Macroeconomics / Edition 6

by Olivier Blanchard, David H. Johnson

Overview

The fundamental goals of this text are to provide an integrated view of macroeconomics and to make close contact with current macroeconomic events. This Intermediate Macroeconomics text is organized around a set of core chapters followed by three optional extensions. The Core covers the Short Run, Medium Run, and Long Run and is then followed by the three Extensions: Openness, Expectations, and Pathologies. The book concludes with a section on policy, although policy issues are also sprinkled throughout most chapters. Already known for its global emphasis and empirical applications of theory, the third edition has attempted to simplify many of the more difficult topics in macroeconomics. Theoretical material is always presented within the context of a real-world application in three ways: words, graphs, and with algebra.

Product Details

ISBN-13:	9780133061635
Publisher:	Pearson
Publication date:	08/02/2012
Edition description:	Older Edition
Pages:	624
Product dimensions:	10.10(w) x 8.20(h) x 1.00(d)

About the Author

Olivier Blanchard. A citizen of France, Olivier Blanchard has spent most of his professional life in Cambridge, Massachusetts. After obtaining his PhD in economics at the Massachusetts Institute of Technology in 1977, he taught at Harvard University, returning to MIT in 1982. He was chair of the economics department from 1998 to 2003. In 2008, he took a leave of absence to be the Economic Counsellor and Director of the Research Department of the International Monetary Fund. Since October 2015, he is the Fred Bergsten Senior Fellow at the Peterson Institute for International Economics, in Washington. He also remains Robert M. Solow Professor of Economics emeritus.

He has worked on a wide set of macroeconomic issues, from the role of monetary policy, to the nature of speculative bubbles, to the nature of the labor market and the determinants of unemployment, to transition in former communist countries, and to forces behind the recent global crisis. In the process, he has worked with numerous countries and international organizations. Blanchard is the author of many books and articles, including a graduate level textbook with Stanley Fischer.

Blanchard is a past editor of the Quarterly Journal of Economics, of the NBER Macroeconomics Annual, and founding editor of the AEJ Macroeconomics. He is a fellow and past council member of the Econometric Society, a past vice president of the American Economic Association, and a member of the American Academy of Sciences.

