Description
Macroeconomics Canada in the Global Environment Edition 9 by Michael Parkin EBOOK PDF Instant Download
Table of Contents
Macroeconomics Canada in the Global Environment
MyEconLab® Provides the Power of Practice
Macroeconomics Canada in the Global Environment
Brief Contents
Preface
The Ninth Edition Revision
Features to Enhance Teaching and Learning
For the Instructor
MyEconLab
Reviewers
Alternative Pathways through the Chapters
Detailed Contents
Macroeconomics Canada in the Global Environment
Part One Introduction
1 What is Economics?
Definition of Economics
Review Quiz
Two Big Economic Questions
What, How, and for Whom?
What?
How?
Land
Labour
Capital
Entrepreneurship
For Whom?
Do Choices Made in the Pursuit of Self-Interest also Promote the Social Interest?
Self-Interest
Social Interest
Efficiency and the Social Interest
Fair Shares and the Social Interest
Globalization
Information-Age Monopolies
Climate Change
Economic Instability
Review Quiz
The Economic Way of Thinking
A Choice is a Tradeoff
Making a Rational Choice
Benefit: What You Gain
Cost: What You Must Give Up
How Much? Choosing at the Margin
Choices Respond to Incentives
Review Quiz
Economics as Social Science and Policy Tool
Economist as Social Scientist
Positive Statements
Normative Statements
Unscrambling Cause and Effect
Economist as Policy Adviser
Review Quiz
Summary
Key Points
Definition of Economics (p. 2)
Two Big Economic Questions (pp. 3–8)
The Economic Way of Thinking (pp. 9–10)
Economics as Social Science and Policy Tool (p. 11)
Key Terms
Study Plan Problems and Applications
Definition of Economics (Study Plan 1.1)
Two Big Economic Questions (Study Plan 1.2)
The Economic Way of Thinking (Study Plan 1.3)
Economics as Social Science and Policy Tool (Study Plan 1.4)
Additional Problems and Applications
Definition of Economics
Two Big Economic Questions
The Economic Way of Thinking
Economics as Social Science and Policy Tool
Appendix Graphs in Economics
Graphing Data
Scatter Diagrams
Breaks in the Axes
Misleading Graphs
Correlation and Causation
Graphs Used in Economic Models
Variables that Move in the Same Direction
Variables that Move in Opposite Directions
Variables that Have a Maximum or a Minimum
Variables that are Unrelated
The Slope of a Relationship
The Slope of a Straight Line
The Slope of a Curved Line
Slope at a Point
Slope Across an Arc
Graphing Relationships Among more than Two Variables
Ceteris Paribus
When other Things Change
Mathematical Note Equations of Straight Lines
A Linear Equation
Slope of the Line
Position of the Line
Positive Relationships
Negative Relationships
Example
Review Quiz
Summary
Key Points
Graphing Data (pp. 15–18)
Graphs Used in Economic Models (pp. 18–21)
The Slope of a Relationship (pp. 22–24)
Graphing Relationships Among More than Two Variables (pp. 24–25)
Key Terms
Study Plan Problems and Applications
Additional Problems and Applications
2 The Economic Problem
Production Possibilities and Opportunity Cost
Production Possibilities Frontier
Production Efficiency
Tradeoff Along the PPF
Opportunity Cost
Opportunity Cost is a Ratio
Increasing Opportunity Cost
Review Quiz
Using Resources Efficiently
The PPF and Marginal Cost
Preferences and Marginal Benefit
Allocative Efficiency
Review Quiz
Economic Growth
The Cost of Economic Growth
A Nation’s Economic Growth
Review Quiz
Gains from Trade
Comparative Advantage and Absolute Advantage
Joe’s Smoothie Bar
Liz’s Smoothie Bar
Joe’s Comparative Advantage
Liz’s Comparative Advantage
Achieving the Gains from Trade
Liz’s Proposal
Illustrating Liz’s Idea
Review Quiz
Economic Coordination
Firms
Markets
Property Rights
Money
Circular Flows Through Markets
Coordinating Decisions
