1. Chapter 1: Limit, Alternative and Choices
1.1. The economic Perpective
1.1.1. Scarcity and Choice
1.1.1.1. Economists call such sacrifices opportunity costs: To obtain more of one thing, society forgoes the opportunity of getting the next best thing. That sacrifice is the opportunity cost of the choice.
1.1.2. Purposeful Behavior
1.1.2.1. Economies assumes that human behavior reflects "rational self-interest." Individuals look for and pursue opportunities to increase their utility—the pleasure, happiness,or satisfaction obtained from consuming a good or service.
1.1.3. Marginal Analysis: Benefits and Costs
1.1.3.1. The economic perspective focuses largely on marginal analysis—comparisons of marginal benefits and marginal costs, usually for decision making
1.2. Theories, Priciples and Models
1.3. Mircoeconomics and Macroeconomics
1.3.1. Microeconomics
1.3.1.1. is the part of economics concerned with individual units such as a person, a household, a firm or industry.
1.3.2. Macroeconomics
1.3.2.1. examines either the economiy as a whole or its basic subdivisions or aggregates, such as the government, household, and business sector.
1.3.3. Positive and Normative Economics
1.3.3.1. Positive economics focuses on facts and cause-ad-effect relationships.
1.3.3.2. Normative economics incorporates value judgments about what the economy should be like or what particular policy actions should be recommended to archieve a desirable goal.
1.4. Individuals' Economizing Problem
1.4.1. Limited Income
1.4.2. Unlimited Wants
1.4.2.1. to pick and choose goods and services that maximize our satisfaction.
1.4.3. A Budget Line
1.4.3.1. Attainalbe and Unattainable Combinatios
1.4.3.2. Trade-Offs and Opportumity Costs
1.4.3.3. Choice
1.4.3.4. Income Changes
1.5. Society's Economizing Problem
1.5.1. Scarce Resources
1.5.2. Resource Categories
1.5.2.1. Land
1.5.2.1.1. Land means much more to the economist than it does to most people. To the economist land includes all natural resources (“gifts of nature”) used in the production process, such as arable land, forests, mineral and oil deposits, and w'ater resources.
1.5.2.2. Labor
1.5.2.2.1. The resource labor consists of the physical and mental talents of individuals used in producing goods and serv ices. The services of a logger, retail clerk, machinist, teacher, professional football player, and nuclear physicist all fall under the general heading “labor.”
1.5.2.3. Capital
1.5.2.3.1. For economists, capital (or capital goods) includes all manufactured aids used in producing consumer goods and services. Included are all factory, storage, transportation, and distribution facilities, as well as tools and machinery. Economists refer to the purchase of capital goods as investment.
1.5.2.4. Entrepreneurial Ability
1.5.2.4.1. The entrepreneur takes the initiative in combining the resources of land, labor, and capital to produce a good or a service. Both a sparkplug and a catalyst, the entrepreneur is the driving force behind production and the agent w'ho combines the other resources in what is hoped will be a successful business venture.
