Macroeconomics 8th Edition

Chapter 1Introduction to MacroeconomicsLearning Objectives I. Goals of Part I1. Growth of output in United States over time Chapter 1Introduction to MacroeconomicsLearning Objectives I. Goals of Part I1. Growth of output in United States over time Chapter 1 Introduction to Macroeconomics Learning Objectives I. Goals of Part I 1. Growth of output in United States

Additional Issues for Classroom Discussion 1. What Are Societys Major Economic Problems Today? In the first class session, it may be interesting to discuss students perceptions of the major economic problems facing the economy today. Public-opinion polls show that Americans views on the importance of different issues vary sharply over the business

Chapter 10 Classical Business Cycle Analysis: Market-Clearing Macroeconomics Learning Objectives I. Goals of Chapter 10A. Summarize the real business cycle theory and describe how well it accounts for the business cycle facts (Sec. 10.1)B. Discuss the effects of fiscal policy shocks in the classical model (Sec. 10.2)C. Discuss unemployment in the classical model

Data Application An early review of empirical work testing the RBC theory of reverse causation is Shaghil Ahmed, Does Money Affect Output? Federal Reserve Bank of Philadelphia Business Review, July/August 1993. He finds mixed support for reverse causation, but does suggest that money growth is unlikely to be a major factor

Additional Issues for Classroom Discussion 1. Do Wages Adjust to Clear the Labor Market? One of the key assumptions of classical macroeconomic theory is that wages adjust rapidly to bring about equilibrium in the labor market in a relatively short period of time. Is this a reasonable assumption? Some economists look at the

Chapter 11 Keynesianism: The Macroeconomics of Wage and Price Rigidity Learning Objectives I. Goals of Chapter 11A. Summarize the Keynesian explanations for real-wage rigidity (Sec. 11.1)B. Describe the causes and effects of price stickiness according to the Keynesian model (Sec. 11.2)C. Analyze the effects of monetary and fiscal policy in the Keynesian

III. Monetary and Fiscal Policy in the Keynesian Model (Sec. 11.3) A. Monetary policy A. Monetary policy A. Monetary policy 1. Monetary policy in the Keynesian IS-LM model a. The Keynesian FE line differs from the classical model in two respects (1) The Keynesian level of full employment occurs where the efficiency wage line intersects the

Additional Issues for Classroom Discussion 1. Do Lags Eliminate the Effectiveness of Fiscal Policy? Keynesian economists in the past have encouraged the use of fiscal policy to combat recession. They believe that wages and prices do not adjust rapidly enough to bring the economy to full employment in a reasonable period of

Analytical Problems1. In Figures 11.15 and 11.16, point A is the starting point, point B shows the short-run equilibrium afterthe change, and point C shows the long-run equilibrium after the change. Analytical Problems1. In Figures 11.15 and 11.16, point A is the starting point, point B shows the short-run equilibrium afterthe

Chapter 12 Unemployment and InflationLearning Objectives I. Goals of Part 4A. How macroeconomic policy works and how it can best be used Unemployment and InflationLearning Objectives I. Goals of Part 4A. How macroeconomic policy works and how it can best be used Unemployment and Inflation Learning Objectives I. Goals of Part 4 A. How macroeconomic

2. Measuring the natural rate of unemployment a. Policymakers need a measure of the natural rate of unemployment to use the unemployment rate for setting policy b. Economists disagree about how to measure the natural rate of unemployment and the CBO has often revised its measure c. Staiger, Stock, and Watson found that

Additional Issues for Classroom Discussion1. Additional Costs of Anticipated InflationThe interaction of the tax system with inflation. Most countries tax systems are not perfectly indexed for inflation. They impose taxes on nominal, not real, returns on investments (bonds and stocks), which distort the prices on those assets. Also, capital gains

Chapter 13Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy13.2)C. Use the relationship between exchange rates and international trade to develop an open-economy IS-LM model (Sec. 13.3)D. Discuss the international effects of domestic macroeconomic policies (Sec. 13.4)E. Evaluate the strengths and weaknesses of different types of exchange-rate systems

Figure 13.8) Figure 13.7a. The increase in net exports is shown as a shift to the right in the NX curveb. This raises the real interest rate for a fixed level of output, shifting the IS curve up and to 3. Summary Table 18: International factors that shift the IS curvea.

