Macroeconomics [Global Edition]

732 Pages·2017·4.98 MB·english

by  Stephen D. Williamson

Macroeconomics
Sixth Edition
Global Edition
STEPHEN D. WILLIAMSON
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Authorized adaptation from the United States edition, entitled Macroeconomics, 6th edition, ISBN 978-0-13-447211-9, by
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ISBN 10: 1-292-21576-3
ISBN 13: 978-1-29-221576-1
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The Pearson Series in Economics
Abel/Bernanke/Croushore Daniels/VanHoose Heilbroner/Milberg
Macroeconomics*† International Monetary & The Making of the Economic
Financial Economics Society
Acemoglu/Laibson/List
Economics*† Downs Heyne/Boettke/Prychitko
An Economic Theory of The Economic Way of Thinking
Bade/Parkin
Democracy
Foundations of Economics*† Holt
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Modern Labor Economics Behavior
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Economics*†
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Game Theory with Economic
Applications Money, Banking, and the Financial
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System*
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Macroeconomics*† Health Care Hubbard/O’Brien/Rafferty
Macroeconomics*
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The Economics of Women, Men, Sports Economics Hughes/Cain
and Work American Economic History
Ehrenberg/Smith
Boardman/Greenberg/Vining/ Modern Labor Economics Husted/Melvin
Weimer International Economics
Cost-Benefit Analysis Froyen
Macroeconomics: Theories and Jehle/Reny
Boyer Policies Advanced Microeconomic Theory
Principles of Transportation
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The Age of the Economist A Health Economics Primer
Brander/Perloff
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Managerial Economics and Gerber
Strategy*† International Economics*† Managerial Economics
Klein
Branson González-Rivera
Mathematical Methods for
Macroeconomic Theory and Forecasting for Economics
Economics
Policy and Business
Krugman/Obstfeld/Melitz
Bruce Gordon
International Economics: Theory
Public Finance and the American Macroeconomics*
& Policy*†
Economy
Greene
Laidler
Carlton/Perloff Econometric Analysis†
The Demand for Money
Modern Industrial Organization*
Gregory
Leeds/von Allmen
Case/Fair/Oster Essentials of Economics
Principles of Economics*† The Economics of Sports
Gregory/Stuart
Chapman Russian and Soviet Economic Leeds/von Allmen/Schiming
Environmental Economics: Theory, Performance and Structure Economics*
Application, and Policy
Lynn
Hartwick/Olewiler
Cooter/Ulen The Economics of Natural Economic Development: Theory
Law and Economics Resource Use and Practice for a Divided World
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Miller Perloff Sherman
Economics Today* Microeconomics*† Market Regulation
Understanding Modern Economics Microeconomics: Theory and
Stock/Watson
Applications with Calculus*†
Miller/Benjamin Introduction to Econometrics†
The Economics of Macro Issues Phelps
Studenmund
Health Economics
Miller/Benjamin/North Using Econometrics:
The Economics of Public Issues Pindyck/Rubinfeld A Practical Guide†
Microeconomics*†
Tietenberg/Lewis
Mills/Hamilton
Urban Economics Riddell/Shackelford/Stamos/ Environmental and Natural
Schneider Resource Economics
Mishkin Economics: A Tool for Critically Environmental Economics
The Economics of Money, Banking, Understanding Society and Policy
and Financial Markets*†
Roberts Todaro/Smith
The Economics of Money, Banking,
The Choice: A Fable of Free Trade Economic Development
and Financial Markets, Business
and Protection
School Edition* Waldman/Jensen
Macroeconomics: Policy and Rohlf Industrial Organization: Theory
Practice* Introduction to Economic Reasoning and Practice
Murray Roland Walters/Walters/Appel/Callahan/
Econometrics: A Modern Development Economics Centanni/Maex/O’Neill
Introduction Econversations: Today’s Students
Scherer
Discuss Today’s Issues
O’Sullivan/Sheffrin/Perez Industry Structure, Strategy, and
Economics: Principles, Public Policy Weil
Applications and Tools*† Economic Growth
Schiller
Parkin The Economics of Poverty and Williamson
Economics*† Discrimination Macroeconomics†
*denotes Pearson MyLab Economics titles. Visit www.myeconlab.com to learn more.