1.5.3. Law of Increasing Opportunity Costs
1.5.3.1. Shape of the Curve
1.5.3.2. Economic Rationable
1.5.4. Optimal Allocation
1.6. Unemployment, Growth and the Future
1.6.1. A Growing Economy
1.6.1.1. Increases in Resource Supplies
1.6.1.2. Advances in Technology
1.6.2. Present Choices and Future Possibilities
1.6.3. A Quanlification International Trade
2. Chapter 2: The Market System and the Circular Flow
2.1. Economic Systems
2.1.1. The Commands System
2.1.2. The Market System
2.2. Charateristics of the Market System
2.2.1. Private Property
2.2.2. Freedom of Enterprise and Choice
2.2.2.1. Freedom of enterprise
2.2.2.2. Freedom of choice
2.2.3. Self-Interest
2.2.4. Competion
2.2.5. Market and Prices
2.2.6. Technology and Capital Goods
2.2.7. Specialization
2.2.7.1. Division of Labor
2.2.7.1.1. Specialization make use of differences in ablity
2.2.7.1.2. Specialization fosters learning by doing
2.2.7.1.3. Specialization saves time
2.2.7.2. Geographic Specialzation
2.2.8. Use of Money
2.2.9. Active, but Limited Govement
2.3. Five Fundamental Question
2.3.1. What Will be Produced?
2.3.2. How Will the Goods and Services Be Produced?
2.3.3. Who Will Get the Output?
2.3.4. How Will the System Accommodate Change?
2.3.5. How Will the System promote Progress?
2.3.5.1. Technological Advance
2.3.5.2. Capital Accumulation
2.4. The "Invisibla Hand"
2.4.1. Efficiency
2.4.2. Incentives
2.4.3. Freedom
2.5. The Demise of the Command Systems
2.5.1. The Coordination Problem
2.5.2. The Incentive Problem
2.6. The Cirular Flow Model
2.6.1. Resource Market
2.6.2. Product Market
3. Chapter 3: Demand, Supply and Market Equilibrium
3.1. Markets
3.2. Demand
3.2.1. Law of Demand
3.2.2. The Demand Curve
3.2.3. Market Demand
3.2.4. Change in Demand
3.2.4.1. Tastes
3.2.4.2. Number of Buyers
3.2.4.3. Income
3.2.4.4. Prices of Relate Goods
3.2.4.4.1. Substitute good is one that can be used in place of another good.
3.2.4.4.2. Complementery good is one that is used together with another good.
3.2.4.5. Substitutes
3.2.4.6. Complements
3.2.4.7. Unrelates Goods
3.2.4.8. Consumer Expectations
3.2.5. Chages in Quantity Demanded
3.3. Supply
3.3.1. Law of Supply
3.3.2. The Supply Curve
3.3.3. Market Supply
3.3.4. Determinants of Supply
3.3.5. Changes in Supply
3.3.5.1. Resource Prices
3.3.5.2. Technology
3.3.5.3. Taxes and Subsidies
3.3.5.4. Prices of Other Goods
3.3.5.5. Producer Expectations
3.3.5.6. Nunber of Seller
3.3.6. Changes in Quantity Supplied
3.4. Market Equilibrium
3.4.1. Equilibrium Price and Quantity
3.4.2. Rationing Function of Prices
3.4.3. Effcient Allcation
3.4.4. Changes in Supply, Demand and Equilibrium
3.4.4.1. Changes in Demand
3.4.4.2. Changes in Supply
3.4.4.3. Comples Cases
3.4.4.3.1. Supply Increase; Demand Decrease
3.4.4.3.2. Supply Decrease; Demand Increase
3.4.4.3.3. Supply Increase; Demand Increase
3.4.4.3.4. Supply Decrease; Demand Decrease
3.5. Application: Government Set Prices