Review Quiz
Summary
Key Points
Production Possibilities and Opportunity Cost (pp. 32–34)
Using Resources Efficiently (pp. 35–37)
Economic Growth (pp. 38–39)
Gains from Trade (pp. 40–43)
Economic Coordination (pp. 44–45)
Key Terms
Worked Problem
Questions
Solutions
Key Figure
Study Plan Problems and Applications
Production Possibilities and Opportunity Cost (Study Plan 2.1)
Using Resources Efficiently (Study Plan 2.2)
Economic Growth (Study Plan 2.3)
Gains from Trade (Study Plan 2.4)
Economic Coordination (Study Plan 2.5)
Additional Problems and Applications
Production Possibilities and Opportunity Cost
Using Resources Efficiently
Economic Growth
Gains from Trade
Economic Coordination
Economics in the News
Part One Understanding the Scope of Economics
Your Economic Revolution
Part Two How Markets Work
3 Demand and Supply
Markets and Prices
Review Quiz
Demand
The Law of Demand
Substitution Effect
Income Effect
Demand Curve and Demand Schedule
Willingness and Ability to Pay
A Change in Demand
Prices of Related Goods
Expected Future Prices
Income
Expected Future Income and Credit
Population
Preferences
A Change in the Quantity Demanded versus a Change in Demand
Movement Along the Demand Curve
A Shift of the Demand Curve
Review Quiz
Supply
The Law of Supply
Supply Curve and Supply Schedule
Minimum Supply Price
A Change in Supply
Prices of Factors of Production
Prices of Related Goods Produced
Expected Future Prices
The Number of Suppliers
Technology
The State of Nature
A Change in the Quantity Supplied versus a Change in Supply
Review Quiz
Market Equilibrium
Price as a Regulator
Price Adjustments
A Shortage Forces the Price Up
A Surplus Forces the Price Down
The Best Deal Available for Buyers and Sellers
Review Quiz
Predicting Changes in Price and Quantity
An Increase in Demand
A Decrease in Demand
An Increase in Supply
A Decrease in Supply
Changes in Both Demand and Supply
Both Demand and Supply Change in the Same Direction
Both Demand and Supply Change in Opposite Directions
Review Quiz
Mathematical Note Demand, Supply, and Equilibrium
Demand Curve
Supply Curve
Market Equilibrium
An Example
Summary
Key Points
Markets and Prices (p. 56)
Demand (pp. 57–61)
Supply (pp. 62–65)
Market Equilibrium (pp. 66–67)
Predicting Changes in Price and Quantity (pp. 68–73)
Key Terms
Worked Problem
Questions
Solutions
Key Figure
Study Plan Problems and Applications
Markets and Prices (Study Plan 3.1)
Demand (Study Plan 3.2)
Supply (Study Plan 3.3)
Market Equilibrium (Study Plan 3.4)
Predicting Changes in Price and Quantity (Study Plan 3.5)
Additional Problems and Applications
Markets and Prices
Demand
Supply
Market Equilibrium
Predicting Changes in Price and Quantity
Economics in the News
Part Two Understanding how Markets Work
The Amazing Market
Part Seven Monitoring Macroeconomic Performance
20 Measuring GDP and Economic Growth
Gross Domestic Product
GDP Defined
Market Value
Final Goods and Services
Produced within a Country
In a Given Time Period
GDP and the Circular Flow of Expenditure and Income
Households and Firms
Governments
Rest of the World
GDP Equals Expenditure Equals Income
Why is Domestic Product “Gross”?
Review Quiz
Measuring Canada’s GDP
The Expenditure Approach
The Income Approach
Nominal GDP and Real GDP
Calculating Real GDP
Review Quiz
The Uses and Limitations of Real GDP
The Standard of Living over Time
Long-Term Trend
The Growth of Potential GDP
Fluctuations of Real GDP
Productivity Growth Slowdown
Real GDP Fluctuations—The Business Cycle
The Standard of Living Across Countries
China and the United States in U.S. Dollars
China and the United States at PPP
Limitations of Real GDP
Household Production
Underground Economic Activity