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CONTENTS
PART I Introduction and Measurement Issues 21
Chapter 1 Introduction 22
What Is Macroeconomics? 23
Gross Domestic Product, Economic Growth,
and Business Cycles 23
Macroeconomic Models 29
Microeconomic Principles 31
Disagreement in Macroeconomics 32
What Do We Learn from Macroeconomic Analysis? 33
Understanding Recent and Current Macroeconomic Events 36
Chapter Summary 53 Problems 56
Key Terms 54 Working with the Data 57
Questions for Review 55
Chapter 2 Measurement 58
Measuring GDP: The National Income and Product Accounts 59
The Components of Aggregate Expenditure 66
Nominal and Real GDP and Price Indices 68
Problems with Measuring Real GDP and the Price Level 75
Macroeconomics in Action: Comparing Real GDP Across
Countries and the Penn Effect 76
Macroeconomics in Action: House Prices and GDP
Measurement 77
Savings, Wealth, and Capital 79
Labor Market Measurement 81
Macroeconomics in Action: Alternative Measures of the
Unemployment Rate 82
Chapter Summary 84 Problems 86
Key Terms 84 Working with the Data 89
Questions for Review 86
Chapter 3 Business Cycle Measurement 90
Regularities in GDP Fluctuations 91
5
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6 Contents
Comovement 93
Macroeconomics in Action: Economic Forecasting and the
Financial Crisis 94
The Components of GDP 101
The Price Level and Inflation 104
Labor Market Variables 105
Macroeconomics in Action: Jobless Recoveries 108
Seasonal Adjustment 109
Macroeconomics in Action: The Great Moderation and the
2008–2009 Recession 112
Comovement Summary 112
Chapter Summary 113 Problems 115
Key Terms 114 Working with the Data 116
Questions for Review 115
PART II Basic Macroeconomic Models: A One-Period Model
and Models of Search and Unemployment 117
Chapter 4 Consumer and Firm Behavior: The Work–Leisure
Decision and Profit Maximization 118
The Representative Consumer 119
Macroeconomics in Action: How Elastic Is Labor Supply? 140
The Representative Firm 142
Macroeconomics in Action: Henry Ford and Total Factor
Productivity 151
Theory Confronts the Data: Total Factor Productivity
and the U.S. Aggregate Production Function 152
Chapter Summary 156 Problems 158
Key Terms 156 Working with the Data 160
Questions for Review 157
Chapter 5 A Closed-Economy One-Period Macroeconomic
Model 162
Government 163
Competitive Equilibrium 164
Optimality 170
Working with the Model: The Effects of a Change in Government
Purchases 177
Working with the Model: A Change in Total Factor
Productivity 179
Theory Confronts the Data: Government Spending in World
War II 180
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Contents 7
Theory Confronts the Data: Total Factor Productivity and Real
GDP 186
Macroeconomics in Action: Government Expenditures and the
American Recovery and Reinvestment Act of 2009 187
A Distorting Tax on Wage Income, Tax Rate Changes, and the Laffer
Curve 191
A Model of Public Goods: How Large Should the Government
Be? 197
Chapter Summary 202 Problems 204
Key Terms 202 Working with the Data 206
Questions for Review 203
Chapter 6 Search and Unemployment 207
Labor Market Facts 208
Macroeconomics in Action: Unemployment and Employment in
the United States and Europe 214
A One-Sided Search Model of Unemployment 216
A Two-Sided Model of Search and Unemployment 225
Working with the Two-Sided Search Model 233
Macroeconomics in Action: Unemployment Insurance and
Incentives 236
Theory Confronts the Data: Productivity, Unemployment, and
Real GDP in the United States and Canada: The 2008–2009
Recession 242
Macroeconomics in Action: The Natural Rate of Unemployment
and the 2008–2009 Recession 244
Chapter Summary 246 Problems 248
Key Terms 247 Working with the Data 249
