -- 20. International trade -- Some key facts -- The economic basis for trade -- Comparative advantage : graphical analysis -- Two isolated nations -- Specializing based on comparative advantage -- Terms of trade -- Gains from trade -- Trade with increasing costs -- The case for free trade -- Supply and demand analysis of exports and imports -- Supply and demand in the United States -- Supply and demand in Canada -- Equilibrium world price, exports, and imports -- Trade barriers -- Economic impact of tariffs -- Economic impact of quotas -- Net costs of tariffs and quotas -- Impact on income distribution -- The case for protection : a critical review -- Military self-sufficiency argument -- Increased domestic employment argument -- Diversification-for-stability argument -- Infant industry argument -- Protection-against-dumping argument -- Cheap foreign labor argument -- A summing up -- Consider this : shooting yourself in the foot -- Last word : the WTO protests -- The World Trade Organization -- 21. Exchange rates, the balance of payments, and trade deficits -- Financing international trade -- U.S. export transaction -- U.S. import transaction -- The balance of payments -- Current account -- Capital account -- Official reserves account -- Payments, deficits, and surpluses -- Flexible exchange rates -- Depreciation and appreciation -- Determinants of exchange rates -- Flexible rates and the balance of payments -- Disadvantages of flexible exchange rates -- Consider this : the Big Mac index -- Fixed exchange rates -- Use of reserves -- Trade policies -- Exchange controls and rationing -- Domestic macroeconomic adjustments -- International exchange-rate systems -- The gold standard : fixed exchange rates -- The Bretton Woods system -- The current system : the managed float -- Recent U.S. trade deficits -- Causes of the trade deficits -- Implications of U.S. trade deficits -- Last word : speculation in currency markets -- 22Web. The economics of developing countries (Web chapter, www.mcconnell16.com) -- The rich and the poor -- Classifications -- Comparisons -- Growth, decline, and income gaps -- The human realities of poverty -- Obstacles to economic development -- Natural resources -- Human resources -- Capital accumulation -- Technological advance -- Sociocultural and institutional factors -- The vicious circle -- Role of government -- A positive role -- Public sector problems -- Role of advanced nations -- Expanding trade -- Foreign aid : public loans and grants -- Flows of private capital -- Where from here? -- DVC policies for promoting growth -- IAC policies for fostering DVC growth -- Last word : famine in Africa -- 23Web. Transition economies : Russia and China -- (Web chapter, www.mcconnell16.com) -- Ideology and institutions -- State ownership and central planning -- Planning goals and techniques -- Problems with central planning -- The coordination problem -- The incentive problem -- Collapse of the Soviet economy -- Declining growth -- Poor product quality -- Lack of consumer goods -- Large military burden -- Agricultural drag -- The Russian transition to a market system -- Privatization -- Price reform -- Promotion of competition -- Making the ruble fully convertible -- Price-level stabilization -- Other major problems -- Recent revival -- Market reforms in China -- Agricultural and rural reform -- Reform of urban industries -- Special economic zones -- Development of supporting institutions -- Transformation of the SOEs -- Outcomes and prospects -- Positive outcomes of reform -- Problems -- Conclusion -- Last word : police smash down Smirnov's doors -- Glossary.
