Macroeconomics: Truths & Myths
Edition: 4
Copyright: 2024
Pages: 329
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Macroeconomics: Truths and Myths introduces macroeconomic concepts in a way that is engaging, while also tackling common misconceptions and myths held by society. Particular emphasis is given to policies which enhance long run economic growth and to exploring the tradeoffs between decisions making for the short term verses the long term.
Macroeconomics: Truths and Myths enables students to understand economic phenomenon such as unemployment, inflation and business cycles while also learning about the institutions that impact economic policy. As the world economy is becoming increasingly interconnected, this book emphasizes how the presence of the international economy works to shape economic events and policies in the US.
Students are presented with the basic theories behind fiscal and monetary policy, and how it is practiced by real life institutions and flawed institutional actors. Macroeconomics: Truths and Myths meets students where they are, explains the pros and cons of fiscal and monetary policy and allows students to add their own subjective criteria to determine for themselves what the “best” policies are.
Preface
Chapter 1: Macroeconomics: An Overview
Wealth Creation and Destruction
Determining Which Economy Is “Best”
Who Plans for Whom?
What’s Ahead
Chapter 2: Production
Measuring Production
Imperfections with GDP
International Comparisons of GDP Per Capita
Opportunity Cost
Production Possibilities and Economic Growth
Chapter 3: Specialization and Trade
Why Trade?
Trade’s Wealth Creating Mathematical Certainty
Trade Agreements
The Balance of Trade
Trade Barriers
Arguments for Trade Restriction
Chapter 4: Long Run Economic Growth
Extensive Growth
Extensive Growth Policies for Natural Resources
The Importance of Property Right Protection
Extensive Growth Policies for Labor
Policies Influencing Family Size
Changes in Immigration and Emigration
Access to Healthcare
Incarceration Rates
Changes in Hours Worked and Labor Force Participation
Extensive Growth Policies for Physical Capital
Greater Accumulation of Physical Goods
Property Rights Protection
Rent Seeking
Tax Incentives for Capital Accumulation
Regulation and Infrastructure
Savings Incentives
Intensive Growth
Incentives for Human Capital Accumulation
Policies That Encourage the Creation of New Technology
Policies That Encourage Entrepreneurship
The Changing Mix of Output in the US
Government Created Obstacles: Bailouts, Tax Codes, and Regulations
Convergence
Chapter 5: Unemployment
Measuring Unemployment, Employment, and Labor Force Participation
Who Is Most Likely to Experience Unemployment?
Types of Unemployment
Seasonal Unemployment
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
Full Employment
Government Policies and Unemployment
Chapter 6: Inflation
Measuring Price Levels
The Impact of Changing Prices
Increased Consumer and Business Uncertainty
Increased Search Costs
Increased Advertising Costs
People on Fixed Incomes and Those Holding onto Cash
Lenders
Bracket Creep and Capital Gains Taxes
Deflation
Problems with Inflation Measurements
Causes of Inflation or Deflation
Chapter 7: Business Cycles and Financial Institutions
Macroeconomic Actors
Consumers
Financial Institutions
Banks, Credit Unions, and Credit Card Companies
Stock and Commodity Markets
Bond Markets, Mutual Funds, and Pensions
Firms
The Government
The Foreign Sector
Business Cycles
Case Study: The Great Recession (2007–2009)
Investment and the Burst of the Housing Bubble
Consumption and the fall of the Dow
Net Exports and the Trade Deficit
Case Study: The Great Recession (2007–2009)
Conclusion
Chapter 8: Aggregate Demand and Aggregate Supply
Aggregate Demand
Factors Which Shift Demand for Output
Changes in Consumption
Policies That Target Consumption
Changes in Investment
Policies That Target Investment
Changes in Government Spending
Policies That Target Government Spending
Changes in Exports
Policies That Target Net Exports
Injections and Leakages
Aggregate Supply
Factors That Shift Aggregate Supply
Macroeconomic Equilibrium
Shifts Away from Full Employment Equilibrium
Recessionary Gap
Inflationary Gap
Stagflation
Long Run Economic Growth
Say’s Law
The Self-Correcting Economy
Self-Correction in a Recessionary Gap
Self-Correction in an Inflationary Gap
Self-Correction in Stagflation
The Self-Correcting Economy in American History
Chapter 9: Keynesian Fiscal Policy and Supply-side Economics
Keynesian Fiscal Policy
Expansionary Fiscal Policy
Contractionary Fiscal Policy
Fiscal Policy During Stagflation
Automatic Stabilizers
Supply-side Economics
Deregulation
Lower Taxes on Income
Lowering Taxes on Savings
Lower Capital Gains Taxes
Lowering Corporate Income Tax Rates
Issues With Supply-side Economics
Conclusion
Chapter 10: Government Spending and Taxing
Government Spending
Mandatory Spending
Social Security and Medicare
Discretionary Spending
Taxes
The Current Federal Tax Structure
Cross Country Comparison of Tax Rates
A Comparison of US State Tax Rates
Tax Efficiency and Fairness
Chapter 11: The National Debt
The US National Debt
The Burden of Government Debt
Debt and Unfunded Liabilities for US States
Unfunded Liabilities and National Governments
Conclusion
Chapter 12: Monetary Policy
Money
Three Functions of Money
Commodity Money
Fiat Money
The Money Supply
The Federal Reserve
Functions of a Central Bank
The History of Central Banking in the US
The Structure of the Federal Reserve
Monetary Policy
An Economy Without a Central Bank
What Is Monetary Policy and Why Is It Often Advocated?
How Does the Federal Reserve Conduct Monetary Policy?
3 Tools of Monetary Policy
Chapter 13: Problems with Fiscal and Monetry Policy
Rent Seeking
Time Lags
Biases of Fiscal Policymakers
Biases of Central Bankers
Inefficiencies Created When Targeting Price Stability
Liquidity Trap and Increased Volatility
Rational Expectations
Chapter 14: Exchange Rates
How Much Is a Dollar Worth?
Floating Exchange Rates
Things That Cause the Demand for the US Dollar to Change
Things That Cause the Supply of The US Dollar to Change
Changes to the Value of a Currency Over Time
Case Study: Argentina’s Exchange Rate
Fixed Exchange Rates
The European Union
Chapter 15: Public Policy in a Global Economy
Fiscal Policy
Expansionary Fiscal Policy
Contractionary Fiscal Policy
Fiscal Policy in Stagflation
Monetary Policy
Expansionary Monetary Policy
Contractionary Monetary Policy
Self-Correction
Foreign Economies' Impact on the Domestic Economy
Barriers in the International Economy
Public Policy Debates
Fiscal Policy Rules vs. Discretion
Monetary Policy Rules vs. Discretion
Revisited: The Pros and Cons of Fiscal and Monetary Policy During a Recessionary Gap
Revisited: The Pros and Cons of Fiscal and Monetary Policy During an Inflationary Gap
Conclusion
Glossary
Answer Key