Leisure Time
Environmental Quality
The Bottom Line
Review Quiz
Appendix Graphs in Macroeconomics
The Time-Series Graph
Making a Time-Series Graph
Reading a Time-Series Graph
Ratio Scale Reveals Trend
A Time-Series with a Trend
Using a Ratio Scale
Mathematical Note Chained-Dollar Real GDP
Value Production in Prices of Adjacent Years
Find the Average of Two Percentage Changes
Link (Chain) to the Base Year
Exercise
Summary
Key Points
Gross Domestic Product (pp. 466–468)
Measuring Canada’s GDP (pp. 469–471)
The Uses and Limitations of Real GDP (pp. 472–477)
Key Terms
Worked Problem
Questions
Solutions
Key Figure
Study Plan Problems and Applications
Gross Domestic Product (Study Plan 20.1)
Measuring Canada’s GDP (Study Plan 20.2)
The Uses and Limitations of Real GDP (Study Plan 20.3)
Mathematical Note (Study Plan 20.MN)
Additional Problems and Applications
Gross Domestic Product
Measuring Canada’s GDP
The Uses and Limitations of Real GDP
Economics in the News
Mathematical Note
21 Monitoring Jobs and Inflation
Employment and Unemployment
Why Unemployment is a Problem
Lost Incomes and Production
Lost Human Capital
Labour Force Survey
Four Labour Market Indicators
The Unemployment Rate
The Involuntary Part-Time Rate
The Labour Force Participation Rate
The Employment-to-Population Ratio
Other Definitions of Unemployment
Discouraged Searchers
Long-Term Future Starts
Involuntary Part-Timers
Most Costly Unemployment
Alternative Measures of Unemployment
Review Quiz
Unemployment and Full Employment
Frictional Unemployment
Structural Unemployment
Cyclical Unemployment
“Natural” Unemployment
The Age Distribution of the Population
The Scale of Structural Change
The Real Wage Rate
Unemployment Benefits
Real GDP and Unemployment over the Cycle
The Changing Natural Unemployment Rate
Review Quiz
The Price Level, Inflation, and Deflation
Why Inflation and Deflation are Problems
Redistributes Income
Redistributes Wealth
Lowers Real GDP and Employment
Diverts Resources from Production
The Consumer Price Index
Reading the CPI Numbers
Constructing the CPI
The CPI Basket
The Monthly Price Survey
Calculating the CPI
Measuring the Inflation Rate
Distinguishing High Inflation from a High Price Level
The Biased CPI
New Goods Bias
Quality Change Bias
Commodity Substitution Bias
Outlet Substitution Bias
The Magnitude of the Bias
Some Consequences of the Bias
Alternative Price Indexes
GDP Deflator
Chained Price Index for Consumption
Core Inflation
The Real Variables in Macroeconomics
Review Quiz
Summary
Key Points
Employment and Unemployment (pp. 490–494)
Unemployment and Full Employment (pp. 495–497)
The Price Level, Inflation, and Deflation (pp. 498–503)
Key Terms
Worked Problem
Questions
Solutions
Study Plan Problems and Applications
Employment and Unemployment (Study Plan 21.1)
Unemployment and Full Employment (Study Plan 21.2)
The Price Level, Inflation, and Deflation (Study Plan 21.3)
Additional Problems and Applications
Employment and Unemployment
Unemployment and Full Employment
The Price Level, Inflation, and Deflation
Economics in the News
Part Seven Monitoring Macroeconomic Performance
The Big Picture
Part Eight Macroeconomic Trends
22 Economic Growth
The Basics of Economic Growth
Calculating Growth Rates
Economic Growth versus Business Cycle Expansion
The Magic of Sustained Growth
Compound Interest
Applying the Rule of 70
Review Quiz
Long-Term Growth Trends
Long-Term Growth in Canada
Real GDP Growth in the World Economy
Review Quiz
How Potential GDP Grows
What Determines Potential GDP?
Aggregate Production Function
Aggregate Labour Market
The Demand for Labour
The Supply of Labour
Labour Market Equilibrium
Potential GDP
What Makes Potential GDP Grow?