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Includes glossary and index

pt. 1. An introduction to economics and the economy --
To the student --
1. The nature and method of economics --
The economic perspective --
Scarcity and choice --
Rational behavior --
Marginalism : benefits and costs --
Consider this : free for all? --
Why study economics? --
Economics for citizenship --
Professional and personal applications --
Economic methodology --
Theoretical economics --
Policy economics --
Macroeconomics and microeconomics --
Macroeconomics --
Microeconomics --
Positive and normative economics --
Pitfalls to sound reasoning --
Biases --
Loaded terminology --
Definitions --
Fallacy of composition --
Causation fallacies --
A look ahead --
Last word : fast-food lines : an economic perspective --
Appendix chapter 1 : Graphs and their meaning --
Construction of a graph --
Direct and inverse relationships --
Dependent and independent variables --
Other things equal --
Slope of a line --
Vertical intercept --
Equation of a linear relationship --
Slope of a nonlinear curve --
2. The economizing problem --
The foundation of economics --
Unlimited wants --
Scarce resources --
Economics : employment and efficiency --
Full employment : using available resources --
Full production : using resources efficiently --
Production possibilities table --
Production possibilities curve --
Law of Increasing opportunity cost --
Allocative efficiency revisited --
Unemployment, growth, and the future --
Unemployment and productive inefficiency --
A growing economy --
A qualification : international trade --
Examples and applications --
Consider this : a matter of degrees : is college worth the cost? --
Economic systems --
The market system --
The command system --
The circular flow model --
Last word : September 11, 2001, and the war on terrorism --
3. Individual markets : demand and supply --
Markets --
Demand --
Law of demand --
The demand curve --
Market demand --
Change in demand --
Changes in quantity demanded --
Supply --
Law of supply --
The supply curve --
Determinants of supply --
Changes in supply --
Changes in quantity supplied --
Supply and demand : market equilibrium --
Surpluses --
Shortages --
Equilibrium price and quantity --
Rationing function of prices --
Changes in supply, demand, and equilibrium --
A reminder : "other things equal" --
Consider this : the cutting edge --
Application : government-set prices --
Price ceilings and shortages --
Price floors and surpluses --
Last word : ticket scalping : a bum rap? --
3Web. Applications and extensions of supply and demand analysis (Web chapter, www.mcconnell16.com) --
Changes in supply and demand --
Lettuce --
American flags --
Pink salmon --
Gasoline --
Sushi --
Preset prices --
Olympic figure skating finals --
Olympic curling preliminaries --
Consider this : taking back a "gift" --
Nonpriced goods :the American bison --
Consumer and producer surplus --
Consumer surplus --
Producer surplus --
Efficiency revisited --
Efficiency losses --
Last word : efficiency gains from generic drugs --
4. The market system --
Characteristics of the market system --
Private property --
Freedom of enterprise and choice --
Self-interest --
Competition --
Markets and prices --
Reliance on technology and capital goods --
Specialization --
Use of money --
Active, but limited, government --
The market system at work --
What will be produced? --
How will the goods and services be produced? --
Who will get the goods and services? --
How will the system accommodate change? --
Consider this : McHits and McMisses --
Competition and the "invisible hand" --
Last word : shuffling the deck --
5. The U.S. economy : private and public sectors --
Households as income receivers --
The functional distribution of income --
The personal distribution of income --
Households as spenders --
Personal taxes --
Personal saving --
Personal consumption expenditures --
The business population --
Legal forms of businesses --
Advantages and disadvantages --
The principal-agent problem --
The public sector : government's role --
Providing the legal structure --
Maintaining competition --
Redistributing income --
Reallocating Resources --
Promoting stability --
Government's role : a qualification --
Consider this : street entertainers --
The circular flow revisited --
Government finance --
Government purchases and transfers --
Federal finance --
Federal expenditures --
Federal tax revenues --
State and local finance --
State finances --
Local finances --
Fiscal federalism --
Last word : the financing of corporations --
6. The United States in the global economy --
International linkages --
The United States and world trade --
Volume and pattern --
Rapid trade growth --
Participants in international trade --
Specialization and comparative advantage --
Basic principle --
Comparative costs --
Terms of trade --
Gains from specialization and trade --
The foreign exchange market --
Dollar-yen market --
Changing rates : depreciation and appreciation --
