Macroeconomics / Charles I. Jones

It includes Glossary and Index Pages

Modern macroeconomics made approachable by the expert on growth.

Combining innovative treatment of macroeconomic concepts with the clearest presentation of long-run growth theory, Jones offers students an accessible and truly modern introduction to the field. The Fourth Edition features:

A uniquely accessible introduction to modern growth theory. In Chapters 5 and 6, Jones combines the Solow Model with complete coverage of the Romer Model to provide an accurate explanation of how growth really works.
A new case study that bridges the IS-MP and IS-LM models makes it easier to teach short-run growth. Innovative coverage of the short run aids the transition to the modern IS-MP model from the traditional IS-LM model.
90+ thoroughly updated charts and tables. All figures and references have been completely updated with NEW data.
Important updates on the aftermath of the Great Recession. New material includes the effects of QE2 and QE3, discussions on the inclusion of intellectual property in the National Income accounts, and a case study on the zero lower bound.
Expanded worked exercises using FRED data. A new exercise in every chapter requires students to obtain and use up-to-date data from the Federal Reserve’s FRED database or occasionally from other data sources.

Contents:

Preface

Acknowledgments

About the Author


PART 1: PRELIMINARIES

Chapter 1. Introduction to Macroeconomics • What Is Macroeconomics? • How Macroeconomics Studies Key Questions • An Overview of the Book • The Long Run • The Short Run • Issues for the Future • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise

Chapter 2. Measuring the Macroeconomy • Introduction • Measuring the State of the Economy • Production = Expenditure = Income • The Expenditure Approach to GDP • The Income Approach to GDP • The Production Approach to GDP • What Is Included in GDP and What’s Not? • Measuring Changes over Time • A Simple Example: Where Real GDP Doesn’t Change • A Second Example: Where Real GDP Changes • Quantity Indexes: Laspeyres, Paasche, and Chain Weighting • Price Indexes and Inflation • Using Chain-Weighted Data • Comparing Economic Performance across Countries • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise


PART 2: THE LONG RUN

Chapter 3. An Overview of Long-Run Economic Growth • Introduction • Growth over the Very Long Run • Modern Economic Growth • The Definition of Economic Growth • A Population Growth Example • The Rule of 10 and the Ratio Scale • U.S. GDP on a Ratio Scale • Calculating Growth Rates • Modern Growth around the World • A Broad Sample of Countries • Some Useful Properties of Growth Rates • The Costs of Economic Growth • A Long-Run Roadmap • Additional Resources • Summary • Growth Rules • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 4. A Model of Production • Introduction • A Model of Production • Setting Up the Model • Allocating Resources • Solving the Model: General Equilibrium • Interpreting the Solution • Analyzing the Production Model • Comparing Models with Data • The Empirical Fit of the Production Model • Productivity Differences: Improving the Fit of the Model • Understanding TFP Differences • Human Capital • Technology • Institutions • Misallocation • Evaluating the Production Model • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 5. The Solow Growth Model • Introduction • Setting Up the Model • Production • Capital Accumulation • Labor • Investment • The Model Summarized • Prices and the Real Interest Rate • Solving the Solow Model • Using the Solow Diagram • Output and Consumption in the Solow Diagram • Solving Mathematically for the Steady State • Looking at Data through the Lens of the Solow Model • The Capital-Output Ratio • Differences in Y/L • Understanding the Steady State • Economic Growth in the Solow Model • Meanwhile, Back on the Family Farm • Some Economic Experiments • An Increase in the Investment Rate • A Rise in the Depreciation Rate • Experiments on Your Own • The Principle of Transition Dynamics • Understanding Differences in Growth Rates • Strengths and Weaknesses of the Solow Model • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 6. Growth and Ideas • Introduction • The Economics of Ideas • Ideas • Nonrivalry • Increasing Returns • Problems with Pure Competition • The Romer Model • Solving the Romer Model • Why Is There Growth in the Romer Model? • Balanced Growth • Experiments in the Romer Model • Growth Effects versus Level Effects • Recapping Romer • Combining Solow and Romer: Overview • Growth Accounting • Concluding Our Study of Long-Run Growth • A Postscript on Solow and Romer • Additional Resources • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises • APPENDIX: Combining Solow and Romer (Algebraically) • Setting Up the Combined Model • Solving the Combined Model • Long-Run Growth • Output per Person • Transition Dynamics • More Exercises

