nd Edition Macroeconomics Policy and Practice Frederic S Mishkin Columbia University Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Macroeconomics Matters: The Latest Economic Events and Policy Responses APPLICATIONS apply the analysis in each chapter to explain important real-world situations Chapter Measuring Macroeconomic Data POLICY AND PRACTICE c examples of policies and how they were executed MACROECONOMICS IN THE NEWS boxes introduce relevant news articles and data from the daily press and explain how to read them • Can GDP Buy Happiness? • Policy and Overstatements of the Cost of Living • Unemployment and Employment • Interest Rates Chapter Aggregate Production and Productivity • Why Are Some Countries Rich and Others Poor? • Explaining Real Wage Growth • Oil Shocks, Real Wages, and the Stock Market Chapter Saving and Investment in Closed and Open Economies • How the United States Became the Largest Net Debtor in the World cits • Government Policies to Stimulate Saving • Crowding Out and the Debate over the 2009 Fiscal Stimulus Package • Balance of Payments Accounts Chapter Money and ation • Testing the Quantity Theory of Money • Testing the Fisher Effect • The Zimbabwean ation • The Monetary Aggregates Chapter Appendix The Money Supply Process • Quantitative Easing and the Money Supply 2007–2013 Chapter The Sources of Growth and the Solow Model • Evidence on Convergence, 1960–2012 • U.S Growth Rates in the Postwar Period • China’s One-Child Policy and Other Policies to Limit Population Growth Chapter Drivers of Growth: Technology, Policy, and Institutions • Does Population Growth Improve Living Standards? • Government Measures to Increase Human Capital • The World Bank’s Doing Business • Does Foreign Aid Work? Chapter Business Cycles: An Introduction Chapter The IS Curve • Leading Economic Indicators • The Vietnam War Buildup, 1964–1969 • The Fiscal Stimulus Package of 2009 Chapter 10 Monetary Policy and Aggregate Demand • Movements Along the MP Curve: The Rise in the Federal Funds Rate Target, 2004–2006 • Shifts in the MP Curve: Autonomous Monetary Easing at the Onset of the 2007–2009 Financial Crisis Chapter 11 Aggregate Supply and the Phillips Curve • The Phillips Curve Tradeoff and Macroeconomic Policy in the 1960s Chapter 12 The Aggregate Demand and Supply Model ation, 1980–1986 • Negative Demand Shocks, 2001– 2004 • Negative Supply Shocks, 1973–1975 and 1978–1980 • Positive Supply Shocks, 1995–1999 • Negative Supply and Demand Shocks and the 2007–2009 Financial Crisis • The United Kingdom and the 2007–2009 Financial Crisis • China and the 2007–2009 Financial Crisis APPLICATIONS apply the analysis in each chapter to explain important real-world situations POLICY AND PRACTICE c examples of policies and how they were executed Chapter 13 Macroeconomic Policy and Aggregate Demand and Supply Analysis ation • Nonconventional Monetary Policy and Quantitative Easing • The Federal Reserve’s Use of the Equilibrium Real Interest Rate, r* • The Activist/Nonactivist Debate Over the Obama Fiscal Stimulus Package • The Fed’s Use of the Taylor Rule • Abenomics and the Shift in Japanese Monetary Policy in 2013 Chapter 14 The Financial System and Economic Growth • The Tyranny of Collateral • Is China a Counter-Example to the Importance of Financial Development to Economic Growth? Chapter 15 Financial Crises and the Economy • The Mother of All Financial Crises: The Great Depression • The Global Financial Crisis of 2007–2009 Chapter 16 Fiscal Policy and the Government Budget MACROECONOMICS IN THE NEWS boxes introduce relevant news articles and data from the daily press and explain how to read them • Was the Fed to Blame for the Housing Price Bubble? • The Federal Reserve’s Nonconventional Monetary Policies and Quantitative Easing During the Global Financial Crisis • Japan’s Lost Decade, 1992–2002 • Debate Over Central Bank Response to Bubbles • The Entitlements Debate: Social Security and Medicare/Medicaid • The European Sovereign Debt Crisis • Tax Smoothing • The 2009 Debate Over Tax-Based Versus Spending-Based Fiscal Stimulus • Two Expansionary Fiscal Contractions: Denmark and Ireland • The Debate Over Fiscal Austerity in Europe • The Bush Tax Cuts and Ricardian Equivalence Chapter 17 Exchange Rates and International Economic Policy • The Global Financial Crisis and the Dollar • Why Are Exchange Rates So Volatile? • How Did China Accumulate Over $3 Trillion of International Reserves? • Will the Euro Survive? • The Collapse of the Argentine Currency Board • Foreign Exchange Rates Chapter 18 Consumption and Saving • Consumer Confidence and the Business Cycle • Housing, the Stock Market, and the Collapse of Consumption in 2008 and 2009 • The 2008 Tax Rebate • Behavioral Policies to Increase Saving • The Consumer Confidence and Consumer Sentiment Indices Chapter 19 Investment • Stock Market Crashes and Recessions • U.S Government Policies and the Housing Market Chapter 20 The Labor Market, Employment, and Unemployment • Why Has Labor Force Participation of Women Increased? • Why Are Income Inequality and Returns to Education Increasing? • Why Are European Unemployment Rates Generally Much Higher Than U.S Unemployment Rates? • Unemployment Insurance and Unemployment • Minimum Wage Laws Chapter 21 The Role of Expectations in Macroeconomic Policy • The Consumption Function • A Tale of Three Oil Price Shocks • The Political Business Cycle and Richard Nixon • The Demise of Monetary Targeting in Switzerland • Ben Bernanke and the Federal Reserve Adoption of Inflation Targeting • The Appointment of Paul Volcker, ation Hawk Editor in Chief: Donna Battista Executive Acquisitions Editor: Adrienne D’Ambrosio Acquisitions Editor: Christina Masturzo Program Manager: Carolyn Philips Editorial Assistant: Patrick Henning Executive Marketing Manager: Lori DeShazo Managing Editor: Jeff Holcomb Project Manager: Alison Eusden Operations Specialist: Carol Melville Senior Art Director: Jonathan Boylan Cover Art: Pal Teravagimov/Shutterstock MyEconLab Content Project Manager: Noel Lotz Executive Media Producer: Melissa Honig Associate Project Manager, Rights and Permissions: Samantha Graham Full-Service Project Management and Composition: Cenveo® Publisher Services Printer/Binder: R.R Donnelly/Willard Cover Printer: Lehigh-Phoenix/Hagerstown Text Font: Palatino LT Std Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text FRED® is a registered trademark and the FRED® logo and ST LOUIS FED are trademarks of the Federal Reserve Bank of St Louis, http://research.stlouisfed.org/fred2/ Microsoft® and Windows® are registered trademarks of the Microsoft Corporation in the U.S.A and other countries Screen shots and icons reprinted with permission from the Microsoft Corporation This book is not sponsored or endorsed by or affiliated with the Microsoft Corporation Copyright © 2015, 2012 by Frederic S Mishkin All rights reserved Manufactured in the United States of America This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your request to 201-236-3290 Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or all caps Cataloging-in-Publication Data is on file at the Library of Congress 10 ISBN 10: 0-13-342431-6 ISBN 13: 978-0-13-342431-7 To My Mom This page intentionally left blank Brief Contents PART 1 Introduction Chapter The Policy and Practice of Macroeconomics Chapter Measuring Macroeconomic Data 19 PART PART PART PART PART PART Macroeconomic Basics 48 Long-Run Economic Growth 144 Business Cycles: The Short Run 204 Chapter Aggregate Production and Productivity 50 Chapter Saving and Investment in Closed and Open Economies 73 Chapter Money and Inflation 101 Chapter The Sources of Growth and the Solow Model 146 Chapter Drivers of Growth: Technology, Policy, and Institutions 178 Chapter Business Cycles: An Introduction Chapter The IS Curve Chapter 10 Monetary Policy and Aggregate Demand Chapter 11 Aggregate Supply and the Phillips Curve Chapter 12 The Aggregate Demand and Supply Model Chapter 13 Macroeconomic Policy and Aggregate Demand and Supply Analysis 207 231 251 281 299 327 Finance and the Macroeconomy 370 Macroeconomic Policy 425 Microeconomic Foundations of Macroeconomics 492 Chapter 14 The Financial System and Economic Growth 372 Chapter 15 Financial Crises and the Economy 391 Chapter 16 Fiscal Policy and the Government Budget 427 Chapter 17 Exchange Rates and International Economic Policy 450 Chapter 18 Consumption and Saving 494 Chapter 19 Investment 523 Chapter 20 The Labor Market, Employment, and Unemployment 544 vii      viii     brief Contents PART Business Cycle Analysis 8 Modern and Macroeconomic Policy 571 Chapter 21 The Role of Expectations in Macroeconomic Policy 573 Chapter 22 Modern Business Cycle Theory 597 Epilogue 619 Web Chapter Financial Crises in Emerging Market Economies Go to the Companion Website, www.pearsonhighered.com/mishkin Contents Preface xxxi PART 1 Introduction Chapter The Policy and Practice of Macroeconomics Preview The Practice of Macroeconomics The Process: Developing Macroeconomic Models The Purpose: Interpreting Macroeconomic Data Macroeconomic Policy How Can Poor Countries Get Rich? Is Saving Too Low? Do Government Budget Deficits Matter? How Costly Is It to Reduce Inflation? How Can We Make Financial Crises Less Likely? How Active Should Stabilization Policy Be? Should Macroeconomic Policy Follow Rules? Are Global Trade Imbalances a Danger? 10 11 11 12 12 13 13 How We Will Study Macroeconomics 13 Emphasis on Policy and Practice 13 Concluding Remarks 14 Summary Key Terms Review Questions Problems Data Analysis Problems 15 15 15 16 17 Chapter Measuring Macroeconomic Data Preview Measuring Economic Activity: National Income Accounting Measuring GDP: The Production Approach Market Value Final Goods and Services Newly Produced Goods and Services Fixed Period of Time POLICY AND PRACTICE: Can GDP Buy Happiness? Stocks Versus Flows 19 19 19 20 20 21 23 23 23 24 Measuring GDP: The Expenditure Approach 24 Consumption Expenditure Investment Government Purchases Meaning of the Word Investment Net Exports Changes in the Spending Components of GDP over Time 25 26 26 26 27 27 ix      www.downloadslide.com I-9      Interest rates, 502–506, 503f, 505f equilibrium and, 264f, 266–267, 267f for Federal Home Loan ­Mortgage Corporation, 40 and inflation, 116, 117f measurement of, 40–42, 41n6, 42f money market and, 263–267, 264f, 267f, 267n4, 268f types of, 40, 40f for U.S Treasury bills, 40, 117 Interest rates, nominal federal funds rate and, 252 real and, 41–42, 42f, 43, 46, 49 Interest rates, real consumer spending and, 82–83, 83f consumption expenditure and, 233 falling, 86, 87 for investments, 235 net export and, 235–236, 236n3 nominal and, 41–42, 42f, 43, 46, 49 planned investment spending and, 234 rising, 87 world, 89, 91–92 International Monetary Fund (IMF), 188 Interstate Highway System, U.S., 180 Intertemporal budget constraint in action, 495–497, 495n3, 496f optimization of, 499–500, 500f preferences of, 498–499 present discounted value and, 497–499, 498f Intertemporal choice, 518 consumption and theory of, 495 model, 500–506, 501f, 503f, 505f Intertemporal marginal rate of substitution, 499 Intuition IS curve and, 238–239 behind money multiplier, 138–139, 139n3 results, 357 Inventories, 22 Inventory investment component, 232–233 GDP and, 22 holding, 534–535 theory of, 535–536 Investment, 49, 80, 81f, 97–100 bank, 373 “bathtub model” and, 152, 153, 154f business fixed, 523 capital government, 438 categories, 24–26, 25t closed economy, changes in saving and, 84–89, 86f, 87n2, 88f closed economy, saving and, 81–84, 83f curve, 88–89, 88f definition of, 26 