Consider this : a ticket to ride --
Government and trade --
Trade impediments and subsidies --
Why government trade interventions? --
Costs to society --
Multilateral trade agreements and free-trade zones --
Reciprocal Trade Agreements Act --
General agreement on tariffs and trade --
World Trade Organization --
The European Union --
North American Free Trade Agreement --
Global competition --
Last word : petition of the candlemakers, 1845. pt. 2. Macroeconomic measurement and basic concepts --
7. Measuring domestic output and national income --
Assessing the economy's performance --
Gross domestic product --
A monetary measure --
Avoiding multiple counting --
GDP excludes nonproduction transactions --
Two ways of looking at GDP : spending and income --
The expenditures approach --
Personal consumption expenditures (C) --
Gross private domestic investment (Ig) --
Government purchases (G) --
Net exports (Xn) --
Putting it all together : GDP = C + Ig + G + Xn --
Consider this : stock answers about flows --
The income approach --
Compensation of employees --
Rents --
Interest --
Proprietors' income --
Corporate profits --
From national income to GDP --
Other national accounts --
Net domestic product --
National income --
Personal income --
Disposable income --
The circular flow revisited --
Nominal GDP versus real GDP --
Adjustment process in a one-product economy --
An alternative method --
Real-world considerations and data --
Shortcomings of GDP --
Nonmarket activities --
Leisure --
Improved product quality --
The underground economy --
GDP and the environment --
Composition and distribution of output --
Noneconomic sources of well-being --
Last word : feeding the GDP accounts --
8. Introduction to economic growth and instability --
Economic growth --
Growth as a goal --
Arithmetic of growth --
Main sources of growth --
Growth in the United States --
Relative growth rates --
The business cycle --
Phases of the business cycle --
Causation : a first glance --
Cyclical impact : Durables and nondurables --
Unemployment --
Measurement of unemployment --
Types of unemployment --
Definition of full employment --
Economic cost of unemployment --
Noneconomic costs --
International comparisons --
Inflation --
Meaning of inflation --
Measurement of inflation --
Facts of inflation --
Types of inflation --
Complexities --
Consider this : clipping coins --
Redistribution effects of inflation --
Who is hurt by inflation? --
Who is unaffected or helped by inflation? --
Anticipated inflation --
Addenda --
Effects of inflation on output --
Cost-push inflation and real output --
Demand-pull inflation and real output --
Hyperinflation and breakdown --
Last word : the stock market and the economy --
9. Basic macroeconomic relationships --
The income-consumption and income-saving relationships --
The consumption schedule --
The saving schedule --
Average and marginal propensities --
Nonincome determinants of consumption and saving --
Terminology, shifts, and stability --
Consider this : what wealth effect? --
The interest-rate, investment --
Relationship --
Expected rate of return --
The real interest rate --
Investment demand curve --
Shifts of the investment demand curve --
Instability of investment --
The multiplier effect --
Rationale --
The multiplier and the marginal propensities --
How large is the actual multiplier effect? --
Last word : squaring the economic circle. pt. 3. Macroeconomic models and fiscal policy --
10. The aggregate expenditures model --
Simplifications --
Consumption and investment schedules --
Equilibrium GDP : C + Ig = GDP --
Tabular analysis --
Graphical analysis --
Other features of equilibrium GDP --
Saving equals planned investment --
No unplanned changes in inventories --
Changes in equilibrium GDP and the multiplier --
Adding international trade --
Net exports and aggregate expenditures --
The net export schedule --
Net exports and equilibrium GDP --
International economic linkages --
Adding the public sector --
Government purchases and equilibrium GDP --
Taxation and equilibrium GDP --
Equilibrium versus full-employment GDP --
Recessionary gap --
Application : the U.S. recession of 2001 --
Inflationary gap --
Application : U.S. inflation in the late 1980s --
Limitations of the model --
Last word : Say's law, the Great Depression, and Keynes --
11. Aggregate demand and aggregate supply --
Aggregate demand --
Aggregate demand curve --
Determinants of aggregate demand --
Aggregate supply --
Aggregate supply in the long run --
Aggregate supply in the short run --
Determinants of aggregate supply --
Equilibrium and changes in equilibrium --
Increases in AD : demand-pull inflation --
Decreases in AD : recession and cyclical unemployment --
Decreases in AS : cost-push inflation --
Increases in AS : full employment with price-level stability --
Consider this : ratchet effect --
Last word : why is unemployment in Europe so high? --
Appendix chapter 11 : the relationship of the aggregate demand curve to the aggregate expenditures model --
