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• Cover Page
• Title Page
• Copyright Page
• Dedication
• Flexible Organization
• Contents
• Videos in This Enhanced eBook
• Preface
• Global Edition Acknowledgments
• About the Author
• THE CORE
• Introduction
• Chapter 1 A Tour of the World
• 1-1 The Crisis
• 1-2 The Euro Area
• Can European Unemployment Be Reduced?
• What Has the Euro Done for Its Members?
• 1-3 The United States
• Do Policymakers Have the Tools to Handle the Next Recession?
• How Worrisome Is Low Productivity Growth?
• 1-4 China
• 1-5 Looking Ahead
• Key Terms
• Questions and Problems
• Appendix 1: Where to Find the Numbers
• Appendix 2: What Do Macroeconomists Do?
• Chapter 2 A Tour of the Book
• 2-1 Aggregate Output
• GDP: Production and Income
• Nominal and Real GDP
• GDP: Level versus Growth Rate
• 2-2 The Unemployment Rate
• Why Do Economists Care about Unemployment?
• 2-3 The Inflation Rate
• The GDP Deflator
• The Consumer Price Index
• Why Do Economists Care about Inflation?
• 2-4 Output, Unemployment, and the Inflation Rate: Okun’s Law and the Phillips Curve
• Okun’s Law
• The Phillips Curve
• 2-5 The Short Run, the Medium Run, and the Long Run
• 2-6 A Tour of the Book
• The Core
• Extensions
• Back to Policy
• Epilogue
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix: The Construction of Real GDP and Chain-Type Indexes
• The Short Run
• Chapter 3 The Goods Market
• 3-1 The Composition of GDP
• 3-2 The Demand for Goods
• Consumption (C)
• Investment (I)
• Government Spending (G)
• 3-3 The Determination of Equilibrium Output
• Using Algebra
• Using a Graph
• Using Words
• How Long Does It Take for Output to Adjust?
• 3-4 Investment Equals Saving: An Alternative Way of Thinking about Goods-Market Equilibrium
• 3-5 Is the Government Omnipotent? A Warning
• Summary
• Key Terms
• Questions and Problems
• Chapter 4 Financial Markets I
• 4-1 The Demand for Money
• Deriving the Demand for Money
• 4-2 Determining the Interest Rate: I
• Money Demand, Money Supply, and the Equilibrium Interest Rate
• Monetary Policy and Open Market Operations
• Choosing Money or Choosing the Interest Rate?
• 4-3 Determining the Interest Rate: II
• What Banks Do
• The Demand for and Supply of Central Bank Money
• The Demand for Central Bank Money
• The Federal Funds Market and the Federal Funds Rate
• 4-4 The Liquidity Trap
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Chapter 5 Goods and Financial Markets: The IS-LM Model
• 5-1 The Goods Market and the IS Relation
• Investment, Sales, and the Interest Rate
• Determining Output
• Deriving the IS Curve
• Shifts of the IS Curve
• 5-2 Financial Markets and the LM Relation
• Real Money, Real Income, and the Interest Rate
• Deriving the LM Curve
• 5-3 Putting the IS and LM Relations Together
• Fiscal Policy
• Monetary Policy
• 5-4 Using a Policy Mix
• 5-5 How Does the IS-LM Model Fit the Facts?
