Macroeconomics

is widely praised for its ability to present theory as a way of evaluating key macro questions, such as why some countries are rich and others are poor. Gordon makes extensive use of data, international examples, and case studies throughout, and the Eleventh Edition incorporates critical developments in the field. New topics include the housing bubble and housing wealth, the effect of oil prices on the economy, and the purchase of dollar reserves by China to finance the U.S. import deficit. http://www.dropshippers.co.za/

Students have a natural interest in what is happening today and what will happen in the near future. Macroeconomics capitalizes on their interest by beginning with business cycles and monetary-fiscal policy in both closed and open economy. After that, Gordon presents a unique dynamic analysis of demand and supply shocks as causes of inflation and unemployment, followed by a dual approach to economic growth in which theory and real-world examples are used to compare rich and poor countries. http://www.dropshippers.co.za/

Table of Contents

Part I: Introduction and Measurement

Chapter 1. What Is Macroeconomics? http://www.dropshippers.co.za/

• 1-1 How Macroeconomics Affects Our Everyday Lives 1-2 Defining Macroeconomics 1-3 Actual and Natural Real GDP 1-4 Macroeconomics in the Short Run and Long Run 1-5 Case Study: A Century of Business Cycles 1-6 Macroeconomics at the Extremes 1-7 Taming Business Cycles: Stabilization Policy 1-8 The “Internationalization” of Macroeconomics
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Chapter 2. The Measurement of Income, Prices, and Unemployment

2-1 Why We Care About Income 2-2 The Circular Flow of Income and Expenditure 2-3 What Transactions Should Be Included in Income and Expenditure? 2-4 Components of Expenditure 2-5 The “Magic” Equation and the Twin Deficits 2-6 How Much Income Flows from Business Firms to Households? 2-7 Nominal GDP, Real GDP, and the GDP Deflator 2-8 Measuring Unemployment 2-9 Case Study: Conflicting Measurements: Was the 2002-04 Recover “Jobless” or Not? http://www.dropshippers.co.za/

Appendix: How We Measure Real GDP and the Inflation Rate

• Part II: Income, Interest Rates, Policy, and the Open Economy
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Chapter 3. Spending, Income, and Interest Rates 3-1 Business Cycles and the Theory of Income Determination 3-2 Income Determination, Unemployment, and the Price Level 3-3 Planned Expenditure 3-4 Case Study: Why Did U.S. Saving Almost Vanish in This Decade? 3-5 The Economy In and Out of Equilibrium 3-6 The Multiplier Effect 3-7 Sources of Shifts in Planned Spending 3-8 How Can Monetary Policy Affect Planned Spending? 3-9 The Relation of Autonomous Planned Spending to the Interest Rate 3-10 The IS Curve 3-11 Conclusion: The Missing Relation

Appendix: Allowing for Income Taxes and Income-Dependent Net Exports http://www.dropshippers.co.za/

Chapter 4. Monetary and Fiscal Policy in the IS-LM Model

4-1 Introduction: The Power of Monetary and Fiscal Policy 4-2 Why People Use Money 4-3 Income, the Interest Rate, and the Demand for Money 4-4 The LM Curve 4-5 The IS Curve Meets the LM Curve 4-6 Monetary Policy in Action 4-7 How Fiscal Expansion Can “Crowd Out” Investment 4-8 Strong and Weak Effects of Monetary Policy 4-9 Strong and Weak Effects of Fiscal Policy 4-10 Using Fiscal and Monetary Policy Together http://www.dropshippers.co.za/

Appendix: The Elementary Algebra of the IS-LM Model

Chapter 5. The Government Budget, Foreign Borrowing, and the Twin Deficits

5-1 Introduction 5-2 The Pervasive Effects of the Government Budget 5-3 Case Study: The Government Budget In Historical Perspective 5-4 The Structural Budget 5-5 National Saving and the Consequences of the Government Budge 5-6 Case Study: How the Deficits Rejoined to Become “Twins” 5-7 The Current Account and the Balance of Payments 5-8 Conclusion: Solutions to the National Saving Squeeze http://www.dropshippers.co.za/

Chapter 6. International Trade, Exchange Rates, and Macroeconomic Policy

6-1 Introduction 6-2 Exchange Rates 6-3 The Market for Foreign Exchange 6-4 Real Exchange Rates and Purchasing Power Parity 6-5 Exchange Rate Systems 6-6 Case Study: Asia Intervenes with Buckets to Buy Dollars and Finance the U.S. Current Account Deficit—How Long Can This Continue? 6-7 Determinants of Net Exports 6-8 The Real Exchange Rate and Interest Rate 6-9 Effects of Monetary and Fiscal Policy with Fixed and Flexible Exchange Rates 6-10 Conclusion: Economic Policy in the Open Economy http://www.dropshippers.co.za/

