INDEX
Note: Page numbers followed by n indicate footnotes.
Abel, Andrew B., 255n
Abraham, Katharine, 420n, 502n Ahmed, Shaghil, 324n
Akerlof, George, 446, 446n Alexpoulos, Michelle, 450
Aruoba, S.
Boragan, 340, 340n Ash, Michael, 633nAshenfelter, O., 114
Auerbach, Alan J., 639, 639n
Aun, Lee Hwok, 129n
Bagehot, Walter, 582, 582n
Baily, Martin Neil, 249n
Baldwin, Richard E., 531n
Ball, Laurence, 511n
Barro, Robert J., 626n, 636, 637n Barsky, Robert, 335n, 343n Bartlett, John, 327n
Berg, Janine, 114n
Bernanke, Ben S., 178n, 225n, 248n,
269n, 323n, 412n, 421, 422n, 501n,
503n, 514, 584n, 597, 597n, 598n, 599, 600n, 607n
Bernheim, B. Douglas, 637n
Bils, Mark, 455
Bizer, David, 629n
Blinder, Alan, 455
Blundell, Richard, 114n
Boivin, Jean, 456
Boskin, Michael, 81
Boubaker, Sabri, 639
Bowman, David, 583n
Brainard, William C., 599n Brunner, K., 499n
Buiter, Willem, 608n
Bullard, James, 116n
Burns, Arthur, 316, 339
Bush, George W., 616
Byrne, David M., 249
Cagan, Philip, 508n, 645
Campbell, John Y., 200n
Cappelli, Peter, 450
Card, D., 114
Carlstrom, Charles T., 120n
Caro, Luis Pinedo, 114n
Carter, Jimmy, 505, 607
Cavallo, Michele, 231n
Chauvin, Keith, 450
Christiano, Lawrence, 416n
Clark, Todd E., 83n
Clinton, Bill, 616
Cohen, Jon, 450
Corrado, Carol A., 249n
Croushore, Dean, 433, 598n
Cummins, Jason, 164-165
D'Auria, Francesca, 95n
Davis, Steven, 418, 419n
Denison, Edward, 243-244
Devereux, Paul J., 335n
Diebold, Francis X., 340, 340n, 341
Durlauf, Steven, 629n
Ebrill, Liam P., 628n
Eichenbaum, Martin, 412, 416n Eichengreen, Barry, 265n
Engels, Friedrich, 316
Evans, Charles L., 339n
Fay, Jon, 412
Feige, Edgar, 57n
Feldstein, Martin S., 559n
Ferguson, Roger W., Jr., 248n Fernald, John G., 120n, 249, 268n
Fischer, Stanley, 506n, 507n
Fisher, Irving, 300n
Fisher, Jonas, 339
Ford, Henry, 451
Fraumeni, Barbara M., 57n
Friedman, Milton, 196, 197n, 336, 423-424, 425, 425n, 490, 508n, 557, 601, 601n, 602-603, 645n
Fuerst, Timothy S., 120n
Fujita, Shigeru, 331 n
Furman, Jason, 626n
Gagnon, Etienne, 583n
Garner, C.
Alan, 177nGertler, Mark, 597, 597n
Giannoni, Marc, 456
Goldfeld, Stephen, 299, 299n
Gordon, Robert J., 82, 249n Gorodnichenko, Yuriy, 639, 639n Greenspan, Alan, 513, 514, 608
Hall, Keith, 44n
Hall, Robert E., 200n
Haltiwanger, John C., 418, 419n, 502n
Hamilton, Alexander, 557
Hassett, Kevin, 164-165
Herndon, Thomas, 633n Hicks, John, 352, 352n Holtz-Eakin, Douglas, 269n Hoynes, Hilary, 502n
Hubbard, R. Glenn, 164-165 Hulten, Charles R., 249n Huber, Nick, 157n
Johnson, Lyndon B., 321 Judson, Rith, 282n
Kao, Chihwa, 269n
Kashyap, Anil, 455
Katz, Lawrence, 420n Keane, Michael P., 114n, 432-433 Kennedy, John F., 321 Keynes, John Maynard, 46-47, 46n, 352, 466
King, Robert G., 405n, 423n Klasen, Stephan, 130n Klemm, Alexander, 157 Koch, Christopher, 298n Kondratieff, Nikolai D., 245n Kozicki, Sharon, 504n Kreibaum, Merle, 130n Krueger, Dirk, 501 Kwon, Ohchul, 628, 628n Kydland, Finn, 404, 406-407
Laffer, Arthur, 627
Landefeld, J. Steven, 57n, 80n Lane, Philip R., 559n Leahy, Mike, 583n Lebow, David, 82 Lettau, Martin, 177n Levin, Andrew, 324n Lilien, David, 418n Liu, Chin Te, 339n
Lucas, Robert E., Jr., 265n, 326, 326n, 425, 425n, 499
Ludvigson, Sydney, 177n
MaCurdy, Thomas, 114n Mankiw, N. Gregory, 200n, 255n,
455n, 511n
Marquis, Milton, 73n Marx, Karl, 316
Matha, Thomas Y., 125n
McGibany, James M., 295n
Medoff, James, 412
Meltzer, A. H., 499n
Mihov, Ilian, 456
Miller, Douglas L., 502n
Miron, Jeffrey, 343n
Mishkin, Frederic S., 200n, 607n
Mitchell, Wesley, 316, 339
Mitman, Kurt, 501
Modigliani, Franco, 197
Mokyr, Joel, 245
Montalbano, Nicholas, 249n
Moore, Geoffrey H., 318n
Mundell, Robert A., 556, 556n, 557
Muth, John F., 431n
Nakamura, Emi, 455
Nguyen, Duc Khuong, 639
Nixon, Richard M., 504, 512
Nourzad, Farrokh, 295n
Obama, Barack, 322
O'Higgins, Niall, 114n
Okun, Arthur, 130, 131n
Orphanides, Athanasios, 504n, 606n
Paltalidis, Nikos, 639
Park, Donghyun, 265n
Parker, Robert P., 80n
Parker, Jonathan, 178, 335n
Parker, Randall E., 350n
Peachey, Kevin, 585n
Penner, Rudolph, 73n
Perri, Fabrizio, 501
Perry, Victoria, 157
Pesenti, Paolo, 608n
Pham-Kanter, Genevieve, 339n
Phelps, Edmund, 490, 601n
Phillips, A.