Deriving the aggregate demand curve from the aggregate expenditures model --
Aggregate demand shifts and the aggregate expenditures model --
12. Fiscal policy --
Legislative mandates --
Fiscal policy and the AD-AS model --
Expansionary fiscal policy --
Contractionary fiscal policy --
Financing of deficits and disposing of surpluses --
Policy options : G or T --
Built-in stability --
Automatic or built-in stabilizers --
Evaluating fiscal policy --
Full-employment budget --
Recent U.S. fiscal policy --
Problems, criticisms, and complications --
Problems of timing --
Political considerations --
Future policy reversals --
Offsetting state and local finance --
Crowding-out effect --
Fiscal policy in the open economy --
Last word : the leading indicators --
Current thinking on fiscal policy. pt. 4. Money, banking, and monetary policy --
13. Money and banking --
The functions of money --
The supply of money --
Money definition M1 --
Money definition M2 --
Money definition M3 --
Consider this : are credit cards money? --
What "backs" the money supply? --
Money as debt --
Value of money --
Money and prices --
Stabilization of money's value --
The demand for money --
Transactions demand, Dt --
Asset demand, Da --
Total money demand, Dm --
The money market --
Adjustment to a decline in the money supply --
Adjustment to an increase in the money supply --
The Federal Reserve and the banking system --
Historical background --
Board of Governors --
FOMC --
The 12 Federal Reserve Banks --
Commercial banks and thrifts --
Fed functions and the money supply --
Federal Reserve independence --
Recent developments in money and banking --
The relative decline of banks and thrifts --
Consolidation among banks and thrifts --
Convergence of services provided by financial institutions --
Globalization of Financial Markets --
Electronic Transactions --
Last word : the global greenback --
14. How banks and thrifts create money --
The balance sheet of a commercial bank --
Prologue : the goldsmiths --
A single commercial bank --
Formation of a commercial bank --
Money-creating transactions of a commercial bank --
Profits, liquidity, and the federal funds market --
The banking system : multiple-deposit expansion --
The banking system's lending potential --
The monetary multiplier --
Some modifications --
Need for monetary control --
Last word : the bank panics of 1930 to 1933 --
15. Monetary policy --
Consolidated balance sheet of the Federal Reserve Banks --
Assets --
Liabilities --
Tools of monetary policy --
Open-market operations --
The reserve ratio --
The discount rate --
Easy money and tight Money --
Relative importance --
Monetary policy, real GDP, and the price level --
Cause-effect chain --
Effects of an easy money policy --
Effects of a tight money policy --
Monetary policy in action --
The focus on the federal funds rate --
Recent monetary policy --
Problems and complications --
"Artful management" or "inflation targeting"? --
Monetary policy and the international economy --
Consider this : pushing on a string --
The "big picture" --
Last word : for the fed, life is a metaphor. pt. 5. Long-run perspectives and macroeconomic debates --
16. Extending the analysis of aggregate supply --
From short run to long run --
Short-run aggregate supply --
Long-run aggregate supply --
Equilibrium in the extended AD-AS model --
Applying the extended AD-AS model --
Demand-pull inflation in the extended AD-AS model --
Cost-push inflation in the extended AD-AS model --
Recession and the extended AD-AS model --
The inflation-unemployment relationship --
The Phillips curve --
Aggregate supply shocks and the Phillips curve --
The long-run Phillips curve --
Short-run Phillips curve --
Long-run vertical Phillips curve --
Disinflation --
Taxation and aggregate supply --
Taxes and incentives to work --
Incentives to save and invest --
The Laffer curve --
Criticisms of the Laffer curve --
Rebuttal and evaluation --
Consider this : Sherwood Forest --
Last word : has the impact of oil prices diminished? --
17. Economic growth --
Ingredients of growth --
Supply factors --
Demand factor --
Efficiency factor --
Production possibilities analysis --
Growth and production possibilities --
Labor and productivity --
Growth in the AD-AS model --
U.S. economic growth rates --
Accounting for growth --
Labor inputs versus productivity --
Technological advance --
Quantity of capital --
Education and training --
Economies of scale and resource allocation --
Other factors --
Consider this : economic growth rates matter! --
The productivity acceleration : a new economy? --
Reasons for the productivity acceleration --
Macroeconomic implications --
Skepticism about permanence --
What can we conclude? --
Is growth desirable and sustainable? --
The antigrowth view --
In defense of economic growth --
Last word : women and economic growth --
18. Deficits, surpluses, and the public debt --
Deficits, surpluses, and debt : definitions --