3.5.1. Price Ceilings on Gasonline
3.5.1.1. Graphical Analysis
3.5.1.2. Rationing Problem
3.5.1.3. Black markets
3.5.2. Rent Controls
3.5.3. Price Floors on Wheat
3.5.3.1. Graphical Analysis
3.5.3.2. Additional Consequences
4. Chapter 4: The U.S Economy: Private and Public Sectors
4.1. Household as Income Receivers
4.1.1. The Functional Distribution of Income
4.1.2. The Personal Distribution of Income
4.2. Households as Spenders
4.2.1. Personal Taxes
4.2.2. Personal Saving
4.2.3. Personal Consumption Expenditures
4.3. The Business Population
4.3.1. Plant
4.3.2. Firm
4.3.3. Industry
4.4. Legal Forms of Businesses
4.4.1. Advantages of Corporation
4.4.2. The Pricipal-Agent Problem
4.5. The Public Sector: Government's Role
4.5.1. Providing the Legal Structure
4.5.2. Maintaning Competition
4.5.3. Redistributing Income
4.5.3.1. Transfer payments
4.5.3.2. market intervention
4.5.3.3. Taxation
4.5.4. Reallocating Resources
4.5.4.1. Externalities
4.5.4.1.1. Negative Externalities
4.5.4.1.2. Correcting for Negaive Externalities
4.5.4.1.3. Positive Externalities
4.5.4.1.4. Correcting for Positive Externalities
4.5.4.1.5. Public Goods and Services
4.5.4.1.6. Qusi-Public Goods
4.5.4.1.7. The Reallocation Process
4.5.5. Promoting Stability
4.5.5.1. Umemployment
4.5.5.2. Inflation
4.5.6. Government's Role: A Qualification
4.6. The Circular Flow Revisiter
4.7. Government Finance
4.7.1. Government Purchases and Transfers
4.7.1.1. Government purchases
4.7.1.2. Transfer payments
4.8. Federal Finance
4.8.1. Federal Expenditures
4.8.2. Federal Tax Recenues
4.8.2.1. Personal Income Tax
4.8.2.2. Payroll Taxes
4.8.2.3. Corporate Income Tax
4.8.2.4. Excise Taxes
4.9. State and Local Finance
4.9.1. State Finances
4.9.2. Local Finances
5. Chapter 5: An Inroduction to Macroeconomics
5.1. Performance and Policy
5.1.1. Real GDP (real gross domestic product)
5.1.2. Unumployment
5.1.3. Inflation
5.2. The Mirecle of Modern Economic Growth
5.2.1. Saving, Investment and Choosing between Present and Future Consumption
5.2.1.1. Saving
5.2.1.2. Investment
5.2.1.2.1. Financial investment
5.2.1.2.2. Economic investment
5.2.2. Banks and Other Financial Institutions
5.3. Uncertainty, Expectations and Shocks
5.3.1. Demand Shocks and Flexibla prices
5.3.2. Demand Shock and Sticky Prices
5.4. How Sticky Are Prices?
5.5. Categorizing Macroeconomic Models using Price Stikiness
6. Chapter 6: measuring Domestic Output and national Income
6.1. Assessing the Economy's Performance
6.1.1. Nation income accounting
6.2. Gross Domestic Product
6.2.1. A Monetary Measure
6.2.2. Avoiding Multiple Counting
6.2.3. GDP Excludes Nonproduction Transactions
6.2.3.1. Financial Transactions
6.2.3.1.1. Public transfer payments
6.2.3.1.2. Private transfer payments
6.2.3.1.3. Stock market transactions
6.2.3.2. Secondhand Sales
6.2.4. Two Ways of Looking at GDP: Spending and Income
6.3. The Expenditures Approach
6.3.1. Personal Consumption Expenditures