Growth of the Supply of Labour
The Effects of Population Growth
Illustrating the Effects of Population Growth
Growth of Labour Productivity
Effects of an Increase in Labour Productivity
Illustrating the Effects of an Increase in Labour Productivity
Review Quiz
Why Labour Productivity Grows
Preconditions for Labour Productivity Growth
Physical Capital Growth
Human Capital Growth
Technological Advances
Review Quiz
Is Economic Growth Sustainable? Theories, Evidence, and Policies
Classical Growth Theory
Modern-Day Malthusians
Neoclassical Growth Theory
Neoclassical Theory of Population Growth
Technological Change and Diminishing Returns
A Problem with Neoclassical Growth Theory
New Growth Theory
A Perpetual Motion Economy
New Growth Theory versus Malthusian Theory
Sorting Out the Theories
The Empirical Evidence on the Causes of Economic Growth
Policies for Achieving Faster Growth
Stimulate Saving
Stimulate Research and Development
Improve the Quality of Education
Provide International Aid to Developing Nations
Encourage International Trade
Review Quiz
Summary
Key Points
The Basics of Economic Growth (pp. 514–516)
Long-Term Growth Trends (pp. 517–519)
How Potential GDP Grows (pp. 520–525)
Why Labour Productivity Grows (pp. 525–528)
Is Economic Growth Sustainable? Theories, Evidence, and Policies (pp. 529–533)
Key Terms
Worked Problem
Questions
Solutions
Study Plan Problems and Applications
The Basics of Economic Growth (Study Plan 22.1)
Long-Term Growth Trends (Study Plan 22.2)
How Potential GDP Grows (Study Plan 22.3)
Why Labour Productivity Grows (Study Plan 22.4)
Is Economic Growth Sustainable? Theories, Evidence, and Policies (Study Plan 22.5)
Additional Problems and Applications
The Basics of Economic Growth
Long-Term Growth Trends
How Potential GDP Grows
Why Labour Productivity Grows
Is Economic Growth Sustainable? Theories, Evidence, and Policies
Economics in the News
23 Finance, Saving, and Investment
Financial Institutions and Financial Markets
Finance and Money
Physical Capital and Financial Capital
Capital and Investment
Wealth and Saving
Financial Capital Markets
Loan Markets
Bond Markets
Stock Markets
Financial Institutions
Banks
Trust and Loan Companies
Credit Unions and Caisses Populaires
Pension Funds
Insurance Companies
Insolvency and Illiquidity
Interest Rates and Asset Prices
Review Quiz
The Loanable Funds Market
Funds that Finance Investment
The Real Interest Rate
The Demand for Loanable Funds
Demand for Loanable Funds Curve
Changes in the Demand for Loanable Funds
The Supply of Loanable Funds
The Supply of Loanable Funds Curve
Changes in the Supply of Loanable Funds
Disposable Income
Expected Future Income
Wealth
Default Risk
Shifts of the Supply of Loanable Funds Curve
Equilibrium in the Loanable Funds Market
Changes in Demand and Supply
An Increase in Demand
An Increase in Supply
Long-Run Growth of Demand and Supply
Review Quiz
Government in the Loanable Funds Market
A Government Budget Surplus
A Government Budget Deficit
The Crowding-Out Effect
The Ricardo-Barro Effect
Review Quiz
Summary
Key Points
Financial Institutions and Financial Markets (pp. 542–546)
The Loanable Funds Market (pp. 547–553)
Government in the Loanable Funds Market (pp. 554–555)
Key Terms
Worked Problem
Questions
Solutions
Key Figure
Study Plan Problems and Applications
Financial Institutions and Financial Markets (Study Plan 23.1)
The Loanable Funds Market (Study Plan 23.2)
Government in the Loanable Funds Market (Study Plan 23.3)
Additional Problems and Applications
Financial Institutions and Financial Markets
The Loanable Funds Market
Government in the Loanable Funds Market
Economics in the News
24 Money, the Price Level, and Inflation
What is Money?
Medium of Exchange
Unit of Account
Store of Value
Money in Canada Today
Currency
Deposits
Official Measures of Money
Are M1 and M2 Really Money?
Deposits are Money but Cheques are not
Credit Cards are Not Money
Review Quiz
Depository Institutions
Types of Depository Institutions
Chartered Banks
Credit Unions and Caisses Populaires
Trust and Mortgage Loan Companies
All Banks Now
What Depository Institutions Do
Reserves
Liquid Assets
Securities
Loans
Economic Benefits Provided by Depository Institutions
Create Liquidity
Pool Risk
Lower the Cost of Borrowing
Lower the Cost of Monitoring Borrowers
How Depository Institutions are Regulated
Financial Innovation
Review Quiz
The Bank of Canada
Banker to Banks and Government
Lender of Last Resort
Sole Issuer of Bank Notes
The Bank of Canada’s Balance Sheet
The Bank of Canada’s Assets
The Bank of Canada’s Liabilities
The Monetary Base
The Bank of Canada’s Policy Tools
Open Market Operation
An Open Market Purchase
An Open Market Sale
Bank Rate
Review Quiz
How Banks Create Money
Creating Deposits by Making Loans
The Monetary Base
Desired Reserves
Desired Currency Holding
The Money Creation Process
The Money Multiplier
Review Quiz
The Money Market
The Influences on Money Holding
The Price Level
The Nominal Interest Rate
Real GDP
Financial Innovation
The Demand for Money
Shifts in the Demand for Money Curve
Money Market Equilibrium
Short-Run Equilibrium
The Short-Run Effect of a Change in the Quantity of Money
Long-Run Equilibrium
The Transition from the Short Run to the Long Run
Review Quiz
The Quantity Theory of Money
Review Quiz
Mathematical Note The Money Multiplier
The Canadian Money Multiplier
Summary
Key Points
What is Money? (pp. 564–566)
Depository Institutions (pp. 567–570)
The Bank of Canada (pp. 571–574)
How Banks Create Money (pp. 574–577)
The Money Market (pp. 578–581)
The Quantity Theory of Money (pp. 582–583)
Key Terms
Worked Problem
Questions
Solutions
Study Plan Problems and Applications
What is Money? (Study Plan 24.1)
Depository Institutions (Study Plan 24.2)
The Bank of Canada (Study Plan 24.3)
How Banks Create Money (Study Plan 24.4)
The Money Market (Study Plan 24.5)
The Quantity Theory of Money (Study Plan 24.6)
Mathematical Note (Study Plan 24.MN)
Additional Problems and Applications
What is Money?
