Macroeconomics, Eleventh Edition
By N. Gregory Mankiw
Contents:
Media and Resources from Worth Publishers
Preface
Part I Introduction
Chapter 1 The Science of Macroeconomics
1-1 What Macroeconomists Study
► CASE STUDY The Historical Performance of the
U.S. Economy
1-2 How Economists Think
Theory as Model Building
The Use of Multiple Models
Prices: Flexible Versus Sticky
Microeconomic Thinking and Macroeconomic
Models
FYI The Early Lives of Macroeconomists
1-3 How This Book Proceeds
Chapter 2 The Data of Macroeconomics
2-1 Measuring the Value of Economic Activity: Gross
Domestic Product
Income, Expenditure, and the Circular Flow
FYI Stocks and Flows
Rules for Computing GDP
Real GDP Versus Nominal GDP
The GDP Deflator
Chain-Weighted Measures of Real GDP
FYI Two Helpful Hints for Working with
Percentage Changes
The Components of Expenditure
FYI What Is Investment?
► CASE STUDY GDP and Its Components
Other Measures of Income
Seasonal Adjustment
2-2 Measuring the Cost of Living: The Consumer Price
Index
The Price of a Basket of Goods
How the CPI Compares to the GDP and PCE
Deflators
Does the CPI Overstate Inflation?
2-3 Measuring Joblessness: The Unemployment Rate
The Household Survey
► CASE STUDY Trends in Labor-Force
Participation
The Establishment Survey
2-4 Conclusion: From Economic Statistics to Economic
Models
Part II Classical Theory: The Economy in the Long Run
Chapter 3 National Income: Where It Comes From and
Where It Goes
3-1 What Determines the Total Production of Goods and
Services?
The Factors of Production
The Production Function
The Supply of Goods and Services
3-2 How Is National Income Distributed to the Factors
of Production?
Factor Prices
The Decisions Facing a Competitive Firm
The Firm’s Demand for Factors
The Distribution of National Income
► CASE STUDY The Black Death and Factor Prices
The Cobb–Douglas Production Function
► CASE STUDY Labor Productivity as the Key
Determinant of Real Wages
3-3 What Determines the Demand for Goods and
Services?
Consumption
Investment
FYI The Many Different Interest Rates
Government Purchases
3-4 What Brings the Supply and Demand for Goods and
Services into Equilibrium?
Equilibrium in the Market for Goods and Services:
The Supply and Demand for the Economy’s Output
Equilibrium in Financial Markets: The Supply and
Demand for Loanable Funds
Changes in Saving: The Effects of Fiscal Policy
Changes in Investment Demand
3-5 Conclusion
Appendix The Growing Gap Between Rich and Poor
Chapter 4 The Monetary System: What It Is and How It Works
4-1 What Is Money?
The Functions of Money
The Types of Money
► CASE STUDY Money in a POW Camp
The Development of Fiat Money
► CASE STUDY Money and Social Conventions on
the Islands of Yap
FYI Bitcoin: The Strange Case of a Digital Money
How the Quantity of Money Is Controlled
How the Quantity of Money Is Measured
FYI How Do Credit Cards and Debit Cards Fit
into the Monetary System?