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Chapter 6 Financial Markets II: The Extended IS-LM Model
• 6-1 Nominal versus Real Interest Rates
• Nominal and Real Interest Rates in the United States since 1978
• Nominal and Real Interest Rates: The Zero Lower Bound and Deflation
• 6-2 Risk and Risk Premia
• 6-3 The Role of Financial Intermediaries
• The Choice of Leverage
• Leverage and Lending
• 6-4 Extending the IS-LM Model
• Financial Shocks and Policies
• 6-5 From a Housing Problem to a Financial Crisis
• Housing Prices and Subprime Mortgages
• The Role of Financial Intermediaries
• Macroeconomic Implications
• Policy Responses
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• The Medium Run
• Chapter 7 The Labor Market
• 7-1 A Tour of the Labor Market
• The Large Flows of Workers
• 7-2 Movements in Unemployment
• 7-3 Wage Determination
• Bargaining
• Efficiency Wages
• Wages, Prices, and Unemployment
• The Expected Price Level
• The Unemployment Rate
• The Other Factors
• 7-4 Price Determination
• 7-5 The Natural Rate of Unemployment
• The Wage-Setting Relation
• The Price-Setting Relation
• Equilibrium Real Wages and Unemployment
• 7-6 Where We Go from Here
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix: Wage- and Price-Setting Relations versus Labor Supply and Labor Demand
• Chapter 8 The Phillips Curve, the Natural Rate of Unemployment, and Inflation
• 8-1 Inflation, Expected Inflation, and Unemployment
• 8-2 The Phillips Curve and Its Mutations
• The Original Phillips Curve
• The De-anchoring of Expectations
• The Re-anchoring of Expectations
• 8-3 The Phillips Curve and the Natural Rate of Unemployment
• 8-4 A Summary and Many Warnings
• Variations in the Natural Rate over Time
• Variations in the Natural Unemployment Rate across Countries
• High Inflation and the Phillips Curve
• Deflation and the Phillips Curve
• Summary
• Key Terms
• Questions and Problems
• Appendix: Derivation of the Relation Between Inflation, Expected Inflation, and Unemployment
• Chapter 9 From the Short to the Medium Run: The IS-LM-PC Model
• 9-1 The IS-LM-PC Model
• 9-2 From the Short to the Medium Run
• 9-3 Complications and How Things Can Go Wrong
• The Zero Lower Bound and Deflation Spirals
• 9-4 Fiscal Consolidation Revisited
• 9-5 The Effects of an Increase in the Price of Oil
• Effects on the Natural Rate of Unemployment
• 9-6 Conclusions
• The Short Run versus the Medium Run
• Shocks and Propagation Mechanisms
• Summary
• Key Terms
• Questions and Problems
• The Long Run
• Chapter 10 The Facts of Growth
• 10-1 Measuring the Standard of Living
• 10-2 Growth in Rich Countries since 1950
• The Large Increase in the Standard of Living since 1950
• The Convergence of Output per Person
• 10-3 A Broader Look across Time and Space
• Looking across Two Millennia
• Looking across Countries
• 10-4 Thinking about Growth: A Primer
• The Aggregate Production Function
• Returns to Scale and Returns to Factors
• Output per Worker and Capital per Worker
• The Sources of Growth
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Chapter 11 Saving, Capital Accumulation, and Output
• 11-1 Interactions between Output and Capital
• The Effects of Capital on Output
• The Effects of Output on Capital Accumulation
• Output and Investment
• Investment and Capital Accumulation
• 11-2 The Implications of Alternative Saving Rates
• Dynamics of Capital and Output
• The Saving Rate and Output
• The Saving Rate and Consumption
• 11-3 Getting a Sense of Magnitudes
• The Effects of the Saving Rate on Steady-State Output
• The Dynamic Effects of an Increase in the Saving Rate
• The US Saving Rate and the Golden Rule
• 11-4 Physical versus Human Capital
• Extending the Production Function
• Human Capital, Physical Capital, and Output
• Endogenous Growth
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix: The Cobb-Douglas Production Function and the Steady State
• Chapter 12 Technological Progress and Growth
• 12-1 Technological Progress and the Rate of Growth
• Technological Progress and the Production Function
• Interactions between Output and Capital
• Dynamics of Capital and Output
• Back to the Effects of the Saving Rate
• 12-2 The Determinants of Technological Progress
• The Fertility of the Research Process
• The Appropriability of Research Results
• Innovation versus Imitation
• 12-3 Institutions, Technological Progress, and Growth
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix: How to Measure Technological Progress, and the Application to China
• Chapter 13 The Challenges of Growth
• 13-1 The Future of Technological Progress
• 13-2 Robots and Unemployment
• 13-3 Growth, Churn, and Inequality
• The Increase in Wage Inequality
• The Causes of Increased Wage Inequality
• Inequality and the Top 1%
• Growth and Inequality
• 13-4 Climate Change and Global Warming
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• EXTENSIONS
• Expectations