Depository Institutions
The Bank of Canada
How Banks Create Money
The Money Market
The Quantity Theory of Money
Economics in the News
Mathematical Note
25 The Exchange Rate and the Balance of Payments
The Foreign Exchange Market
Trading Currencies
Exchange Rates
Questions about the Canadian Dollar Exchange Rate
An Exchange Rate is a Price
The Demand for One Money is the Supply of Another Money
Demand in the Foreign Exchange Market
The Law of Demand for Foreign Exchange
Exports Effect
Expected Profit Effect
Demand Curve for Canadian Dollars
Supply in the Foreign Exchange Market
The Law of Supply of Foreign Exchange
Imports Effect
Expected Profit Effect
Supply Curve for Canadian Dollars
Market Equilibrium
Changes in the Demand for Canadian Dollars
World Demand for Canadian Exports
Canadian Interest Rate Relative to the Foreign Interest Rate
The Expected Future Exchange Rate
Changes in the Supply of Canadian Dollars
Canadian Demand for Imports
Canadian Interest Rate Relative to the Foreign Interest Rate
The Expected Future Exchange Rate
Changes in the Exchange Rate
Review Quiz
Arbitrage, Speculation, and Market Fundamentals
Arbitrage
The Law of One Price
No Round-Trip Profit
Interest Rate Parity
Purchasing Power Parity
Speculation
The Expected Future Exchange Rate
Exchange Rate Volatility
Market Fundamentals
The Real Exchange Rate
Price Levels and Money
Review Quiz
Exchange Rate Policy
Flexible Exchange Rate
Fixed Exchange Rate
Crawling Peg
Review Quiz
Financing International Trade
Balance of Payments Accounts
An Individual’s Balance of Payments Accounts
Borrowers and Lenders
The Global Loanable Funds Market
An International Borrower
An International Lender
Debtors and Creditors
Is Canadian Borrowing for Consumption?
Current Account Balance
Net Exports
Where is the Exchange Rate?
Review Quiz
Summary
Key Points
The Foreign Exchange Market (pp. 594–601)
Arbitrage, Speculation, and Market Fundamentals (pp. 602–604)
Exchange Rate Policy (pp. 605–607)
Financing International Trade (pp. 608–613)
Key Terms
Worked Problem
Questions
Solutions
Study Plan Problems and Applications
The Foreign Exchange Market (Study Plan 25.1)
Arbitrage, Speculation, and Market Fundamentals (Study Plan 25.2)
Exchange Rate Policy (Study Plan 25.3)
Financing International Trade (Study Plan 25.4)
Additional Problems and Applications
The Foreign Exchange Market
Arbitrage, Speculation, and Market Fundamentals
Exchange Rate Policy
Financing International Trade
Economics in the News
Part Eight Understanding Macroeconomic Trends
Expanding the Frontier
Part Nine Macroeconomic Fluctuations
26 Aggregate Supply and Aggregate Demand
Aggregate Supply
Quantity Supplied and Supply
Long-Run Aggregate Supply
Production at a Pepsi Plant
Short-Run Aggregate Supply
Back at the Pepsi Plant
Changes in Aggregate Supply
Changes in Potential GDP
An Increase in the Full-Employment Quantity of Labour
An Increase in the Quantity of Capital
An Advance in Technology
Changes in the Money Wage Rate
What Makes the Money Wage Rate Change?