6.3.2. Gross Privative Domectic Investment
6.3.2.1. Positive and Negative Change in Investories
6.3.2.2. Noninvestment Transactions
6.3.2.3. Gross Investment versus Net Investment
6.3.3. Government Purchases
6.3.4. Net Exports
6.3.5. Putting It All Together: GDP = C + Ig + G + Xn
6.4. The Income Approach
6.4.1. Compensation of Employees
6.4.2. Rent
6.4.3. Interest
6.4.4. Proprietors' Income
6.4.5. Corporate Profits
6.4.5.1. Corporate income taxes
6.4.5.2. Dividends
6.4.5.3. Undistributed corporate profits
6.4.6. Taxes on Production and Imports
6.4.7. From National Income to GDP
6.4.7.1. Net Foreign Factor Income
6.4.7.2. Statistical Discrepancy
6.4.7.3. Consumption of Fixed Capital
6.5. Other National Accounts
6.5.1. Net Domestic Product
6.5.2. National Income
6.5.3. Personal Income
6.5.4. Disposable Income
6.5.5. The Circular Flow Revisited
6.6. Nominal GDP versus Real GDP
6.6.1. Adjustent Process in a One-Product Economy
6.6.1.1. GDP Price Index
6.6.1.2. Dividing Nominal GDP by the Price Index
6.6.2. An Alternative Method
6.6.3. Real-World Considerations and Data
6.7. Shortcomings of GDP
6.7.1. Nonmarket Activities
6.7.2. Leisure
6.7.3. Improved Product Quality
6.7.4. The Underground Economy
6.7.5. GDP and the Environment
6.7.6. Composiion and Distrubution of Output
6.7.7. Noneconomic Sources of Well-being
7. Chapter 7: Economic Growth
7.1. Economic Growth
7.1.1. Growth as a Goal
7.1.2. Arithmetic of Growth
7.1.3. Growth in the Inuted States
7.1.3.1. Improved product and services
7.1.3.2. Added leisure
7.1.3.3. Otber impact
7.2. Modern Economic Growth
7.2.1. The Unvem Distribution of Growth
7.2.2. Catching Ip Is Possible
7.3. Institutional Structures That Promote Growth
7.3.1. Strong property rights
7.3.2. Patents and copyrights
7.3.3. Afficient financial institutions
7.3.4. Literacy and widespread education
7.3.5. Free trade
7.3.6. A complotive market system
7.4. Ingredients of Growth
7.4.1. Supply factors
7.4.2. Demand Factor
7.4.3. Efficiency Factor
7.5. Production Possibilities Analysis
7.5.1. Growth and Producttion Possibilities
7.5.2. Labor and Productivity
7.5.2.1. Hours of Work
7.5.2.2. Labor Productivity
7.6. Accounting for Growth
7.6.1. Labor Inputs versus Labor Productivity
7.6.2. Technological Advance
7.6.3. Quantity Of Capital
7.6.4. Education and Training
7.6.5. Economies of Scale and Resource Allocation
7.6.5.1. Economies of Scale
7.6.5.2. Improved Resource Allocation
7.7. The Recent Produtiviy Acceleration
7.7.1. Reasons for the Productivity
7.7.1.1. Thee Micrichip and Information Technology
7.7.1.2. New Firms and Increasing Returns
7.7.1.2.1. More specialzed inputs
7.7.1.2.2. Spreading of development costs
7.7.1.2.3. Simultaneous consumption
7.7.1.2.4. Network effects
7.7.1.2.5. Learning by doing
7.7.1.3. Global Competition
7.7.2. Implication: More Rapid Economic Growth
7.7.3. Skepticism about Permanence
7.7.4. What Can We Cinclude?
7.8. is Growth Desirable and Sustainable?
