Part I Introduction and Measurement 1 An Overview of Macroeconomics
How Keynes Viewed the Economy's Behavior
Measuring the Economy's Performance
The National Output
Nominal versus Real GDP
Potential GDP
The Price Level
Index Numbers
Patterns of Price Changes
Employment and Unemployment
Labor Force Participation Rate
Fluctuations in Unemployment
The Trade Balance
The Trade Balance in Merchandise
Origins of Contemporary Macroeconomics
Say's Law of Markets
Economics as a Science
Quantity Theory of Money
Keynesian Theory
Monetarism: The Modern Quantity Theory
New Classical Economics
New Keynesian Economics
Post Keynesian Economics
Summary
2 Measuring the Economy's Performance
The Nature and Uses of National Income Accounting
Income and Wealth
The Concept of Income
The Circular Nature of Economic Activity
Using Models in Economics
The Concept of Wealth
The Capital Goods Component of Wealth
The Concept of Human Capital
Interactions between Income and Wealth
Output and Income Measures
Gross Domestic Product
Ex Ante and Ex Post Values
Simon Kuznets: Father of the GDP
Consumption Goods and Services (C)
Investment Goods (I)
Government Purchases of Goods and Services (G)
Transfer Expenditures (TR) and Taxes (TX)
Net Exports (X - M) or (I(f))
Final and Intermediate Goods and Services
Monetary Transactions and Productive Activity
Other Measures of Product and Income
Net National Product
National Income
Personal Income
Disposable Income
Price Indexes and Comparisons Over Time
Limitations Inherent in Aggregate Measures
of Income and Product
Economic versus Social Values
Economic versus Social Costs
The Value of Leisure
Qualitative Changes in the National Output
The Composition of Output
Does GDP Measure Happiness?
The Distribution of the National Output
Income and Output per Capita
Employment and Unemployment
The Meaning of Maximum Employment
Problems in Measuring Unemployment
Employment and Output: The Production Function
Summary
Appendix
Part II The Basic Theory of Income and Employment 3 The Classical System
Functional Relationships in Economics
Classical Economics before Keynes
Three Propositions
Jean Baptiste Say
The Formal Classical Model
Some Microeconomic Foundations for Classical Analysis
The Labor Market
The Concept of Equilibrium
Say's Law and the Classical Theory of Interest
Saving, Investment, and the Rate of Interest
The Theory of the Price Level
The Complete Classical Model
A Classical Aggregate Supply and Aggregate Demand Model
The Classical Aggregate Supply Curve
The Classical Aggregate Demand Curve
The Complete Classical Model of Aggregate Supply and Demand
Real and Nominal Shocks in the Classical Model
Policy Implications of the Classical Theory
Classical Economics and the Great Depression
Summary
4 The Keynesian System
John Maynard Keynes: Architect of a Revolution
The Essence of the Income-Employment Problem
Keynesian Aggregate Supply
Aggregate Supply: A Real-World Example
The Ex Ante Aggregate Supply Curve
Keynesian Aggregate Demand
The Origin of Spending Decisions
Consumption Spending
Investment and Government Spending
Constructing the Keynesian Aggregate
Demand Curve
The Equilibrium Level of Income and Employment
A Numerical Example
Characteristics of the Income Equilibrium
Changes in Income and Employment
The Keynesian Multiplier
Statics and Dynamics
The Keynesian Income-Expenditure Model Summarized
Bringing Economic Policy into the Analysis
A Keynesian-Classical Model
The Keynesian-Classical Aggregate Demand Curve
The Keynesian-Classical Aggregate Supply Curve
The Money Illusion and Aggregate Supply
Macroeconomic Equilibrium in a Keynesian-Classical Context
Comparing the Keynesian-Classical and Classical Views of Aggregate Demand and Aggregate Supply
Summary
5 Money and Interest in the Keynesian System
The Nature of Money
From Gold to Electronic Blips: A Capsule
History of Money
The Functions of Money
Neutral versus Nonneutral Money
The Supply of Money
Money and Its Creation
Measuring the Nation's Money Supply
How Interest Rates Are Determined
The Loanable Funds Theory of Interest
Bond Prices and Interest Rates
The Supply Curve for Loanable Funds
The Demand Curve for Loanable Funds
The Liquidity Preference Theory of Interest
The Significance of Keynesian Interest Theory
Which Theory?
Interest Rates and Aggregate Demand
The Rate of Interest and Investment Spending
Interest Rates and the Trade Balance
Interest Rate Differentials and the Trade Balance
Summary
6 The IS-LM Model
Constructing the IS-LM Model
Sir John Hicks and the IS-LM Curves
Equilibrium in the Goods Sphere
The IS Curve
Equilibrium in the Monetary Sphere
The LM Curve
General Equilibrium
Expanding the IS-LM Model
Changes in the Equilibrium Values of Income and Interest
Shifts in the IS Curve
Shifts in the LM Curve
The Price Level and the IS-LM Model
The Price Level as an Exogenous Variable
The Keynes and Pigou Effects
The Price Level as an Endogenous Variable
Public Policy and the IS-LM Model
Summary
Part III Exploring the Foundations of Aggregate Demand and Aggregate Supply 7 Consumption, Saving, and the Multiplier
The Determinants of Consumption Expenditure
The Keynesian Consumption Function
Technical Attributes of the Consumption Function
The Saving Function
Are Americans Failing to Save Enough?
Empirical Verification
The Equilibrium Income Level
The Identity of Saving and Investment
The Theory of the Multiplier
The Formal Multiplier Process
Algebraic Statement of the Multiplier
Summary Remarks on the Theory of the Multiplier
Putting Theory into Practice: The 1964
Kennedy-Johnson Tax Cut
Consumption and the Multiplier in the IS-LM
Model
Income, Consumption, and Saving in the Long Run
Expanded Theories of Consumption
The Relative Income Hypothesis
The Permanent Income Hypothesis
The Life-Cycle Income Hypothesis
Which Hypothesis?
Other Influences on Consumption
Attitudes toward Thrift
Asset Holdings by the Consumer
The Distribution of Income
The Rate of Interest
Price Changes and Consumer Expectations
Consumer Credit
A Concluding Comment
Summary
8 Investment and Finance
The Investment Decision
Investment and Expected Income
The Costs of Investment
The Basic Framework of Investment Theory
The Discount Formula
The Marginal Efficiency of Capital
Keynes's Investment Demand Schedule (Curve)
Shifts in the Keynesian Investment Demand Schedule (Curve)
The Shape of the Keynesian Investment
Demand Schedule (Curve)
Current Income and Investment Expenditure
The Marginal Propensity to Invest and Equilibrium Income
Induced Investment Expenditure and the Multiplier
Investment and the IS-LM Model
The Acceleration Principle
A Practical Use for the Acceleration Principle
Limitations of the Acceleration Principle
The Flexible Accelerator Hypothesis
Theory and Reality
Financing Investment
Financial Instruments and Real Capital Assets
Pricing Financial Assets