W., 488Pieters, Gina C., 298n
Plosser, Charles, 405n, 423n
Pollin, Robert, 633n Poole, William, 592n
Prescott, Edward, 404, 406-407, 408, 408n, 409
Radford, R. A., 278 Raff, Daniel M. G., 451n Ramey, Garey, 331n Ranchhod, Vimal, 270-271 Reagan, Ronald, 165, 505, 627 Rebelo, Sergio, 405n, 412 Reinhart, Carmen M., 633n Reinhart, Vincent R., 584n, 633n Reinsdorf, Marshall B., 249 Riera-Crichton, D., 639, 639n Rogerson, Richard, 114n Rogoff, Kenneth S., 608n, 633n Romer, Christina, 322, 350n,
372n, 424
Romer, David, 372n, 424, 593n Romer, Paul, 265n
Roosevelt, Franklin D., 320 Rotemberg, J., 178n, 412n, 503n, Rothman, Philip, 350n Rudd, Jeremy, 82
Rudebusch, Glenn D., 325, 325n,
341, 583n
Runkle, David, 177n, 432-433
Samuelson, Paul, 327 Sandusky, Kristin, 502n Schaller, Jessamyn, 502n Schwartz, Anna J., 336, 423-424,
424n, 601, 602 Scotti, Chiara, 340, 340n Seskin, Eugene P., 57n Shambaugh, Jay C., 559n Shapiro, Carl, 446n Shiffer, Zalman F., 507n Shimer, Robert, 503, 503n Shin, Kwanho, 265n
Sims, Christopher, 372n
Smith, Adam, 45-46, 48, 377n
Solon, Gary, 335n
Solow, Robert, 250, 250n, 410
Solt, Frederick, 271
Spletzer, James, 502n
Staiger, Douglas, 504
Steindel, Charles, 79n
Steinsson, Jon, 455
Stiglitz, Joseph E., 446n
Stock, James H., 323, 335n, 342, 504, 599n
Summers, Lawrence H., 255n, 451n
Summers, Peter M., 324n
Taylor, John, 604, 605
Thatcher, Margaret, 627
Tobin, James, 169
Trehan, Bharat, 120n
Truman, Harry, 44n
Truss, Liz, 628
Vegh, C., 639, 639n
Vickers, Chris, 245
Volcker, Paul, 424, 498, 513, 514, 607-608, 608n
Vuletin, G. 639, 639n
Wascher, William L., 248n
Watson, Mark W., 323, 335n, 342, 504, 599n
Wieland, Volker, 504n
Williams, John, 504n
Wilson, Beth Ann, 324n
Wolla, Scott, 298n
Woodford, Michael, 472n
Zarnowitz, Victor, 318n
Zeckhauser, Richard J., 255n
Ziebarth, Nicholas L., 245
Note: Page numbers in boldface type indicate pages where terms are defined; page numbers followed by n indicate footnotes.
Absorption, 216
Activist strategy, 600 Acyclical variables, 326
AD-AS model.
See Aggregate demandaggregate supply (AD-AS) modelAD curve. See Aggregate demand (AD) curve
ADS index. See Aruoba-Diebold-Scotti (ADS) Business Conditions Index Agency of Statistics of the Republic of Kazakhstan (ASRK), 122
Aggregate consumption, 40
Aggregate demand, 345 fiscal policy and, 621-623 for labor, 110 management of, 469
Aggregate demand-aggregate supply (AD-AS) model, 344-348, 353, 401-402
classical, algebraic version of, 442-443 classical, exercise for solving, 441 development using IS-LM model,
377- 385
equilibrium in, 383
Keynesian, monetary policy in, 461 monetary neutrality in, 383-385
Aggregate demand (AD) curve,
378- 379, 401
factors shifting, 380
Aggregate demand for labor, 110
Aggregate demand management, 469 Aggregate demand shocks,
346-347, 465
Aggregate supply, 345 of labor, 110, 116-117
Aggregate supply (AS) curve, 380-382, 401-402
factors shifting, 380-382
Aggregate supply shocks, 347-348 Aggregation, 40
asset market equilibrium condition and, 302-303
American Enterprise Institute, 42
American Recovery and Reinvestment Act (ARRA) of 2009, 622
Appreciation, of currencies, 524-525 ARRA. See American Recovery and
Reinvestment Act (ARRA) of 2009
Aruoba-Diebold-Scotti (ADS) Business Conditions Index, 340-341 AS curve. See Aggregate supply (AS) curve
Asset market, 399-400 equilibrium in, 399-400
Asset market equilibrium condition,
301- 304
aggregation assumption and,
302- 303
LM curve and, 359-366
Assets. See also Investment; Money; Portfolio allocation decision; Saving
types and characteristics of, 287-291
Association of Southeast Asian Nations (ASEAN), 114
Automatic stabilizers, 622-623
Average labor productivity, 33
Average tax rate, 624
marginal tax rate vs., 624-626
Balance of payments, 208, 210
Balance of payments accounts, 206-215
current account and, 206-209, 210-212
financial account and, 209-212 in Malaysia, 208, 239 net foreign assets and, 212-213 Bank Negara Malaysia (BNM), 54, 208
Bank of England, 582
Bank reserves, 575
Bank runs, 577-578
Basic Indicators of Labor Market, 122, 123
BEA.
See Bureau of Economic Analysis (BEA)Bequests
failure to leave, 638
saving and, 197-198
Big Mac index, 526-527
Bitcoin, 297-298
BLS. See Bureau of Labor Statistics (BLS)
BNP Paribas, 588
Board of Governors of the Federal Reserve System, 578-579
Bonds
discount, 360n maturity of, 153 yield curve for, 153 yield of, 360 zero-coupon, 360n
Booms, 316
Borrowing constraints, 199-200, 637 Boskin Commission, 81-82, 83 Bretton Woods system, 522 Brookings Institution, 42
Budget constraint, 188-191, 189 present values and, 190-191
Budget deficits, 38, 69, 619-621 current, 620
full-employment, 623 money supply and, 640-641 national saving and, 228-229, 634-637
primary, 619-621 twin, 228, 229-231
Budget line, 189-190
Budget surpluses, 69
Bureau of Economic Analysis (BEA), 44
Bureau of Labor Statistics (BLS), 44, 82 unemployment measures of, 121
Bush tax cuts of 2000s, 616
Business current transfer payments, 65
Business cycle chronology, 316 Business Cycle Indicators, 327 Business cycles, 31, 34, 315-350, 316.
