Giáo trình MacroEconomics 6th global edition by blanchard johnson

Giáo trình MacroEconomics 6th global edition by blanchard johnson Giáo trình MacroEconomics 6th global edition by blanchard johnson Giáo trình MacroEconomics 6th global edition by blanchard johnson Giáo trình MacroEconomics 6th global edition by blanchard johnson Giáo trình MacroEconomics 6th global edition by blanchard johnson Giáo trình MacroEconomics 6th global edition by blanchard johnson Giáo trình MacroEconomics 6th global edition by blanchard johnson

GLOBAL EDITION Macroeconomics SIXTH EDITION 3PMZMIV&PERGLEVHˆ(EZMH6.SLRWSR Sixth Edition MACROECONOMICS Global Edition Olivier Blanchard International Monetary Fund Massachusetts Institute of Technology David R Johnson Wilfrid Laurier University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Donna Battista AVP/Executive Editor: David Alexander International Senior Acquisitions Editor: Laura Dent International Senior Editor: Leandra Paoli International Editorial Assistant: Toril Cooper Senior Editorial Project Manager: Lindsey Sloan Executive Marketing Manager: Lori DeShazo International Marketing Manager: Dean Erasmus Senior Managing Editor: Nancy Fenton Senior Production Project Manager: Nancy Freihofer Senior Manufacturing Buyer: Carol Melville Cover Designer: Jodi Notowitz Cover Photo: © chungking - Fotolia.com Permissions Specialist: Jill Dougan Image Manager: Rachel Youdelman Executive Media Producer: Melissa Honig MyEconLab Content Lead: Noel Lotz Cover Printer: Courier Kendalville Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearson.com/uk © Pearson Education Limited 2013 The right of Olivier Blanchard and David R Johnson to be identified as authors of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988 Authorised adaptation from the United States edition, entitled Macroeconomics, 6th Edition, ISBN: 978-0-13-306163-5 by Olivier Blanchard and David R Johnson, published by Pearson Education, Inc., © 2013 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on appropriate page within text ISBN 13: 978-0-273-76633-9 ISBN 10: 0-273-76633-3 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 16 15 14 13 12 Typeset in Utopia 10/12 by PreMediaGlobal Printed and bound by Courier Kendallville in The United States of America The publisher’s policy is to use paper manufactured from sustainable forests To Noelle and Susan About the Authors Olivier Blanchard is the Robert M Solow Professor of Economics at the Massachusetts Institute of Technology He did his undergraduate work in France and received a Ph.D in economics from MIT in 1977 He taught at Harvard from 1977 to 1982 and has taught at MIT since 1983 He has frequently received the award for best teacher in the department of economics He is currently on leave from MIT and serves as the Chief Economist at the International Monetary Fund He has done research on many macroeconomic issues, including the effects of fiscal policy, the role of expectations, price rigidities, speculative bubbles, unemployment in Western Europe, transition in Eastern Europe, the role of labor market institutions, and the various aspects of the current crisis He has done work for many governments and many international organizations, including the World Bank, the IMF, the OECD, the EU Commission, and the EBRD He has published over 150 articles and edited or written over 20 books, including Lectures on Macroeconomics with Stanley Fischer He is a research associate of the National Bureau of Economic Research, a fellow of the Econometric Society, a member of the American Academy of Arts and Sciences, and a past Vice President of the American Economic Association He currently lives in Washington, D.C with his wife, Noelle He has three daughters: Marie, Serena, and Giulia David Johnson is Professor of Economics at Wilfrid Laurier University and Education Policy Scholar at the C D Howe Institute Professor Johnson’s areas of specialty are macroeconomics, international finance, and, more recently, the economics of education His published work in macroeconomics includes studies of Canada’s international debt, the influence of American interest rates on Canadian interest rates, and the determination of the exchange rate between Canada and the United States His 2005 book Signposts of Success, a comprehensive analysis of elementary school test scores in Ontario, was selected as a finalist in 2006 for both the Donner Prize and the Purvis Prize He has also written extensively on inflation targets as part of monetary policy in Canada and around the world His primary teaching area is macroeconomics He is coauthor with Olivier Blanchard of Macroeconomics (fourth Canadian edition) Professor Johnson received his undergraduate degree from the University of Toronto, his Master’s degree from the University of Western Ontario, and his Ph.D in 1983 from Harvard University, where Olivier Blanchard served as one of his supervisors He has worked at the Bank of Canada and visited at the National Bureau of Economic Research, Cambridge University, and most recently at the University of California, Santa Barbara as Canada-U.S Fulbright Scholar and Visiting Chair Professor Johnson lives in Waterloo, Ontario, with his wife Susan, who is also an economics professor They have shared the raising of two children, Sarah and Daniel When not studying or teaching economics, David plays Oldtimers’ Hockey and enjoys cross-country skiing in the winter and sculling in the summer For a complete change of pace, Professor Johnson has been heavily involved in the Logos program, an after-school program for children and youth at First Mennonite Church in Kitchener, Ontario Brief Contents THE CORE EXTENSIONS Introduction  21 Expectations  309 Chapter Chapter A Tour of the World  23 A Tour of the Book  39 The Short Run  61 Chapter Chapter Chapter The Goods Market  63 Financial Markets  83 Goods and Financial Markets: The IS–LM Model  105 Chapter 14 Chapter 15 Chapter 16 Chapter 17 The Open Economy  397 Chapter 18 The Medium Run  129 Chapter Chapter Chapter Chapter The Labor Market  131 Putting All Markets Together: The AS–AD Model  153 The Phillips Curve, the Natural Rate of Unemployment, and Inflation  181 The Crisis  203 Chapter 19 Chapter 20 Chapter 21 The Long Run  225 Chapter 11 Chapter 12 Chapter 13 The Facts of Growth  227 Saving, Capital Accumulation, and Output  245 Technological Progress and Growth  269 Technological Progress: The Short, the Medium, and the Long Run  287 Openness in Goods and Financial Markets  399 The Goods Market in an Open Economy  419 Output, the Interest Rate, and the Exchange Rate  443 Exchange Rate Regimes  465 Back to Policy  491 Chapter 22 Chapter 10 Expectations: The Basic Tools  311 Financial Markets and Expectations  333 Expectations, Consumption, and Investment  357 Expectations, Output, and Policy  377 Chapter 23 Chapter 24 Chapter 25 Should Policy Makers Be Restrained?  