Additional Issues for Classroom Discussion 1. What Other Relationships Are There Between Currencies? In financial markets, there are many relationships between the returns on different assets. In international financial markets, these relationships depend a lot on the exchange rate. Ask your students how they would determine how much money to invest in

Figure 13.17 Foreign IncomeThe effect of an increase in foreign income on the IEB curve is just the opposite of the effect of an increase in domestic income. Suppose that before the increase in foreign income the current and future real exchange rates are represented by point E on IEB1 in

Chapter 14Monetary Policy and the Federal Reserve SystemLearning Objectives I. Goals of Chapter 141. This new sub-section includes a discussion of Monetary Policy in the Great Recession 2. It discusses the Zero Lower Bound and the Feds new tools, includinga. Forward guidance3. We illustrate how the amount of assets on

Figure 14.1 a. This strategy works well if the main shocks to the economy are to the LM curve (shocks to money supply or money demand) b. The strategy stabilizes output, the real interest rate, and the price level, as it offsets the shocks to the LM curve completelyc. But if other shocks

Additional Issues for Classroom Discussion 1. Should the Federal Reserve Be More Responsive to the Public? Central banks in different countries vary dramatically in both their degree of independence from political pressure and the degree of accountability for their actions. Is the U.S. Federal Reserve sufficiently independent and accountable for optimal policymaking?

Chapter 15 Government Spending and Its Financing Learning Objectives I. Goals of Chapter 15 A. Use the measures of government outlays and taxes to measure government surpluses and deficits(Sec. 15.1)B. Describe how government spending and taxing decisions affect the macroeconomy (Sec. 15.2)C. Discuss the economic effects of government deficits and debt (Sec. 15.3)D.

3. The deficit is the change in the debt in a year a. B nominal government budget deficit (15.3)4. A useful measure of governments indebtedness that accounts for the ability to pay off the debt is the debtGDP ratio a. The U.S. debtGDP ratio (text Figure 15.6) fell from over 1

Additional Issues for Classroom Discussion 1. Should the Tax System Be Reformed? People spend a huge amount of resources both paying taxes and preparing tax returns. Should the U.S. tax system be fundamentally reformed? If so, how? To organize the discussion of this issue, you may want to ask your students to think

Chapter 2The Measurement and Structure of the National EconomyLearning Objectives I. Section Goals1. Product approach: the amount of output produced2. Income approach: the incomes generated by production3. Expenditure approach: the amount of spending by purchasersC. Juice business example shows that all three approaches are equal1. Important concept in product approach:

Additional Issues for Classroom Discussion 1. Welfare Does Not Equal GDP You can get students involved in a useful discussion of how our national-income accounts fail to measure our well-being. GDP covers only market activity. Ask your students to come up with some non-market activities that are valuable to society, but which

Chapter 3 Productivity, Output, and EmploymentLearning Objectives I. Goals of Part 2: The Macroeconomics of Full EmploymentA. Analyze factors that affect the longer-term performance of the economyB. Develop a theoretical model of the macroeconomy Productivity, Output, and EmploymentLearning Objectives I. Goals of Part 2: The Macroeconomics of Full EmploymentA. Analyze factors that

Figure 3.6 Theoretical ApplicationThe field of labor economics studies the determinants of labor supply. One of the major issues in Theoretical ApplicationThe field of labor economics studies the determinants of labor supply. One of the major issues in Theoretical Application The field of labor economics studies the determinants of labor supply. One

Additional Issues for Classroom Discussion 1. Is the Unemployment Rate a Good Measure of Economic Distress? Macroeconomists often treat the unemployment rate as the key indicator of the business cycle. But terms like discouraged worker and underemployed suggest that the unemployment rate by itself doesnt reveal the whole picture. A useful topic

Chapter 4Consumption, Saving, and InvestmentLearning Objectives I. Goals of Chapter 4 Chapter 4Consumption, Saving, and InvestmentLearning Objectives I. Goals of Chapter 4 Chapter 4 Consumption, Saving, and Investment Learning Objectives I. Goals of Chapter 4 A. Describe the factors that affect consumption and saving decisions (Sec. 4.1)B. Discuss the factors that affect the investment of

Policy Application Should tax policy be used to promote savings or investment? Many policymakers and economists have argued that obtaining the correct amount of future economic growth requires us to have a higher capital stock, so that we need more investment than we have. They suggest tax policies like IRAs to

Additional Issues for Classroom Discussion1. Do You Believe in Ricardian Equivalence?Economists have debated the idea of Ricardian equivalence for some time now (Robert Barros classic 2. The Interaction of Taxation and InflationMacroeconomists like to debate whether the central bank should drive inflation down to zero or merely maintain it at

3. (a) The temporary increase in the price of oil reduces the marginal product of labor, causing the labor demand curve to shift to the left from ND1 to ND2 in Figure 4.10. At equilibrium, there is a reduced real wage and lower employment. Figure 4.10 The productivity shock results in a reduction

Chapter 5Saving and Investment in the Open EconomyLearning Objectives I. Goals of Chapter 5 Chapter 5Saving and Investment in the Open EconomyLearning Objectives I. Goals of Chapter 5 Chapter 5 Saving and Investment in the Open Economy Learning Objectives I. Goals of Chapter 5 A. Explain how the balance of payments is calculated (Sec. 5.1)B.