4-2 The Role of Banks in the Monetary System
100-Percent-Reserve Banking
Fractional-Reserve Banking
Bank Capital, Leverage, and Capital Requirements
4-3 How Central Banks Influence the Money Supply
A Model of the Money Supply
The Instruments of Monetary Policy
► CASE STUDY Quantitative Easing and the
Exploding Monetary Base
Problems in Monetary Control
► CASE STUDY Bank Failures and the Money
Supply in the 1930s
4-4 Conclusion
Chapter 5 Inflation: Its Causes, Effects, and Social Costs
5-1 The Quantity Theory of Money
Transactions and the Quantity Equation
From Transactions to Income
The Money Demand Function and the Quantity
Equation
The Assumption of Constant Velocity
Money, Prices, and Inflation
► CASE STUDY Inflation and Money Growth
5-2 Seigniorage: The Revenue from Creating Money
► CASE STUDY Paying for the American
Revolution
5-3 Inflation and Interest Rates
Two Interest Rates: Real and Nominal
The Fisher Effect
► CASE STUDY Inflation and Nominal Interest
Rates
Two Real Interest Rates: Ex Ante and Ex Post
5-4 The Nominal Interest Rate and the Demand for
Money
The Cost of Holding Money
Future Money and Current Prices
5-5 The Social Costs of Inflation
The Layperson’s View and the Classical Response
► CASE STUDY What Economists and the Public
Say About Inflation
The Costs of Expected Inflation
The Costs of Unexpected Inflation
► CASE STUDY The Free Silver Movement, the
Election of 1896, and the Wizard of Oz
One Benefit of Inflation
5-6 Hyperinflation
The Costs of Hyperinflation
The Causes of Hyperinflation
► CASE STUDY Hyperinflation in Interwar
Germany
► CASE STUDY Hyperinflation in Zimbabwe
5-7 Conclusion: The Classical Dichotomy
Chapter 6 The Open Economy
6-1 The International Flows of Capital and Goods
The Role of Net Exports
International Capital Flows and the Trade Balance
International Flows of Goods and Capital: An
Example
The Irrelevance of Bilateral Trade Balances
6-2 Saving and Investment in a Small Open Economy
Capital Mobility and the World Interest Rate
Why Assume a Small Open Economy?
The Model
How Policies Influence the Trade Balance
Evaluating Economic Policy
► CASE STUDY The U.S. Trade Deficit
► CASE STUDY Why Doesn’t Capital Flow to Poor
Countries?
6-3 Exchange Rates
Nominal and Real Exchange Rates
The Real Exchange Rate and the Trade Balance
The Determinants of the Real Exchange Rate
How Policies Influence the Real Exchange Rate
The Effects of Trade Policies
► CASE STUDY The Economic Consequences of
Mr. Trump
The Determinants of the Nominal Exchange Rate
► CASE STUDY Inflation and Nominal Exchange
Rates
The Special Case of Purchasing-Power Parity
► CASE STUDY The Big Mac Around the World
6-4 Conclusion: The United States as a Large Open
Economy
Appendix The Large Open Economy
Chapter 7 Unemployment and the Labor Market
7-1 Job Loss, Job Finding, and the Natural Rate of
Unemployment
7-2 Job Search and Frictional Unemployment
Causes of Frictional Unemployment
Public Policy and Frictional Unemployment
► CASE STUDY Unemployment Insurance and the
Rate of Job Finding
► CASE STUDY Unemployment Insurance During
the Great Shutdown of 2020
7-3 Real-Wage Rigidity and Structural Unemployment
Minimum-Wage Laws
Unions and Collective Bargaining
Efficiency Wages
► CASE STUDY Henry Ford’s $5 Workday
7-4 Labor-Market Experience: The United States
The Duration of Unemployment
► CASE STUDY The Increase in U.S. Long-Term
Unemployment and the Debate over
Unemployment Insurance
Variation in the Unemployment Rate Across
Demographic Groups
Transitions into and out of the Labor Force
7-5 Labor-Market Experience: Europe
The Rise in European Unemployment
Unemployment Variation Within Europe
The Rise of European Leisure
7-6 Conclusion
Part III Growth Theory: The Economy in the Very Long Run
Chapter 8 Capital Accumulation as a Source of Growth
8-1 The Basic Solow Model
The Supply and Demand for Goods
Growth in the Capital Stock and the Steady State
Approaching the Steady State: A Numerical
Example
► CASE STUDY The Miracle of Japanese and
German Growth
How Saving Affects Growth
8-2 The Golden Rule Level of Capital
Comparing Steady States
Finding the Golden Rule Steady State: A Numerical
Example
The Transition to the Golden Rule Steady State
8-3 Conclusion
Chapter 9 Population Growth and Technological Progress
9-1 Population Growth in the Solow Model
The Steady State with Population Growth
The Effects of Population Growth
► CASE STUDY Investment and Population Growth
Around the World
Alternative Perspectives on Population Growth
9-2 Technological Progress in the Solow Model
The Efficiency of Labor
The Steady State with Technological Progress
The Effects of Technological Progress
9-3 Beyond the Solow Model: Endogenous Growth
Theory
The Basic Model
A Two-Sector Model
The Microeconomics of Research and Development
The Process of Creative Destruction
9-4 Conclusion
Chapter 10 Growth Empirics and Policy
10-1 From Growth Theory to Growth Empirics
Balanced Growth
Convergence
Factor Accumulation Versus Production Efficiency
► CASE STUDY Good Management as a Source of
Productivity
10-2 Accounting for the Sources of Economic Growth
Increases in the Factors of Production
Technological Progress
The Sources of Growth in the United States
► CASE STUDY The Slowdown in Productivity
Growth
The Solow Residual in the Short Run
10-3 Policies to Promote Growth
Evaluating the Rate of Saving
Changing the Rate of Saving
Allocating the Economy’s Investment
► CASE STUDY Industrial Policy in Practice
► CASE STUDY Misallocation in India and China
Establishing the Right Institutions
► CASE STUDY The Colonial Origins of Modern
Institutions
Supporting a Pro-growth Culture
Encouraging Technological Progress
► CASE STUDY Is Free Trade Good for Economic
Growth?