493 Fiscal Policy: A Summing Up  513 Monetary Policy: A Summing Up  537 Epilogue: The Story of Macroeconomics  559 Contents Preface 13 THE CORE The Short Run 61 Introduction 21 Chapter Chapter 3-1 The Composition of GDP 64 3-2 The Demand for Goods 65 A Tour of the World 23 1-1 The Crisis 24 1-2 The United States 26 Consumption (C) 66 • Investment ( I ) 68 • Government Spending (G) 68 Should You Worry about the United States Deficit? 28 3-3 The Determination of Equilibrium Output 69 1-3 The Euro Area 29 Using Algebra 70 • Using a Graph 71 •  Using Words 73 • How Long Does It Take for Output to Adjust? 74 How Can European Unemployment Be Reduced? 30 • What Has the Euro Done for Its Members? 32 3-4 Investment Equals Saving: An Alternative Way of Thinking about Goods—Market Equilibrium 76 3-5 Is the Government Omnipotent? A Warning 78 1-4 China 33 1-5 Looking Ahead 35 Appendix: Where to Find the Numbers 37 Chapter A Tour of the Book 39 2-1 Aggregate Output 40 GDP: Production and Income 40 • Nominal and Real GDP 42 • GDP: Level versus Growth Rate 44 2-2 The Unemployment Rate 45 Why Do Economists Care about Unemployment? 47 2-3 The Inflation Rate 49 The GDP Deflator 49 • The Consumer Price Index 49 • Why Do Economists Care about Inflation? 50 2-4 Output, Unemployment, and the Inflation Rate: Okun’s Law and the Phillips Curve 51 Okun’s Law 51 • The Phillips Curve 52 2-5 The Short Run, the Medium Run, the Long Run 53 2-6 A Tour of the Book 54 The Core 54 • Extensions 55 • Back to Policy 56 • Epilogue 56 Appendix: The Construction of Real GDP, and Chain-Type Indexes 59 The Goods Market 63 Chapter Financial Markets 83 4-1 The Demand for Money 84 Deriving the Demand for Money 86 4-2 Determining the Interest Rate: I 87 Money Demand, Money Supply, and the Equilibrium Interest Rate 88 • Monetary Policy and Open Market Operations 90 • Choosing Money or Choosing the Interest Rate? 92 • Money, Bonds, and Other Assets 92 4-3 Determining the Interest Rate: II 93 What Banks Do 93 • The Supply and the Demand for Central Bank Money 94 4-4 Two Alternative ways of looking at the Equilibrium 99 The Federal Funds Market and the Federal Funds Rate 99 • The Supply of Money, the Demand for Money, and the Money Multiplier 100 • Understanding the Money Multiplier 100 Chapter Goods and Financial Markets: The IS-LM Model 105 Chapter 5-1 The Goods Market and the IS Relation 106 7-1 Aggregate Supply 154 7-2 Aggregate Demand 156 7-3 Equilibrium in the Short Run and in the Medium Run 159 Investment, Sales, and the Interest Rate 106 • Determining Output 107 •  Deriving the IS Curve 109 • Shifts of the IS Curve 109 Equilibrium in the Short Run 159 • From the Short Run to the Medium Run 160 5-2 Financial Markets and the LM Relation 110 7-4 The Effects of a Monetary Expansion 162 Real Money, Real Income, and the Interest Rate 110 • Deriving the LM Curve 111 • Shifts of the LM Curve 112 The Dynamics of Adjustment 162 •  Going Behind the Scenes 163 • The Neutrality of Money 164 7-5 A Decrease in the Budget Deficit 166 5-3 Putting the IS and the LM Relations Together 113 Deficit Reduction, Output, and the Interest Rate 167 • Budget Deficits, Output, and Investment 168 Fiscal Policy, Activity, and the Interest Rate 114 • Monetary Policy, Activity, and the Interest Rate 116 7-6 An Increase in the Price of Oil 169 5-4 Using a Policy Mix 118 5-5 How Does the IS-LM Model Fit the Facts? 122 Appendix: An Alternative Derivation of the LM Relation as an Interest Rate Rule 127 Effects on the Natural Rate of Unemployment 170 • The Dynamics of Adjustment 171 7-7 Conclusions 174 The Short Run versus the Medium Run 174 • Shocks and Propagation Mechanisms 175 • Where We Go from Here 176 The Medium Run 129 Chapter The Labor Market 131 6-1 A Tour of the Labor Market 132 The Large Flows of Workers 132 6-2 Movements in Unemployment 135 6-3 Wage Determination 137 Bargaining 138 • Efficiency Wages 139 • Wages, Prices, and Unemployment 140 • The Expected Price Level 140 • The Unemployment Rate 141 • The Other Factors 141 6-4 Price Determination 142 6-5 The Natural Rate of Unemployment 142 The Wage-Setting Relation 143 •  The Price–Setting Relation 143 •  Equilibrium Real Wages and Unemployment 144 • From Unemployment to Employment 145 •  From Employment to Output 146 6-6 Where We Go from Here 147 Appendix: Wage- and Price-Setting Relations versus Labor Supply and Labor Demand 151 Putting All Markets Together: The AS–AD Model 153 Chapter The Phillips Curve, the Natural Rate of Unemployment, and Inflation 181 8-1 Inflation, Expected Inflation, and Unemployment 182 8-2 The Phillips Curve 184 The Early Incarnation 184 •  Mutations 184 • The Phillips Curve and the Natural Rate of Unemployment 189 • The Neutrality of Money, Revisited 191 8-3 A Summary and Many Warnings 191 Variations in the Natural Rate across Countries 192 • Variations in the Natural Rate over Time 192 • Disinflation, Credibility, and Unemployment 192 •  High Inflation and the Phillips Curve Relation 197 • Deflation and the Phillips Curve Relation 198 Appendix: From the Aggregate Supply Relation to a Relation between Inflation, Expected Inflation, and Unemployment 202 Contents Chapter 11-3 Getting a Sense of Magnitudes 256 The Crisis 203 The Effects of the Saving Rate on Steady-State Output 258 • The Dynamic Effects of an Increase in the Saving Rate 259 • The U.S Saving Rate and the Golden Rule 261 9-1 From a Housing Problem to a Financial Crisis 204 Housing Prices and Subprime Mortgages 204 • The Role of Banks 205 11-4 Physical versus Human Capital 262 9-2 The Use and Limits of Policy 209 Initial Policy Responses 211 • The Limits of Monetary Policy: The Liquidity Trap 212 • The Limits of Fiscal Policy: High Debt 216 Extending the Production Function 262 • Human Capital, Physical Capital, and Output 263 • Endogenous Growth 264 9-3 The Slow Recovery 216 Chapter 12 The Long Run 225 Chapter 10 Appendix: The Cobb-Douglas Production Function and the Steady State 267 The Facts of Growth 227 12-1 Technological Progress and the Rate of Growth 270 10-1 Measuring the Standard of Living 228 10-2 Growth in Rich Countries since 1950 231 Technological Progress and the Production Function 270 • Interactions between Output and Capital 272 •  Dynamics of Capital and Output 274 • The Effects of the Saving Rate 275 The Large Increase in the Standard of Living since 1950 233 • The Convergence of Output per Person 234 12-2 The Determinants of Technological Progress 276 10-3 A Broader Look across Time and Space 235 The Fertility of the Research Process 277 • The Appropriability of Research Results 278 Looking across Two Millennia 235 •  Looking across Countries 235 12-3 The Facts of Growth Revisited 280 10-4 Thinking About Growth: A Primer 237 Capital Accumulation versus Technological Progress in Rich Countries since 1985 280 • Capital Accumulation versus Technological Progress in China 281 The Aggregate Production Function 237 • Returns to Scale