See also Covid recession; Great Depression; Great Recession of 2007-2009; Recessions
AD-AS model and, 344-348 analysis of, 342-348 calibration of, 407-409 classical approach to. See Classical approach to business cycles; Real business cycle (RBC) theory coincident and leading indexes and, 338-342
cyclical behavior of macroeconomic variables and, 326-327 dampening using fiscal policy, 416-417
Business cycles (continued) employment and unemployment and, 330-334
expenditure and, 329-330 financial variables and, 336-337 international aspects of, 337-338 international transmission of, 542-543 Keynesian theory of, 465-467 labor productivity and the real wage and, 334-335 macroeconomic consequences of stock price booms and busts and, 176-179
money growth and inflation and, 335-336
production and, 327-328 real business cycle theory and. See Real business cycle (RBC) theory seasonal cycle and, 343 severity of, 322-325 in United States, historical record of, 318-325
Business fixed investment, 62
Calibration, of business cycles, 407-409 Capital
fixed, consumption of, 66 government, 624 human.
See Human capital marginal product of, 98-100 user cost of, 159-160Capital services, 411
Capital stock, desired. See Desired capital stock
Central banks, 574. See also European Central Bank (ECB); Federal Reserve System
credibility of, 603-604, 607-608 CFNAI. See Chicago Fed National Activity Index (CFNAI)
Chain-weighted GDP, 78-80 Check 21 law, 297
Cheltenham and Gloucester, 585 Chicago Fed National Activity Index (CFNAI), 339, 340-341
China, economic growth of, 263-265 Chronically unemployed workers, 127 Classical approach, 45-46
AD-AS model and, algebraic version of, 442-443
AD-AS model and, exercise for solving, 441
DSGE models and, 472, 473
IS-LM model and, 376-377 Keynesian approach vs., 47 Phillips curve and, 498
taxes and aggregate demand and, 621-622
Classical approach to business cycles, 403-440
fiscal policy shocks and, 413-417 misperceptions theory and, 425-431
money and, 422-424
rational expectations and, 432-433 real business cycle theory and. See Real business cycle (RBC) theory unemployment and, 417-422 Classical model of the labor market, 117
equilibrium and, 117-120
Closed economies, 37
Cobb-Douglas production function, 95n, 242n, 407n
Coincident indexes, 338, 339-341
Coincident variables, 326
COLAs. See Cost-of-living adjustments (COLAs)
Cold turkey, 510
Commonwealth of Independent States, 589
Comovement, 317
Compensation of employees, 64. See also Wages
Competition
monopolistic, 453-454 perfect, 453
Computer revolution, chain-weighted GDP and, 78-80
Conference Board, 327, 334-335 index of leading indicators of, 339, 341-342
Congressional Budget Office, 41 Constant-dollar GDP. See Real GDP Consumer durables, 62
Consumer preferences, consumption and saving and, 191-193
Consumer price index (CPI), 36n, 80-82, 310
Consumption, 62 aggregate, 40 excess sensitivity of, 199 of fixed capital, 66 government, 68 optimal level of, 193-194
Consumption and saving, 143-158 bequests and saving and, 197-198 budget constraint and, 188-191 consumer preferences and, 191-193 current income changes and, 145-146 excess sensitivity and borrowing constraints and, 199-200
expected future income changes and, 146-148
fiscal policy and, 151-158
formal model of, 188-204 government purchases and, 153-154 income changes and, 194-196 individuals' decisions regarding, 144-145
life-cycle model of, 197
optimal level of consumption and, 193-194
permanent income theory and, 196-197
real interest rate and, 200-204 real interest rate changes and, 149-151
Ricardian equivalence and, 198-199 substitution effect and, 201, 202-204
taxes and, 150-151, 154-158 wealth changes and, 148-149, 196 wealth effect and, 202-204
Consumption-smoothing motive, 145 Contractionary monetary policy, 460 Contractions, 316
Coronavirus Job Retention Scheme, 638
Corporate profits, 65
Corporate taxes, 617 Correlation, 409
Cost-of-living adjustments (COLAs), 507
Council of Economic Advisers, 41 Countercyclical variables, 326 Covid recession
consumption and, 147-148 job loss rate during, 332 monetary policy in response to, 589-590
CPI. See Consumer price index (CPI) Credibility, 603
central bank, 603-604, 607-608 disinflation and, 513
Cryptocurrencies, 297-298 Currencies
appreciation and depreciation of, 524-525
cryptocurrencies and, 297-298 devaluation and revaluation of, 525 exchange rates and. See Exchange rates; Fixed exchange rates; Flexible exchange rates inconvertible, 550
overvalued, 550 undervalued, 551
U.S., held abroad, 282-283
Currency unions, 555-560
Current account, 206-209
financial account related to, 210-212 fiscal policy and, 227-229 of United States, deficit in, 225-226 Current account balance, 70, 209 Current deficit, 620
Current income
changes in, saving and, 145-146
increase in, consumption and saving and, 194-195
Current surplus of government enterprises, 65
Cyclical unemployment, 127-128
unanticipated inflation and, 490
Danmarks Nationalbank, 584 Debt-GDP ratio, 651
Deflation, 36, 508-509, 510-511
rapid vs. gradual, 510-511 Demand
aggregate. See Aggregate demand; Aggregate demand-aggregate supply (AD-AS) model; Aggregate demand (AD) curve; Aggregate demand shocks
for labor. See Labor demand
meeting at the fixed nominal price, 456-457
Demand for money, 292-301
elasticities of, 298-299
interest rates and, 293-294 liquidity of alternative assets and, 296
money demand function and, 294-295 payment technologies and, 296-298 price level and, 292
real income and, 293
risk and, 295-296
velocity and quantity theory of money and, 299-301
wealth and, 295
Department of Statistics Malaysia (DOSM), 54, 208, 239
Department for Work and Pensions (DWP), 632
Depository institutions, 574 Depreciation, 66
of currencies, 524-525
of fixed capital, 66
Depreciation allowances, 163 Depressions, 316. See also Great
Depression
Desired capital stock, 158-166 changes in, 161-166 determining, 160-161
taxes and, 162-166
user cost of capital and, 159-160
Devaluation, 525
Diminishing marginal productivity, 100
Discount bonds, 360n
Discount rate, 581
Discount window lending, 581-582
Discouraged workers, 123
Discretion, 600-608
Disinflation, U.S., of 1980s and 1990s, 513-514
Disposable income, private, 66
Distortions, 626
Diversification, 291
DSGE models. See Dynamic, stochastic, general equilibrium (DSGE) models
Duration, of unemployment spells, 123-124, 125-126