Questions for Review 247
PART III Economic Growth 251
Chapter 7 Economic Growth: Malthus and Solow 252
Economic Growth Facts 254
The Malthusian Model of Economic Growth 259
The Solow Model: Exogenous Growth 269
Theory Confronts the Data: The Solow Growth Model, Investment
Rates, and Population Growth 283
Macroeconomics in Action: Resource Misallocation and Total
Factor Productivity 285
Macroeconomics in Action: Recent Trends in Economic Growth
in the United States 286
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8 Contents
Growth Accounting 289
Macroeconomics in Action: Development Accounting 294
Chapter Summary 296 Problems 298
Key Terms 297 Working with the Data 300
Questions for Review 297
Chapter 8 Income Disparity Among Countries and Endogenous
Growth 301
Convergence 302
Theory Confronts the Data: Is Income Per Worker Converging in
the World? 307
Macroeconomics in Action: Measuring Economic Welfare: Per Capita
Income, Income Distribution, Leisure, and Longevity 308
Endogenous Growth: A Model of Human Capital
Accumulation 310
Macroeconomics in Action: Education and Growth 319
Chapter Summary 320 Problems 321
Key Terms 321 Working with the Data 323
Questions for Review 321
PART IV Savings, Investment, and Government
Deficits 325
Chapter 9 A Two-Period Model: The Consumption–Savings Decision
and Credit Markets 326
A Two-Period Model of the Economy 328
Theory Confronts the Data: Consumption Smoothing and the
Stock Market 345
The Ricardian Equivalence Theorem 357
Macroeconomics in Action: Default on Government Debt 363
Chapter Summary 365 Problems 368
Key Terms 366 Working with the Data 370
Questions for Review 367
Chapter 10 Credit Market Imperfections: Credit Frictions, Financial
Crises, and Social Security 371
Credit Market Imperfections and Consumption 373
Credit Market Imperfections, Asymmetric Information, and the
Financial Crisis 377
Theory Confronts the Data: Asymmetric Information and Interest
Rate Spreads 379
Credit Market Imperfections, Limited Commitment, and the
Financial Crisis 380
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Contents 9
Social Security Programs 383
Theory Confronts the Data: The Housing Market, Collateral, and
Consumption 384
Macroeconomics in Action: Social Security and Incentives 392
Chapter Summary 395 Problems 396
Key Terms 395 Working with the Data 398
Questions for Review 396
Chapter 11 A Real Intertemporal Model with Investment 399
The Representative Consumer 401
The Representative Firm 409
Theory Confronts the Data: Investment and the Interest Rate
Spread 419
Government 421
Competitive Equilibrium 422
The Equilibrium Effects of a Temporary Increase in G: Stimulus,
the Multiplier, and Crowding Out 434
The Equilibrium Effects of a Decrease in the Current Capital
Stock K 437
Theory Confronts the Data: Government Expenditure Multipliers
in the Recovery from the 2008–2009 Recession 438
The Equilibrium Effects of an Increase in Current Total Factor
Productivity z 441
The Equilibrium Effects of an Increase in Future Total Factor
Productivity, z′: News About the Future and Aggregate
Economic Activity 443
Theory Confronts the Data: News, the Stock Market, and
Investment Expenditures 445
Credit Market Frictions and the Financial Crisis 447
Sectoral Shocks and Labor Market Mismatch 449
Theory Confronts the Data: The Behavior of Real GDP,
Employment, and Labor Productivity in the 1981–1982 and
2008–2009 Recessions 452
Chapter Summary 455 Problems 458
Key Terms 457 Working with the Data 460
Questions for Review 457
PART V Money and Business Cycles 461
Chapter 12 Money, Banking, Prices, and Monetary Policy 462
What Is Money? 463
A Monetary Intertemporal Model 465
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