and Returns to Factors 238 • Output per Worker and Capital per Worker 239 • The Sources of Growth 240 Chapter 11 Saving, Capital Accumulation, and Output 245 11-1 Interactions between Output and Capital 246 The Effects of Capital on Output 246 • The Effects of Output on Capital Accumulation 247 11-2 The Implications of Alternative Saving Rates 249 Dynamics of Capital and Output 249 • Steady-State Capital and Output 251 • The Saving Rate and Output 251 • The Saving Rate and Consumption 255 Contents Technological Progress and Growth 269 Appendix: Constructing a Measure of Technological Progress 285 Chapter 13 Technological Progress: The Short, the Medium, and the Long Run 287 13-1 Productivity, Output, and Unemployment in the Short Run 288 Technological Progress, Aggregate Supply, and Aggregate Demand 288 • The Empirical Evidence 290 13-2 Productivity and the Natural Rate of Unemployment 292 Price Setting and Wage Setting Revisited 292 • The Natural Rate of Unemployment 293 • The Empirical Evidence 294 and Economic Activity 345 •  A Monetary Expansion and the Stock Market 346 • An Increase in Consumer Spending and the Stock Market 347 13-3 Technological Progress, Churning, and Distribution Effects 296 The Increase in Wage Inequality 299 • The Causes of Increased Wage Inequality 299 15-3 Risk, Bubbles, Fads, and Asset Prices 348 13-4 Institutions, Technological Progress, and Growth 301 Stock Prices and Risk 348 • Asset Prices, Fundamentals, and Bubbles 350 Chapter 16 EXTENSIONS 16-1 Consumption 357 Expectations 309 Chapter 14 The Very Foresighted Consumer 358 •  An Example 358 • Toward a More Realistic Description 360 • Putting Things Together: Current Income, Expectations, and Consumption 363 Expectations: The Basic Tools 311 14-1 Nominal versus Real Interest Rates 312 16-2 Investment 364 Nominal and Real Interest Rates in the United States since 1978 314 Investment and Expectations of Profit 364 • A Convenient Special Case 366 • Current versus Expected Profit 368 • Profit and Sales 370 14-2 Nominal and Real Interest Rates, and the IS–LM Model 317 14-3 Money Growth, Inflation, Nominal and Real Interest Rates 318 Revisiting the IS–LM Model 318 • Nominal and Real Interest Rates in the Short Run 318 • Nominal and Real Interest Rates in the Medium Run 320 • From the Short to the Medium Run 321 •  Evidence on the Fisher Hypothesis 322 16-3 The Volatility of Consumption and Investment 372 Appendix: Derivation of the Expected Present Value of Profits under Static Expectations 376 Chapter 17 Expectations, Consumption, and Investment Decisions 378 • Expectations and the IS Relation 378 • The LM Relation Revisited 381 Computing Expected Present Discounted Values 325 • Using Present Values: Examples 327 • Nominal versus Real Interest Rates, and Present Values 328 17-2 Monetary Policy, Expectations, and Output 382 Appendix: Deriving the Expected Present Discounted Value Using Real or Nominal Interest Rates 331 From the Short Nominal Rate to Current and Expected Real Rates 382 •  Monetary Policy Revisited 383 Financial Markets and Expectations 333 17-3 Deficit Reduction, Expectations, and Output 387 15-1 Bond Prices and Bond Yields 334 Bond Prices as Present Values 335 • Arbitrage and Bond Prices 336 • From Bond Prices to Bond Yields 338 • Interpreting the Yield Curve 339 • The Yield Curve and Economic Activity 339 15-2 The Stock Market and Movements in Stock Prices 342 Stock Prices as Present Values 343 • The Stock Market Expectations, Output, and Policy 377 17-1 Expectations and Decisions: Taking Stock 378 14-4 Expected Present Discounted Values 324 Chapter 15 Expectations, Consumption, and Investment 357 The Role of Expectations about the Future 388 • Back to the Current Period 389 The Open Economy 397 Chapter 18 Openness in Goods and Financial Markets 399 18-1 Openness in Goods Markets 400 Exports and Imports 400 • The Choice between Domestic Goods and Foreign Contents www.downloadslide.net in United States, 172 (figure), 182 (figure), 186–188, 195–196 variability, 541–542 Inflation-adjusted deficit, 515 Inflation rate, 27, 28, 49–51 optimal, 539–544 Institutions, technological progress and growth, 301–303 Instrumental variable methods, A17 Instruments, A17 Insurance, deposit, 95 Insurance, unemployment, 193 Interest parity condition, 413, 447–448 Interest rate on bonds, 84 constant, 327–328 deficit reduction and, 167–168 demand for money and, 97 determination of, 87–99 equilibrium, 93–101 exchange rates and, 413–415, 462–463, 477–478 fiscal policy and, 114–116 German unification and, 458 investment dependent on, 106–107 LM relation, 127–128 monetary policy and, 116–118 money growth and inflation in relation to, 318–324 money supply and, 92 nominal vs real, 312–315, 328–329 real, 488–489, 543 real money, real income and, 110–111 relationship to investment, 106 rules, 537, 549–550 wealth in money vs bonds, 85 zero, 328 Intermediate good, 40–41 International Monetary Fund (IMF), 38 Internet resources, macroeconomic data, 37–38 Inventories, changes in business, A4 Inventory profit and sales, 370–372 relationship to interest rates, 106 saving and trade balance and, 435, 438 stock market and, 367–368 in United States during WWII, 525 volatility, 372–373 Inventory investment, 65 Investment, 64, 68, 85, 364–372, 561 budget deficits and, 168–169 capital accumulation and, 247–249 China, 35 consumption decisions and, 372–373, 378 current vs expected profit, 368–370 decisions, 366 dependent on sales, 106 determinants of, 420–421 equaling saving, 78 goods market, 106–107 nominal, 86 savings and current account balance, 435, 438 stock market, 367–368 Ireland deficit reduction in, 390–391 unemployment, 193–194 unemployment rate (figure), 194 IS curve deriving, 108, 109 expectations and, 380–381 shifts of, 108–110 tax increase effect, 114–116 IS-LM model, 54, 105, 113–118, 561 dynamics, 122–124 liquidity trap, 215 (figure) monetary expansion, 163–164 open economy, 451 in open economy, 452 (figure) real and nominal interest rates, 318 Israel, 482 IS relation aggregate demand, 157–158 expectations and, 378–381 goods market and, 77, 106–110 LM relations and, 113–118 in open economy, 420–423 IS-UM model fiscal policy and interest rate, 114–116 monetary policy and activity, 116–118 Italy bond spreads, 528–529 unemployment rate (figure), 194 J Japan collective bargaining, 138 fiscal policy and liquidity trap, 217 output per person since 1950, 231 (table) output per worker and technological progress, 280 (table) J-curve, 433–434 Job destruction, 298 Jorgenson, Dale, 561 Junior securities, 207 Junk bonds, 335 K Kenya, property rights in, 301 Keynes, John Maynard, 76, 105, 471, 472, 560, 562–563 Keynesians, 562 new Keynesians, 568 Klein, Lawrence, 561–562 Korea, 220 Kukk, Merike, 362 Kulikov, Dmitry, 362 Krugman, Paul, 252 Kuwait, GDP vs GNP example, 412 Kuznets, Simon, 40 Kydland, Finn, 499, 565 L Labor, decreasing returns to, 239 Labor-demand relation, 