• Chapter 14 Financial Markets and Expectations
• 14-1 Expected Present Discounted Values
• Computing Expected Present Discounted Values
• A General Formula
• Using Present Values: Examples
• Constant Interest Rates
• Constant Interest Rates and Payments
• Constant Interest Rates and Payments Forever
• Zero Interest Rates
• Nominal versus Real Interest Rates and Present Values
• 14-2 Bond Prices and Bond Yields
• Bond Prices as Present Values
• Arbitrage and Bond Prices
• From Bond Prices to Bond Yields
• Reintroducing Risk
• Interpreting the Yield Curve
• 14-3 The Stock Market and Movements in Stock Prices
• Stock Prices as Present Values
• The Stock Market and Economic Activity
• A Monetary Expansion and the Stock Market
• An Increase in Consumer Spending and the Stock Market
• 14-4 Risk, Bubbles, Fads, and Asset Prices
• Stock Prices and Risk
• Asset Prices, Fundamentals, and Bubbles
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix: Deriving the Expected Present Discounted Value Using Real or Nominal Interest Rates
• Chapter 15 Expectations, Consumption, and Investment
• 15-1 Consumption
• The Very Foresighted Consumer
• An Example
• Toward a More Realistic Description
• Putting Things Together: Current Income, Expectations, and Consumption
• 15-2 Investment
• Investment and Expectations of Profit
• Depreciation
• The Present Value of Expected Profits
• The Investment Decision
• A Convenient Special Case
• Current versus Expected Profit
• Profit and Sales
• 15-3 The Volatility of Consumption and Investment
• Summary
• Key Terms
• Questions and Problems
• Appendix: Derivation of the Expected Present Value of Profits under Static Expectations
• Chapter 16 Expectations, Output, and Policy
• 16-1 Expectations and Decisions: Taking Stock
• Expectations, Consumption, and Investment Decisions
• Expectations and the IS Relation
• 16-2 Monetary Policy, Expectations, and Output
• Monetary Policy Revisited
• 16-3 Deficit Reduction, Expectations, and Output
• The Role of Expectations about the Future
• Back to the Current Period
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• The Open Economy
• Chapter 17 Openness in Goods and Financial Markets
• 17-1 Openness in Goods Markets
• Exports and Imports
• The Choice between Domestic Goods and Foreign Goods
• Nominal Exchange Rates
• From Nominal to Real Exchange Rates
• From Bilateral to Multilateral Exchange Rates
• 17-2 Openness in Financial Markets
• The Balance of Payments
• The Choice between Domestic and Foreign Assets
• Interest Rates and Exchange Rates
• 17-3 Conclusions and a Look Ahead
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Chapter 18 The Goods Market in an Open Economy
• 18-1 The IS Relation in the Open Economy
• The Demand for Domestic Goods
• The Determinants of C, I, and G
• The Determinants of Imports
• The Determinants of Exports
• Putting the Components Together
• 18-2 Equilibrium Output and the Trade Balance
• 18-3 Increases in Demand—Domestic or Foreign
• Increases in Domestic Demand
• Increases in Foreign Demand
• Fiscal Policy Revisited
• 18-4 Depreciation, the Trade Balance, and Output
• Depreciation and the Trade Balance: the Marshall-Lerner Condition
• The Effects of a Real Depreciation
• Combining Exchange Rate and Fiscal Policies
• 18-5 Saving, Investment, and the Current Account Balance
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix: Derivation of the Marshall-Lerner Condition
• Chapter 19 Output, the Interest Rate, and the Exchange Rate
• 19-1 Equilibrium in the Goods Market
• 19-2 Equilibrium in Financial Markets
• Domestic Bonds versus Foreign Bonds
• 19-3 Putting Goods and Financial Markets Together
• 19-4 The Effects of Policy in an Open Economy
• The Effects of Monetary Policy in an Open Economy
• The Effects of Fiscal Policy in an Open Economy
• 19-5 Fixed Exchange Rates
• Pegs, Crawling Pegs, Bands, the EMS, and the Euro
• Monetary Policy When the Exchange Rate Is Fixed
• Fiscal Policy When the Exchange Rate Is Fixed
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix: Fixed Exchange Rates, Interest Rates, and Capital Mobility
• Chapter 20 Exchange Rate Regimes
• 20-1 The Medium Run
• The IS Relation under Fixed Exchange Rates
• Equilibrium in the Short and the Medium Run
• The Case for and against a Devaluation
• 20-2 Exchange Rate Crises under Fixed Exchange Rates
• 20-3 Exchange Rate Movements under Flexible Exchange Rates
• Exchange Rates and the Current Account
• Exchange Rates and Current and Future Interest Rates
• Exchange Rate Volatility
• 20-4 Choosing between Exchange Rate Regimes
• Common Currency Areas
• Hard Pegs, Currency Boards, and Dollarization
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Appendix 1: Deriving the IS Relation under Fixed Exchange Rates
• Appendix 2: The Real Exchange Rate and Domestic and Foreign Real Interest Rates
• Back to Policy
• Chapter 21 Should Policymakers Be Restrained?