Dynamic, stochastic, general equilibrium (DSGE) models, 413 classical-Keynesian debate and, 472, 473
“Easy" money, 460
ECB. See European Central Bank (ECB)
Econometric models, 370-372
Economic data development, 42-44
Economic forecasting, 40-41, 370-372
Economic growth
of China, 263-265
growth accounting and, 242-249 sources of, 240-249
Economic models, 42. See also specific models
Economic Report of the President, 281
Economic theory, 42, 43
Economies
closed, 37
gig, size of, 114
international. See International
economy
open. See Large open economies; Open economies; Open-economy IS-LM model; Small open economies
self-correcting, 376-377 underground, 57
Effective labor demand, 457-458
Effective tax rate, 164-166
Efficiency wage, 448
Henry Ford and, 451
Efficiency wage model, 446-452 employment and unemployment in, 448-450
FE line and, 450-452
wage determination in, 447-448
Effort curve, 447
Elasticities, of demand for money, 298-299
Emerging market economies (EMEs), 156-157
Empirical analysis, 42
Employee compensation, 64. See also Wages
Employment. See also Unemployment; Wages; entries beginning with terms Full-employment and Labor business cycles and, 330-334 in efficiency wage model, 448-450 full-employment level of, 117-118 oil price shocks and, 119-120
Employment Act of 1946, 320 Employment ratio, 122 Endogenous growth theory, 265-266
Endogenous variables, 262-263, 371 Equilibrium, 46
in AD-AS model, 383
in asset market. See Asset market equilibrium condition general. See General equilibrium in goods market. See Goods market equilibrium condition
in labor market, 117-120, 397 long-run, 402 short-run, 374, 402
Equilibrium condition, 262
ERTA. See Economic Recovery Tax Act of 1981 (ERTA)
European Central Bank (ECB), 125, 559, 608
European countries in transition, money growth and inflation in, 305-307
European Financial Stability Facility (EFSF), 125
European Union, production function and changes in productivity, 95-97
Excess sensitivity, 199
Exchange rates, 521-536 appreciation and depreciation and, 524-525
determination of, 532-536 fixed. See Fixed exchange rates; Fixed-exchange-rate system flexible. See Flexible exchange rates fundamental value of, 549-550 macroeconomic determinants of, 534-536
nominal, 521-522 overvalued, 550
Exchange rates (continued) purchasing power parity and, 525-528
real. See Real exchange rate undervalued, 551
Exogenous variables, 262-263, 371
Expansionary monetary policy, 460 Expansions, 316
ends of, 325
Expectations, rational, 430-433 Expectations-augmented Phillips curve, 490-493
Expectations theory of the term structure, 286
Expected inflation rate, short-run Phillips curve and, 494
Expected real after-tax interest rate, 150-151
Expected real interest rate, 86
Expected returns, 285
portfolio allocation and, 284-285
Expenditure approach, 55-56, 61-63 business cycles and, 329-330
Extensive margin, 116
Factors of production, 94
Fannie Mae, 586, 594n
Federal Deposit Insurance Corporation
(FDIC), 577-578, 579
Federal funds rate, 580
targeting of, 590-594
Federal Open Market Committee (FOMC), 579
Federal Reserve Act, 578
Federal Reserve Bulletin, 281
Federal Reserve System, 41, 44, 578-590. See also Monetary policy; Money supply
balance sheet of, 579-580
discount window lending by, 581-582 disinflation of 1980s and 1990s and,
513-514
FRB/US model of, 371-372 inflation measures preferred by, 83-84
interest rate on reserves and, 583 open-market transactions and, 575-577
reserve requirements of, 580-581 website of, 281
Fed funds rate, 580
FE line. See Full-employment (FE) line
Final goods and services, 58
Financial account, 209-212
current account related to, 210-212
Financial account balance, 209-210
Financial crisis of 2008, 178-179,
588- 589
Financial inflow, 209
Financial outflow, 209
Financial variables, business cycles and, 336-337
Fiscal expansion, in open economy with flexible exchange rates, 543-546
Fiscal policy, 38-39, 613-650 aggregate demand and, 621-623 consumption and saving and, 151-158
current account and, 227-229 government budget and, 613-621 government capital formation and, 624
government debt and. See Government debt
incentive effects of, 624-629 in Keynesian model, 461-464
Fiscal policy shocks, in classical model, 413-417
Fixed exchange rates, 549-560 currency unions and, 555-560 fixing of rate and, 549-552 flexible exchange rates vs., 555 monetary policy and, 552-554
Fixed-exchange-rate system, 521-522 Fixed investment, 62
Flexible exchange rates, 543-548 fiscal expansion and, 543-546 fixed exchange rates vs., 555 monetary contraction and, 546-548
Flexible-exchange-rate system, 521 Floating-exchange-rate system, 521.
See also Flexible exchange rates Flow variables, 71-72
FOMC. See Federal Open Market Committee (FOMC)
Forecasting macroeconomic, 40-41, 370-372 price, rational expectations and, 432-433
Foreign direct investment, 213 Foreign exchange market, 521 Forward guidance, 584-585 Fractional reserve banking, 575 FRB/US model, 371-372
FRED database, 281
Freddie Mac, 586, 594n
Frictional unemployment, 126-127
Full-employment deficit, 623
Full-employment level of employment, 117-118
Full-employment (FE) line, 353-354 efficiency wages and, 450-452 factors shifting, 353-354
Full-employment output, 119
Fundamental identity of national income accounting, 56
Fundamental value of the exchange rate, 549-550
Future income
expected, changes in, saving and, 146-148
increase in, consumption and saving and, 195-196
GDP. See Gross domestic product (GDP) GDP deflator, 77-78
General equilibrium, 367
in IS-LM model, 367-370, 400-401 monetary expansion and, 372-376
short-run, 374
The General Theory of Employment, Interest and Money (Keynes), 46
Germany, inflation in, 31, 645
Gift exchange motive, 446
Gig economy, size of, 114
Gini coefficient, 270, 271
Globalization, impact on U.S. economy, 223-225
GNP. See Gross national product (GNP)
Golden Rule capital-labor ratio, 253 Gold standard, 522
Goods and services
consumption of, 62 final, in GDP, 58-59 government purchases of, 62-63 intermediate, 58
net exports of, in current account, 206-207
newly produced, in GDP, 57-58
Goods market equilibrium condition,
171- 179, 398-399
equilibrium in, 398-399
IS curve and, 355-359 in open economies, 215-216 saving-investment diagram and,
172- 176
Government budget, 613-621 deficits and surpluses and. See Budget deficits; Budget surpluses government outlays and, 613-615 taxes and, 615-619