154 Labor force, 132 unemployment rate and, 45–48 Labor income, 41 Labor in efficiency units, 271 Labor market general considerations, 131–135 institutions, 32 rigidities in, 32, 192 wage- and price-setting, 151–152 Labor productivity, 142 Labor-supply relation, 151–152 Lamont, Owen, 370 Latin America hyperinflation in, 531 nominal interest rates and inflation across, 323 Layoffs, 133 costs of, 193 Lehman Brothers, 24, 75–76 Lerner, Abba, 430 Level of transactions, 84 Leverage ratio, 206 Libor rate, 209 Life cycle theory of consumption, 358 Linear relation, 67 Liquidity, 88, 207–209 Liquidity facilities, 211 Liquidity preference, 560 Liquidity trap, 214, 217, 219 bond yield curve, 342 economic crisis, 550–552 quantitative easing and expectations, 385–386 Litterman, Robert, 496 LM curve deriving, 111–112 equilibrium in financial markets, 157 shifts of, 112 tax increase effect, 114–116 LM relation, 88 aggregate demand, 157–158 expectations and, 381–382 financial markets and, 110–118 interest rate rule, 127–128 Loans, 94, 95 maximum loan-to-value (LTV) ratios, 554 Logarithmic scales, 227, A10–A12 Long run, 53–54 Lucas, Robert, 196, 264, 387, 564–565, 567, 569 Lucas critique, 196, 564 Luxembourg, 194 M M1, 84, 546 M2, 547–548 Maastricht Treaty, 481, 506–507 Macroeconometric models, 496, 561–562 Macroeconomic policy coordination, 428 expectations and, 498–502 politics and, 502–508 Macroeconomic policy makers games they play, 503–505 knowledge base, 494–496 restraints on, 497–498, 502 uncertainty and, 497–498 Macroeconomics new classical economics, 567 new growth theory, 569 new Keynesians, 567 real business cycle theory, 567 Macroeconomic variables, France (2001–2005), 454 (figure) Macro prudential regulation, 552–555 Maddison, Angus, 38 Malthus, Robert, 235 Malthusian trap, 235 Index I-5 www.downloadslide.net Mankiw, N Gregory, 568 Mao Tse Tung, 304 Marginal propensity to consume, 67 Market economy, 34 Markup, 142 Marshall, Alfred, 430 Marshall-Lerner condition, 430, 441–442 Maturity, bond, 334 Mavrody, Sergei, 351 McKibbin, Warwick, 496 Medicaid, 528 Medicare, 528 Medium run, 53–54 equilibrium, 160–162, 174–175 flexible vs fixed exchange rates, 466–471 nominal and real interest rates, 320–321 Menem, Carlos, 483 Merkel, Angela, 117 Menu cost, 568 Mexico depreciation of peso in 1990s, 431 output after banking crisis, 220 Mid-cycle deficit, 523 Minimum wages, 193 MMM pyramid, 351 Models of endogenous growth, 264 Modified Phillips curve, 188 Modigliani, Franco, 358, 498, 561 Monetarists, 562–563 Monetary aggregates, 547 Monetary base, 100 Monetary contraction, 116 Monetary expansion, 116, 162–164 in France (early 2000s), 454–455 IS-LM model, 163–164 response of output to, 495 (figure) stock market and, 346–347 Monetary-fiscal policy mix, 118, 122 A Monetary History of the United States (Friedman and Schwartz), 562 Monetary policy challenges of economic crisis, 550–555 design of, 544–550 dynamics of adjustment, 162–163 effects on, 382–386, 453 expansionary, 162–164 expectations and output, 382–386 fiscal policy vs., 562 interest rate and, 116–118 limits and liquidity trap, 212–216 neutrality of money, 164 in open economy, 453 Monetary policy (continued) open market operations and, 90–92 short-run and medium-run effects, 174–175 Monetary tightening, 116 Money, 85 See also Central Bank money bonds vs., 445 demand for, 84–87, 561 finance, 530–532 growth, 318–324, 545–546 growth, inflation, and interest rates, 318–324 high-powered, 100 long-lasting effects of, 165 multiplier, 100–101 neutrality of, 164, 191 real, 110–111 supply, 88–90, 94–96, 100 I-6 Index Money illusion, 541, 542, 544 Money market funds, 85 Mortensen, Dale, 568 Mortgage-based security (MBS), 207 Mortgage lenders, 204 Mortgages, subprime, 204–205 MPS model, 562 Multilateral exchange rates, 407–408 Multilateral real U.S exchange rate, 407 Multiplicative uncertainty, 497 Multiplier in algebraic equations, 70 money, 100–101 Mundell, Robert, 443, 453, 479–480 Mundell-Fleming model, 443 N Narrow banking, 95 Nash, John, 498 National accounts See National income and product accounts (NIPA) National Basketball Association, 505 National Bureau of Economic Research (NBER), 119 National Economic Trends, 37 National Income and Product Accounts (NIPA), 40, 562 National income and product accounts (NIPA), A1–A6 National Income and Product Accounts of the United States, 37 Natural level of employment, 145–146 Natural level of output, 146–147 Natural rate of unemployment across countries, 190 from employment to output, 146–147 equilibrium real wages and unemployment, 144–145 oil prices and, 170–171 Phillips curve and, 189–190 price-setting relation, 143–144 productivity and, 293–296 from unemployment to employment, 145–146 United States, 195 variations over time, 192, 195 wage-setting relation, 143 Natural real interest rate, 320 Negotiation, hostage taking and, 499 Neoclassical synthesis, 560–563 Net capital flows, 410 Net exports, 65 Net exports, A4 Netherlands, the, 193–194 Net interest, A2 Net national product (NNP), A2 Net transfers received, 410 Neutrality of money, 164, 191 New classical economics, 567 New growth theory, 569–570 New Keynesian economics, 568 News articles, stock market and, 349 New Zealand, 521 Nikkei Index, 350 Nominal exchange rates, 402–407 Nominal GDP, 42–44, 49 Nominal income, 86 Nominal interest rates, 312–315, 328–329, 331–332 expected present discounted value, 331–332 inflation, 323 IS-LM model, 317 medium run, 320–321 short run, 318–320 Nominal rigidities, 568 Non-accelerating, inflation rate of unemployment (NAIRU), 190 Nondurable goods, A3 Nonhuman wealth, 358 Noninstitutional civilian population, 132 Nonresidential investment, 64 Nonresidential investment, A3 North American Free Trade Agreement (NAFTA), 399 North Korea, institutions in, 303 Not in the labor force designation, 46 n-year interest rate, 338 O OECD Economic Outlook, 38 OECD Employment Outlook, 38 Oil prices, changes in, 169–174 Okun, Arthur, 51 Okun’s law, 51–52 Open economy fiscal policy in, 451–453 IS-LM model in, 452 (figure) IS relation, 420–423 monetary policy effects, 453 Open market operations, 90 aggregate demand and, 158–159 monetary policy and, 90–92 Openness factor markets, 399 financial markets, 399, 408–415 goods markets, 399, 400–408 Optimal control theory, 498, 565 Optimal currency area, 479–480 Ordinary least squares (OLS), A14 Organization chart, book, 54–56 Organization for Economic Co-operation and Development (OECD), 37–38 growth, 235–237 inflation rates in, 539–540, 540 (table) ratio of exports to GDP, 401 Organization of Petroleum Exporting Countries (OPEC), 170 Out of the labor force, 132 Output, 27, 27 See also aggregate output; equilibrium output adjustment over time, 159–162 banking crises, 220 budget deficits and, 168–169 capital, 246–247, 263–264, 272–275 China, 33–34, 34 (table) deficit reduction and, 167–168, 387–389 depreciation and trade balance, 429–432 