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Coordination tasks, 47“49, 50“52, 183“184 Disposable income, 155, 157“160, 161“164
Carter, Jimmy, 317
Copeland, Kemp, 68 Distribution, 50“52
Causation, 10
Central bank, 263, 264. see also Banking Corporate income tax, 230 Division of labor, 48“49, 50
Corporate profits, 31 Doha Round (tariff reductions), 348, 349
system
Corporation, 31“32, 147“148 Dollar, U.S., 362, 374“375, 376, 380, 391.
Central bank independence, 264“265.
see also Exchange rates
see also Banking system Correlation, 10
Central planning, 48. see also Communism Corruption, 75 Donne, John, 379, 390
Double coincidence of wants, 243
“Cheap foreign labor,” 339“340, 347“348, Cost disease of personal services,
146“147 Drugs, 71
354
Costs, 91, 111, 122“124, 325 Dumping, 353“356
China
CPI (Consumer Price Index), 118, 127,
currency, 369, 373
E
128, 134, 282, 382
education and training in, 148
Crowding-in, 311“312
growth, 133, 138, 147, 355 Earnings, 29“30
Crowding-out, 310“311, 314
investor protection, 140 Eastern Europe, 70
Cuba, 352
labor quality, 136 Economic analysis, graphs in, 13
Cumby, Robert, 368
openness of economy, 24 Economic discrimination, 47
Currency. see Exchange rates
technology in, 148 Economic forecasts, 229, 292
Current account, 370
trade with U.S., 346 Economic growth. see Growth
Current account deficit, 376, 385
U.S. trade deficit, 388 Economic model, 10“11
Cyclical unemployment, 114, 207
Chodad, John, 244 Economics, 3“19
Choice. see Scarcity abstraction, 7“9, 84
D
Circular flow diagram, 33, 155“157, as discipline, 7
177, 184 De Lamare, Paul, 249 graphs, 13“18
Clinton, Bill Debt, 303“305, 310“311. see also National imperfect information and value
balanced budget, 307 judgments, 11“12
debt
budget deficits, 40, 97“98 Defense, Department of, 143 models, 10“11
Clintonomics, 97“98 Deficit. see Budget deficit; Trade deficit theory, role of, 9“10
economic growth, 25, 93 Economist, The, 140, 340, 368
Deficit spending, inflationary effects
government regulation, 34 Economy, U.S.. see U.S. economy
of, 309
minimum wage, 115 Deflating, 129 Ecuador, 374
on supply-side economics, 232 Deflation, 93“94, 207“209 Education and training, 34, 140“142, 148,
Clinton, Hillary, 300, 340 Demand, 139, 154, 331. see also Demand 331“332
Closed economy, 23“24, 384“385 Education policy, 141
curve; Supply and demand
College tuition, 134, 146“147 Demand curve, 13“14, 58“60, 66“67 Educational services, 28
Commodity money, 245“246 Demand inflation, 210“211 Efficiency, 47, 325“326
Communism, 36, 70. see also Central Demand schedule, 58 Einstein, Albert, 107
planning Demand-side equilibrium, 175“197. Electricity prices, 60
Comparative advantage. see also see also Equilibrium Employment sectors, 28“29
International trade aggregate demand curve, 180“182 Energy prices, 60, 144, 145
arithmetic of, 343“344 equilibrium GDP, 176“177, 181, Environmental policy, 91
“cheap foreign labor” fallacy, 339“340, 190, 223 Equation of exchange, 278
347“348, 354 and full employment, 182“183 Equilibrium, 64“70, 176, 203“204,
definition, 49 212“213. see also Demand-side
income determination, 178“180,
generally, 5, 354 193“194 equilibrium
graphics of, 344“347 multiplier analysis, 185“189, 190“191, Equilibrium GDP, 176“177, 181, 190, 223
Competition, 31, 33“34 193“197 Equilibrium price, 358“359
Compound interest, 107. see also saving and investment coordination, Escalator clause, 332
Interest rates 183“184 Euro, 375“376
Confidence, business, 165 Europe, 26, 30. see also European Union;
Demand-side fluctuations, 213“214
ConocoPhillips, 69 individual nations
Demand-side inflation, 318
Conservatives, and small government, 228 Demarcation line, between macroeconomics European Central Bank (ECB), 285
Consumer expenditure, 154“155. see also and microeconomics, 85 European Union, 264, 353, 375“376
Consumer spending Democratic Party, fiscal policy, 228 Excess reserves, 252, 269
Consumer incomes, and shifts in demand Deposit creation, 252“256 Exchange rates
curve, 59 Deposit destruction, 256 and aggregate demand, 381“383
Consumer preferences, and shifts in Deposit insurance, 250 and aggregate supply, 382
demand curve, 59“60 Depositors, safety of, 242 appreciate/depreciate, 362
Consumer Price Index (CPI), 118, 127, Depreciate (currency), 362. see also Argentina, 361, 369, 372, 373, 374
128, 134, 282, 382 Brazil, 361, 373, 374
Exchange rates
Consumer spending, 30“31, 157“160, Depreciation, 171 Canada, 362, 363
163“164, 229. see also Consumer Depressions, 176. see also Great Depression China, 369, 373
expenditure Devaluation (currency), 363, 370 and deficit reduction, 386“388
Consumption, 45, 157“160, 188, 191. see Developing countries, 147“149 determination of, 363“368
also Consumer expenditure; Development assistance, 147 devaluation, 363, 370
Consumer spending Diamond, Gary, 249 dollar, value of, 362, 380, 391
Consumption function, 160“164 and economic activity, 366
Dinosaur National Monument, 46
Consumption possibilities, 346 effect of supply and demand, 363“368
Dioccletian, 56


