[...]... 1 1-2 IS–LM as a Theory of Aggregate Demand 315 From the IS–LM Model to the Aggregate Demand Curve 315 The IS–LM Model in the Short Run and Long Run 318 1 1-3 The Great Depression 320 The Spending Hypothesis: Shocks to the IS Curve 321 The Money Hypothesis: A Shock to the LM Curve 322 The Money Hypothesis Again: The Effects of Falling Prices 323 Could the Depression Happen Again? 325 ᭤ CASE STUDY The Financial. .. FYI The Many Different Interest Rates 63 Government Purchases 63 3-4 What Brings the Supply and Demand for Goods and Services Into Equilibrium? 64 Equilibrium in the Market for Goods and Services: The Supply and Demand for the Economy’s Output 64 Equilibrium in the Financial Markets: The Supply and Demand for Loanable Funds 65 Changes in Saving: The Effects of Fiscal Policy 67 ᭤ CASE STUDY Wars and. .. Aggregate Demand I: Building the IS–LM Model 281 1 0-1 The Goods Market and the IS Curve 283 The Keynesian Cross 283 ᭤ CASE STUDY Cutting Taxes to Stimulate the Economy: The Kennedy and Bush Tax Cuts 289 ᭤ CASE STUDY Increasing Government Purchases to Stimulate the Economy: The Obama Spending Plan 290 The Interest Rate, Investment, and the IS Curve 292 How Fiscal Policy Shifts the IS Curve 294 1 0-2 The Money... fully flexible, the chapter presents the prominent ideas of classical monetary theory: the quantity theory of money, the inflation tax, the Fisher effect, the social costs of inflation, and the causes and costs of hyperinflation Chapter 5 introduces the study of open-economy macroeconomics Maintaining the assumption of full employment, this chapter presents models to explain the trade balance and the exchange... approaches to explaining the short-run aggregate supply curve and discusses the short-run tradeoff between inflation and unemployment Part Five, Macroeconomic Policy Debates Once the student has command of standard long-run and short-run models of the economy, the book uses these models as the foundation for discussing some of the key debates over economic policy Chapter 13 considers the debate over how... The Financial Crisis and Economic Downturn of 2008 and 2009 326 ᭤ FYI The Liquidity Trap 328 1 1-4 Conclusion 329 Chapter 12 Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment 333 1 2-1 The Basic Theory of Aggregate Supply 334 The Sticky-Price Model 335 An Alternative Theory: The Imperfect-Information Model 337 ᭤ CASE STUDY International Differences in the Aggregate Supply... Monetary Policy 400 Debt and the Political Process 401 International Dimensions 401 ᭤ CASE STUDY The Benefits of Indexed Bonds 402 1 4-6 Conclusion 403 xviii | Contents part VI The Financial System and the Economy 407 Chapter 15 Introduction to the Financial System 409 1 5-1 Financial Markets 410 Bonds 410 Stocks 411 1 5-2 Economic Functions of Financial Markets 411 Matching Savers and Investors 411 Risk... 82 ᭤ FYI How Do Credit Cards and Debit Cards Fit Into the Monetary System? 83 4-2 The Quantity Theory of Money 84 Transactions and the Quantity Equation 84 From Transactions to Income 85 The Money Demand Function and the Quantity Equation 85 The Assumption of Constant Velocity 86 Money, Prices, and Inflation 87 ᭤ CASE STUDY Inflation and Money Growth 88 4-3 Seigniorage: The Revenue from Printing Money... 259 9-2 Time Horizons in Macroeconomics 260 How the Short Run and Long Run Differ 261 ᭤ CASE STUDY If You Want to Know Why Firms Have Sticky Prices, Ask Them 262 The Model of Aggregate Supply and Aggregate Demand 264 9-3 Aggregate Demand 264 Contents | xv The Quantity Equation as Aggregate Demand 265 Why the Aggregate Demand Curve Slopes Downward 266 Shifts in the Aggregate Demand Curve 266 9-4 Aggregate... Europe 184 ᭤ CASE STUDY The Secrets to Happiness 185 The Rise of European Leisure 186 6-6 Conclusion 188 part III Growth Theory: The Economy in the Very Long Run 191 Chapter 7 Economic Growth I: Capital Accumulation and Population Growth 193 7-1 The Accumulation of Capital 194 The Supply and Demand for Goods 194 Growth in the Capital Stock and the Steady State 197 Approaching the Steady State: A Numerical . Mamos Library of Congress Cataloging-in-Publication Number: 2010932595 ISBN-13: 97 8-1 -4 29 2-5 36 7-3 ISBN-10: 1-4 29 2-5 36 7-3 © 2011 by Worth Publishers All rights reserved. Printed in the United States of America First. Cards and Debit Cards Fit Into the Monetary System? 83 4-2 The Quantity Theory of Money 84 Transactions and the Quantity Equation 84 From Transactions to Income 85 The Money Demand Function and the. Stimulate the Economy: The Obama Spending Plan 290 The Interest Rate, Investment, and the IS Curve 292 How Fiscal Policy Shifts the IS Curve 294 1 0-2 The Money Market and the LM Curve 295 The Theory