determining, 107–109 dynamics, 74 dynamics, and IS-LM model, 122–124 expansion, 390–391 fluctuations in, 175 GDP and, 40–41 growth worldwide since 2000 (table), 24 interest rate increase effect, 107–109 investment and, 247–248 www.downloadslide.net monetary policy and expectations and, 382–386 money effects on, 162–163 natural level of, 146–147 productivity and unemployment and, 288–291 savings rate and, 251–255, 258–262 steady state, 251, 258–259 steady-state effect on, 258–259 unemployment and, 288–291 Output growth, 27 Output per hour worked, 231 Output per person, 228–231 across countries, 235–237 across millenia, 235 convergence of, 234–235 OECD countries, 235–237 rich countries, 231, 233–235 Output per worker, 231, 239–240 P Panel data sets, 359 Panel Study of Income Dynamics (PSID), 359 Paradox of saving, 79 Parameters, 67 Participation rate, 47, 132 Patents, 279 Pay-as-you-go system, 256–257 PAYGO rule, 506, 508 Payments balance of, 409–411 constant interest rates and, 328 Pegging of currency, 455–457 exchange rate, 455–457 hard, 482 Pent-up demand, 219 Permanent income theory of consumption, 358 Perry, Rick, 493 Personal consumption expenditures, A3 Personal disposable income, A3 Personal income, A3 Phelps, Edmund, 145, 189, 190, 563 Phillips, A W., 181 Phillips curve, 52–53, 181–182, 184–191, 562–563 deflation and, 198–199 Friedman’s critique, 190 high inflation, 197–198 mutations, 186–188 natural rate of unemployment and, 189–190 rational expectations and, 564–565 wage-price spiral, 184 Physical capital, 262–264 endogenous growth, 264 extending production function, 262–263 output and, 263–264 Pissarides, Christopher, 568 Players, 498 Poland, hyperinflation in, 532 (table) Policy expectations, 498–502 financial crisis use and limits, 209–216 mix of, 493 politics, 502–505, 507–508 role of, 563 theory of, 566 uncertainty, 494–498 Policy coordination, 428 Policy mix Clinton-Greenspan, 122 monetary-fiscal, 118, 122 Political business cycle, 503 Politics, macroeconomic policy and, 502–508 Portugal, 194, 475 PPI See producer price index PPP See purchasing power parity (PPP) Prescott, Edward, 499, 565, 567 Present value, 326–328 bonds prices as, 335–336 deriving, 331–332 expected profits, 365–366, 376 nominal vs real interest rates and, 328–329 stock prices as, 343–345 utilization of, 324–329 Price, housing, 204 Price determination, production function, 142 Price indexes, 49–50 Price level, 49 expected, 140–141 Prices, wages, unemployment and, 140 Price-setting relation, 143–144, 154, 292–293 Primary deficit, 517 Primary surplus, 517 Prison population, 195 Private saving, 77 Private sector involvement, 529 Private spending, 379 Production, 50, 63 See also output Production function, 142 aggregate, 237–238 Cobb-Douglas, 267 extending, 262–263 price determination, 142 technological progress and, 270–272 Productivity natural rate of unemployment and, 292–296 output and unemployment and, 288–291 Product side, national accounts, A3–A4 Profit corporate, A2 current vs expected, 368–370 expectations and investment, 364–366 expected present value under static expectations, 376 sales and, 370–372 Profitability, cash flow vs., 370 Profit income, 41 Propagation mechanism, of shocks, 175––176 Propensity to consume, 67 Propensity to save, 78 Property rights, protection of, 301–304 Public debt, of Greece 117 Proprietor’s income, A2 Public saving, 77 Purchasing power parity (PPP), 33, 229 construction of, 230 Pure inflation, 50–51 Q Quantitative easing, 216, 385–386, 551 Quits, 133 Quotas, 399 R Random walk, 346 Random walk of consumption, 566 Random walk of stock prices, 346 Rating agencies, 207 Rational expectations, 386, 387 critique of, 563–566 integration of, 565–566 Phillips curve and, 564–565 Rational speculative bubbles, 351–353 Real appreciation, 405 Real business cycle theory, 567 Real depreciation, 405 Real exchange rate, 402, 403–407, 488–489 Real GDP, 42–44, 49 computing, 43, 45 construction of, 59–60 Real GDP in chained (2005) dollars, 43 Real GDP per capita, 44 Real income, 110–111 Real interest rates, 312–315, 318–324, 328–329, 331–332, 488–489 expected present discounted value, 331 IS-LM model, 317 medium run, 320–321 negative, 543 real exchange rate and, 488–489 short run, 318–320 Real money, 110–111 changes in stock, 157 Real wages, 51 equilibrium, 144–145 natural rate of unemployment and, 293–294 receipts of factor income from the rest of the world, A2 Recession, 44–45 Estonia, 362 Euro market members, 32 shocks and, 175–176 United States, 119–121 Reform, Social Security, 256–257 Regression, A14 Regression line, 188 Regression line, A14 Relative price, 43 Rental cost, 368 Rental income of persons, A2 Repayment, debt, 517–519 Research and development (R&D), 276–277 Research process, 276–277 appropriability of results, 278–280 fertility of, 277–278 Reservation wage, 138 Reserve ratio, 94 Reserves, 93 demand for, 97 Residential investment, 64 Residential investment, A3 Residual, 285–286 Residual, A14 Retail sales, 372 Returns to capital, decreasing, 239 Returns to factors, 238–239 Returns to labor, decreasing, 239 Returns to scale, constant, 238–239 Revaluations, 403 Ricardian equivalence, 522–523 Index I-7 www.downloadslide.net Ricardo, David, 522 Ricardo-Barro proposition, 522 Risk, default, 334, 526 Risk, stock prices and, 348–350 Risk averse, 348 Risk neutral, 348 Risk premium, 335 Romer, Paul, 264, 569 Roubini, Nouriel, 38 Russia hyperinflation, 532 (table) MMM pyramid, 351 U.S currency, holders of, 87 S Sachs, Jeffrey, 496 Sales investment dependent on, 106 profit and, 370–372 Samuelson, Paul, 181, 560 Sargent, Thomas, 196, 387, 564 Saving, 85 investment and trade balance and, 435, 438 investment equaling, 77 paradox of, 79 private, 77 public, 77 Social Security and, 256–257 U.S current account deficit, 436–438 Saving rate, 240, 245 consumption and, 255, 257–258 dynamics of capital and output, 249–252 effect on steady-state output, 258–259, 275–276 increase, dynamic effects of, 259–261 output in relation to, 251–255, 258–262 steady state, 251, 258–259 United States, 256–257, 261–262 Schelling, Tom, 498 Schumpeter, Joseph, 296, 569 Schwartz, Anna, 562 Securitization, 206–207 Seignorage, 530–531, 542–543 Selten, Reinhard, 498 Senior securities, 207 Separations, 133 Services, A3 Shadow banking system, 208 Shadow cost, 368 Shafir, Eldar, 542 Shares, 343 Shiller, Robert, 352–353 Shleifer, Andrei, 569, 570–571 Shocks to aggregate supply, 175–176 labor market, 193 Shoe-leather costs, 540 Short run, 53–54 aggregate demand, 468–470 equilibrium, 159–160, 174–175 nominal and real interest rates, 551–552 Sims, Christopher, 496 Skill-biased technological progress, 300 Social Security, 256–257 Soft landing, 339–340 Solow, Robert, 181, 237, 285, 561 Solow residual, 285–286 Solvency, 206, 208–209 I-8 Index South Korea, institutions in, 303 Soviet Union, 252 Spain bond spreads, 528–529 EMS crisis, 475 unemployment rate (figure), 