Government capital, 624
Government consumption, 68
Government debt, 629-634
burden of, on future generations, 633-634
growth of, 629-633
Government investment, 68
Government outlays, 69, 613-615 composition of, 617-619
Government purchases, 62-63 budget deficit caused by, 228 consumption and saving and, 153-154 increased, 462-464
measuring impact on economy, 638-639
Government receipts, 69
Government saving, 68-69
Government spending, 613-615 Gradualism, 510-511
Grants in aid, 618
Great Depression, 34, 318-320 budget deficits during, 38 deflation and, 36
Keynesian approach and, 47 real business cycle theory and, 406 unemployment during, 35
Great Moderation, 321
Great Recession of 2007-2009, 321 budget deficits and, 620 unemployment during, 125-126, 501
Gross domestic product (GDP), 56-67, 343
chain-weighted, 78-80 constant-dollar. See Real GDP
Debt-GDP ratio and, 651 expenditure approach to measuring,
61-63
GNP vs., 59-60
growth of, 76-77
income approach to measuring, 64-67 nominal, 76
product approach to measuring, 56-60 real. See Real GDP
Gross investment, 166-168
Gross national product (GNP), GDP vs., 59-60
Growth accounting, 242-249 productivity and, 243-245
Growth accounting equation, 241-242
Gulf Cooperation Council (GCC), 343
High-powered money, 575
Honda Motor Company, 213
Housing, investment in, 168-169 Housing crisis of 2007-2011, 289-291
Human capital, 73n, 266
building, 268-269
Hyperinflation, 508
real seignorage and, 645
ICICI Bank, 582
Impact lag, 417 Implementation lag, 417 Imports, taxes on, 616 Income
current, changes in, saving and, 145-146
current, increase in, consumption and saving and, 194-195 disposable, private, 66 future, expected, changes in, saving and, 146-148
future, increase in, consumption and saving and, 195-196 government, net, 67 national, 64-65 net, from abroad, in current account, 208-209
proprietors', 64
real, demand for money and, 293 rental, of persons, 64-65 trade-off between leisure and, 111 Income approach, 55-56, 64-67 Income distribution, trends, in South Africa, 269-271
Income effect of a higher real wage, 112-113
Income effect of the real interest rate on saving, 149-150, 201-204
Income elasticity of money demand, 298, 299
Income-expenditure identity, 62 Income tax, 616
Inconvertible currency, 550 Indexed contracts, 507
Index of leading indicators, 339, 341-342
Indicators, 590-591 leading, index of, 339, 341-342
Indifference curves, 191-193 Inflation, 31, 36-37, 504-514 alternative measures of, 310 business cycles and, 336 costs of, 505-509 credibility and reputation and, 513 disinflation and, 510-511, 513-514 expectations for, measuring, 308-310 Fed's preferred measures of, 83-84 indexed contracts and, 507 monetary expansion and, 375-376 money growth and, 304-310 perfectly anticipated, 505-506 price indexes and, 82-94 real seignorage collection and, 642-645
sacrifice ratio and, 511-512
too low, 508-509 trade-off with unemployment. See
Phillips curve unanticipated, 490, 506-508 wage and price controls and, 512-513
Inflation rate, 36-37, 307-308 nominal interest rate and, 307-308
Inflation targeting, 607-608
Inflation tax, 642
Infrastructure, improving, 268 Instruments, 590
Intensive margin, 116
Interest elasticity of money demand, 298-299
Interest rate differential, 309, 310
Interest rates, 84-86
after-tax, real, expected, 150-151 consumption and saving and, 149-151, 152-153
demand for money and, 293-294 discount rate as, 581
federal funds rate as, 580, 590-594 nominal. See Nominal interest rate real. See Real interest rate on reserves, 583
on UK nominal and inflation indexed ten-year government gilts, 309
zero lower bound on, 583-588 Intermediate goods and services, 58 Intermediate targets, 590-591 International economy, 31-32, 37-38
business cycles in, 337-338 International gold standard system, 522 International Labour Organisation, 114 International Monetary Fund, 41, 125, 157-158, 208
Inventories, 58
investment in, 62, 168-171 Investment, 62, 158-171
desired capital stock and, 158-166 gross, 166-168
in inventories and housing, 62, 168-171
lags and, 168
net, 166-168
saving and. See Saving and investment; Saving-investment diagram in stock market, 169-170 taxes and, 162-166
Investment tax credit, 163-164
Invisible hand, 45-46
IS curve, 355-359
factors shifting, 357-359
IS-LM model, 352-353
algebraic version of, 396-401 classical vs. Keynesian versions of, 376-377
general equilibrium in, 400-401 Keynesian, monetary policy in, 458-460
monetary expansion and, 372-376 numerical exercise for solving, 393-395
Japan, economic growth of, 239
J curve, 529-530
Job finding rate, 331-332, 333-334 Jobless recoveries, 420-422
Job loss rate, 331, 332-334
Joseph Rowntree Foundation (JRF), 632 Jyske Bank, 585
Kennedy-Johnson tax cut of 1964, 616 Keynesian approach, 46-47, 444-479
AD-AS model and, monetary policy in, 461
automatic stabilizers and, 623
to business cycles, 404-405 business cycle theory and, 465-467 classical approach vs., 47
DSGE models and, 472, 473
fiscal policy and, 461-464
IS-LM model and, 376-377, 458-460 labor contracts and, 480 macroeconomic stabilization and, 467-470
monetary policy and, 458-461 multiplier in, 485-486
multiplier in, numerical exercise for calculating, 483-484
nonneutrality of money and, 480-482 Phillips curve and, 498-500 price stickiness and, 452-458 real-wage rigidity and, 445-452 rules and, 604
supply shocks in, 470-472
taxes and aggregate demand and, 621-622
Labor contracts
monetary nonneutrality and, 480-482
short-run aggregate supply curve with, 480
Labor demand, 103-110 aggregate, 110 effective, 457-458 factors shifting, 108-110 marginal product of labor and, 104-105
wage changes and, 106
Labor force, 122
Labor force participation rate (LFPR),
129-130
Labor hoarding, 413 business cycles and, 467
Labor market, 396-397
Labor market equilibrium, 117-120, 397
Labor productivity average, 33 business cycles and, 334-335 marginal product of, 100-101 procyclical, business cycles and, 467
Labor supply, 110-117 aggregate, 110, 116-117 factors shifting, 115-116 income-leisure trade-off and, 111 real wages and, 112-115 recent trends in, 129-130
Laffer curve, 627-628
Lagging variables, 326
Lags, 417 investment and, 168 in monetary policy effects, 596-598
Large open economies, 221
saving and investment in, 221-223
Leading indexes, 338, 339, 341-342
Leading variables, 326
Legislative lag, 417
Lehman Brothers, 588, 589
Leisure, trade-off between income and, 111