10-4 Conclusion
Part IV Business Cycle Theory: The Economy in the Short Run
Chapter 11 Introduction to Economic Fluctuations
11-1 The Facts About the Business Cycle
GDP and Its Components
Unemployment and Okun’s Law
Leading Economic Indicators
11-2 Time Horizons in Macroeconomics
How the Short Run and the Long Run Differ
► CASE STUDY If You Want to Know Why Firms
Have Sticky Prices, Ask Them
The Model of Aggregate Supply and Aggregate
Demand
11-3 Aggregate Demand
The Quantity Equation as Aggregate Demand
Why the Aggregate Demand Curve Slopes
Downward
Shifts in the Aggregate Demand Curve
11-4 Aggregate Supply
The Long Run: The Vertical Aggregate Supply
Curve
The Short Run: The Horizontal Aggregate Supply
Curve
From the Short Run to the Long Run
► CASE STUDY A Monetary Lesson from French
History
11-5 Stabilization Policy
Shocks to Aggregate Demand
Shocks to Aggregate Supply
► CASE STUDY How OPEC Helped Cause
Stagflation in the 1970s and Euphoria in the 1980s
11-6 The Covid-19 Recession of 2020
Modeling the Shutdown
The Policy Response
The Recovery and the Road Ahead
11-7 Conclusion
Chapter 12 Aggregate Demand I: Building the IS–LM
Model
12-1 The Goods Market and the IS Curve
The Keynesian Cross
► CASE STUDY Cutting Taxes to Stimulate the
Economy: From Kennedy to Trump
► CASE STUDY Increasing Government Purchases
to Stimulate the Economy: The Obama Stimulus
► CASE STUDY Using Regional Data to Estimate
Multipliers
The Interest Rate, Investment, and the IS Curve
How Fiscal Policy Shifts the IS Curve
12-2 The Money Market and the LM Curve
The Theory of Liquidity Preference
► CASE STUDY Does a Monetary Tightening Raise
or Lower Interest Rates?
Income, Money Demand, and the LM Curve
How Monetary Policy Shifts the LM Curve
12-3 Conclusion: The Short-Run Equilibrium
Chapter 13 Aggregate Demand II: Applying the IS–LM
Model
13-1 Explaining Fluctuations with the IS–LM Model
How Fiscal Policy Shifts the IS Curve and Changes
the Short-Run Equilibrium
How Monetary Policy Shifts the LM Curve and
Changes the Short-Run Equilibrium
The Interaction Between Monetary and Fiscal
Policy
Shocks in the IS–LM Model
► CASE STUDY The U.S. Recession of 2001
What Is the Fed’s Policy Instrument — The Money
Supply or the Interest Rate?
13-2 IS–LM as a Theory of Aggregate Demand
From the IS–LM Model to the Aggregate Demand
Curve
The IS–LM Model in the Short Run and Long Run
13-3 The Great Depression
The Spending Hypothesis: Shocks to the IS Curve
The Money Hypothesis: A Shock to the LM Curve
The Money Hypothesis Again: The Effects of Falling
Prices
Could the Depression Happen Again?