7.8.1. The Antigrowth View
7.8.2. In Defense of Economic Growth
8. Chapter 8: Business Cycles, Unemployments and Inflation
8.1. The Business Cycle
8.1.1. Phases of the Business Cyccle
8.1.1.1. Peak
8.1.1.2. Recession
8.1.1.3. Trough
8.1.1.4. Expansion
8.1.2. Casation: A First Glance
8.1.3. Cyclical Impact: Durables and Nondurables
8.2. Unemployment
8.2.1. Measurement of Unemployment
8.2.1.1. Part-time employment
8.2.1.2. Discourraged workers
8.2.2. Types of Unemployment
8.2.2.1. Frictional Unemployment
8.2.2.2. Strutural Unemployment
8.2.2.3. Cyclical Unemployment
8.2.3. Definition of Full Employment
8.2.4. Economic Cost of Unemployment
8.2.4.1. GDP Gap and Okun's Law
8.2.4.2. Unequal Burdens
8.2.4.2.1. Occupation
8.2.4.2.2. Age
8.2.4.2.3. Race and etbnicity
8.2.4.2.4. Gender
8.2.4.2.5. Education
8.2.4.2.6. Duration
8.2.5. Noneconomic Costs
8.2.6. International Comparions
8.3. Inflation
8.3.1. Meaning of Inflation
8.3.2. Measurement of Inflation
8.3.3. Facts of Inflation
8.3.4. Types of Inflation
8.3.4.1. Denamd-Pull Inflation
8.3.4.2. Cost-Push Inflation
8.3.5. Complexities
8.4. Redistribution Effects of inflation
8.4.1. Nominal and Real Income
8.4.2. Anticipations
8.4.3. Who Is Hurt by Inflation?
8.4.3.1. Fixed-Income Receivers
8.4.3.2. Savers
8.4.3.3. Creditiors
8.4.4. Who Is Unaffected or helped by Inflation
8.4.4.1. Flexible-Income Receivers
8.4.4.2. Debtors
8.4.5. Anticipated Inflation
8.4.6. Other Redistribution Issues
8.4.6.1. Deflation
8.4.6.2. Mixed effcts
8.4.6.3. Arbitrariness
8.5. Does Inflation Affect Output?
8.5.1. Cost-Push Inflation and Real Output
8.5.2. Demand-Pull Inflation and Real Output
8.5.3. Hyperinflation
9. Chapter 9: Basic Macroeconomic Relationship
9.1. The Income-Consumption and Income-Saving Relationship
9.1.1. The Consumption Schedule
9.1.2. The Saving Schedule
9.1.3. Average and Marginal Propensities
9.1.4. Nonincome Determinants of Consumption and Saving
9.1.4.1. Wealth
9.1.4.2. Borrowing
9.1.4.3. Expectations
9.1.4.4. Real Interest Rates
9.1.5. Other Important Considerations
9.1.5.1. Switching to real GDP
9.1.5.2. Changes along schedules
9.1.5.3. Schedule shifts
9.1.5.4. Taxation
9.1.5.5. Stability
9.2. The Interest-Rate-Investment Relationship
9.2.1. Expected Rate of Return
9.2.2. The Real Interest Rate
9.2.3. Investment Demand Curve
9.2.4. Shifts of the Investment Demand Curve
9.2.4.1. Acquisition , Maintenance and Operating Costs
9.2.4.2. Business Taxes
9.2.4.3. Technological Change
9.2.4.4. Stock of Capital Goods on Hand
9.2.4.5. Planned Inventory Changes
9.2.4.6. Expectations
9.2.5. Instability of Investment
9.2.5.1. Durability
9.2.5.2. Irregularity of Innovation
9.2.5.3. Variability of Profis
9.2.5.4. Variability of Expectations
9.3. The Multiplier Effect
9.3.1. Rationale
9.3.2. The Multiplier and the Marginal Propensities
9.3.3. How Large Is the Actual Multiplier Effect?
10. Chapter 10: The Aggregate Expenditures Model
10.1. Assumptions and Simplifications
10.2. Consumption and Investment Schedules
10.3. Equilibrium GDP: C + lg = GDP
10.3.1. Tabular Analysis
10.3.1.1. Quilibrium GDP
10.3.1.2. Disequilibrium
10.3.2. Graphical Analysis
10.4. Other Features of Equilibrium GDP
10.4.1. Saving Equals Planned Investment
10.4.2. No Unplanned Changes in Inventories
10.5. Changes in Quilibrium GDP and the Multiplier
10.6. Adding International Trade
10.6.1. Net Exports and Aggregate Expenditures
10.6.2. The Net Export Schedule
10.6.3. Net Exports and Equilibrium GDP
10.6.3.1. Positive Net Exports
10.6.3.2. Negative Net Exports
10.6.4. International Economic Linkages
10.6.4.1. Prosperity Abroad
10.6.4.2. Tariffs
10.6.4.3. Exchange Rates
10.7. Adding the Public Sector
10.7.1. Government Purchases and Equilibrium GDP