Part III: Aggregate Demand, Aggregate Supply, Unemployment and Inflation

Chapter 7. Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy

7-1 Combining Aggregate Demand with Aggregate Supply 7-2 Flexible Prices and the AD Curve 7-3 Shifting the Aggregate Demand Curve with Monetary and Fiscal Policy 7-4 Alternative Shapes of the Short-Run Aggregate Supply Curve 7-5 The Short-Run Aggregate Supply (SAS) Curve When the Nominal Wage Rate Is Constant 7-6 How the Wage Rate Is Set 7-7 Fiscal and Monetary Expansion in the Short and Long Run 7-8 Classical Macroeconomics: The Quantity Theory of Money and the Self-Correcting Economy 7-9 The Keynesian Revolution: The Failure of Self-Correction 7-10 Case Study: What Caused the Great Depression http://www.dropshippers.co.za/

Chapter 8. Inflation: Its Causes and Cures

8-1 Introduction 8-2 Real GDP, the Inflation Rate, and the Short-Run Phillips Curve 8-3 The Adjustment of Expectations 8-4 Nominal GDP Growth and Inflation 8-5 Effects of an Acceleration in Nominal GDP Growth 8-6 Expectations and the Inflation Cycle 8-7 Recession as a Cure for Inflation 8-8 The Importance of Supply Shocks 8-9 The Response of Inflation and the Output Ratio to a Supply Shock 8-10 Case Study: Why Did Inflation Creep Up After 2003? 8-11 Inflation and Output Fluctuations: Recapitulation of Causes and Cures 8-12 How Is the Unemployment Rate Related to the Inflation Rate? http://www.dropshippers.co.za/

Appendix: The Elementary Algebra of the SP-DG Model

Chapter 9. The Goals of Stabilization Policy: Low Inflation and Low Unemployment

9-1 The Costs and Causes of Inflation 9-2 Money and Inflation 9-3 Why Inflation Is Not Harmless 9-4 Indexation and Other Reforms to Reduce the Costs of Inflation 9-5 The Government Budget Constraint and the Inflation Tax 9-6 Starting and Stopping in Hyperinflation 9-7 Why the Unemployment Rate Cannot Be Reduced to Zero 9-8 Sources of Mismatch Unemployment 9-9 Turnover Unemployment and Job Search http://www.dropshippers.co.za/

Part IV: Macroeconomics in the Long Run: Growth and Public Finance

Chapter 10. The Theory of Economic Growth

10-1 The Importance of Economic Growth 10-2 Standards of Living as the Consequence of Economic Growth 10-3 The Production Function and Economic Growth 10-4 Solow’s Theory of Economic Growth 10-5 Technology in Theory and Practice 10-6 Puzzles That Solow’s Theory Cannot Explain 10-7 Human Capital, Immigration, and the Solow Puzzles 10-8 Endogenous Growth Theory: How Is Technological Change Produced? 10-9 Conclusion: Are There Secrets of Growth? http://www.dropshippers.co.za/

Appendix: General Functional Forms and the Production Function

Chapter 11. The Big Questions of Economic Growth

11-1 Answering the Big Questions 11-2 The Standard of Living and Concepts of Productivity 11-3 The Failure of Convergence 11-4 Human Capital and Technology 11-5 Political Capital, Infrastructure, and Geography 11-6 Case Study: Uneven U.S. Growth Across Eras: Why Did U.S. Productivity Growth Slow Down and Then Revive? 11-7 Labor Supply Shifts as a Source of Faster or Slower Productivity Growth 11-8 Case Study: The Productivity Growth Contrast Between Europe and the United States 11-9 Conclusion to the Great Questions of Growth http://www.dropshippers.co.za/

Chapter 12. The Government Budget, the Public Debt, and Social Security

12-1 Introduction: The Government Budget and Long-Run Economic Growth 12-2 Long-Run Effects of Fiscal Policy on Economic Growth and Welfare 12-3 The Future Burden of the Government Debt 12-4 Will the Government Remain Solvent? 12-5 Case Study: Historical Behavior of the Debt-GDP Ratio Since 1790 12-6 Why the Budget Deficit Disappeared Temporarily and the Reappeared 12-7 Alternative Views of Fiscal Policy: Supply-Side Economics 12-8 Alternative Views of Fiscal Policy: The Barro-Ricardo Equivalence Theorem 12-9 The Great Debate over Social Security 12-10 Long-Run Economic Growth and the Fiscal Debate http://www.dropshippers.co.za/