Lender of last resort, 582
Life-cycle model, 197
Linkers, 308
Liquidity, 285
of alternative assets, demand for money and, 296
portfolio allocation and, 285
Liquidity trap, 584
Living standards, long-run fundamental determinants of, 257-261
government policies to raise, 267-271
LM curve, 359-366
equity of money demanded and money supplied and, 360-363 factors shifting, 363-366 interest rate and price of a nonmonetary asset and, 360 Lombard Street (Bagehot), 582 “Long boom," 321 Long-run aggregate supply (LRAS) curve, 346, 380
Long-run economic growth, 31, 32-34, 239-276
endogenous growth theory of, 265-268
government policies to raise living standards and, 267-271
Solow model of. See Solow model
Long-run equilibrium, 402
Long-run Phillips curve, 500
Lorenz curve, 270
LRAS curve. See Long-run aggregate supply (LRAS) curve
Lucas critique, 499
Lump-sum tax cuts, 154
M1, 281
M2, 281, 283
Maastricht Treaty, 558, 589 Macroeconomic analysis, 41 Macroeconomic forecasting, 40-41, 370-372
Macroeconomic policy, 32, 38-39
Phillips curve and, 498-500 Macroeconomic research, 41-42 Macroeconomics, 31
classical approach to. See Classical approach
issues addressed by, 31-32
Keynesian approach to. See
Keynesian approach
unified approach to, 47-48 Macroeconomic stabilization, 467-470, 469
difficulties of, 469-470 Macroeconomists, disagreements among, 44-47
Marginal cost, 456
Marginal productivity, diminishing, 100
Marginal product of capital (MPK), 98-100
Marginal product of labor (MPN), 100-101
labor demand curve and, 106-108 Marginal propensity to consume (MPC), 146
Marginal revenue product of labor (MRPN), 104-105
Marginal tax rate, 624
average tax rate vs., 624-626 reduction in, supply-side economics and, 627-628
Market value, 56-57
Markup, 456
Maturity, time to, portfolio allocation and, 285-286
Maturity Extension Program, 586
Measuring Business Cycles (Burns and
Mitchell), 316
Medium of exchange, 279
Menu costs, 454 Microeconomics, 40
Microsoft Corporation, 213 Ministry of Finance (MOF), 208
Misperceptions theory, 425-431 MMMFs. See Money-market mutual
funds (MMMFs)
Monetarism, 601
rules and, 601-603
Monetary aggregates, 280-283
Monetary base, 575
Monetary contraction
long-run effects of, 548
in open economy with flexible exchange rates, 546-548 short-run effects of, 546-548
A Monetary History of the United States, 1867-1960 (Friedman and Schwartz), 423-424
Monetary neutrality, 377
in AD-AS model, 383-385
Monetary nonneutrality
in classical model, 422-424 labor contracts and, 480-482 misperceptions theory and, 425-431
Monetary policy, 38. See also Money supply
with abundant reserves, 594-596
in classical model, 422 contractionary, 460 econometric models and macroeconomic forecasts for analysis of, 370-372
expansionary, 460
fixed exchange rates and, 552-554 inflation targeting and, 607-608 in Keynesian AD-AS model, 461 in Keynesian IS-LM model, 458-460 lags in effects of, 596-598 misperceptions theory and, 428-430 new tools developed during Great
Recession for, 583-589
in practice, 596-600 rational expectations and, 430-431 in response to pandemic of 2020,
589- 590
rules vs. discretion and, 600-608 targeting of federal funds rate and,
590- 594
Taylor rule and, 604-606
under uncertainty, 598-600
zero lower bound and, 583-588
Money, 277-284
in classical model, 422-424 demand for. See Demand for money functions of, 279-280 high-powered, 575
measurement of, 280-283
in prisoner-of-war camp, 278-279 quantity theory of, 300 supply of, 283-284
Money demand function, 294-295 real, changes in, shifts of LM curve and, 365-366
Money-market mutual funds (MMMFs), 280
Money stock, 283n
Money supply, 283-284
anticipated changes in, 429-430 budget deficits and, 640-641 determination of, 574-678 expansion of, IS-LM model and, 372-376
growth in European countries in transition, 305-307
growth of, business cycles and, 335-336
growth of, inflation and, 304-310 real, changes in, shifts of LM curve and, 363-365
reverse causation and, 423 unanticipated changes in,
428, 431
Money supply-money demand diagram, 360, 361
Monopolistic competition, 453
price stickiness and, 453-454 Mortgage reset, 290
MPC. See Marginal propensity to consume (MPC)
MPK. See Marginal product of capital (MPK)
MPN. See Marginal product of labor (MPN)
MRPN. See Marginal revenue product of labor (MRPN)
Multiple expansion of loans and deposits, 576-577
Multiplier, in Keynesian model, 485-486
numerical exercise for calculating, 483-484
National Accounts Statistics, 54
National Bureau of Economic
Research (NBER), 42, 316
National income, 64-65
National income accounts, 52-56
National Income and Product
Accounts, 54
National Insurance (NI) system, 631
National saving, 69
budget deficits and, 634-637 current account and, 227-229
National wealth, 67, 72-74
Natural rate of unemployment, 127-128 changes in, short-run Phillips curve and, 494-495
changing, 502-503 measurement of, 504
Natural resources, depletion of, 59
NBER. See National Bureau of
Economic Research (NBER)
Net exports, 63
in current account, 206-207 demand for, macroeconomic determinants of, 534-536
real exchange rate and, 528-532 U.S., value of dollar and,
530-532
Net factor payments from abroad (NFP), 60
Net foreign assets, balance of payments accounts and, 212-213
Net government income, 67
Net income, from abroad, in current account, 208-209
Net interest, 65
Net interest paid, 618-619
Net investment, 166-168
Net national product (NNP), 66
Net unilateral transfers, 70n
Net worth, 72
New Deal, 320
NFP. See Net factor payments from abroad (NFP)
NIPA. See National income and product accounts (NIPA)
NNNP. See Net national product (NNP) No-borrowing, no-lending point, 201 Nominal appreciation, 524-525 Nominal depreciation, 524
Nominal exchange rate, 521-522
Nominal GDP, 76
Nominal interest rate, 85-86 inflation rate and, 307-308 real interest rate vs., 85-86
Nominal shocks, 405
Nominal variables, 74
Nominal wage, 105
Nondurable goods, 62
Nordea Bank, 585
Normative analysis, 45
Northern Rock, 582
Number and Wages of Employees by Types of Economic Activities, 122, 123
OECD. See Organisation for Economic Co-operation and Development (OECD)
Official reserve assets, 210
Oil price shocks, 407
output, employment, and real wage during, 119-120
Okun's law, 130-132, 501
growth rate form of, 141
100% reserve banking, 575
OPEC. See Organization of Petroleum Exporting Countries (OPEC)