depreciation and, 150–151, 151f determinants of, 532t–534t diagram, saving-, 83f, 84, 240–241, 241f expenditure, 24–26, 25t fixed, 25t, 26, 233 function, 149–150, 150f, 150n3, 151f GDP and, 24–26, 25t, 27–28, 28f levels, 83f, 84 neoclassical theory on, 524–534, 527f, 528f, 529f, 530f, 532t–534t net foreign, 77 open economy, saving and, 89 planned, 235 real interest rates for, 235 residential, 25t, 26, 523, 537–538, 538f rise in, 88–89, 88f small open economy, changes in saving and, 92–95, 93f, 94f, 95f spending, 523–524, 524f tax credit, 89 See also Government investment; Inventory investment Investment, autonomous analysis, 83f, 84 changes in, 87f, 88–89 as component, 235 monetary policy and, 300, 300t, 301 spending, 246 Investment spending, planned, 232 fixed, 233 inventory, 233–234 real interest rates and, 234 Iraq War (2002), 433 IRAs See Individual Retirement Accounts Ireland, 385, 406, 447, 448 IS curve, 247 comprehension of, 238–241, 240f, 240n7, 241f intuition and, 238–239 with numerical example, 239 planned expenditure and, 231–232 saving-investment diagram and, 240–241, 241f shift in, 241–246, 242f, 243f, 244f, 246t, 259–261, 260f, 261n3, 262f Italy, 161, 448 Japan, 161 convergence and, 154–155, 155f lost decade of, 414–415 per capita income of, 53–54, 54t, 147–148, 148f post-war, 156 Jay Cooke & Company, 218, 396 Jewelry, 103 Job creation, 17 Johnson, Lyndon B., 281, 283 Jorgenson, Dale, 524 J.P Morgan, 408 Katz, Lawrence, 181, 560 Kennedy, John F., 281, 283 Kenya, 147f, 148 Keynes, John Maynard, 221, 223, 231, 232, 235, 263, 273, 279, 506 Keynesian model, new, 612–615, 613f, 624–627 basis of, 572, 601–602 building blocks of, 602–605, 602f comparison of, 611 fluctuations in, 605–606, 606f objections to, 606–607 Keynesian model, traditional, 207, 226, 607, 612, 613f, 615, 624–627 comparison of, 611 on consumption, 506–507 on economic fluctuations, 221–222 long run and, 222–223, 222t short run and, 222–223, 222t theories of money demand, 273–275, 274n1 King, Robert, 384 Klenow, Peter, 225 Kleptocracies, 187 Knickerbocker Trust Company, 218, 396 Kremer, Michael, 197 Krueger, Alan, 560 Kuznets, Simon, 19 Kydland, Finn, 578 Labor costs, 60 factor prices, demand for capital and, 60–62, 60n7–9, 61n10 factor prices and supply of ­capital, 62, 63f growth of, 66t www.downloadslide.com I-10 Labor (cont.) hoarding, 600 input, 56, 56f levels, 160n8 measurement of, 51 productivity of, 51–52, 53n3, 65n11, 167n10 Romer model and, 189–190 unit of, 65n11 See also Marginal product of labor Labor demand, 60–62, 60n7–9, 61n10 changes in, 549–550, 550f, 550n3 Labor force excluded from, 37 types of, 37–38 women in, 551–554, 551f, 552f, 553f, 554f Labor-force participation rate, 38–39, 39f Labor income concept of real, 64–65 share, 65 Labor market, U.S demand curve and, 547, 548–549, 548f developments in, 544–546, 545f, 546f, 547f equilibrium in, 549 real wages for, 546, 547f supply curve and, 547, 549, 549n1–2 unemployment rate for, 546, 547f Labor supply capital supply and factor prices, 62, 63f changes in, 550–551, 551f Laffer, Arthur, 445–446 Lags, 343–345 Land as collateral, 380–381 legal title to, 381 Latin America, 16, 147–148, 147f Law common, 184, 185 of one price, 463–464 reading of, 186 Lawyers, 185 Legal system economic growth and, 185 effective, 178 enforcement of contracts within, 184–185, 184t origins of, 184–185, 184t property rights and, 183–185, 184t resouces for, 184–185 Legislative lag, 343 Lehman Brothers, 216, 319, 320, 396, 407 Leisure, 549 Lender-savers, 373, 373f, 374, 396 Leverage cycle, 393 Levine, Ross, 384 Liabilities currency in circulation as, 125–126 definition of, 373 monetary, 125–126 primary, 375, 375t reserves as, 125–126 LIBOR See London Inter-Bank ­Offered Rate Life -cycle consumption function, 511–515, 514f -cycle hypothesis, 511–515, 514f expectancy, 23 Liquidity constraints, 452, 504–506, 505f money demand and, 263 of other assets, 276 preference framework, 263, 269 preference function, 263, 275 preference theory, 263 provision, 359, 359f trap, 277, 277n3 Liquidity preference, theory, 263 Literacy, 23 Loan car, 119–120 obtaining, 381 private, 377 Loans, discount as asset, 125, 126, 128 effects of, 128–129 Loan-to-value ratio, 403 London Inter-Bank Offered Rate (LIBOR), 40 Lucas, Robert, 146, 576 Lucas critique consumption function and, 577 econometric policy evaluation and, 576 of policy evaluation, 576–581 Maastricht Treaty, 329 Macroeconomic analysis, 575–576 Macroeconomic data interpretation of, 5–9, 5f, 6f, 7f, 8f, 9f measurement of, 19–20 Macroeconomic models, 4–5, 4f, 24 Macroeconomic policy during 1960s, 283 issues, 9–13, 10f, 11f, 12f, 16–17 objectives of, 327–330, 327n1, 328n2, 329n4 rule and, 13 Macroeconomics agreement on, 619–624 disagreement on, 624–628 finance and, 370–371 practice of, 3–9, 4f, 5f, 6f, 7f, 8f, 9f, 15–16 study of, summary on, 15 time horizons in, 221–223, 222t Macroeconomic variables, 226 business cycle and, 211–216, 212f, 213f, 214f, 215f, 216f, 217f, 218f financial variables and, 215, 215f, 216f, 217f, 218f inflation and, 212, 214f real GDP and, 211–212, 213f unemployment and, 212, 214f Managed float regime, 477 Mandate-consistent inflation ­objective, 588 Marginal product decline of, 55–56, 55f, 56f diminishing, 55 Marginal product of capital (MPK) calculation for, 57, 57n5 indication of, 55–56, 55f real rental price of capital and, 61, 61n10 supply shock and, 58f, 59, 59n6 Marginal product of labor (MPL) calculation for, 57, 57n5 indication of, 56, 56f real wage rate and, 61, 61n10, 64–65 supply shocks and, 58f, 59, 59n6 Marginal propensity to consume, 233, 506 Marginal rate of substitution, 499 Marginal rate of substitution, intertemporal, 499 Market -clearing assumption, 601 financial, 216, 405–406 operations, open, 105 power, 223 value of goods and services, 20–22 See also