• 21-1 Uncertainty and Policy
• How Much Do Macroeconomists Actually Know?
• Should Uncertainty Lead Policymakers to Do Less?
• Uncertainty and Restraints on Policymakers
• 21-2 Expectations and Policy
• Hostage Takings and Negotiations
• Inflation and Unemployment Revisited
• Establishing Credibility
• Time Consistency and Restraints on Policymakers
• 21-3 Politics and Policy
• Games between Policymakers and Voters
• Games between Policymakers
• Politics and Fiscal Restraints
• Chapter 22 Fiscal Policy: A Summing Up
• 22-1 What We Have Learned
• 22-2 The Government Budget Constraint: Deficits, Debt, Spending, and Taxes
• The Arithmetic of Deficits and Debt
• Current versus Future Taxes
• Full Repayment in Year 2
• Full Repayment in Year t
• Debt Stabilization in Year 2
• The Evolution of the Debt-to-GDP Ratio
• 22-3 Ricardian Equivalence, Cyclical Adjusted Deficits, and War Finance
• Ricardian Equivalence
• Deficits, Output Stabilization, and the Cyclically Adjusted Deficit
• Wars and Deficits
• 22-4 The Dangers of High Debt
• High Debt, Default Risk, and Vicious Cycles
• Debt Default
• Money Finance
• 22-5 The Challenges Facing US Fiscal Policy Today
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Chapter 23 Monetary Policy: A Summing Up
• 23-1 What We Have Learned
• 23-2 From Money Targeting to Inflation Targeting
• Money Targeting
• Inflation Targeting
• The Interest Rate Rule
• 23-3 The Optimal Inflation Rate
• The Costs of Inflation
• The Benefits of Inflation
• The Optimal Inflation Rate: The State of the Debate
• 23-4 Unconventional Monetary Policy
• Monetary Policy since the End of the Liquidity Trap
• 23-5 Monetary Policy and Financial Stability
• Liquidity Provision and Lender of Last Resort
• Macroprudential Tools
• Summary
• Key Terms
• Questions and Problems
• Further Readings
• Chapter 24 Epilogue: The Story of Macroeconomics
• 24-1 Keynes and the Great Depression
• 24-2 The Neoclassical Synthesis
• Progress on All Fronts
• Keynesians versus Monetarists
• 24-3 The Rational Expectations Critique
• The Three Implications of Rational Expectations
• The Integration of Rational Expectations
• 24-4 Developments in Macroeconomics up to the 2009 Crisis
• New Classical Economics and Real Business Cycle Theory
• New Keynesian Economics
• New Growth Theory
• Toward an Integration
• 24-5 First Lessons for Macroeconomics after the Crisis
• Summary
• Key Terms
• Further Readings
• Appendix 1 An Introduction to the National Income and Product Accounts
• Appendix 2 A Math Refresher
• Appendix 3 An Introduction to Econometrics
• Glossary
• Index
• Credits
• Symbols Used in This Book