194 unemployment rate in 1994, 48 Spending aggregate private, 379 autonomous, 70 Spending caps, 508 Spread, 528 Staehr, Karsten, 362 Stagflation, 173, 563 Staggering of wage and price decisions, 566 Stalinist growth, 252 Standardized employment deficit, 523 Standard of living, 228–231 increase in since 1950, 233–234 Standard & Poor’s Index, 335, 343 Starve the Beast, 504 State of technology, 238, 270 Static expectations, 366, 376 Statistical Abstract of the United States, 37 Statistical discrepancy, 410 Steady state capital, 251 Cobb-Douglas production function and, 267 Stock indexes, 343 Stock market economic activity and, 345–346 increase in consumer spending and, 347–348 investment and, 367–368 monetary expansion and, 346–347 Stock prices from 2007-2010, 25 bubbles and fads, 348–351 movements in, 342–348 as present values, 343–345 Stocks, 343 Stone, Richard, 40 Strategic interactions, 498 Strauss-Kahn, Dominique, 429 Structural change, 296 Structural deficit, 523 Structural rate of unemployment, 145 Structured investment vehicle (SIV), 208 Structures, A3 Subprime mortgages, 204 Supply See Aggregate supply Surpluses budget, 77 capital account, 410 Survey of Current Business, 37 Sweden, 194, 220, 475 Taylor rule, 549–550 Tea Party, 493 Technological catch-up, 282 Technological frontier, 282 Technological progress aggregate supply and demand and, 288–291 capital accumulation vs., 280–282 constructing measure of, 285–286 determinants, 276–280 diffusion, 278 distribution effects, 296–301 growth, 240, 269 institutions, 301–304 output and capital, 272–275 production function and, 270–272 real business cycle models and, 567 real GDP and changes in market, 45 savings rate, 275–276 skill-biased, 300 Technological unemployment, 292 Technology corn hybridization, 278 output in relation to, 238 state of, 238, 270 Ted spread, 209 Temporary help, 195 Term structure of interest rates, 334 Thailand, 220 Thaler, Richard, 571 Time consistency, 502 Time inconsistency, 499, 565 Tirole, Jean, 570 Tobin, James, 366, 367–368, 561 Tobin’s q, 367–368 Total wealth, 358 Toxic assets, 207 Tradable goods, 401 Trade balance, 65 depreciation and output and, 429–432 equilibrium output and, 423–424 saving and investment and, 435, 438 wage inequality, increasing, 300 Trade balance, A4 Trade deficit, 65, 425 United States, 436–438 Trade surplus, 65 Transfers, business, A2 Treasury bills (T-bills), 91, 335 inflation, 324 (figure) Treasury bonds, 335 Treasury notes, 335 Troubled Asset Relief Program (TARP), 211 Trust fund, 256 Tulipmania, 351 Tversky, Amos, 542 2001 recession, 119–121 T U Tariffs, 399 Tax distortions, 525–526, 540–541 Taxes, 68 current vs future, 517–521 effect on IS curve, 108, 114–116 government control of output, 78–79 indirect, A2 in national income accounts, A5 Taylor, John, 165, 496, 548, 566 Taylor model, disinflation, 165 Uncovered interest parity, 413 Underwater, 205 Unemployment, 45 disinflation and, 192, 194 duration, 134 economists’ view of, 47–48 equilibrium real wages and, 144–145 in Europe, 193–194 inflation and, 202, 499–500 insurance, 141 www.downloadslide.net job destruction, churning, and earnings losses, 298 movements in, 135–137 output and, 288–291 relation to inflation and expected inflation, 202 technological, 292 wages and prices and, 140 Unemployment rate, 27, 45–48, 132, 141 See also natural rate of unemployment computing, 46 equilibrium, 144–145 labor force and, 46–47 natural, 142–148 1994-2010, 136 (figure) in Spain, 48 structural, 144–145 U.S., 1960-2010 (figure), 47 versus output growth in U.S., 1960-2010 (figure), 52 wages and, 140 United Kingdom debt ratios after WWII, 521 gold standard, 472 nominal and real interest rates, 415 (figure) output per person since 1950, 231 (table) output per worker and technological progress, 280 (table) unemployment, 193–194 unemployment rate (figure), 194 United States, 26–29 balanced budget, 493 budget deficit, 28–29, 527–528 consumption during WWII, 525 country composition of exports and imports, 2010 (table), 407 currency, holders of, 87 current account deficit, 436–438 deficit reduction in, 507–508 economic statistics, 37 employment, unemployment and nonparticipation rates (1994-2011), 133 (figure) exports to GDP ratios since 1960, 401 (figure) growth, unemployment, inflation 1960– 2007 (table), 28 housing price increases, 352–353 income adjustment from GDP to GNP, A1–A2 inflation in, 172 (figure), 182 (figure), 186–188 inflation rate since 1914, 186 (figure) interest rates since 1978, 314–315 natural rate of unemployment, 195 nominal and real interest rates, 314–315, 415 (figure) output per person since 1950, 231 (table) output per worker and technological progress, 280 (table) property rights in, 301 recession of 2001, 119–121 saving rate, 245 Social Security, 256–257 unemployment, 46–47 unemployment rate 1948–2010, 135 (figure) U.S Department of Commerce, 37 User cost, 368 V Value added, GDP as sum of, 41 Variables Variables (continued) endogenous, 68 exogenous, 68 Volatility exchange rate, 477–478 investment and consumption, 372–373 Voters, policymakers and, 503–504 bargaining, 138 efficiency wages, 139–140 expected price level, 140 unemployment and prices, 140 unemployment insurance, 141 unemployment rate, 140 Wage indexation, 197–198 Wage inequality, increase in, 299–301 Wage-price spiral, 184 Wages, real, 144–145, 293 Wage-setting relation, 143, 151–152, 293 Wars of attrition, 505 deficits and, 524–526 Wealth, 85 in form of bonds, 84–85 types of, 358 Web sites, for macroeconomic issues, 38 Well-functioning stock market, 346 Wholesale funding, 95, 207 Woodford, Michael, 570 Workers bargaining power, 138 discouraged, 46, 135 flows of, 132–135 output and capital per, 239–240 World Economic Outlook, 38 The World Economy: A Millennial Perspective, 38 Y Yeltsin, Boris, 351, 473 Yield curve, 334 economic activity and, 339–341 interpreting, 339 liquidity trap, 342 Yield to maturity, 334 W Z Wage decisions, staggering of, 566 Wage determination, 137–141 Zero interest rates, 328 Zimbabwe, hyperinflation in, 531 Index I-9 www.downloadslide.net www.downloadslide.net Credits Chapter Chapter p 43: Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St Louis: Series GDPCA,GDPA: U.S Department of Labor: Bureau of Labor Statistics; http://research.stlouisfed.org/fred2/ p 165: MACROECONOMIC POLICY IN A WORLD ECONOMY by John Taylor Copyright © 1993 John Taylor Reprinted by permission of the author p 46: Non Sequitur © 2006 Wiley Ink, Inc Dist by Universal Uclick Reprinted with permission All rights reserved p 47: Data Source: FRED, Federal Reserve Economic Data, Federal Reserve Bank of St Louis: Series GDPCA,GDPA: U.S Department of Labor: Bureau of Labor Statistics; http://research.stlouisfed.org/fred2/ Chapter p 63: Toles © 1991 The Washington Post Reprinted with permission of Universal Uclick All rights reserved p 76: Copyright © 2012 Google Inc Reprinted by permission Chapter