Goods market ­equilibrium www.downloadslide.com I-11      Market equilibrium, 152 concept of, 62 factor prices and, 62–64, 63f Marshall Plan, 189, 189n13 Massachusetts Institute of Technology (MIT), 182 McCallum, Bennet, 576, 578 Measuring Business Cycles (Burns & Mitchell), 207 Medicaid, 434 Medicare, 26, 427, 434 Meltzer, Alan, 578–579 Merrill Lynch, 407 Mexico, 147f, 148 Microcredit, 374 Microeconomic models, 3–5, 4f Microeconomics rationale, 575 study of, Mihov, Ilian, 225 MIT See Massachusetts Institute of Technology Mitchell, Wesley, 207, 209 Monetary aggregates, 121 Fed and, 106–107, 107t, 108f M1, 106–107, 107t, 108f M2, 106–107, 107t, 108f measures of, 107t usage of, 108f Monetary base, 141 control of, 126–129 Fed’s, 125–126 nonborrowed, 129, 133 U.S Treasury’s, 125–126 A Monetary History of the United States (Friedman & Schwartz), 579 Monetary neutrality, 350 Monetary policy, 269, 364 autonomous, 300, 300t autonomous consumption ­expenditure and, 300, 300t, 301 autonomous easing of, 254, 255f, 256 autonomous investment and, 300, 300t, 301 autonomous net exports and, 300, 300t, 301 autonomous tightening of, 254 equilibrium real interest rate and, 330–331, 331n5, 332f Fed and, 251–252 financial friction and, 300, 300t, 302 government purchases and, 300, 300t, 301 management of, 12 nonconventional, 358–359, 358f shift in Japan’s, 362–363, 363f taxes and, 300, 300t, 301 Taylor principle and, 253–254, 253n1, 254n2 at zero lower bound, 355–363, 356f, 358f, 359f, 361f zero lower bound and, 355–363, 356f, 358f, 359f, 361f, 364 Monetary policy, inflationary causes of, 350–354, 351f, 353f Great Inflation and, 351f, 353f, 354–355, 354f Monetary policy curve (MP), 205 inflation rate and, 252, 253f movements along, 253f, 254–255, 255f, 256f shifts in, 254, 255f, 256, 256f, 261, 266f Taylor Rule and, 335f, 342f, 346–347, 347f upward slope of, 253–254, 253n1, 254n2 usage of, 251 Monetary union, 480–481 Money, 121 balances, real, 263 demand curve for, 264, 264f forms of, 103 functions of, 102–103 government-issued, 449–450, 449n13 growth rates and inflation, 114, 114f high-powered, 126 meaning of, 102 measurement of, 106–108, 107t, 108f as medium of exchange, 102–103 neutrality of, 112 printing, 449 quantity of, 101 quantity theory of, 109–114, 109n3, 113f, 114f simple curve for, 264f, 265 as stock, 102 as store of value, 103 as unit of account, 103 velocity of, 109–110, 109n3 wealth and, 102 Money demand, 279 evidence on, 276–278, 277n3, 277t factors, 110, 276 interest rates and, 277, 277n3 Keynesian theories of, 273–275, 274n1 liquidity and, 263 portfolio theories of, 275–276, 275n2, 279 precautionary motive of, 273–274 speculative motive of, 273–274 stability of, 278 transaction motive of, 273 Money market equilibrium in, 264f, 265 interest rates and, 263–267, 264f, 267f, 267n4, 268f Money multiplier concept, 136–137 deriving, 137–138 intuition behind, 138–139, 139n3 Money supply control of, 104–106, 104f determination of, 133–136, 134t, 135f, 136t process, 125–140, 132t, 134t, 135f, 136t, 139n3 quantitative easing and, ­135–136, 135f, 136t responses, 139–140 Monitoring, 378 Monopoly, 223 Moral hazard, 376, 392, 398–399, 398f Mortgage loans, 381 subprime, 400 Mortgage market, subprime collapse of, 207 problems with, 401 MPK See Marginal product of capital MPL See Marginal product of labor Mugabe, Robert, 115, 187 Multiplier expenditure, 441–442 fiscal, 443–444, 444f tax, 440–442, 441f, 441n8 See also Money multiplier Mutual funds, 375, 375t Myopia, 45 The Mystery of Capital (De Soto), 186, 380 NAIRU See Non-accelerating inflation rate of unemployment Napoleonic Code, 184 National Bureau of Economic ­Research (NBER), 209, 209n2 National Central Banks (NCBs), 106 www.downloadslide.com I-12 National income to capital owners, 64–68, 66t, 67f, 69, 70 distribution of, 64–68, 66t, 67f, 69–71 GDP and, 30t identity, 24–26, 25t measurement of, 30–31, 30t to workers, 64–68, 66t, 67f, 69, 70 National income accounting fundamental identity of, 20 government spending and, 24–26, 25t invention of, 19 system, 20 National Income and Product ­Accounts, 19 National Institutes of Health, 182 National saving, 80, 81f, 451 calculation of, 75 policies to stimulate, 76 rate, 75–76, 159 reduction in, 438 National Science Foundation, 182 NBER See National Bureau of Economic Research NCBs See National Central Banks Neoclassical synthesis, new, 619 Neoclassical theory on investment, 524–534, 527f, 528f, 529f, 530f, 532t–534t Net capital outflow, 77–78, 77n1, 92 Net capital outflow identity, 77–78, 77n1, 80, 81f Net domestic product, 30 Net export, 232 autonomous, 236, 237, 237n4, 245, 300, 301t, 302 function, 236 GDP and, 24–25, 25t, 27, 27n2 imports and, 27, 27n2 real interest rates and, 235–236, 236n3 U.S trade deficits and, 27–28, 28f, 77 Net factor income, 30, 30t Net foreign assets, 78–79, 78f Net worth, 375, 375t New York Times, 344 New Zealand, 184, 329 Nigeria oil of, 50 per capita income of, 147–148, 147f Nixon, Richard, 580 Nominal anchor, 593 benefits of, 582 commitment to, 623 role of, 582–587, 583f, 585f, 586f Non-accelerating inflation rate of unemployment (NAIRU), 287 North, Douglass, 183 North America, 147–148, 147f Northern Rock, 405–406 Norway, 23 Obama, Barack, 87, 344, 427, 433, 440, 442, 560 Objects, 179 Objects, rival, 179 OECD See Organization of ­Economic Cooperation and Development Office of the Controller of the ­Currency, 408n8 Ohio Life Insurance and Trust Company, 396 Oil embargo, 313 of Nigeria, 50 price shocks, 585–587, 585f, 586f shocks, 66–68, 67f, 354 wealth, 50 Okun’s law, 288–291, 288f, 289f, 289n8–9 OPEC See Organization of the ­Petroleum Exporting Countries Open market purchase, 127 sale, 127 Open market operations bank system and, 127–128 factors of, 105 Fed’s, 127 securities and, 126 Optimal forecast, 574 Organization of