10.7.1.1. Tabular Example
10.7.1.2. Graphical Analysis
10.7.2. Taxation and Equilibrium GDP
10.7.2.1. Tabular Example
10.7.2.2. Graphical Analysis
10.7.2.3. Differential Impacts
10.7.2.4. Injections, Leakages and Unplanned Changes Inventories
10.8. Equilibrium versus Full-Employment GDP
10.8.1. Recessionary Expenditure Gap
10.8.1.1. Keynes' Solution to a Recessionary Expenditure Gap
10.8.2. Inflationary Expenditure Gap
10.8.3. Application: The U.S Recession of 2001
10.8.4. Application: Full-Emploment Output with Large Negative Net Exports
11. Chapter 11: Aggregate Demand and Aggregate Supply
11.1. Aggregate Demand
11.1.1. Aggregate Demand Curve
11.1.1.1. Real-Balances Effect
11.1.1.2. Interest Rate-Effect
11.1.1.3. Foreign Purchases Effect
11.2. Changes in Aggregate Demand
11.2.1. Consumer Spending
11.2.1.1. Consumer Wealth
11.2.1.2. Household Borrowing
11.2.1.3. Consumer Expectations
11.2.1.4. Peronal Taxes
11.2.2. Investment Spending
11.2.2.1. Real Interest Rates
11.2.2.2. Expected Returns
11.2.2.2.1. Expectations about future business conditions
11.2.2.2.2. Technology
11.2.2.2.3. Degree of excess capacity
11.2.2.2.4. Bisuness taxes
11.2.3. Government Spending
11.2.4. Net Export Spending
11.2.4.1. National Income Abroad
11.2.4.2. Exchange Rates
11.3. Aggregate Supply
11.3.1. Aggregate Supply in the Immediate Short Run
11.3.2. Aggregate Supply in the Short Run
11.3.3. Aggregate Supply in the Long Run
11.3.4. Focusing on the Short Run
11.4. Changes in Aggregate Supply
11.4.1. Input Prices
11.4.1.1. Domestic Resource Prices
11.4.1.1.1. Increases
11.4.1.1.2. Decreases
11.4.1.2. Prices of Imported Resources
11.4.2. Productivity
11.4.3. Legal-Institutional Environment
11.4.3.1. Business taxes and Subsidies
11.4.3.2. Government Regulation
11.5. Equilibrium and Changes in Equilibrium
11.5.1. Invrease in AD: Demand-Pull Inflation
11.5.2. Decreases in AD: Recession and Cyclical Unemployment
11.5.2.1. Fear of price was
11.5.2.2. Menu costs
11.5.2.3. Wage contracts
11.5.2.4. Morale, effort and productivity
11.5.2.5. Minimum wage
11.5.3. Decreases in AS: Cost-Push Inflation
11.5.4. Increases in AS: Full Employment with Price-Level Stability
12. Chapter 12: Fiscal Policy, Deficits and Debt
12.1. Fiscal Policy and the AD-AS Model
12.1.1. Expansionary Fiscal Policy
12.1.1.1. Increased Government Spending
12.1.1.2. Tax Reductions
12.1.1.3. Combined Government Spendng Increases and Tax Reductions
12.1.2. Contractionary Fiscal Policy
12.1.2.1. Decreased Government Spending
12.1.2.2. Increased Taxes
12.1.2.3. Combined Government Spending Decreases and Tax Increases
12.1.3. Policy Options: G or T?
12.2. Built-In Stability
12.2.1. Automatic or Built-In Stabilizers
12.2.1.1. Economic Importance
12.2.1.2. Tax Progressivity
12.3. Evaluating Fiscal Policy
12.3.1. Standardized Budget
12.3.2. Recent U.S Fiscal Policy
12.3.3. Budget Deficits and Projections
12.3.4. Social Security Considerations
12.4. Problems, Criticisms and Complications
12.4.1. Problems of Timing
12.4.1.1. Recognition lag
12.4.1.2. Administrative lag
12.4.1.3. Operational lag
12.4.2. Political Considertions
12.4.3. Future Policy Reversals
12.4.4. Offsetting State and Local Finance
12.4.5. Crowding-Out Effect
12.4.6. Current Thinking on Fiscal Policy
12.5. The Public Debt
12.5.1. Ownership
12.5.2. Debt and GDP
12.5.3. International Comparisons
12.5.4. Interset Charges
12.6. False Concerns
12.6.1. Bankruptcy
12.6.1.1. Refinancing
12.6.1.2. Taxation
12.6.2. Burdening Future Generations
12.7. Substantive Issues
12.7.1. Income Distribution
12.7.2. Incentives
12.7.3. Foreign-Owned Public Debt
12.7.4. Crowding-Out Effect Revisited
12.7.4.1. A Graphical Look at Crowding Out