Table of Contents

	Preface	xvii
	Introduction	1
Chapter 1	A Tour of the World	3
1-1	The United States	4
1-2	The European Union	8
1-3	Japan	13
1-4	Looking Ahead	16
Appendix	Where to Find the Numbers?	19
Chapter 2	A Tour of the Book	21
2-1	Aggregate Output	22
2-2	The Other Major Macroeconomic Variables	26
2-3	A Road Map	34
Appendix	The Construction of Real GDP, and Chain-Type Indexes	40
	The Core	43
	The Short Run	43
Chapter 3	The Goods Market	45
3-1	The Composition of GDP	46
3-2	The Demand for Goods	48
3-3	The Determination of Equilibrium Output	51
3-4	Investment Equals Saving: An Alternative Way of Thinking About Goods-Market Equilibrium	58
3-5	Is the Government Omnipotent? A Warning	60
Chapter 4	Financial Markets	65
4-1	The Demand for Money	66
4-2	The Determination of the Interest Rate. I	69
4-3	The Determination of the Interest Rate. II	75
4-4	Two Alternative Ways to Think About the Equilibrium	81
Chapter 5	Goods and Financial Markets: The IS-LM Model	87
5-1	The Goods Market and the IS Relation	88
5-2	Financial Markets and the LM Relation	93
5-3	Putting the IS and the LM Relations Together	96
5-4	Using a Policy Mix	101
5-5	How Does the IS-LM Model Fit the Facts?	102
	The Medium Run	111
Chapter 6	The Labor Market	113
6-1	A Tour of the Labor Market	114
6-2	Movements in Unemployment	116
6-3	Wage Determination	120
6-4	Price Determination	124
6-5	The Natural Rate of Unemployment	125
6-6	Where We Go from Here	129
Appendix	Wage- and Price-Setting Relations Versus Labor Supply and Labor Demand	132
Chapter 7	Putting All Markets Together: The AS-AD Model	135
7-1	Aggregate Supply	136
7-2	Aggregate Demand	139
7-3	Equilibrium in the Short Run and in the Medium Run	141
7-4	The Effects of a Monetary Expansion	144
7-5	A Decrease in the Budget Deficit	149
7-6	Changes in the Price of Oil	152
7-7	Conclusions	156
Chapter 8	The Natural Rate of Unemployment and the Phillips Curve	161
8-1	Inflation, Expected Inflation, and Unemployment	162
8-2	The Phillips Curve	163
8-3	A Summary and Many Warnings	169
Appendix	From the Aggregate Supply Relation to a Relation Between Inflation, Expected Inflation, and Unemployment	179
Chapter 9	Inflation, Activity, and Nominal Money Growth	181
9-1	Output, Unemployment, and Inflation	182
9-2	The Medium Run	186
9-3	Disinflation	188
9-4	Expectations, Credibility, and Nominal Contracts	193
9-5	The U.S. Disinflation, 1979-1985	196
	The Long Run	201
Chapter 10	The Facts of Growth	203
10-1	Growth in Rich Countries Since 1950	204
10-2	A Broader Look Across Time and Space	208
10-3	Thinking About Growth: A Primer	212
Chapter 11	Saving, Capital Accumulation, and Output	219
11-1	Interactions Between Output and Capital	220
11-2	Implications of Alternative Saving Rates	223
11-3	Getting a Sense of Magnitudes	230
11-4	Physical Versus Human Capital	236
Appendix	The Cobb-Douglas Production Function and the Steady State	240
Chapter 12	Technological Progress and Growth	243
12-1	Technological Progress and the Rate of Growth	244
12-2	The Determinants of Technological Progress	251
12-3	The Facts of Growth Revisited	254
12-4	Epilogue: The Secrets of Growth	258
Appendix	Constructing a Measure of Technological Progress	265
Chapter 13	Technological Progress, Wages, and Unemployment	267
13-1	Productivity, Output, and Unemployment in the Short Run	268
13-2	Productivity and the Natural Rate of Unemployment	272
13-3	Technological Progress and Distribution Effects	278
	Extensions	287
	Expectations	287
Chapter 14	Expectations: The Basic Tools	289
14-1	Nominal Versus Real Interest Rates	290
14-2	Expected Present Discounted Values	293
14-3	Nominal and Real Interest Rates, and the IS-LM Model	298
14-4	Money Growth, Inflation, and Nominal and Real Interest Rates	299
Appendix	Deriving the Expected Present Discounted Value Using Real or Nominal Interest Rates	308
Chapter 15	Financial Markets and Expectations	311
15-1	Bond Prices and Bond Yields	312
15-2	The Stock Market and Movements in Stock Prices	320
15-3	Bubbles, Fads, and Stock Prices	326
Appendix	Arbitrage and Stock Prices	332
Chapter 16	Expectations, Consumption, and Investment	335
16-1	Consumption	336
16-2	Investment	342
16-3	The Volatility of Consumption and Investment	349
Appendix	Derivation of the Expected Present Value of Profits Under Static Expectations	353
Chapter 17	Expectations, Output, and Policy	355
17-1	Expectations and Decisions: Taking Stock	356
17-2	Monetary Policy, Expectations, and Output	360
17-3	Deficit Reduction, Expectations, and Output	364
	The Open Economy	371
Chapter 18	Openness in Goods and Financial Markets	373
18-1	Openness in Goods Markets	374
18-2	Openness in Financial Markets	383
18-3	Conclusions and a Look Ahead	390
Chapter 19	The Goods Market in an Open Economy	395
19-1	The IS Relation in the Open Economy	396
19-2	Equilibrium Output and the Trade Balance	399
19-3	Increases in Demand, Domestic or Foreign	400
19-4	Depreciation, the Trade Balance, and Output	405
19-5	Looking at Dynamics: The J-Curve	408
19-6	Saving, Investment, and the Trade Balance	412
Appendix 1	Multipliers--Belgium Versus the United States	415
Appendix 2	Derivation of the Marshall-Lerner Condition	416
Chapter 20	Output, the Interest Rate, and the Exchange Rate	417
20-1	Equilibrium in the Goods Market	418
20-2	Equilibrium in Financial Markets	419
20-3	Putting Goods and Financial Markets Together	422
20-4	The Effects of Policy in an Open Economy	423
20-5	Fixed Exchange Rates	426
Appendix	Fixed Exchange Rates, Interest Rates, and Capital Mobility	433
Chapter 21	Exchange Rate Regimes	437
21-1	Fixed Exchange Rates and the Adjustment of the Real Exchange Rate in the Medium Run	438
21-2	Exchange Rate Crises Under Fixed Exchange Rates	444
21-3	Exchange Rate Movements under Flexible Exchange Rates	448
21-4	Choosing Between Exchange Rate Regimes	451
Appendix	The Real Exchange Rate, and Domestic and Foreign Real Interest Rates	458
	Pathologies	461
Chapter 22	Depressions and Slumps	463
22-1	Disinflation, Deflation, and the Liquidity Trap	464
22-2	The Great Depression	471
22-3	The Japanese Slump	477
Chapter 23	High Inflation	489
23-1	Budget Deficits and Money Creation	490
23-2	Inflation and Real Money Balances	492
23-3	Deficits, Seignorage, and Inflation	494
23-4	How Do Hyperinflations End?	499
23-5	Conclusions	501
	Back to Policy	507
Chapter 24	Should Policy Makers Be Restrained?	509
24-1	Uncertainty and Policy	510
24-2	Expectations and Policy	514
24-3	Politics and Policy	518
Chapter 25	Monetary Policy: A Summing Up	529
25-1	The Optimal Inflation Rate	530
25-2	The Design of Monetary Policy	535
25-3	The Fed in Action	542
Chapter 26	Fiscal Policy: A Summing Up	549
26-1	The Government Budget Constraint	550
26-2	Four Issues in Fiscal Policy	558
26-3	The U.S. Budget	563
	Epilogue	571
Chapter 27	Epilogue: The Story of Macroeconomics	571
27-1	Keynes and the Great Depression	572
27-2	The Neoclassical Synthesis	572
27-3	The Rational Expectations Critique	575
27-4	Current Developments	579
27-5	Common Beliefs	581
Appendix 1	An Introduction to National Income and Product Accounts	1
Appendix 2	A Math Refresher	6
Appendix 3	An Introduction to Econometrics	12
	Glossary	1
	Index	1

Editorial Reviews

A book/CD-ROM text providing an integrated view of macroeconomics, featuring boxes on current macroeconomic events. Material is built around an underlying model that concentrates on the implications of equilibrium conditions in the goods, financial, and labor markets. This second edition is reorganized in a core section on the short, medium, and long run, and a set of three major extensions examining the role of expectations, implications of openness, and pathologies. Includes key points and terms and exercises. The CD-ROM contains a series of 48 interactive graphs. The author teaches economics at Massachusetts Institute of Technology. Annotation c. Book News, Inc., Portland, OR (booknews.com)

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