Economic ­Cooperation and Development (OECD), 23, 154 Organization of the Petroleum Exporting Countries (OPEC), 59, 313 Originate-to-distribute, 401 Output, 87 aggregate, 85, 112 capital and, 55–56, 55f, 56f domestic, 27n2 gap, 209, 293–294, 294f levels, 156, 158 natural rate of, 287 per capita income, 195, 195t potential, 208–209, 208t technology as production, 178–179 value of, 20–21 Parmalat, 382 Patents, 181, 182–183 Payment interest, 27, 31 technology, 27, 273 PCE See Personal consumption expenditure deflator Peg, crawling, 482 Pegging advantages of, 482–483 disadvantages of, 483–484 foreign exchange rate, 482–484 Pension funds, 375, 375t People’s Bank of China, 322 Percentage change method, inflation rate and, 36–37 Permanent income hypothesis, 508, 509–510, 509f, 510f Personal consumption expenditure, 24–25, 25t, 27–28, 28f, 43 Personal consumption expenditure deflator (PCE), 34, 36f, 43 Peru, 186 Phelps, Edmund, 284 Philippines, 380 Phillips, A W., 281 Phillips curve, 205, 295 after 1960s, 284f, 285 accelerationist, 287 analysis, 282–283, 282f analysis, Friedman-Phelps, 283–285, 283n3–4, 284f concept, 281–282 expectations-augmented, 284–285, 284f long-run, 284f, 285 modern, 285–287, 286n5 short-run, 285 short-run aggregate supply curve and, 291 tradeoff, 283 Policy conduct, 577–579 discretionary, 13 implementation, 343–345 key, rule-determined, 13 trilemma, 479–480, 480f Policy makers, 578, 593 activist, 343, 344–345 debate of, 344–345 economic activity and, 343–344 nonactivist, 343, 344–345 www.downloadslide.com I-13      Population engaged in R&D, 192–193, 193f increase in, 195, 195f Population growth changes in, 161 living standards and, 196–197, 196f policies limiting, 163 Real GDP and, 161–163, 162f, 163f in Solow growth model, 159–163, 160f, 160n8, 162f, 163f steady state and, 159–161, 160f, 160n8 “Pork” spending, 438 Portfolio theories of money ­demand, 275–276, 275n2, 279 Portugal, 154–155, 155f Poverty, 50, 189n12 See also Countries, poor PPP See Theory of purchasing power parity Prescott, Edward, 578 Price changing, 223–224 controls, 313 of currency, 235–236, 236n3 deflator for GDP, implicit, 33–34, 33n4, 36f, 43 as flexible, 111 fluctuation of, 119 of goods and services, 33 inflation and, 7–9, 8f, 9f level, 32 market, 59–60 relative, 118–119, 120 setting, staggered, 224 shocks, 292, 293f stability, 329, 620 See also Factor prices; Sticky prices Price index inflation and, 33 inflation rate and, 36, 36f See also Consumer price index Prime rate, 40 Principal-agent problems, 401 Production, 49 approach to GDP, 20–24, 24f, 43, 44 changes in R&D, 194, 194f conventional inputs, 179 factors of, 50–51 function, 51–52, 190 function and Romer model, 190 of goods and services, 20, 21 inputs, 178 just-in-time, 534 smoothing, 535 tax on, 430 total, 20 Production, aggregate, 50–59, 51n1, 53n3, 54t, 55f, 56f, 58f, 69, 70 Production function, aggregate, 69, 70 application of, 52–54, 53n3, 54t changes in, 57–59, 58f description of, 51–52 supply shocks and, 57–59, 58f Production function, Cobb-Douglas aggregate, 148 characteristics of, 54–57, 55f, 56f, 69 general form of, 51, 51n1 properties of, 65 Productivity, 199 of capital, 51–52 description of, 51 exogenous, 178 growth in Solow growth model, 164–165, 164f growth of, 66t of labor, 51–52, 53n3, 65n11 policies to promote, 179–183 total factor, 51, 167n10 Profits, 30, 30t Property rights, 103, 178, 199 grabbing hand and, 186–187 institutions and, 183–189, 184t, 186n6, 188n9–11, 189n12–14 legal system and, 183–185, 184t obstacles to, 185–187, 186n6 The Purchasing Power of Money (Fisher), 109 Quantitative easing, 360, 360n12, 410–412 Quantity theory, 121 inflation and, 112–114, 113f, 114f in long run, 113–114, 113f of money, 109–114, 109n3, 113f, 114f price level and, 111–112 in short run, 114, 114f test, 113–114, 113f, 114f Random walk hypothesis, 515–516, 518 Ratio capital-labor, 149 dependency, 433 employment, 38–39, 39f, 544–546, 545f employment-to-population, 544 loan-to-value, 403 sacrifice, 612, 613f Ratio, required reserve changes in, 133 factors of, 126 Rational expectations, 593 concept of, 286n5, 572 policy making and, 573–576, 574n1 revolution, 576 theory, 575–576 R&D See Research and development Reagan, Ronald, 93, 94f, 432 Real estate, 381 Recession, 537 1973–1975, 212 1981–1982, 212 2001, 209 consumer spending during, 212 representations of, 5–6, 5f start of, 209 See also Great Recession Recognition lag, 343 Regulation of financial sector, 381–384 macroprudential, 418 prudential, 384 Regulatory forbearance, 415, 415n9 Reinhart, Carmen, 435 Rent, housing, 21, 30 Rental cost of capital, real concept of, 60–62 notation for, 60n8 Rental price of capital, real concept of, 60–62, 60n8 MPK and, 61, 61n10 negative supply shock’s effect on, 66–68, 67f Repurchase agreements (repos), 404 Research and development (R&D) encouragement of, 181–183 government purchases on, 181–182 patents and, 181, 182–183 population engaged in, 192–193, 193f production changes in, 194, 194f tax incentives for, 181, 182 Reserve Bank of New Zealand, 329 Reserves bank, 126–127 borrowed, 126, 129, 133 excess, 126, 132, 134 Fed, 264f, 265 international, 475 as liabilities, 125–126 required, 126 www.downloadslide.com I-14 Restrictive covenants, 379 Retirement benefits, 29, 30t Returns expected, 275, 487 on saving, 76 to scale, constant, 54 Revaluation, 479 Revenue from goods and services, 60 from seignorage, 450 tax, 31, 73, 75 Ricardian equivalence, 454 bottom line on, 452–453 government budget deficits and, 450–453 implications of, 451 objections to, 452 Risk averse, 275 currency and, 276 definition of, 275 hazard, 376 Rogoff, Kenneth, 435, 589 Rolls-Royce, 78 Romer, Christine, 442 Romer, Paul, 189 Romer model, 189n14, 199 factors affecting, 190–198, 193f, 194f, 195f, 196f, 198f labor and, 189–190 production