Chapter 7. The Labor Market, Wages, and Unemployment • Introduction • The U.S. Labor Market • The Dynamics of the Labor Market • Supply and Demand • A Change in Labor Supply • A Change in Labor Demand • Wage Rigidity • Different Kinds of Unemployment • The Bathtub Model of Unemployment • Labor Markets around the World • Hours of Work • How Much Is Your Human Capital Worth? • Present Discounted Value • Your Human Capital • The Rising Return to Education • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 8. Inflation • Introduction • The Quantity Theory of Money • Measures of the Money Supply • The Quantity Equation • The Classical Dichotomy, Constant Velocity, and the Central Bank • The Quantity Theory for the Price Level • The Quantity Theory for Inflation • Revisiting the Classical Dichotomy • Real and Nominal Interest Rates • Costs of Inflation • The Fiscal Causes of High Inflation • The Inflation Tax • Central Bank Independence • The Great Inflation of the 1970s • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises



PART 3: THE SHORT RUN

Chapter 9. An Introduction to the Short Run • Introduction • The Long Run, the Short Run, and Shocks • Trends and Fluctuations • Short-Run Output in the United States • Measuring Potential Output • The Inflation Rate • The Short-Run Model • A Graph of the Short-Run Model • How the Short-Run Model Works • The Empirical Fit of the Phillips Curve • Summary • Okun’s Law: Output and Unemployment • Filling in the Details • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise

Chapter 10. The Great Recession: A First Look • Introduction • Recent Shocks to the Macroeconomy • Housing Prices • The Global Saving Glut • Subprime Lending and the Rise in Interest Rates • The Financial Turmoil of 2007-2009 • Oil Prices • Macroeconomic Outcomes • A Comparison to Previous Recessions • Inflation • The Rest of the World • Some Fundamentals of Financial Economics • Balance Sheets • Leverage • Bank Runs and Liquidity Crises • Financial Wrap-Up • Going Forward • Summary • Key Concepts • Review Questions • Exercises

Chapter 11. The IS Curve • Introduction • Setting Up the Economy • Consumption and Friends • The Investment Equation • Deriving the IS Curve • Using the IS Curve • The Basic IS Curve • The Effect of a Change in the Interest Rate • An Aggregate Demand Shock • A Shock to Potential Output • Other Experiments • Microfoundations of the IS Curve • Consumption • Multiplier Effects • Investment • Government Purchases • Net Exports • Conclusion • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises •

Chapter 12. Monetary Policy and the Phillips Curve • Introduction • The MP Curve: Monetary Policy and Interest Rates • From Nominal to Real Interest Rates • The IS-MP Diagram • Example: The End of a Housing Bubble • The Phillips Curve • Price Shocks and the Phillips Curve • Cost-Push and Demand-Pull Inflation • Using the Short-Run Model • The Volcker Disinflation • The Great Inflation of the 1970s • The Short-Run Model in a Nutshell • Microfoundations: Understanding Sticky Inflation • The Classical Dichotomy in the Short Run • Microfoundations: How Central Banks Control Nominal Interest Rates • Changing the Interest Rate • Why it instead of Mt? • Inside the Federal Reserve • Conventional Monetary Policy • Open-Market Operations: How the Fed Controls the Money Supply • Conclusion • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 13. Stabilization Policy and the AS/AD Framework • Introduction • Monetary Policy Rules and Aggregate Demand • The AD Curve • Moving along the AD Curve • Shifts of the AD Curve • The Aggregate Supply Curve • The AS/AD Framework • The Steady State • The AS/AD Graph • Macroeconomic Events in the AS/AD Framework • Event 1: An Inflation Shock • Event 2: Disinflation • Event 3: A Positive AD Shock • Further Thoughts on Aggregate Demand Shocks • Empirical Evidence • Predicting the Fed Funds Rate • Inflation-Output Loops • Modern Monetary Policy • More Sophisticated Monetary Policy Rules • Rules versus Discretion • The Paradox of Policy and Rational Expectations • Managing Expectations in the AS/AD Model • Inflation Targeting • Conclusion • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 14.The Great Recession and the Short-Run Model • Introduction • Financial Considerations in the Short-Run Model • Financial Frictions • Financial Frictions in the IS/MP Framework • Financial Frictions in the AS/AD Framework • The Dangers of Deflation • Policy Responses to the Financial Crisis • The Taylor Rule and Monetary Policy • The Money Supply • The Fed’s Balance Sheet • The Troubled Asset Relief Program • Fiscal Stimulus • The European Debt Crisis • Financial Reform • The Aftermath of the Great Recession • Secular Stagnation • A Productivity Slowdown? • Conclusion • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise

Chapter 15. DSGE Models: The Frontier of Business Cycle Research • Introduction • A Brief History of DSGE Models • From Real Business Cycles to DSGE • Endogenous Variables • Shocks • Features • Mathematics and DSGE Models • A Stylized Approach to DSGE • Labor Demand • Labor Supply • Equilibrium in the Labor Market • Using the Stylized DSGE Model • A Negative TFP Shock • A Rise in Taxes Paid by Firms • A Rise in Government Purchases • Introducing Monetary Policy and Unemployment: Sticky Wages • Monetary Policy and Sticky Prices • Lessons from the Labor Market in DSGE Models • Quantitative DSGE Models • Impulse Response Functions • A Total Factor Productivity Shock • A Shock to Government Purchases • A Financial Friction Shock • Conclusion • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise • APPENDIX: Deriving the Labor Supply Curve



PART 4: APPLICATIONS AND MICROFOUNDATIONS

Chapter16. Consumption • Introduction • The Neoclassical Consumption Model • The Intertemporal Budget Constraint • Utility • Choosing Consumption to Maximize Utility • Solving the Euler Equation: Log Utility • Solving for ctoday and Cfuture, Log Utility and ß =1 • The Effect of a Rise in R on Consumption • Lessons from the Neoclassical Model • The Permanent-Income Hypothesis • Ricardian Equivalence • Borrowing Constraints • Consumption as a Random Walk • Precautionary Saving • Empirical Evidence on Consumption • Evidence from Individual Households • Aggregate Evidence • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise

Chapter 17. Investment • Introduction • How Do Firms Make Investment Decisions? • Reasoning with an Arbitrage Equation • The User Cost of Capital • Example: Investment and the Corporate Income Tax • From Desired Capital to Investment • The Stock Market and Financial Investment • The Arbitrage Equation and the Price of a Stock • P/E Ratios and Bubbles? • Efficient Markets • Components of Private Investment • Residential Investment • Inventory Investment • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 18. The Government and the Macroeconomy • Introduction • U.S. Government Spending and Revenue • Spending and Revenue over Time • The Debt-GDP Ratio • International Evidence on Spending and Debt • The Government Budget Constraint • The Intertemporal Budget Constraint • How Much Can the Government Borrow? • Economic Growth and the Debt-GDP Ratio • High Inflation and Default • Generational Accounting • Deficits and Investment • The Fiscal Problem of the Twenty-First Century • The Problem • Possible Solutions • Conclusion • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise

Chapter 19. International Trade • Introduction • Some Basic Facts about Trade • A Basic Reason for Trade • Trade across Time • Trade with Production • Autarky • Free Trade • Lessons from the Apple: Computer Example • Trade in Inputs • Moving Capital versus Moving Labor • The Costs of Trade • The Trade Deficit and Foreign Debt • Trade and Growth around the World • The Twin Deficits • Net Foreign Assets and Foreign Debt • Conclusion • Summary • Key Concepts • Review Questions • Exercises • Worked Exercise

Chapter 20. Exchange Rates and International Finance • Introduction • Exchange Rates in the Long Run • The Nominal Exchange Rate • The Law of One Price • The Real Exchange Rate • Summary • Exchange Rates in the Short Run • The Nominal Exchange Rate • The Real Exchange Rate • Fixed Exchange Rates • The Open Economy in the Short-Run Model • The New IS Curve • Event 1: Tightening Domestic Monetary Policy and the IS Curve • Event 2: A Change in Foreign Interest Rates • Exchange Rate Regimes • The Policy Trilemma • Which Side of the Triangle to Choose? • The Future of Exchange Rate Regimes • The Euro Crisis • The Crisis of 2011-2013 • Long-Term Competitiveness • Summary • Key Concepts • Review Questions • Exercises • Worked Exercises

Chapter 21. Parting Thoughts • What We’ve Learned • Significant Remaining Questions • Conclusion

Glossary

Index