12.7.4.2. Public Invesrments and Public-Private Complementarities
13. Chapter 13: Moneey and Banking
13.1. The Functions of Money
13.1.1. Medium of exchange
13.1.2. Unit of account
13.1.3. Store of value
13.2. The Components of the Money Supply
13.2.1. Money Definition M1
13.2.1.1. Currency: Coins + Paper Money
13.2.1.2. Checkable Deposits
13.2.1.3. Institutions That Offer Checkable Deposits
13.2.1.4. Two Qualifications
13.2.2. Money Definition M2
13.2.2.1. Saving deposits, including money market deposit accounts
13.2.2.2. Small (less than $100,000) time deposits
13.2.2.3. Money market mutual funds beld by individuals
13.3. What "Backs" the Money Supply
13.3.1. Money as Debt
13.3.2. Value of Money
13.3.2.1. Acceptability
13.3.2.2. Legal Tender
13.3.2.3. Relative Scarity
13.3.3. Money and Prices
13.3.3.1. The Purchasing Power of the Dollar
13.3.3.2. Inflation and Acceptability
13.3.4. Stabilizing Money's Purchasing Power
13.4. The Federal Reserve and the Banking System
13.4.1. Historical Backgound
13.4.2. Board of Governors
13.4.3. The 12 Federal Reserve Banks
13.4.3.1. Central Bank
13.4.3.2. Quasi-Public Banks
13.4.3.3. Bankers' Banks
13.4.4. FOMC
13.4.5. Commercial Banks and Thrifts
13.4.6. Fed Functions and the Money Supply
13.4.6.1. Issuing currency
13.4.6.2. Setting reserve requirements and bolding reserves
13.4.6.3. Lending money
13.4.6.4. Providing for check collection
13.4.6.5. Acting as Fiscal agent
13.4.6.6. Supervising banks
13.4.6.7. Controlling the money supply
13.4.7. Federal Reserve Independence
13.5. Recent Developments in Money and Banking
13.5.1. The Relative Decline of Banks and Thrifts
13.5.2. Consolidation among Banks and Thrifts
13.5.3. Convergence of Services Provided by Financial Institutions
13.5.4. Globalization of Financial Markets
13.5.5. Electronic Payments
14. Chapter 14: Money Creation
14.1. The Fractional Reserve System
14.1.1. Illustrating the Idea: The Goldsmiths
14.1.2. Significant Characteristics of Fractional Reserve Banking
14.2. A Single Commercial Bank
14.2.1. Transaction 1: Creating a Bank
14.2.2. Transaction 2: Acquiring Property and Equipment
14.2.3. Transaction 3: Accepting Deposits
14.2.4. Transaction 4: Deposting Reserves in a Federal Reserve Bank
14.2.4.1. Excess Reserves
14.2.4.2. Control
14.2.4.3. Asset and Liability
14.2.5. Transaction 5: Clearing a Check Drawn against the Bank
14.3. Money-Creating Transactions of a Commercial Bank
14.3.1. Transaction 6: Granting a Loan
14.3.2. Transaction 7: Buying Government Securities
14.3.3. Profits, Liquidity and the Federal Funds Market
14.3.3.1. Profit
14.3.3.2. Liquidity
14.4. The Banking System: Multiple-Dposit Expansion
14.4.1. The Banking System's Lending Potential
14.4.2. The Monetary Multiplier
14.4.3. Reversibility: The Multiple Destruction of Money
15. Chapter 15: Interest Rates and Monetary Policy
15.1. Interest Rates
15.1.1. The Demand for Money
15.1.1.1. Transactions Demand, Dt
15.1.1.2. Asset Demand, Da
15.1.1.3. Total Money Demand, Dm
15.1.2. The Equilibrium Interest Rate
15.1.3. Interest Rates and Bond Prices
15.2. The Consolidated Balance Sheet of the Federal Reserve Banks
15.2.1. Assets
15.2.1.1. Securities
15.2.1.2. Loans to Commercial Banks
15.2.2. Liabilities
15.2.2.1. Reserves of Commercrial Banks
15.2.2.2. Treasury Deposits
15.2.2.3. Federal Reserve Notes Outstanding
15.3. Tools of Monetary Policy
15.3.1. Open-Market Operations
15.3.1.1. Buying Securities
15.3.1.1.1. From Commercial Banks
15.3.1.1.2. From the Public
15.3.1.2. Selling Securities
15.3.1.2.1. To Commercial Banks
15.3.1.2.2. To the Public
15.3.2. The Reserve Ratio
15.3.2.1. Raising the Reserve Ratio
15.3.2.2. Lowering the Reserve Ratio
15.3.2.2.1. Changes the amount of excess reserve