Review Quiz
Aggregate Demand
The Aggregate Demand Curve
Wealth Effect
Maria’s Wealth Effect
Substitution Effects
Maria’s Substitution Effects
Changes in the Quantity of Real GDP Demanded
Changes in Aggregate Demand
Expectations
Fiscal Policy and Monetary Policy
The World Economy
Shifts of the Aggregate Demand Curve
Review Quiz
Explaining Macroeconomic Trends and Fluctuations
Short-Run Macroeconomic Equilibrium
Long-Run Macroeconomic Equilibrium
Economic Growth and Inflation in the AS-AD Model
The Business Cycle in the AS-AD Model
Fluctuations in Aggregate Demand
Fluctuations in Aggregate Supply
Review Quiz
Macroeconomic Schools of Thought
The Classical View
Aggregate Demand Fluctuations
Aggregate Supply Response
Classical Policy
The Keynesian View
Aggregate Demand Fluctuations
Aggregate Supply Response
Policy Response Needed
The Monetarist View
Aggregate Demand Fluctuations
Aggregate Supply Response
Monetarist Policy
The Way Ahead
Review Quiz
Summary
Key Points
Aggregate Supply (pp. 624–627)
Aggregate Demand (pp. 628–631)
Explaining Macroeconomic Trends and Fluctuations (pp. 632–637)
Macroeconomic Schools of Thought (pp. 638–639)
Key Terms
Worked Problem
Questions
Solutions
Key Figure
Study Plan Problems and Applications
Aggregate Supply (Study Plan 26.1)
Aggregate Demand (Study Plan 26.2)
Explaining Macroeconomic Trends and Fluctuations (Study Plan 26.3)
Macroeconomic Schools of Thought (Study Plan 26.4)
Additional Problems and Applications
Aggregate Supply
Aggregate Demand
Explaining Macroeconomic Trends and Fluctuations
Macroeconomic Schools of Thought
Economics in the News
27 Expenditure Multipliers
Fixed Prices and Expenditure Plans
Expenditure Plans
A Two-Way Link between Aggregate Expenditure and Real GDP
Consumption and Saving Plans
Consumption Expenditure and Saving
Consumption Function
45° Line
Saving Function
Marginal Propensities to Consume and Save
Slopes and Marginal Propensities
Consumption as a Function of Real GDP
Import Function
Review Quiz
Real GDP with a Fixed Price Level
Aggregate Planned Expenditure
Actual Expenditure, Planned Expenditure, and Real GDP
Equilibrium Expenditure
Convergence to Equilibrium
From Below Equilibrium
From Above Equilibrium
Review Quiz
The Multiplier
The Basic Idea of the Multiplier
The Multiplier Effect
Why is the Multiplier Greater Than 1?
The Size of the Multiplier
The Multiplier and the Slope of the AE Curve
Imports and Income Taxes
The Multiplier Process
Business Cycle Turning Points
Review Quiz
The Multiplier and the Price Level
Adjusting Quantities and Prices
Aggregate Expenditure and Aggregate Demand
Deriving the Aggregate Demand Curve
Wealth Effect
Substitution Effects
Changes in Aggregate Expenditure and Aggregate Demand
Equilibrium Real GDP and the Price Level
An Increase in Aggregate Demand in the Short Run
An Increase in Aggregate Demand in the Long Run
Review Quiz
Mathematical Note The Algebra of the Keynesian Model
Aggregate Expenditure
Consumption Function
Import Function
Aggregate Expenditure Curve
Equilibrium Expenditure
The Multiplier
Government Expenditure Multiplier
Autonomous Tax Multiplier
Balanced Budget Multiplier
Exercise
Summary
Key Points
Fixed Prices and Expenditure Plans (pp. 648–651)
Real GDP with a Fixed Price Level (pp. 652–655)
The Multiplier (pp. 656–660)
The Multiplier and the Price Level (pp. 661–665)
Key Terms
Worked Problem
Questions
Solutions
Study Plan Problems and Applications
Fixed Prices and Expenditure Plans (Study Plan 27.1)
Real GDP with a Fixed Price Level (Study Plan 27.2)
The Multiplier (Study Plan 27.3)
The Multiplier and the Price Level (Study Plan 27.4)
Mathematical Note (Study Plan 27.MN)
Additional Problems and Applications
Fixed Prices and Expenditure Plans
Real GDP with a Fixed Price Level
The Multiplier
The Multiplier and the Price Level
Economics in the News
Mathematical Note
28 The Business Cycle, Inflation, and Deflation
The Business Cycle
Mainstream Business Cycle Theory
Keynesian Cycle Theory
Monetarist Cycle Theory
New Classical Cycle Theory
New Keynesian Cycle Theory
Real Business Cycle Theory
The RBC Impulse
The RBC Mechanism
The Key Decision: When to Work?