► CASE STUDY The Financial Crisis and Great
Recession of 2008–2009
The Liquidity Trap and Unconventional Monetary
Policy
FYI The Curious Case of Negative Interest
Rates
13-4 Conclusion
Chapter 14 The Open Economy Revisited: The Mundell–
Fleming Model and the Exchange-Rate Regime
14-1 The Mundell–Fleming Model
The Key Assumption: Small Open Economy with
Perfect Capital Mobility
The Goods Market and the IS Curve
The Money Market and the LM Curve
Putting the Pieces Together
14-2 The Small Open Economy Under Floating
Exchange Rates
Fiscal Policy
Monetary Policy
Trade Policy
14-3 The Small Open Economy Under Fixed Exchange
Rates
How a Fixed-Exchange-Rate System Works
► CASE STUDY The International Gold Standard
Fiscal Policy
Monetary Policy
► CASE STUDY Devaluation and the Recovery from
the Great Depression
Trade Policy
Policy in the Mundell–Fleming Model: A Summary
14-4 Interest Rate Differentials
Country Risk and Exchange-Rate Expectations
Differentials in the Mundell–Fleming Model
∗
∗
► CASE STUDY International Financial Crisis:
Mexico 1994–1995
► CASE STUDY International Financial Crisis: Asia
1997–1998
14-5 Should Exchange Rates Be Floating or Fixed?
Pros and Cons of Different Exchange-Rate Systems
► CASE STUDY The Debate over the Euro
Speculative Attacks, Currency Boards, and
Dollarization
The Impossible Trinity
► CASE STUDY The Chinese Currency Controversy
14-6 From the Short Run to the Long Run: The
Mundell–Fleming Model with a Changing Price Level
14-7 A Concluding Reminder
Appendix A Short-Run Model of the Large Open Economy
Chapter 15 Aggregate Supply and the Short-Run Tradeoff
Between Inflation and Unemployment
15-1 The Basic Theory of Aggregate Supply
The Sticky-Price Model
An Alternative Theory: The Imperfect-Information
Model
► CASE STUDY International Differences in the
Aggregate Supply Curve
Implications
15-2 Inflation, Unemployment, and the Phillips Curve
Deriving the Phillips Curve from the Aggregate
Supply Curve
FYI The History of the Modern Phillips Curve
Adaptive Expectations and Inflation Inertia
Two Causes of Rising and Falling Inflation
► CASE STUDY Inflation and Unemployment in the
United States
The Short-Run Tradeoff Between Inflation and
Unemployment
FYI How Precise Are Estimates of the Natural
Rate of Unemployment?
Disinflation and the Sacrifice Ratio
Rational Expectations and the Possibility of
Painless Disinflation
► CASE STUDY The Sacrifice Ratio in Practice
Hysteresis and the Challenge to the Natural-Rate
Hypothesis
15-3 Conclusion
Appendix The Mother of All Models
Part V Topics in Macroeconomic Theory and Policy
Chapter 16 A Dynamic Model of Economic Fluctuations
16-1 Elements of the Model
Output: The Demand for Goods and Services
The Real Interest Rate: The Fisher Equation
Inflation: The Phillips Curve
Expected Inflation: Adaptive Expectations
The Nominal Interest Rate: The Monetary-Policy Rule
► CASE STUDY The Taylor Rule
16-2 Solving the Model
The Long-Run Equilibrium
The Dynamic Aggregate Supply Curve
The Dynamic Aggregate Demand Curve
The Short-Run Equilibrium
16-3 Using the Model
Long-Run Growth
A Shock to Aggregate Supply
A Shock to Aggregate Demand
FYI The Numerical Calibration and
Simulation
A Shift in Monetary Policy
16-4 Two Applications: Lessons for Monetary Policy
The Tradeoff Between Output Variability and
Inflation Variability
► CASE STUDY Different Mandates, Different
Realities: The Fed Versus the ECB
The Taylor Principle
► CASE STUDY What Caused the Great Inflation?
16-5 Conclusion: Toward DSGE Models
Chapter 17 Alternative Perspectives on Stabilization Policy
17-1 Should Policy Be Active or Passive?