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Index 415



effects of changes in, 381“382 of George W. Bush, 228 hyperinflation, 123“124, 282
European Union, 375“376 graphical representation, 235“237 investment in, 144
fiscal expansion, 385 income taxes and consumption openness of economy, 24
fixed, 369“370, 372“373 schedule, 222“223 taxes in, 35
floating, 363 and interest rates, 281“283 unemployment, 26, 113
Indonesia, 361, 390 international capital flows, 385 Gilman, Mark, 68“69
Globalization, 339, 340. see also
inflation, 367“368, 372 vs. monetary policy, 270, 283“284, 301
and the multiplier, 223“226
interest rates, 365“366, 372 International trade
in open economy, 384“386
international trade, 342, 380“382 GNP (Gross national product), 171
and recessionary gap, 227
Japan, 363, 383 Gold standard, 370“371
Republican Party, 228
macroeconomic effects of, 383“384 Goods, intermediate, 89, 170, 171“172
spending policy vs. tax policy, 227“228
Mexico, 363, 373, 374 Gore, Al, 232
supply-side tax cuts, 229“233 Gotbaum, Betsy, 46
price ratios, 346
and taxation, 235“239 Gough, William, 249
purchasing power parity theory,
time lags, 229 Governance, in developing countries, 149
366“368
trade deficit, 382, 387“390 Government
and relative prices, 165“166
and unemployment, 99“100, 324 budget, and investment, 283
revaluation, 363, 370
and velocity, 278“283 as employment sector, 28“29
in Russia, 361, 374
Fitzgerald, F. Scott, 147 expenditures, 34
in South Korea, 390
Fixed consumption function, 181, 188 and fixed exchange rates, 369“370
and trade deficit, 382, 388“390
Fixed exchange rates, 369, 372“373 intervention, 289“291
of various currencies, 363
Fixed taxes, 235“236 policy, 293
Excise tax, 235
Floating exchange rates, 363 as redistributor, 35
Expected inflation, 120“121, 332
Fluctuations, economic, 6 as referee, 33
Expenditure, consumer, 154“155
during 1990s, 321“322 regulation, 33“34
Expenditure schedule, 178“179
aggregate demand curve, 319 role of, 32“35
Expenditures, government, 34
Clintonomics, 97“98 size of, 228, 292“293
Experience, 331“332
demand-side, 213“214 spending surge under
Export subsidy, 349
Exports, 23“24, 195“196, 381. see also in George W. Bush economy, 93, 98“99 George W. Bush, 313
taxes. see Taxation
Great Depression, 94“95
Net exports
Great Stagflation (1973“1980), 96 transfer payments, 35, 157,
Externalities, 47
growth, 24“25, 91“93 225“226, 332
Exxon Mobil Corp., 69
inflation and deflation, 93“94 Government purchases, 155
F Phillips curve, 319“320 Graphs, 14“19
Reaganomics, 97 comparative advantage, 344“347
Factors of production, 22
supply-side inflation, 214“215, contour maps, 17“18
Farming, 29, 73“74
318“319, 321“322 economic analysis, use in, 13
Favoritism, 75
World War II to 1973, 25“26, 95“96 fiscal policy, 235“237
FDIC (Federal Deposit Insurance
FMOC (Federal Open Market Committee), rays through origin and 45º lines,
Corporation), 250
263“264, 265 16“17
“Fed.” see Federal Reserve System
Ford Motor Co., 31, 32 slope, definition and measurement,
Federal budget, 40, 46
Forecasts, economic, 229, 292 14“16
Federal Deposit Insurance Corporation