Open economies, 37 exchange rates in. See Exchange rates; Fixed exchange rates fiscal expansion in, 543-546 goods market equilibrium in, 215-216 IS-LM model for. See Open-economy
IS-LM model
monetary contraction in, 546-548 small, saving and investment in, 217-220
Open-economy IS-LM model, 537-543 algebraic version of, 570-572 factors shifting IS curve and, 540-542 international transmission of business cycles and, 542-543
IS curve and, 537-540 numerical exercise for, 567-569
Open-market operations, 284, 577
Open-market purchases, 283, 577
Open-market sales, 284, 577
Operation Twist, 586
Optimum currency areas, 556-558
Organisation for Economic Co-operation and Development (OECD), 156, 607
Organization of Petroleum Exporting Countries (OPEC), 119, 321
Output
changes in, net export demand and, 535 full-employment (potential), 119 oil price shocks and, 119-120 reverse causation and, 423 unemployment and, 130-132, 141
Overvalued currency, 550
Overvalued exchange rates, 550
Pandemic recession. See Covid recession
Parameters, 371
Participation rate, 122
Paycheck Protection Program, 579,
590
Payment technologies, demand for money and, 296-298
PCE price index, 83-84
Peaks, 316
Perfect competition, 453
Permanent income theory, 196-197 Persistence, 318
Personal taxes, 616
Phillips curve, 487-500, 488
changes in expected inflation rate and, 494
changes in natural rate of unemployment and, 494-495 expectations-augmented, 490-493 long-run, 500
Lucas critique and, 499 macroeconomic policy and, 498-500
short-run, shifting, 493-500 supply shocks and, 495-496
PMCCF. See Primary Market Corporate Credit Facility (PMCCF)
Pollution, control of, 59-60 Population growth, in Solow model, 259-260
Portfolio allocation decision, 284-292 asset demands and, 291-292 asset types and characteristics and, 287-291
expected return and, 284-285 liquidity and, 285 risk and, 285
time to maturity and, 285-287
Positive analysis, 45
Potential output, 119
PPP. See Purchasing power parity (PPP)
Preemptive strikes, 598
Present value, 190-191
budget constraint and, 190-191
Present value of lifetime consumption (PVLC), 191, 501
Present value of lifetime resources (PVLR), 190-191
Price controls, 512-513
Price forecasts, rational expectations and, 432-433
Price indexes, 77-84
consumer price index as, 80-82
GDP deflator as, 77-78 inflation and, 82-94
PCE price index as, 83-84
Price level
demand for money and, 292 misperceptions theory and, 425-431 monetary expansion and, 374-375, 376-377
Price setters, 453
Price stickiness, 452-458
effective labor demand and, 457-458
empirical evidence on, 454-456 meeting demand at the fixed nominal price and, 456-457 menu costs and, 454 monopolistic competition and, 453-454
price setting and, 454
sources of, 452-458
Price takers, 453
Primary current deficit, 620
Primary government budget deficit, 619-621
Primary Market Corporate Credit Facility (PMCCF), 590
Private disposable income, 66
Private saving, 67-68
uses of, 69-71
Procyclical variables, 326
Product approach, 53, 55-60 Production
business cycles and, 327-328 taxes on, 616
Production function, 94-102 Cobb-Douglas, 95n, 242n, 407n in European Union, 95-97 marginal product of capital and, 98-100
marginal product of labor and, 100-101
per-worker, 251-252 shape of, 97-98 supply shocks and, 101-102
Productivity, 93
labor. See Labor productivity marginal, diminishing, 100 total factor, 95
Productivity growth
government policies to raise, 268-269
growth accounting and, 243-245
over time, 245
in Solow model, 260-261
in United States, 245-249
Productivity shocks, 405. See also Supply shocks
Propagation mechanism, 431 Proprietors' income, 64
Purchasing power parity (PPP), 525-528
PVLC. See Present value of lifetime consumption (PVLC)
PVLR. See Present value of lifetime resources (PVLR)
Quality adjustment bias, 81 Quantitative easing, 585-588
Quantity theory of money, 300 Quarterly Balance of Payments, 208
Rational expectations, 430-433, 431
RBC theory. See Real business cycle (RBC) theory
Reagan tax cut of 1981, 616
Real appreciation, 525
Real balances, 295
Real business cycle (RBC) theory,
404- 413
adverse productivity shocks and,
405- 406, 410
business cycle facts and, 406-409 calibrating business cycles and, 407-409
Solow residual and, 410-413
Real depreciation, 525
Real exchange rate, 523-524
J curve and, 529-530 net exports and, 528-532
Real GDP, 32n, 74-77, 75
Real GNP, 32n
Real income, demand for money and, 293
Real interest rate, 85-86 changes in, consumption and, 149-151
changes in, net export demand and, 535-536
consumption-saving decision and, 200-204
expected, 86
nominal interest rate vs., 85-86 world, 217
Real shocks, 405
Real variables, 75-76
Real wage, 105
business cycles and, 334-335 labor supply and, 112-115 oil price shocks and, 119-120
Real-wage rigidity, 445-452 efficiency wage model and, 446-452 reasons for, 445-446
Recessions, 34. See also Covid recession; Great Recession of 2007-2009 budget deficits during, 623 jobless recoveries and, 420-422 productivity shocks as source of, 405-406, 410
unemployment during, 35, 501-502
Recognition lag, 417
Relative purchasing power parity, 528
Rental income of persons, 64-65 Report on Labor 1T, 123
Reputation, disinflation and, 513
Research and development, encouraging, 269
Reserve Bank of India (RBI), 582
The Reserve Bank of New Zealand Act, 1989, 607
Reserve-deposit ratio, 575
Reserve requirements, 580-581 Reserves
abundant, monetary policy with, 594-596
bank, 575
interest rates on, 583
Residential investment, 62
Retail price index (RPI), 310
Retained earnings, 65
Revaluation, 525
Reverse causation, 423
Ricardian equivalence proposition, 155-156, 198-199, 634-637
across generations, 635-637 departures from, 637-638
Risk, 285
demand for money and, 295-296 portfolio allocation and, 285
Rules
central bank credibility and, 603-604 monetarist case for, 601-603
Sacrifice ratio, 511-512
Saving, 67-74 aggregate, measures of, 67-69 bequests and, 197-198 consumption and. See
Consumption and saving government, 68-69 meaning of term, 144n national, 69
private, 67-68
wealth related to, 71-74
Saving and investment
in large open economies,
221-223
in small open economies,
217-220
Saving-investment diagram, 172-176
Saving rate
government policies to raise, 267-268
in Solow model, 257-259
Savings, meaning of term, 144n
Seasonal cycle, 343
Secondary Market Corporate Credit
Facility (SMCCF), 590
Seignorage, 640-645
real, inflation and collection of, 642-645