p.120: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 123: “The Effects of Monetary Policy Shocks: Evidence from the Flow of Funds” by Lawrence J Christiano, Martin Eichenbaum and Charles Evans from THE REVIEW OF ECONOMICS AND STATISTICS, 78:1 Copyright © 1996 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology Chapter p 135: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 139: “Did Henry Ford Pay Efficiency Wages?” by Dan Raff and Lawrence Summers from THE JOURNAL OF LABOR ECONOMICS, 5:4, October 1987 Copyright © 1987 University of Chicago Press Reprinted by permission p 169: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 172: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 174: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission Chapter p 185: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 186: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 188: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 190: “The Role of Monetary Policy,” March 1968, American Economic Review 58-1, 1-17 Copyright © 1968 American Economic Association Reprinted by permission Chapter p 212: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission Chapter 10 p 229: Copyright © 1988 by Dana Fradon/The New Yorker Collection/The Cartoon Bank p 231: SOURCE: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 7.0, Center for C-1 www.downloadslide.net International Comparisons of Production, Income and Prices at the University of Pennsylvania, May 2011 p 234: SOURCE: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 7.0, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, May 2011 p 236: SOURCE: Alan Heston, Robert Summers and Bettina Aten, Penn World Table Version 7.0, Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania, May 2011 Chapter 11 p 252: POSTWAR ECONOMIC RECONSTRUCTION AND LESSONS FOR THE EAST TODAY by Rudiger Dornbusch, Wilhelm Nolling, and Richard Layard, eds Copyright © 1993 MIT Press Reprinted by permission Chapter 12 p 316: “Nominal Interest Rates and Inflation: Latin America, 1992-1993” in IMF INTERNATIONAL FINANCIAL STATISTICS Copyright © 2012 International Monetary Fund Reprinted by permission p 324: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission Chapter 15 p 334: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 342: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 343: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 278: “Hybrid Corn: An Exploration in the Economics of Technological Change,” by Zvi Griliches from ECONOMETRICA, October 1957 Copyright © 1957 The Econometric Society Reprinted by permission p 349: © Tribune Media Services, Inc All Rights Reserved Reprinted with permission p 279: © Chappatte in “L’Hebdo”, Lausanne—www globecartoon.com p 360: Cartoon Excerpted by permission from Cartoon Bank Copyright © 1997 by Roz Chast/The New Yorker Collection/The Cartoon Bank Chapter 13 p 291: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 297: © Chappatte in “Die Weltwoche”, Zurich— www.globecartoon.com p 298: “Earnings of Displaced Male Workers before and after Displacement” by Steven J Davis and Till M vonWachter, from BROOKINGS PAPERS ON ECONOMIC ACTIVITY, Fall 2011 Copyright © 2011 Steven J Davis and Till M vonWachter Reprinted by permission p 301: “Understanding Institutions” by Daron Acemoglu from the Lionel Robbins lectures Copyright © 2004 Daron Acemoglu Reprinted by permission p 302: “Understanding Institutions” by Daron Acemoglu from the Lionel Robbins lectures Copyright © 2004 Daron Acemoglu Reprinted by permission Chapter 16 p 364: Surveys of Consumers by Thomson Reuters/ University of Michigan Copyright © 2012 Thomson Reuters/University of Michigan Reprinted by permission p 373: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission Chapter 18 p 400: “Growth in Advanced and Emerging Economies Since 2005” in WORLD ECONOMIC OUTLOOK, July 8, 2009 Copyright © 2009 International Monetary Fund Reprinted by permission Chapter 21 p 465: Copyright © 1971 by Ed Fisher/The New Yorker Collection/The Cartoon Bank Chapter 14 Chapter 23 p 315: Graphs and Charts from FRED, Federal Reserve Bank of St Louis Copyright © 2012 Federal Reserve Bank of St Louis Reprinted by permission p 532: “The Monetary Dynamics of Hyperinflation” by Milton Friedman from STUDIES IN THE QUANTITY THEORY OF MONEY Copyright © 1956 C-2 Credits www.downloadslide.net University of Chicago Press Reprinted by permission of the publisher p 561 (middle): AFP/Newscom Chapter 24 p 566 (middle): Achmad Ibrahim/AP Images p 538: Daryl Cagle/MSNBC.com/Cagle Cartoons p 542: “Money Illusion” by Eldar Shafir, Peter Diamond, and Amos Tversky from the QUARTERLY JOURNAL OF ECONOMICS, 1997 (No 2): 341–374 Copyright © 1997 Oxford University Press Reprinted by permission of the publisher p 562 (bottom): Chuck Nacke/Alamy p 566 (bottom): Michael Probst/AP Images p 567: Giuseppe Aresu/AP Images p 568 (bottom): Jay L Clendenin/Aurora Photos/ Aurora Photos p 571 (bottom): Antoine Devouard/REA/Redux Chapter 25 p 560 (top): Bettmann/Corbis p 561 (top): Plinio Lepri/AP Images Credits C-3 www.downloadslide.net Flexible Organization Macroeconomics, sixth edition is organized around two central parts: A core and a set of two major extensions The text’s flexible organization emphasizes an integrated view of macroeconomics, while enabling professors to focus on the theories, models, and applications that they deem central to their particular course The flowchart below quickly illustrates how the chapters are organized and fit within the book’s overall structure For a more detailed explanation of the Organization, and for an extensive list of Alternative Course Outlines, see pages 13–15 in the preface INTRODUCTION A Tour of the World Chapter A Tour of the Book Chapter THE CORE The Short Run The Goods Market Chapter Financial Markets Chapter Goods and Financial Markets: The IS-LM Model Chapter The Medium Run The Labor Market Chapter Putting All Markets Together: The AS-AD Model Chapter The Natural Rate of Unemployment and The Phillips Curve Chapter The Crisis Chapter The Long Run The Facts of Growth Chapter 10 Saving, Capital Accumulation, and Output Chapter 11 Technological Progress and Growth Chapter 12 Technological Progress: The Short, the Medium, and the Long Run Chapter 13 EXPECTATIONS THE OPEN ECONOMY Expectations: The Basic Tools Chapter 14 Financial Markets and Expectations Chapter 15 Expectations, Consumption, and Investment Chapter 16 Expectations, Output, and Policy Chapter 17 EXTENSIONS Openness in Goods and Financial Markets Chapter 18 The Goods Market in an Open Economy Chapter 19 Output, the Interest Rate, and the Exchange Rate Chapter 20 Exchange Rate Regimes Chapter 21 BACK TO POLICY Should Policy Makers Be Restrained? Chapter 22 Fiscal Policy: A Summing Up Chapter 23 Monetary Policy: A Summing Up Chapter 24 EPILOGUE The Story of Macroeconomics Chapter 25 www.downloadslide.net Symbols