What Happened to Money?
Cycles and Growth
Criticisms and Defences of RBC Theory
Review Quiz
Inflation Cycles
Demand-Pull Inflation
Initial Effect of an Increase in Aggregate Demand
Money Wage Rate Response
A Demand-Pull Inflation Process
Demand-Pull Inflation in Chatham
Demand-Pull Inflation in Canada
Cost-Push Inflation
Initial Effect of a Decrease in Aggregate Supply
Aggregate Demand Response
A Cost-Push Inflation Process
Cost-Push Inflation in Chatham
Cost-Push Inflation in Canada
Expected Inflation
Forecasting Inflation
Inflation and the Business Cycle
Review Quiz
Deflation
What Causes Deflation?
A One-Time Fall in the Price Level
A Persistently Falling Price Level
The Quantity Theory and Deflation
Japan Example
What are the Consequences of Deflation?
How can Deflation be Ended?
Money Growth, Not Quantity
Review Quiz
The Phillips Curve
The Short-Run Phillips Curve
The Long-Run Phillips Curve
Change in Expected Inflation
Change in Natural Unemployment Rate
Review Quiz
Summary
Key Points
The Business Cycle (pp. 678–682)
Inflation Cycles (pp. 683–688)
Deflation (pp. 689–691)
The Phillips Curve (pp. 692–693)
Key Terms
Worked Problem
Questions
Solutions
Key Figure
Study Plan Problems and Applications
The Business Cycle (Study Plan 28.1)
Inflation Cycles (Study Plan 28.2)
Deflation (Study Plan 28.3)
The Phillips Curve (Study Plan 28.4)
Additional Problems and Applications
The Business Cycle
Inflation Cycles
Deflation
The Phillips Curve
Economics in the News
Part Nine Understanding Macroeconomic Fluctuations
Boom and Bust
Part Ten Macroeconomic Policy
29 Fiscal Policy
The Federal Budget
Budget Making
The Federal Budget in 2013
Revenues
Outlays
Budget Balance
The Budget in Historical Perspective
Revenues
Outlays
Deficit and Debt
Debt and Capital
Review Quiz
Supply-Side Effects of Fiscal Policy
Full Employment and Potential GDP
The Effects of the Income Tax
Taxes on Expenditure and the Tax Wedge
Taxes and the Incentive to Save and Invest
Effect of Tax Rate on Real Interest Rate
Effect of Income Tax on Saving and Investment
Tax Revenues and the Laffer Curve
The Supply-Side Debate
Review Quiz
Fiscal Stimulus
Automatic Fiscal Policy and Cyclical and Structural Budget Balances
Automatic Changes in Tax Revenues
Automatic Changes in Outlays
Automatic Stimulus
Cyclical and Structural Budget Balances
Canadian Structural Budget Balance in 2013
Discretionary Fiscal Stimulus
Fiscal Stimulus and Aggregate Demand
Graphical Illustration of Fiscal Stimulus
When Fiscal Stimulus is Removed
Fiscal Stimulus and Aggregate Supply
Magnitude of Stimulus
Time Lags
Recognition Lag
Law-Making Lag
Impact Lag
Review Quiz
Summary
Key Points
The Federal Budget (pp. 704–709)
Supply-Side Effects of Fiscal Policy (pp. 710–713)
Fiscal Stimulus (pp. 714–719)
Key Terms
Worked Problem
Questions
Solutions
Study Plan Problems and Applications
The Federal Budget (Study Plan 29.1)
Supply-Side Effects of Fiscal Policy (Study Plan 29.2)
Fiscal Stimulus (Study Plan 29.3)
Additional Problems and Applications
The Federal Budget
Supply-Side Effects of Fiscal Policy
Fiscal Stimulus
Economics in the News
30 Monetary Policy
Monetary Policy Objectives and Framework
Monetary Policy Objective
Bank of Canada Act
Joint Statement of the Government of Canada and the Bank of Canada
Interpretation of the Agreement
Actual Inflation
Rationale for an Inflation-Control Target
Controversy about the Inflation-Control Target
Responsibility for Monetary Policy
Governing Council of the Bank of Canada
Bank of Canada Economists
Consultations with the Government
Review Quiz
The Conduct of Monetary Policy
The Monetary Policy Instrument
The Overnight Loans Rate
The Bank’s Interest Rate Decision
Hitting the Overnight Loans Rate Target
Review Quiz
Monetary Policy Transmission
Quick Overview