Self-correcting economy, 376-377
Self-employed Income Support
Scheme, 638
Services, 62. See also Goods and services
Shirking model, 446
Shocks, 344
demand. See Aggregate demand shocks
fiscal policy, in classical model, 413-417
nominal, 405
oil price, 119-120, 407
productivity, 405. See also Supply shocks
real, 405
in small open economies, 220-221 supply. See Aggregate supply shocks; Supply shocks technology, 410-413
Shoe leather costs, 505-506 Short-run aggregate supply curve,
with labor contracts, 480
Short-run aggregate supply (SRAS) curve, 345, 380
Short-run equilibrium, 374, 402
Short-run Phillips curve, 493-500
changes in expected inflation rate and, 494
changes in natural rate of unemployment and, 494-495
macroeconomic policy and, 498-500
shifting, in practice, 496-498 supply shocks and, 495-496
Shortsightedness, 637-638
Sixteenth Amendment to the
Constitution, 616
Small open economies, 217 economic shocks in, 220-221 saving and investment in, 217-220
SMCCF. See Secondary Market Corporate Credit Facility (SMCCF)
Social insurance, contributions for, 616
Social Security Advisory Committee (SSAC), 653
Social security in United Kingdom, 631-633, 653
Solow model, 249-265 equilibrium conditions and, 262 exogenous vs. endogenous variables and, 262-263 per-worker production function and, 251-252
population growth and, 259-260 productivity growth and, 260-261
saving rate and, 257-259 setup of, 250-257 steady states and, 252-257
Solow residual, 410 technology shocks and, 410-413
Southern Africa Labour and
Development Research Unit (SALDRU), 271
South Africa, trends in income distribution, 269-271
Speculative runs, 550-551
SRAS curve. See Short-run aggregate supply (SRAS) curve
Stagflation, 47
Statistical discrepancy, 65-66, 212 Statistics Act of 1965, 208 Steady-state capital-labor ratio, 257 Steady states, 252-257
reaching, 255-257
Stock market
investment in, 169-170 1987 crash of, consumption and, 177
Stock prices, boom and bust in, macroeconomic consequences of, 176-179
Stock variables, 72
Store of value, 280
Structural unemployment, 127 Subprime borrowers, 289-291 Substitution bias, 81
Substitution effect of a higher real wage, 112, 113
Substitution effect of the real interest rate on saving, 149, 201, 202-204
Supply. See Aggregate demandaggregate supply (AD-AS) model; Aggregate supply; Aggregate supply (AS) curve; Aggregate supply shocks; Labor supply; Long-run aggregate supply (LRAS) curve; Money supply; Short-run aggregate supply (SRAS) curve
Supply shocks, 101-102. See also Productivity shocks
adverse, IS-LM framework and, 368-370
adverse, recessionary impact of, 405-406, 410
in Keynesian model, 470-472 short-run Phillips curve and, 495-496
Supply-side economics, 627-628 Survey of Current Business, 208
TARP. See Troubled Asset Relief
Program (TARP)
Tax-adjusted user cost of capital, 163 Tax Cut and Jobs Act, 165n
Tax cuts, 616 budget deficits caused by, 228-229 lump-sum, 154
Taxes
average vs. marginal tax rates and, 624-626
composition of, 619 consumption and saving and, 150-151, 154-158
corporate, 617 desired capital stock and, 162-166
distortions induced by, 626 government budget and, 615-619 income, 616
inflation, 642 investment and, 162-166 lower, 464
non-lump-sum, 638 personal, 616 on production and imports, 65
Tax incentives, 156-158
Tax rate smoothing, 626, 629 Taylor rule, 604-606
Technology shocks, 410-413 Tennessee Valley Authority, 614
Term premium, 286-287
“Tight" money, 460
Time to maturity, 285
portfolio allocation and, 285-286
TIPS. See Treasury Inflation-Protected Securities (TIPS)
Tobin's q, 169-170
Total factor productivity, 95
Trade deficits, 38
Trade imbalances, 37-38
Trade surpluses, 38
Transfer payments, 618
Transfers, 63
unilateral, 209
Treasury Inflation-Protected
Securities (TIPS), 507
Troughs, 316
Turning points, 316-317
Turnover costs, 446
Twin deficits, 38, 228, 229-231
U-1-U-6 measures, 128-129
UBS, 585
Unanticipated inflation, 490
costs of, 506-508
Uncertainty, monetary policy under, 598-600
Underground economy, 57
Undervalued currency, 551
Undervalued exchange rates, 551
Unemployment, 31, 35, 121-130, 501-504 business cycles and, 330-334 changes in employment status and, 122-123
in classical model, 417-422 costs of, 501-502 cyclical, 127-128 cyclical, unanticipated inflation and, 490
duration of, 123-126
in efficiency wage model, 448-450 frictional, 126-127
measurement of, 121-122, 128-129 natural rate of, 127-128 output and, 130-132, 141 during recessions, 501-502 structural, 127
trade-off with inflation. See Phillips curve
Unemployment rate, 122 long-term behavior of, 502-504 natural. See Natural rate of unemployment
Unemployment spells, 123-126
Unilateral transfers, 209
United Kingdom's Coronavirus Job Retention Scheme, 638
United Kingdom, economic growth of, 239
United Kingdom, social security in, 631-633, 653
United States
budget deficits of, 38
business cycle in, historical record of, 318-325
current account deficit of, 225-226 disinflation of 1980s and 1990s in, 513-514
globalization's impact on economy of, 223-225
housing crisis of 2007-2011 in, 289-291
as international debtor, 213-215 productivity growth in, 245-249 unemployment rate in, 35 value of dollar and net exports of, 530-532
U.S. Bureau of the Census, 44
U.S. Federal Reserve, 608
Unit of account, 279-280
User cost of capital, 159-160 tax-adjusted, 163
Uses-of-saving identity, 71
Utility, 111, 191
Utilization rate of capital, 411
Utilization rate of labor, 411
Value added, 53
Velocity, 299-301
Wage and price controls, 512-513 Wages
change in, labor demand and, 106 determination of, in efficiency wage model, 447-448
efficiency, 448, 451. See also
Efficiency wage model nominal, 105 real. See Real wage; Real-wage rigidity
Wealth, 67 changes in, consumption and, 148-149
demand for money and, 295 increase in, consumption and
saving and, 196
saving related to, 71-74
Wealth effect of stock price booms and busts, 176-177
The Wealth of Nations (Smith), 45, 46 World Bank, 41
World real interest rate, 217
World War II, 320
Zero-coupon bonds, 360n
Zero lower bound, 583-588
7Not only do macroeconomists often seem to disagree with one another, but they also sometimes are accused of not being able to agree with themselves. President Harry Truman expressed the frustration of many policymakers when he said he wanted a one-handed economist—one who wouldn't always say, "On the one hand,... ; on the other hand...."