Used in This Book Symbol ( )d ( )e A a B C CU c c0 c1 D $D d E E Ee e G gA gK gM gN g, gy H I IM i i1 i2 i* K Term Superscript d means demanded e Superscript means expected Aggregate private spending Also: Labor productivity/states of technology Effect on the inflation rate of the unemployment   rate, given expected inflation Goverment debt Consumption Currency Proportion of money held as currency Consumption when disposable income   equals zero Propensity to consume Checkable deposits Also: Real dividend on a stock Nominal dividend on a stock Depreciation rate Nominal exchange rate (price of domestic currency in terms of foreign currency) Fixed nominal exchange rate Expected future exchange rate Real exchange rate Government spending Growth rate of technological progress Growth rate of capital Growth rate of nominal money Growth rate of population Growth rate of output High powered money/monetary base/   central bank money Also: Human capital Fixed investment Imports Nominal interest rate One-year nominal interest rate Two-year nominal interest rate Foreign nominal interest rate Also: Target interest rate for central bank Capital stock Introduced in Chapter 17 6, 12 23 4 3 15 15 11 18 20 18 18 12 12 12 11 3 15 15 18 10 www.downloadslide.net Symbol L M Md Ms m N Nn NI NX P P* p Π Q $Q R r S s T Tr u U u un V $V W Y $Y YD YL Yn Y* X Z z $Z Term Labor force Money stock (nominal) Money demand (nominal) Money supply (nominal) Markup of prices over wages Employment Natural level of employment Net income payments from the rest of the world Net exports GDP deflator/CPI/price level Foreign price level Inflation Profit per unit of capital Real stock price Nominal stock price Bank reserves Real interest rate Private saving Private saving rate Net taxes (taxes paid by consumers minus   transfers) Government transfers Reserve ratio of banks Unemployment Unemployment rate Natural rate of unemployment Present value of a sequence of real payments z Present value of a sequence of nominal payments $z Nominal wage Real GDP/Output/Production Nominal GDP Disposable income Labor income Natural level of output Foreign output Exports Demand for goods Factors that affect the wage, given unemployment Also: A real payment Nominal payment Introduced in Chapter 4 6 19 18 16 15 15 14 11 23 2 14 14 2 16 19 3 14 14 www.downloadslide.net The Pearson Series in Economics Chapman Environmental Economics: Theory, Application, and Policy Hartwick/Olewiler The Economics of Natural Resource Use Cooter/Ulen Law & Economics Heilbroner/Milberg The Making of the Economic Society Downs An Economic Theory of Democracy Heyne/Boettke/Prychitko The Economic Way of Thinking Bierman/Fernandez Game Theory with Economic Applications Ehrenberg/Smith Modern Labor Economics Hoffman/Averett Women and the Economy: Family, Work, and Pay Blanchard Macroeconomics* Farnham Economics for Managers Blau/Ferber/Winkler The Economics of Women, Men and Work Folland/Goodman/Stano The Economics of Health and Health Care Boardman/Greenberg/Vining/ Weimer Cost-Benefit Analysis Fort Sports Economics Hubbard/O’Brien Economics* Money, Banking, and the Financial System* Froyen Macroeconomics Hubbard/O’Brien/Rafferty Macroeconomics* Fusfeld The Age of the Economist Hughes/Cain American Economic History Gerber International Economics* Husted/Melvin International Economics González-Rivera Forecasting for Economics and Business Jehle/Reny Advanced Microeconomic Theory Abel/Bernanke/Croushore Macroeconomics* Bade/Parkin Foundations of Economics* Berck/Helfand The Economics of the Environment Boyer Principles of Transportation Economics Branson Macroeconomic Theory and Policy Brock/Adams The Structure of American Industry Bruce Public Finance and the American Economy Carlton/Perloff Modern Industrial Organization Case/Fair/Oster Principles of Economics* Caves/Frankel/Jones World Trade and Payments: An Introduction Gordon Macroeconomics* Greene Econometric Analysis Holt Markets, Games and Strategic Behavior Johnson-Lans A Health Economics Primer Keat/Young Managerial Economics Gregory Essentials of Economics Klein Mathematical Methods for Economics Gregory/Stuart Russian and Soviet Economic Performance and Structure Krugman/Obstfeld/Melitz International Economics: Theory & Policy* www.downloadslide.net Laidler The Demand for Money Leeds/von Allmen The Economics of Sports Leeds/von Allmen/Schiming Economics* Lipsey/Ragan/Storer Economics* Lynn Economic Development: Theory and Practice for a Divided World Miller Economics Today* Understanding Modern Economics Miller/Benjamin The Economics of Macro Issues Miller/Benjamin/North The Economics of Public Issues Mills/Hamilton Urban Economics Mishkin The Economics of Money, Banking, and Financial Markets* The Economics of Money, Banking, and Financial Markets, Business School Edition* Macroeconomics: Policy and Practice* Murray Econometrics: A Modern Introduction Nafziger The Economics of Developing Countries O’Sullivan/Sheffrin/Perez Economics: Principles, Applications and Tools* Scherer Industry Structure, Strategy, and Public Policy Parkin Economics* Schiller The Economics of Poverty and Discrimination Perloff Microeconomics* Microeconomics: Theory and Applications with Calculus* Perman/Common/McGilvray/Ma Natural Resources and Environmental Economics Phelps Health Economics Pindyck/Rubinfeld Microeconomics* Riddell/Shackelford/Stamos/ Schneider Economics: A Tool for Critically Understanding Society Ritter/Silber/Udell Principles of Money, Banking & Financial Markets* Roberts The Choice: A Fable of Free Trade and Protection Rohlf Introduction to Economic Reasoning Ruffin/Gregory Principles of Economics Sargent Rational Expectations and Inflation Sawyer/Sprinkle International Economics * denotes MyEconLab titles Visit www.myeconlab.com to learn more Sherman Market Regulation Silberberg Principles of Microeconomics Stock/Watson Introduction to Econometrics Studenmund Using Econometrics: A Practical Guide Tietenberg/Lewis Environmental and Natural Resource Economics Environmental Economics and Policy Todaro/Smith Economic Development Waldman Microeconomics Waldman/Jensen Industrial Organization: Theory and Practice Walters/Walters/Appel/Callahan/ Centanni/Maex/O’Neill Econversations: Today’s Students Discuss Today’s Issues Weil Economic Growth Williamson Macroeconomics www.downloadslide.net ... adaptation from the United States edition, entitled Macroeconomics, 6th Edition, ISBN: 978-0-13-306163-5 by Olivier Blanchard and David R Johnson, published by Pearson Education, Inc., © 2013 All rights...Sixth Edition MACROECONOMICS Global Edition Olivier Blanchard International Monetary Fund Massachusetts Institute of Technology David R Johnson Wilfrid Laurier University... around the world His primary teaching area is macroeconomics He is coauthor with Olivier Blanchard of Macroeconomics (fourth Canadian edition) Professor Johnson received his undergraduate degree