15.3.2.2.2. Changes the size of the monetary multiplier
15.3.3. The Discount Rate
15.3.4. Term Auction Facility
15.3.5. Relative Importance
15.4. Targeting the Federal Funds Rate
15.4.1. Expansionary Monetary Policy
15.4.2. Restrictive Monetary Policy
15.4.3. The Taylor Rule
15.5. Monettary Policy, Real GDP and the Price Level
15.5.1. Cause-Effect Chain
15.5.1.1. Market for Money
15.5.1.2. Investment
15.5.1.3. Equilibrium GDP
15.5.2. Effects of a Expansionary Monetary Policy
15.5.3. Effects of a Restritive Monetary Policy
15.6. Monetary Policy: Evaluation and Issues
15.6.1. Recent U.S. Monetary Policy
15.6.2. Problems and Complications
15.6.2.1. Lags
15.6.2.2. Cyclical Asymmetry
15.7. The "Big Picture"
16. Chapter 16: Extending the Analysis of Aggregate Supply
16.1. From Short Run to Long Run
16.1.1. Short-Run Aggregate Supply
16.1.2. Long-Run Aggregate Supply
16.1.3. Long-Run Equilibrium in the AD-AS Model
16.2. Analysis the Extanded AD-AS Model
16.2.1. Demand-Pull Inflation in the Extended AD-AS Model
16.2.2. Cost-Push Inflation in the Extended AD-AS Model
16.2.2.1. Analysis
16.2.2.2. Policy Dilemma
16.2.3. Recession and the Extended AD-AS Model
16.2.4. Ongoing Inflation in the Extended AD-AS Model
16.2.4.1. Economic Growth and Aggregate Supply
16.2.4.2. Economic Growth in the Extended AD-AS Model
16.3. The Inflation-Unemployment Relationship
16.3.1. The Phillips Curve
16.3.2. Aggregate Supply Shocks and the Pillips Curve
16.3.2.1. Adverse Aggregate Supply Shocks
16.3.2.2. Stagflation's Demise
16.4. The Long-Run Phillips Curve
16.4.1. Short-Run Phillips Curve
16.4.2. Long-Run Vertical Phillips Curve
16.4.3. Disinflation
16.5. Taxaxtion and Aggregate Supply
16.5.1. Taxes and Incentives to Work
16.5.2. Incentives to Save and Invest
16.5.3. The Laffer Curve
16.5.4. Critisisms of the Laffer Curve
16.5.4.1. Taxes, Incentives and Time
16.5.4.2. Inflation or Hiher-Real Interest Rates
16.5.4.3. Position on the Curve
16.5.5. Rebuttal and Evaluation
17. Chapter 17: The Balance of Payments, Exchange Rates and Trade Deficits
17.1. International Financial Transactions
17.1.1. Trading either goods or services for money
17.1.2. Trading assets for money
17.2. The Balance of Payments
17.2.1. Current Account
17.2.1.1. Balance on Goods
17.2.1.2. Balance on Services
17.2.1.3. Balance on Current Account
17.2.2. Capital and Financial Account
17.2.2.1. Capital Account
17.2.2.2. Financial Account
17.2.3. Why the Balance of Payments Balances
17.2.4. Payments, Deficits and Surpluses
17.3. Flexible Exchange Rates
17.3.1. Flexile or floating exchange rate system
17.3.2. Fixed exchange rate system
17.3.3. Depreciation and Appreciation
17.3.4. Determinants of Exchange Rates
17.3.4.1. Changes in Tastes
17.3.4.2. Relative Income Changes
17.3.4.3. Relative Price-Level Changes
17.3.4.4. Relative Interest Rates
17.3.4.5. Changes in Relative Expected Returns on Stocks, real Estate and Pruduction Facilities
17.3.4.6. Speculation
17.3.5. Flexible Rates and the Balance of Payments
17.3.6. Disadvantages of Flexible Exchange Rates
17.3.6.1. Uncertainty and Diminished Trade
17.3.6.2. Terms-of-Trade Changes
17.3.6.3. Instability
17.4. Fixed Exchange Rates
17.4.1. Use of Reserves
17.4.2. Trade Pilicies
17.4.3. Exchange Controls and Rationing
17.4.3.1. Distored trade
17.4.3.2. Favoritism
17.4.3.3. Restricted choice
17.4.3.4. Black markets
17.4.4. Domestic Macroeconomic Adjustments
17.5. The Current Exchange Rate System: The Managed Float
17.5.1. Insupport of the Managed Float
17.5.2. Concerns with the Managed Float
17.6. Recent U.S. Trade Deficits
17.6.1. Causes of the Trade Deficits
17.6.2. Implication of U.S. Trade Deficits
17.6.2.1. increased Current Consumption
17.6.2.2. Increased U.S. Indebtedness