Budget philosophies --
Annually balanced budget --
Cyclically balanced budget --
Functional finance --
The public debt : facts and figures --
Causes --
Quantitative aspects --
Social Security considerations --
False concerns --
Bankruptcy --
Burdening future generations --
Substantive issues --
Income distribution --
Incentives --
Foreign-owned public debt --
Crowding out and the stock of capital --
Deficits and surpluses : 1992-2012 --
From deficits to surpluses --
What to do with the surpluses? --
Back to deficits in 2002 --
The Tax cuts of 2003 --
Last word : the long-run fiscal imbalance : Social Security --
19. Disputes over macro theory and policy --
Some history : classical economics and Keynes --
The classical view --
The Keynesian view --
What causes macro instability? --
Mainstream view --
Monetarist view --
Real-business-cycle view --
Coordination failures --
Does the economy "self-correct"? --
New classical view of self-correction --
Mainstream view of self-correction --
Rules or discretion? --
In support of policy rules --
In defense of discretionary stabilization policy --
Increased Macro stability --
Consider this : on the road again --
Summary of alternative views --
Last word : the Taylor rule : could a robot replace Alan Greenspan? pt. 6. International economics and the world economy --
20. International trade --
Some key facts --
The economic basis for trade --
Comparative advantage : graphical analysis --
Two isolated nations --
Specializing based on comparative advantage --
Terms of trade --
Gains from trade --
Trade with increasing costs --
The case for free trade --
Supply and demand analysis of exports and imports --
Supply and demand in the United States --
Supply and demand in Canada --
Equilibrium world price, exports, and imports --
Trade barriers --
Economic impact of tariffs --
Economic impact of quotas --
Net costs of tariffs and quotas --
Impact on income distribution --
The case for protection : a critical review --
Military self-sufficiency argument --
Increased domestic employment argument --
Diversification-for-stability argument --
Infant industry argument --
Protection-against-dumping argument --
Cheap foreign labor argument --
A summing up --
Consider this : shooting yourself in the foot --
Last word : the WTO protests --
The World Trade Organization --
21. Exchange rates, the balance of payments, and trade deficits --
Financing international trade --
U.S. export transaction --
U.S. import transaction --
The balance of payments --
Current account --
Capital account --
Official reserves account --
Payments, deficits, and surpluses --
Flexible exchange rates --
Depreciation and appreciation --
Determinants of exchange rates --
Flexible rates and the balance of payments --
Disadvantages of flexible exchange rates --
Consider this : the Big Mac index --
Fixed exchange rates --
Use of reserves --
Trade policies --
Exchange controls and rationing --
Domestic macroeconomic adjustments --
International exchange-rate systems --
The gold standard : fixed exchange rates --
The Bretton Woods system --
The current system : the managed float --
Recent U.S. trade deficits --
Causes of the trade deficits --
Implications of U.S. trade deficits --
Last word : speculation in currency markets --
22Web. The economics of developing countries (Web chapter, www.mcconnell16.com) --
The rich and the poor --
Classifications --
Comparisons --
Growth, decline, and income gaps --
The human realities of poverty --
Obstacles to economic development --
Natural resources --
Human resources --
Capital accumulation --
Technological advance --
Sociocultural and institutional factors --
The vicious circle --
Role of government --
A positive role --
Public sector problems --
Role of advanced nations --
Expanding trade --
Foreign aid : public loans and grants --
Flows of private capital --
Where from here? --
DVC policies for promoting growth --
IAC policies for fostering DVC growth --
Last word : famine in Africa --
23Web. Transition economies : Russia and China --
(Web chapter, www.mcconnell16.com) --
Ideology and institutions --
State ownership and central planning --
Planning goals and techniques --
Problems with central planning --
The coordination problem --
The incentive problem --
Collapse of the Soviet economy --
Declining growth --
Poor product quality --
Lack of consumer goods --
Large military burden --
Agricultural drag --
The Russian transition to a market system --
Privatization --
Price reform --
Promotion of competition --
Making the ruble fully convertible --
Price-level stabilization --
Other major problems --
Recent revival --
Market reforms in China --
Agricultural and rural reform --
Reform of urban industries --
Special economic zones --
Development of supporting institutions --
Transformation of the SOEs --
Outcomes and prospects --
Positive outcomes of reform --
Problems --
Conclusion --
Last word : police smash down Smirnov's doors --
Glossary.

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