Interest Rate Changes
Overnight Loans Rate
3-Month Treasury Bill Rate
The Long-Term Bond Rate
Exchange Rate Fluctuations
Money and Bank Loans
The Long-Term Real Interest Rate
Expenditure Plans
Consumption Expenditure
Investment
Net Exports
Change in Aggregate Demand, Real GDP, and the Price Level
The Bank of Canada Fights Recession
Market for Bank Reserves
Money Market
Loanable Funds Market
The Market for Real GDP
The Bank of Canada Fights Inflation
Market for Bank Reserves
Money Market
Loanable Funds Market
The Market for Real GDP
Loose Links and Long and Variable Lags
Loose Link from Overnight Loans Rate to Spending
Time Lags in the Adjustment Process
Review Quiz
Extraordinary Monetary Stimulus
The Key Elements of the Crisis
The Policy Actions
Painfully Slow Recovery
Policy Strategies and Clarity
Review Quiz
Summary
Key Points
Monetary Policy Objectives and Framework (pp. 728–730)
The Conduct of Monetary Policy (pp. 730–732)
Monetary Policy Transmission (pp. 733–740)
Extraordinary Monetary Stimulus (pp. 741–743)
Key Terms
Worked Problem
Questions
Solutions
Study Plan Problems and Applications
Monetary Policy Objectives and Framework (Study Plan 30.1)
The Conduct of Monetary Policy (Study Plan 30.2)
Monetary Policy Transmission (Study Plan 30.3)
Extraordinary Monetary Stimulus (Study Plan 30.4)
Additional Problems and Applications
Monetary Policy Objectives and Framework
The Conduct of Monetary Policy
Monetary Policy Transmission
Extraordinary Monetary Stimulus
Economics in the News
31 International Trade Policy
How Global Markets Work
International Trade Today
What Drives International Trade?
Why Canada Imports T-Shirts
Why Canada Exports Regional Jets
Review Quiz
Winners, Losers, and the Net Gain from Trade
Gains and Losses from Imports
Gains and Losses from Exports
Gains for All
Review Quiz
International Trade Restrictions
Tariffs
The Effects of a Tariff
Rise in Price of a T-Shirt
Decrease in Purchases
Increase in Domestic Production
Decrease in Imports
Tariff Revenue
Winners, Losers, and the Social Loss from a Tariff
Canadian Consumers of the Good Lose
Canadian Producers of the Good Gain
Canadian Consumers Lose More than Canadian Producers Gain: Society Loses
Import Quotas
The Effects of an Import Quota
Winners, Losers, and the Social Loss from an Import Quota
Canadian Consumers of the Good Lose
Canadian Producers of the Good Gain
Importers of the Good Gain
Society Loses
Tariff and Import Quota Compared
Other Import Barriers
Health, Safety, and Regulation Barriers
Voluntary Export Restraints
Export Subsidies
Review Quiz
The Case Against Protection
Helps an Infant Industry Grow
Counteracts Dumping
Saves Domestic Jobs
Allows Us to Compete with Cheap Foreign Labour
Penalizes Lax Environmental Standards
Prevents Rich Countries from Exploiting Developing Countries
Reduces Offshore Outsourcing that Sends Good Canadian Jobs to other Countries
Winners and Losers
Avoiding Trade Wars
Why is International Trade Restricted?
Tariff Revenue
Rent Seeking
Compensating Losers
Review Quiz
Summary
Key Points
How Global Markets Work (pp. 752–754)
Winners, Losers, and the Net Gain from Trade (p. 755)
International Trade Restrictions (pp. 756–761)
The Case Against Protection (pp. 762–765)
Key Terms
Worked Problem
Questions
Solutions
Key Figure
Study Plan Problems and Applications
How Global Markets Work (Study Plan 31.1)
Winners, Losers, and the Net Gain from Trade (Study Plan 31.2)
International Trade Restrictions (Study Plan 31.3)
The Case Against Protection (Study Plan 31.4)
Additional Problems and Applications
How Global Markets Work
Winners, Losers, and the Net Gain from Trade
International Trade Restrictions
The Case Against Protection
Economics in the News
Part Ten Understanding Macroeconomic Policy
Tradeoffs and Free Lunches
Glossary
Index