function and, 190 production of technology and, 190–191, 191f saving and, 197–198, 198f Roosevelt, Franklin Delano, 398 Royal Dutch Shell, 382 Ruble, 108 Rule adoption of, 577 case for, 579 constant-money-growth-rate, 578–579 -determined policy, 13 institutions, 624 macroeconomic policy and, 13 types of, 578–579 See also Taylor Rule Russia, 108 Rwanda, 6, 6f Sachs, Jeffrey, 188, 188n9 St Louis Federal Reserve FRED database, 17–18, 40, 588 Salaries employee, 28–29, 30t non, 65, 66t Samuelson, Paul, 215, 281, 283 Sargent, Thomas, 576 Saving, 49, 97–100 changes in, 85–88, 86f closed economy, changes in investment and, 84–89, 86f, 87n2, 88f closed economy, investment and, 81–84, 83f domestic, 92–93, 93f government policies to ­stimulate, 76 -investment diagram, 83f, 84 open economy, investment and, 89 policies, 517 private, 74, 75f, 87n2 returns on, 76 small open economy, changes in investment and, 92–95, 93f, 94f, 95f uses of, 77–78, 77n1 wealth and, 73–80, 75f, 79f, 80f, 81f See also Government saving; National saving Saving-investment diagram, 240–241, 241f Saving rate, 507 changes in Solow growth model, 156–159, 156n5, 157f, 158f, 159n6 cross-country comparisons of, 11, 11f government, 73 national, 75–76, 159 private, 74, 75f U.S., 10–11, 10f, 17, 73, 75f, 80 of workers, 149–150, 150f SCAP See Supervisory Capital ­Assessment Program Schleifer, Andrei, 187 Schwartz, Anna, 579 Screening, 378 Securities as assets, 125, 126–127 markets, 379–380 mortgage-backed, 400 open market operations and, 126 purchase of, 132 sale of, 373 Securities and Exchange Commission, U.S (SEC), 381–382 Securitization, 400 Seignorage currency, 449, 449n14 revenue from, 450 Seko, Mobutu Sese, 188 Self-correcting mechanism, 364 disappearance of, 357, 358f of economy, 307, 317 Self-employed, 28–30, 30t September 11, 2001 terrorist attacks, 310 Services, 25, 25t Services, goods and final, 20, 21–22 intermediate, 21–22 market value of, 20–22 newly produced, 20, 23 nonmarket, 21 nontradable, 464 price of, 33 production of, 20, 21 in relationship with CPI, 34–35 revenue from, 60 Shelter, 50 Shinzo Abe, 362 Shocks, 364 energy, 59 natural environment, 59 oil, 66–68, 67f technology, 57 See also Supply shocks Singapore, 169 Social Security, 26 benefits, 35 increases, 434 program, 427 Social Security Administration, 433 Solow, Robert, 14, 148, 281, 283 Solow diagram, 152 Solow growth model, 171 algebra of, 176–177 building blocks of, 148–156, 150f, 150n3, 151f, 153f, 154f, 155f, 155n4 concept, 148 dynamics of, 151f, 152–153, 153f limitations of, 166 population growth in, 159–163, 160f, 160n8, 162f, 163f productivity growth in, 164–165, 164f results of, 165–166 saving rate changes in, 156–159, 156n5, 157f, 158f, 159n6 steady state and, 151–152 Solow residual, 167 business cycle fluctuations and, 599, 600f productivity shocks and, 600–601 www.downloadslide.com I-15      South Korea, 155 economic growth of, 146, 169 Real GDP of (2012), 6–7, 6f Sovereign debt crisis, 433–437, 454 Soviet Union, 386 Spain, 448 Speculative attacks, 483–484 Spending autonomous, 235, 245–246 autonomous investment, 246 for capital goods, 26 categories of, 24 components of GDP, 27–28, 28f education, 181 investment, 523–524, 524f “pork,” 438 types of, 232 U.S., 13 See also Consumer spending; Government purchases; Investment spending Stabilization policy active, 13 of economic activity, 328, 328n2, 330–340, 331n5, 332f, 333f, 334n6–7, 335f, 336f, 337n8, 338f, 339f, 341f, 342f effectiveness of, 626 implications for, 608–611, 609t, 610f importance of, Stagflation, 312 Stagnation, 312 Standard of living within countries, 18 differences in, 50 Standard & Poor’s, 405 Stanford University, 35, 182 Statistical discrepancy, 30, 30n3 statistics See Economic statistics Steady state “bathtub model” of, 152, 153, 154f levels, 156 population growth and, 159–161, 160f, 160n8 Solow growth model and, 151–152 solving, 176–177 summary on, 165–166 Sticky prices, 226 empirical evidence for, 224–225 role of, 222–223, 222t sources of, 223–224 Stiglitz, Joseph, 23 Stock, 103 common, 23 concept of, 23–24, 24f -out avoidance, 535 prices, 215, 215f Stock, capital increase of, 55 level of, 524–525, 529–530, 529f, 530f Stock market crash, 398, 398f, 513, 537 effects on, 66–68, 67f Substitution effect, 503, 503n5 Summers, Larry, 591 Supervision of financial sector, 381–384 prudential, 384 Supervisory Capital Assessment Program (SCAP), 408n8 Supply excess, 62–64, 63f, 264f, 265 negative, 318–319, 318f -siders, 445 See also Aggregate supply Supply curve aggregate demand curve and, 299–303, 300t, 303t factors, 266–267, 267f, 267n4 U.S labor market and, 547, 549, 549n1–2 Supply curve, aggregate, 295, 323 factor, 281 long-run, 287–288, 288f Phillips curve and short-run, 291 shifts in, 291–294, 292f, 293f, 294f short- and long-run, 302–303, 303t short-run, 288–291, 288f, 289f, 289n8–9 Supply shocks, 323 aggregate production function and, 57–59, 58f effect of, 58f, 59, 59n6 negative, 58f, 59, 66–68, 67f, 313, 314f permanent, 314–315, 315f, 315n3, 336–337, 336f, 337n8 positive, 58f, 59, 66–68, 67f, 316–317, 317f temporary, 311–313, 312f, 337–340, 338f, 339f, 341f, 342f types of, 57–59 Supply shocks, aggregate credibility and, 584–585, 585f equilibrium and, 311–319, 312f, 314f, 315f, 316f, 318f negative, 313, 314f permanent, 314–315, 315f, 315n3 positive, 316–317, 317f Survey establishment, 39 household, 39 on workers, 39 Sweden, 184 Swiss Interbank Clearing, 581 Swiss National Bank, 581 Switzerland, 7, 8f, 154, 155f, 581 T-account, 127 Taiwan, 169 Targeting exchange rate, 587 inflation, 587–589 nominal GDP, 589–590 Tariffs, 430 TARP See Treasury Asset Relief Plan Tasmania, 197 Tax, 531, 531n3 breaks, 11, 76 capital gains, 76 changes, 85, 244, 244f code, 89 consumption, 76 corporate, 430 credit, investment, 89 distortions, 118–119, 439 federal