Macroeconomics

"Really up-to-date...gives a fantastic overview of the financial crisis" Fabian Kreutzer, University of Applied Science Niederrhein, Germany "Extensive references to and content regarding crises. It's really amazing" Yioryos Georgios Makedonis, Queen Mary University of London Using real-world case studies and examples, this comprehensive text offers intermediate and applied macroeconomics students a truly European and global perspective. Continuing to successfully combine theory with application, Macroeconomics has been fully updated in this fifth edition to keep students up-to-date with the ever changing macroeconomic environment we are experiencing today. This book presents macroeconomics as an applied science designed to improve our understanding of current and past policy issues. * The unique mix of theory, analysis and policy issues takes students from macroeconomic basics to cutting-edge research topics * Includes case studies addressing major policy issues in detail, supported by a wealth of economic data * Moves beyond standard intermediate macroeconomics content by discussing liquidity traps, quantitative easing, price bubbles, multiple equilibria, self-fulfilling prophecy, ratings agencies, debt brakes and austerity * Self quizzes, road map, glossary and other content also available for mobile devices Visit www.pearsoned.co.uk/gartner for a comprehensive companion website featuring interactive macroeconomic models equipped with guided exercises, state of the art data display and analysis, quizzes and more.Guided tour of the book List of case studies and boxes Preface Publisher's acknowledgements 1 Macroeconomic essentials 1.1 The issues of macroeconomics 1.2 Essentials of macroeconomic accounting 1.3 Beyond accounting Chapter summary Key terms and concepts Exercises Online resources Recommended reading Appendix: Logarithms, growth rates and logarithmic scales 2 Booms and recessions (I): the Keynesian cross 2.1 The circular flow model revisited: terminology and overview 2.2 Income determination: a first look 2.3 Income determination: a second look 2.4 An intertemporal view of consumption and investment Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 3 Money, interest rates and the global economy 3.1 The money market, the interest rate and the LM curve 3.2 Aggregate expenditure, the interest rate and the exchange rate: the IS curve 80 3.3 The IS-LM or the global-economy model Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 4 Exchange rates and the balance of payments 4.1 Globalization 4.2 The exchange rate and the balance of payments 4.3 Back to IS-LM: enter the FE curve 4.4 Equilibrium in all three markets Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 5 Booms and recessions (II): the national economy 5.1 Fiscal policy in the Mundell-Fleming model 5.2 Monetary policy in the Mundell-Fleming model 5.3 The algebra of monetary and fiscal policy in the Mundell-Fleming model 5.4 Comparative statics versus adjustment dynamics 5.5 Adjustment dynamics with expected depreciation 5.6 When prices move 5.7 Today's exchange rate and the future 5.8 Speculative bubbles Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 6 Enter aggregate supply 6.1 Potential income and the labour market 6.2 Why is there unemployment in equilibrium? 6.3 Why may actual output deviate from potential output? Chapter summary Key terms and concepts Exercises 185 Online resources Recommended reading Applied problems 7 Booms and recessions (III): aggregate supply and demand 7.1 The short-run aggregate supply curve 7.2 The aggregate demand curve 7.3 The AD-AS model: basics 7.4 Policy and shocks in the AD-AS model Chapter summary Key terms and concepts Exercises Online resources Recommended reading Appendix: The algebra of the AD curve 8 Booms and recessions (IV): dynamic aggregate supply and demand 8.1 The aggregate supply curve in an inflation-income diagram 8.2 Equilibrium income and inflation: the DAD curve 8.3 The DAD-SAS model 8.4 Inflation expectations 8.5 The DAD-SAS model at work Chapter summary Key terms and concepts Exercises Online resources Recommended reading Appendix: The algebra of the DAD curve Appendix: The genesis of the DAD-SAS model Applied problems 9 Economic growth (I): basics 9.1 Stylized facts of income and growth 9.2 The production function and growth accounting 9.3 Growth theory: the Solow model 9.4 Why incomes may differ 9.5 What about consumption? 9.6 Population growth and technological progress 9.7 Empirical merits and deficiencies of the Solow model Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 10 Economic growth (II): advanced issues 10.1 The government in the Solow model 10.2 Economic growth and capital markets 10.3 Extending the Solow model and moving beyond 10.4 Poverty traps in the Solow model 10.5 Human capital 10.6 Endogenous growth Chapter summary Key terms and concepts Exercises Online resources Recommended reading Appendix: A synthesis of the DAD-SAS and the Solow model Applied problems 11 Endogenous economic policy 11.1 What do politicians want? 11.2 Political business cycles 11.3 Rational expectations 11.4 Policy games 11.5 Ways out of the time inconsistency trap Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 12 The European Monetary System and the Eurozone at work 12.1 Preliminaries 12.2 The 1992 EMS crisis 12.3 Exchange rate target zones 12.4 Speculative attacks 12.5 Monetary and fiscal policy in the euro area Chapter summary Key terms and concepts Exercises Online resources Recommended reading Appendix: The two-country Mundell-Fleming model Applied problems 13 Inflation and central bank independence 13.1 Inflation, central bank independence and the EMS 13.2 Supply shocks and central bank independence 13.3 D isinflations and the sacrifice ratio 13.4 Lessons for European Monetary Union Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 14 Budget deficits and public debt 14.1 The government budget 14.2 The dynamics of budget deficits and the public debt 14.3 What is wrong with having deficits and debt? 14.4 D oes monetary union need budget rules? 14.5 Government debt and the financial markets Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 15 A closer look at economic crises 15.1 Linking unemployment and growth 15.2 The price of oil (and other raw materials) 15.3 Persistence in the DAD-SAS model 15.4 Financial crises and risk premiums: a closer look 15.5 Quantitative easing: unorthodox monetary policy 15.6 From financial crises to debt crises and austerity 15.7 Lessons learned Chapter summary Key terms and concepts Exercises Online resources Recommended reading Applied problems 16 Sticky prices and sticky information: new perspectives on booms and recessions (I) 16.1 Reality check: business cycle patterns and the DAD-SAS model 16.2 New Keynesian responses 16.3 The Phillips curves and monetary policy rules of current research 16.4 Supply shocks in the DAD-SAS model Chapter summary Key terms and concepts Exercises Online resources Recommended reading 17 Real business cycles: new perspectives on booms and recessions (II) 17.1 Real business cycle philosophy 17.2 A real business cycle model 17.3 A graphical real business cycle Chapter summary Key terms and concepts Exercises Online resources Recommended reading Appendix A: A primer in econometrics A.1 First task: estimating unknown parameters A.2 Second task: testing hypotheses A.3 A closer look at oLS estimation Appendix summary Key terms and concepts Exercises Recommended reading Appendix B: Glossary Online resources Appendix C: Economics Nobel Prize winners and earlier giants Online resources Index