Lags in the Implementation and Effects of Policies
The Difficult Job of Economic Forecasting
► CASE STUDY Mistakes in Forecasting
Ignorance, Expectations, and the Lucas Critique
The Historical Record
► CASE STUDY How Does Policy Uncertainty
Affect the Economy?
17-2 Should Policy Be Conducted by Rule or Discretion?
Distrust of Policymakers and the Political Process
The Time Inconsistency of Discretionary Policy
► CASE STUDY Alexander Hamilton Versus Time
Inconsistency
Rules for Monetary Policy
► CASE STUDY Inflation Targeting: Rule or
Constrained Discretion?
► CASE STUDY Central-Bank Independence
17-3 Conclusion
Appendix Time Inconsistency and the Tradeoff Between
Inflation and Unemployment
Chapter 18 Government Debt and Budget Deficits
18-1 The Size of the Government Debt
► CASE STUDY The Troubling Long-Term Outlook
for Fiscal Policy
18-2 Measurement Problems
Problem 1: Inflation
Problem 2: Capital Assets
Problem 3: Uncounted Liabilities
Problem 4: The Business Cycle
Summing Up
18-3 The Traditional View of Government Debt
FYI Taxes and Incentives
18-4 The Ricardian View of Government Debt
The Basic Logic of Ricardian Equivalence
Consumers and Future Taxes
► CASE STUDY George H. W. Bush’s Withholding Experiment
Making a Choice
FYI Ricardo on Ricardian Equivalence
18-5 Other Perspectives on Government Debt
Balanced Budgets Versus Optimal Fiscal Policy
Fiscal Effects on Monetary Policy
Debt and the Political Process
International Dimensions
18-6 Conclusion
Chapter 19 The Financial System: Opportunities and Dangers
19-1 What Does the Financial System Do?
Financing Investment
Sharing Risk
Dealing with Asymmetric Information
Fostering Economic Growth
FYI The Efficient Markets Hypothesis Versus
Keynes’s Beauty Contest
19-2 Financial Crises
The Anatomy of a Crisis
FYI The TED Spread
► CASE STUDY Who Should Be Blamed for the
Financial Crisis of 2008–2009?
Policy Responses to a Crisis
Policies to Prevent Crises
► CASE STUDY The European Sovereign Debt Crisis
19-3 Conclusion
Chapter 20 The Microfoundations of Consumption and Investment
20-1 What Determines Consumer Spending?
John Maynard Keynes and the Consumption Function
Franco Modigliani and the Life-Cycle Hypothesis
Milton Friedman and the Permanent-Income Hypothesis
► CASE STUDY The 1964 Tax Cut and the 1968 Tax Surcharge
► CASE STUDY The Tax Rebates of 2008
Robert Hall and the Random-Walk Hypothesis
► CASE STUDY Do Predictable Changes in Income
Lead to Predictable Changes in Consumption?
David Laibson and the Pull of Instant Gratification
► CASE STUDY How to Get People to Save More
The Bottom Line on Consumption
20-2 What Determines Investment Spending?
The Rental Price of Capital
The Cost of Capital
The Cost-Benefit Calculus of Investment
Taxes and Investment
The Stock Market and Tobin’s q
► CASE STUDY The Stock Market as an Economic Indicator
Financing Constraints
The Bottom Line on Investment
20-3 Conclusion: The Key Role of Expectations
Epilogue What We Know, What We Don’t
The Four Most Important Lessons of Macroeconomics
Lesson 1: In the long run, a country’s capacity to
produce goods and services determines the
standard of living of its citizens.
Lesson 2: In the short run, aggregate demand
influences the amount of goods and services that a country produces.
Lesson 3: In the long run, the rate of money growth
determines the rate of inflation, but it does not
affect the rate of unemployment.
Lesson 4: In the short run, policymakers who
control monetary and fiscal policy face a tradeoff
between inflation and unemployment.
The Four Most Important Unresolved Questions of Macroeconomics
Question 1: How should policymakers try to
promote growth in the economy’s natural level of output?
Question 2: What is the best way to stabilize the economy?
Question 3: How costly is inflation, and how costly is reducing inflation?
Question 4: Are government budget deficits a big problem?
Conclusion
Glossary
Index