income, 430 government purchases and, 236–237, 237n5 higher, 11 incentives, 76 incentives for R&D, 181, 182 income, 31, 73, 75 inflation, 450 monetary policy and, 300, 300t, 301 multiplier, 440–442, 441f, 441n8 national sales, 11, 76 negative, 232, 232n1 personal, 430 on production and imports, 430 rates, income, 76 rebate (2008), 510, 511f revenue, 31, 73, 75 smoothing, 439–440 value-added, 76 wedges, 439 Taylor, John, 253, 403 Taylor principle, 267n4, 622 differences, 346 inflation and, 254, 254n2 monetary policy and, 253–254, 253n1, 254n2 Taylor Rule, 579 equation, 345–346 Fed and, 347–348 www.downloadslide.com I-16 Taylor Rule (cont.) as guide, 345–346 MP and, 335f, 342f, 346–347, 347f in practice, 347–348 Teal Book, 331n5 Tech bubble, 310 Technological spillover, 196 Technology, 199 available, 148 endogenous growth theory and production of, 190–191, 191f excludability and, 179 as ideas, 179 payment, 27, 273 as production output, 178–179 Romer model and production of, 190–191, 191f shocks, 57 Theory agency, 392 economic, 3–4, 4f intertemporal choice, 495 inventory investment, 535–536 neoclassical investment, 524–534, 527f, 528f, 529f, 530f, 532t–534t rational expectations, 575–576 Tobin’s q, 536–537, 540 See also Quantity theory Theory of purchasing power parity (PPP), 464 Third World, 183 This Time It’s Different: Eight ­Centuries of Financial Folly ­(Reinhart & Rogoff), 435 Time fixed period of, 23 -inconsistency problem, 578, 622–623 motion studies, 186–187 subscripts, 149–150, 150f Tobin, James, 274, 536–537, 540 Toyota Corolla, 101 Trade, terms of, 460 Trade balance concept, 77, 77n1 decline in, 92 higher, 92 negative, 27, 80, 81f net capital outflow and, 77–78 Trade deficits, U.S dangers of, 13 decline in, 80, 81f goods market equilibrium and, 83f, 88f, 91–92, 91f net export and, 27–28, 28f, 77 Trade imbalances, global dangers of, 13 significance of, Trade surplus of China, 13, 77 goods market equilibrium and, 90–91, 91f Transaction bank, 78 costs, 102–103 forward, 460 motive of money demand, 273 spot, 459–460 Transfer examples of, 232n1 GDP and, 26–27 government income as, 31, 232n1 payments, 428–429 Traveler’s checks, 106, 121 Treasury, U.S monetary base of, 125–126 monetary liabilities of, 125–126 Treasury Asset Relief Plan (TARP), 413 Treasury bills, U.S interest rates for, 40, 117 short-term, 42, 215, 216f Treasury bonds, U.S., ten-year rate for, 40 Treasury securities, U.S., 434 Trump, Donald, 102 UK See United Kingdom UN See United Nations Unemployed chronically, 556 flows, 555 Unemployment business cycle and, 212, 214f cyclical rate, 561 data, duration of, 556 dynamics of, 554–556, 555f employment and, 39 frictional, 328, 556–557, 557n5 inflation and, 282–283, 282f, 620–621 insurance, 26, 557–558 insurance benefits, 26 macroeconomic variables and, 212, 214f measurement of, 37–39, 39f natural rate of, 284, 284n4, 328, 561–566, 562f, 563n7, 564f, 565t spells, 556 structural, 328, 558–559, 559f wage growth and, 281 See also Non-accelerating inflation rate of unemployment Unemployment rate, cross-country comparisons of (2003–2013), 7, 8f Europe’s, 564–565, 564f, 565t factors, 38–39, 39f, 328, 328n2, 546, 546f government spending and, 4–5, 4f during Great Depression, 7, 7f during Great Recession, 7, 7f of Greece, 7, 8f measurement of, 37–39, 39f, 43, 46 post-WWII, 7, 7f of Switzerland, 7, 8f U.S (1929–2013), 7, 7f for U.S labor market, 546, 547f See also Endogenous variables Unions, 560 United Kingdom (UK), 281 financial crisis (2007–2009) of, 319, 320f per capita income of, 147–148, 147f United Nations (UN) Millennium Project, 188 rankings by, 23 United States (U.S.), 96 currency, 108 economic growth of, 146, 168, 169f education in, 180–181 expenditure components for, 29f GDP, 20, 23, 28f, 31, 207, 427 government budget deficits, 11, 12f inflation rate (1910–2013) of, 7–9, 8f as net debtor, 79–80, 80f, 81f per capita income of, 53–54, 54t, 146–148, 148f real GDP per capita of (1900–2013), 5–6, 5f, 6f saving rate of, 10–11, 10f, 17, 73, 75f, 80 spending, 13 unemployment rate (1929–2013) of, 7, 7f Universities, 182 U.S See United States U.S dollar global financial crisis and, 471 value of, 3, 235–236, 236n3 yardstick, 119 Uses-of-saving identity, 77–78, 77n1, 97 Utility, 498 www.downloadslide.com I-17      Value -added tax, 76 of capital, loss of, 30, 30t imputed, 21 market, 20–22 of output, 20–21 present, 497–499, 498f present discounted, 497–499, 498f of U.S dollar, Variables coincident, 211 consumer optimism, 4–5, 4f endogenous, 4–5, 4f exogenous, 4–5, 4f lagging, 211 leading, 211 in macroeconomic models, 4–5, 4f, 24 nominal, 31 real, 32 See also Economic variables Velocity determinants of, 110 of money, 109–110, 109n3 Vietnam War, 156, 243, 243f Vishny, Robert, 187 Volcker, Paul, 309, 355, 590 Volcker Disinflation, 309–310, 309f, 311f Wage controls, 313 efficiency, 560, 561 employee, 28–30, 30t as flexible, 111, 624 growth and unemployment, 281 non, 65, 66t rate, 60 real, 546, 547f Wage, minimum imposed, 559 laws, 559–560 Wage rate, real application of, 66–68, 67f definition of, 60, 60n8–9 explanation of, 65–66, 65n11, 66t growth of, 66t MPL and, 61, 61n10, 64–65 Walk hypothesis, 515–516, 518 Wall Street, 215, 391 Wall Street Journal, 40, 344 Wars, 17, 156, 243, 243f, 313, 433 See also World War I; World War II Wealth, 97–100, 275 amount of, 49 changes in, 512 consumption to, 501, 501f money and, 102 national, 74 oil, 50 saving and, 73–80, 75f, 79f, 80f, 81f See also Countries, rich Weil, David, 169 Welfare, 498 The White Man’s Burden (Easterly), 188 Women, 551–554, 551f, 552f, 553f, 554f Workers discouraged, 37–38, 555 national income to, 64–68, 66t, 67f, 69, 70 number of, 65n11 saving rate of, 149–150, 150f survey on, 39 Work in process, 535 World Bank, 186–187, 382, 385 WorldCom, 382 World War I (WWI), 210t, 