Foreign aid, 147 two-variable diagrams, 13“14
(FDIC), 250
Foreign direct investment, 147“148 Great Boom of 1990s, 376
Federal Energy Regulatory Commission, 60
Great Britain. see United Kingdom
Fractional reserve banking, 248
Federal funds rate, 266
France, 22, 26, 35, 113, 341, 363 Great Depression
Federal Open Market Committee (FOMC),
Franklin, Benjamin, 105, 339 and banking system, 258
263“264, 265
Free markets, 250, 363“368. see also Free economic fluctuations during, 94“95
Federal Reserve Board, 97“100, 262, 317
trade; Market system; Price system gold standard, 370“371
Federal Reserve System
Free trade, 351, 354. see also Free markets Keynes on, 182
and Bernanke, 262
Frictional unemployment, 114 price supports, 73
budget deficits, 386“387
Friedman, Milton, 282, 286 savings during, 158
central bank independence, 264“265
Full employment, 115, 182“183, 229 and self-correcting mechanism, 208
control debate (money supply or
Future, 165 unemployment, 25“26, 112“113
interest rates), 284“287
Future income expectations, and unemployment insurance, 116
monetary policy, 263“265
consumption function, 163“164 Great Stagflation (1973“1980), 96
origins and structure of, 263
Greenspan, Alan, 287, 293
and recessions, 290
G Gross Domestic Product (GDP). see also
Federal tax system. see Taxation
Potential GDP; Real GDP; Real
Fiat money, 246 Galbraith, John Kenneth, 261
GDP per capita
Final goods and services, 89, 169, 170, Gasoline tax, 69“70
components, 88“90
GDP. see Gross Domestic Product (GDP)
171“172
definition, 23
Financial crisis of 2007“2008, 262, 269 GDP deflator, 129
equilibrium, 176“177, 181, 190, 223
Gender, workforce composition, 27
Fiscal policy
exceptions to the rules, 168“169
aggregate demand, 221“239, 314 General Electric, 84
and labor costs, 341
aggregate demand shifts, 273 General Motors, 31, 84, 201
limitation of, 90“91
General Theory of Employment, Interest, and
algebraic treatment, 238“239
in macroeconomics, 87“91
Money, The (Keynes), 95, 168, 182
contractionary, 227, 283, 314
national debt relative to, 304
definition, 6, 95“96, 221 Geography, as problem for developing
and national income, 153“155
Democratic Party, 228 countries, 148“149
nominal GDP, 88, 92
difficulties, 228“229 Germany
as sum of all factor payments, 169“171
expansionary, 226, 228, 281“283, 324, currency, 363
as sum of final goods and services, 169
372, 385 GDP of, 22


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Licensed to:
Index
416



Inflation targeting, 97, 100, 293, 325“326
as sum of values added, 171“172 determinants of, 178“180, 193“194
Inflationary gap, 183“184, 205“207,
in various nations, 22 disposable, 155, 157“160, 161“164
209“211, 227, 322“323
Gross national income, 156 distribution, 231“232
Information Age, 29, 145
Gross national product (GNP), 171 future expectations of, 163“164
Information technology (IT), 144“145
Gross private domestic investment, 169 and inflation, 120
Infrastructure, public, 34
Growth vs. money, 262
Innovation, 142“143
in Africa, 138 national, 153“155, 157, 165, 170
Inputs, 30, 32, 42, 63, 105, 108“109. see also

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