Additional Issues for Classroom Discussion1. How Open Is Our Economy?Many people dont realize the extent of our interdependence with other countries. Though net exports are small as a proportion of GDP, imports and exports arent insubstantial, as each is over 10% of GDP today, compared with less than 5% in

Chapter 6Long-Run Economic GrowthLearning Objectives I. Goals of Chapter 6 Chapter 6Long-Run Economic GrowthLearning Objectives I. Goals of Chapter 6 Chapter 6 Long-Run Economic Growth Learning Objectives I. Goals of Chapter 6 A. Discuss the sources of economic growth and the fundamentals of growth accounting (Sec. 6.1)B. Explain the factors affecting long-run living standards in

Additional Issues for Classroom Discussion1. More on Measurement and ProductivityThe textbook discusses some of the issues involved in measurement and productivity. If the quality of outputs isnt accounted for accurately, then increases in quality go unmeasured, and real GDP is higher than is measured. But the implications go even further.

Chapter 77.1)B. Discuss the factors that affect how people choose which assets they own (Sec. 7.2)C. Examine macroeconomic variables that affect the demand for money (Sec. 7.3)D. Discuss the fundamentals of asset market equilibrium (Sec. 7.4)D. Discuss the relationship between money growth and inflation (Sec. 7.5)1. Medium of exchangea. Barter

Additional Issues For Classroom Discussion 1. How Has Technology Changed Money? Ask your students how they think improved technology has changed the role of money in the economy. They might mention such things as ATMs, which allow better access to money in bank accounts; telephone banking and computer

Chapter 8 Chapter 8 Chapter 8 Business CyclesLearning Objectives I. Goals of Part 3A. What causes business cycles?B. How should policymakers respond to cyclical fluctuations? Business CyclesLearning Objectives I. Goals of Part 3A. What causes business cycles?B. How should policymakers respond to cyclical fluctuations? Business Cycles Learning Objectives I. Goals of Part 3 A. What causes business

Additional Issues for Classroom Discussion 1. Should the Government Try to Prevent Recessions? Ask your class if they think the government should try to prevent recessions. Most people do, but some economists are not convinced that the government knows enough to take the right action at the right time. If the timing

Chapter 9 The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Learning Objectives I. Goals of Chapter 9A. Combine the labor market (Chapter 3), the goods market (Chapter 4), and the asset market (Chapter 7) into a complete macroeconomic model (for a closed economy)B. Although the IS-LM model was originally a Keynesian model

4. Since the FE, IS, and LM curves dont intersect, the price level adjusts, shifting the LM curve until a general equilibrium is reached a. In this case the price level rises to shift the LM curve up and to the left to restore equilibrium (Figure 9.8)Figure 9.8 a. In this case the

Additional Issues for Classroom Discussion 1. Where Would We Be Without Equilibrium Forces? Economists generally take for granted that markets work so that powerful economic forces return the economy to general equilibrium. But you may want to discuss with your class what the forces are that bring the economy back to equilibrium.

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1 Copyright 2014 Pearson Education, Inc. Copyright 2014 Pearson Education, Inc. Copyright 2014 Pearson Education, Inc. 11.1 Real-Wage Rigidity 1) The existence of labor unions could contribute to real-wage rigidity, except that in the United States A) labor unions are outlawed. B) most workers aren't in unions.

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14 Answer: An increase in U.S. output or an increase in the foreign real interest rate will cause the supply curve for dollars to shift to the right. A rightward shift in the supply curve causes the exchange rate to depreciate in a flexible-exchange-rate system. An increase in foreign

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13 Answer: (a) MTR = .10. (b) T = 800 + [(27,000 - 8,000) .15] = 3,650. ATR = 3,650/27,000 = .135. MTR = .15. (c) T = 4850 + [(72,000 - 35,000) .25] = 14,100. ATR = 14,100/72,000 = .196. MTR = .25. (d) T = 4850 +

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16 Answer: (a) Higher wealth shifts the labor supply curve left. (b) Lower participation rate shifts the labor supply curve left. (c) Smaller working-age population shifts the labor supply curve left. (d) The lower future wage shifts the labor supply curve to the right and the stock market crash

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18 Answer: The world real interest rate is determined by the aggregate supply of saving and demand for investment in the international capital market. Changes in domestic saving or investment in a small open economy do not affect the interest rate. Diff: 2 Topic: Section 5.3 Question Status: New

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