218–233, 218n4, 219f World War II (WWII), 103, 431–432, 454 destruction and economic growth post, 156 inflation rate during, 7–9, 8f unemployment rate post-, 7, 7f U.S business cycle post-, 210t, 218–233, 219f Zaire, 188 Zero lower bound fiscal multiplier at, 443–444, 444f monetary policy and, 355–363, 356f, 358f, 359f, 361f, 364 Zimbabwe, 187 hyperinflation in, 115 inflation rate of, 9, 9f www.downloadslide.com This page intentionally left blank www.downloadslide.com Guide to Commonly Used Symbols Symbol Term γ δ ∆ ε λ π πe πT Π ρ τ χ A AD AS B BR c c c C C C d D D e E Ee Epar ER EX f g gA gK gL gY G GC GI i i I I iD iF IM IS k K kG L fraction of population devoted to R&D parameter that indicates how expectations of future inflation affect current inflation responsiveness of inflation to output gap depreciation rate change in a variable real exchange rate responsiveness of real interest rate to inflation rate inflation rate expected rate of inflation inflation target real economic profits price shock tax rate productivity of research and development available technology (total factor productivity) aggregate demand curve aggregate supply curve bonds borrowed reserves consumption per worker currency ratio responsiveness of consumption to real interest rates consumption expenditure currency in circulation autonomous consumption responsiveness of investment to real interest rates checkable deposits demand curve excess reserves ratio nominal exchange rate expected exchange rate fixed exchange rate excess reserves exports financial friction productivity growth rate growth rate of technology (total factor productivity) growth rate of capital growth rate of labor growth rate of output government purchases government consumption government investment investment per worker nominal interest rate investment autonomous investment interest rate on dollar assets interest rate on foreign assets imports IS curve capital per worker (capital-labor ratio) capital Golden Rule capital-labor ratio labor α β www.downloadslide.com Symbol Term LA LP LRAS LRPC m M Md Ms MB MBn MD MP mpc MPK MPL MRS MS n N NX NX P pk PC r r rc ri R R RD RF rr RR s S S sG SG SP SRAS T U Un uc V w W W x y Y YD YP YP Ype YT labor devoted to producing new technology labor devoted to producing goods and services long-run aggregate supply curve long-run Phillips curve money multiplier money supply demand for money money supply monetary base nonborrowed monetary base money demand curve monetary policy curve marginal propensity to consume marginal product of capital marginal product of labor marginal rate of substitution money supply curve population growth rate (labor force growth rate) population net exports autonomous net exports price or price level real price of unit of capital Phillips curve real interest rate autonomous component of the real interest rate real rental price of capital real interest rate for investments rental price of capital reserves in banking system nominal expected return on dollar assets nominal expected return on foreign assets required reserve ratio required reserves savings per worker supply curve savings or national savings Golden Rule saving rate government savings private savings short-run aggregate supply curve taxes unemployment rate natural rate of unemployment user cost of capital velocity of money real wage rate wage rate initial wealth (assets) responsiveness of net exports to real interest rates income per worker (output per worker) output, income private disposable income potential output permanent income planned expenditure transitory income www.downloadslide.com ® MyEconLab Provides the Power of Practice Optimize your study time with MyEconLab, the online assessment and tutorial system When you take a sample test online, MyEconLab gives you targeted feedback and a personalized Study Plan to identify the topics you need to review Study Plan The Study Plan shows you the sections you should study next, gives easy access to practice problems, and provides you with an automatically generated quiz to prove mastery of the course material Unlimited Practice As you work each exercise, instant feedback helps you understand and apply the concepts Many Study Plan exercises contain algorithmically generated values to ensure that you get as much practice as you need Learning Resources Study Plan problems link to learning resources that further reinforce concepts you need to master ® r Help Me Solve This learning aids help you break down a problem much the same way as an instructor would during office hours Help Me Solve This is available for select problems MyEconLab r eText links are specific to the problem at hand so that related concepts are easy to review just when they are needed Find out more at www.myeconlab.com r A graphing tool enables you to build and manipulate graphs to better understand how concepts, numbers, and graphs connect www.downloadslide.com 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With no unused material or unnecessary expense, Pearson Learning Solutions provides the right content you need for a course that’s entirely your own www.pearsonlearningsolutions.com Contact your Pearson representative for more information on Pearson Choices ... situations POLICY AND PRACTICE c examples of policies and how they were executed Chapter 13 Macroeconomic Policy and Aggregate Demand and Supply Analysis ation • Nonconventional Monetary Policy and. .. 13) • A new Policy and Practice case, “Abenomics and the Shift in Japanese Monetary Policy in 2013” (Chapter 13) • A new Policy and Practice case, “Nonconventional Monetary Policy and Quantitative... finance and macroeconomics, (4) its focus on economic growth, and (5) its international perspective xxxiv     preface Policy And Practice This book emphasizes policy and practice in macroeconomics