Part V: Stabilization Policy in an Open Economy

Chapter 13. Money and Financial Markets

13-1 Money in a World of Many Financial Assets and Liabilities 13-2 Financial Institutions, Markets, and Instruments 13-3 Definitions of Money 13-4 High-Powered Money and Determinants of the Money Supply 13-5 The Fed's Three Tools for Changing the Money Supply 13-6 Theories of the Demand for Money 13-7 Case Study: Why Interest Rates Were More Volatile in the 1980s and Less Volatile in the 1990s 13-8 Why the Federal Reserve "Sets" Interest Rates http://www.dropshippers.co.za/

Chapter 14. Stabilization Policy in the Closed and Open Economy

14-1 The Central Role of Demand Shocks 14-2 Stabilization Targets and Instruments in the Activists' Paradise 14-3 Policy Rules 14-4 Policy Pitfalls: Lags and Uncertain Multipliers 14-5 Case Study: Was the Fed Responsible for the Great Moderation? 14-6 Time Inconsistency, Credibility, and Reputation 14-7 Case Study: The Taylor Rule and the Changing Fed Attitude Toward Inflation and Output 14-8 Rules Versus Discretion: An Assessment 14-9 Case Study: Should Monetary Policy Target the Exchange Rate? http://www.dropshippers.co.za/

Part VI: Stability and Instability in the Private Economy

Chapter 15. The Economics of Consumption Behavior

15-1 Consumption and Economic Stability 15-2 Case Study: Main Features of U.S. Consumption Data 15-3 Background: The Conflict Between the Time-Series and Cross-Section Evidence 15-4 Forward-Looking Behavior: The Permanent-Income Hypothesis 15-5 Forward-Looking Behavior: The Life-Cycle Hypothesis 15-6 Rational Expectations and Other Amendments to the Simple Forward-Looking Theories 15-7 Bequests and Uncertainty 15-8 Case Study: Did Souring Household Assets Cause the Collapse in the Household Saving Rate? 15-9 Why the Official Household Saving Data Are Misleading 15-10 Conclusion: Consumption and the Case For and Against Activism http://www.dropshippers.co.za/

Chapter 16. The Economics of Investment Behavior

16-1 Investment and Economic Stability 16-2 Case Study: The Historical Instability of Investment 16-3 The Accelerator Hypothesis of Net Investment 16-4 Case Study: The Simple Accelerator and the Postwar U.S. Economy 16-5 The Flexible Accelerator 16-6 The Neoclassical Theory of Investment Behavior 16-7 User Cost and the Role of Monetary and Fiscal Policy 16-8 Business Confidence and Speculation 16-9 Case Study: The Boom and Bust in the "New Economy" Investment 16-10 Investment as a Source of Instability of Output and Interest Rates 16-11 Conclusion: Investment and the Case For and Against Activism http://www.dropshippers.co.za/

Part VII: Debates at the Macroeconomic Frontier

Chapter 17. New Classical Macro Confronts New Keynesian Macro

17-1 Introduction: Classical and Keynesian Economics, Old and New 17-2 Imperfect Information and the "Fooling Model" 17-3 The Lucas Model and the Policy Ineffectiveness Proposition 17-4 The Real Business Cycle Model 17-5 New Classical Macroeconomics: Limitations and Positive Contributions 17-6 Essential Features of the New Keynesian Economics 17-7 Why Small Nominal Rigidities Have Large Macroeconomic Effects 17-8 Coordination Failures and Indexation 17-9 Long-Term Labor Contracts as a Source of the Business Cycle 17-10 "Real" Sources of Wage Stickiness 17-11 Assessment of the New Keynesian Model http://www.dropshippers.co.za/

Chapter 18. Conclusion: Where We Stand

18-1 The Evolution of Events and Ideas 18-2 The Reaction of Ideas to Events, 1923–47 18-3 The Reaction of Ideas to Events, 1947–69 18-4 The Reaction of Ideas to Events, 1970–2007 18-5 The Reaction of Ideas to Events in the World Economy 18-6 Macro Mysteries: Unsettled Issues and Debates http://www.dropshippers.co.za/