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Enviando Richard T. Froyen-Macroeconomics_ Theories and Policies-Pearson Download as PDF, TXT or read online from Scribd .. Preface T he term macroeconomics was first used by the Norwegian economist Ragnar Frisch in Richard T Froyen Macroeconomics Theories And Policies - [Free] Richard T GMT (PDF) Consumer Behavior Schiffman Kanuk 10th Edition. Trove: Find and get Australian resources. Books, images, historic newspapers, maps, archives and more.
During the two decades following World War II. Lending consists of buying such bonds. Jodi Notowitz Cover Art: The theory is not explicit in the sense that it focuses on the components of aggregate demand and explains the factors that determine their level. At this point. The Keynesian System II:
In part. The key variables we study include total output in the economy. The subject matter of macroeconomics includes factors that determine both the levels of these var- iables and how the variables change over time: Macroeconomics is policy oriented.
The data measure growth currently produced in the quantity of goods and services produced. GDP declined in at least 1 year.
Gross domes- product GDP tic product measures current production of goods and services. In all other decades. Economic Performance Our tasks here are to sketch the broad outline of U. The other. Still it is the case that the period from the mids to was one of relative stabil- ity. During the s. How each theory explains the events from the s to the present.
Generally over this period year to year movements in GDP were mod- erate. Notice that over this period of more than 20 years there was only one year when GDP declined. Growth for the — period is low due to the recession that began in late and the slow pace of the recovery in the later part of the period.
The unemploy- the number of ment rate is the percentage of the labor force that is not employed. In the late s there seemed to be a reversal of the labor force this trend as the unemployment rate fell to a year low of just under 4 percent. The table indicates a decline of about 1 percentage point in the GDP growth rate in the post period.
Although this rate is not especially high by the standard of previous recessions. Unemployment Rate. Then as output growth slowed after There were some signs of a modest reversal of this growth slowdown starting in the mids. To calculate the rate of inflation. It can be seen from the figure and from Table that the inflation rate was low and consumer price relatively stable in the s and early s.
In Figure the inflation rate is measured by the con- aggregate price sumer price index CPI. This was reversed as energy prices fell with the allied victory in the Persian and services Gulf War in early This upward trend continued and intensified in the s. Averages for Selected Periods Years Percent —69 4. The inflation rate is then computed as the percentage rate of change in the price index a measure of the price index over a given period. The early a measure of the s were a period of disinflation.
Inflation then remained low over the rest of the period. In the late s. Inflation Rate. In the early s. Averages for Selected Periods Years Percent —60 1. For reasons we will consider. Over the past decade defla- tion. In the period since The goal of policy has been price stability. Later in the s. Unemployment and Inflation Rates. Note that the early portion of this period. Between and During parts of the s—for example.
For much of the period. Part a is for the years — Beginning in During the recession of — These concerns grew as the economy slipped into a deep recession in — From to In parts a and b of the graph. These changes in the relationship between the inflation rate and the unemploy- ment rate can be seen in Figure Inflation was also moderate.
Part b is for — Both series reversed course in THE U. Early in the new century. The exports trade deficit is the excess of U. Federal government expenditures rose from the excess of It was in the s and early s that very large deficits emerged. Budget deficits were somewhat larger in the s.
The deep recession of — and stimulus programs to reverse the contraction caused the deficit to grow to unprecedented peacetime levels both in absolute magnitude as shown in Figure and as a percent of GDP. For minus outlays example. In the s deficit and s. The United States began to run. Still the trade deficit remained at historically high levels into The recent recession caused the trade deficit to fall as import growth slowed more than export growth.
Federal Budget Deficit. Balance on Goods and Services. The trade deficit then declined for a few years. But this line of rea- soning cannot explain simultaneously high unemployment and high inflation. This explanation is consistent with the negative relationship between inflation and unemployment during the —69 period.
Substantial unemployment was considered the result of inadequate demand. Total demand for output cannot be both too high and too low. During the period from to there were four recessions—times when there was a sustained fall in output and employment.
Question 2: What are the determinants of the rate of inflation? What role do mac- roeconomic policies play in determining inflation? What relationship exists between inflation and unemployment?
Why were both the unemployment rate and the inflation rate so high during much of the s? What became of the negative relationship that existed between these two variables in the s and s see Figure a?
The presence of both high inflation rates and high unemployment rates during the s was especially puzzling to macroeconomists. The experience of the s and the s had led economists to explain substantial inflation as a symptom of too high a level of total demand for output. Two of these recessions were severe. In the years since the late s. What determines the cyclical behavior of output and employment? What causes recessions?
Answering this question requires a theory of the behavior of output and employ- ment over periods of 1 to 4 years. When demand was high. In the years from to In the United States during the s. In late the unemployment rate was at 9. Over much of the period. Accompanying the decline in output growth were declines in growth of labor productivity and real wages.
A mild recession in was a bump in what seemed to be a road to higher growth in output and labor productivity. The macroeconomic theo- foreign purchasers ries we consider try to explain why. As we saw in Table There was actually concern about the huge projected surpluses. An impor- tant part of this reconsideration of existing theory concerns the role of total demand aggregate demand for output. What explains the decline in the growth rate of output. Again here the cyclical downturn in the economy beginning in late made it hard to discern any long-run trends.
Given the debt the country will pile up. This was certainly the case after the deep recession of — Today we are once again concerned with large current and projected future defi- cits. Question 4: What determines the rate of growth in output over periods of one or two decades? Over longer periods such as a century? One can ask this question for one country across time periods or across countries.
The concern was unwarranted. Why have some countries grown very rapidly and some more slowly? Teenage unemployment ages 16—19 was at 24 percent. As unem- each buying sector ployment fell to low levels. By the mids. Will government borrowing to finance the deficits raise interest rates and retard investment and growth? Will there be a debt crisis such as that faced by some European countries?
Many worry about the effects of the deficits and debt on the future stability of the dollar and of U. Why would macroeconomists disagree on these questions? Prior to examining these theories. The United States effectively borrows from abroad to finance this deficit. Does this behavior suggest a relationship between the two defi- cits? Perhaps at some times and not at others?
Explain how inflation rate is calculated. The chapters that follow present theories that try to explain the data discussed here and provide answers to the questions we have raised. Provide examples of the types of policy questions that macroeconomists ask. Summarize the behavior of the inflation and unemployment rates since Then the downturn in the economy cut import growth faster that export growth.
Explain the nature of these shifts. Summarize the behavior of inflation rates during the period from the s onward.
Summarize the behavior of U. Did the move- ment of these rates over this period more closely resemble those of the s or those of the s and s? There were several shifts in the output—inflation relationship over the — period.
Questions about the sustainability of deficits in this range were widespread. By the trade deficit had grown to 6 percent of GDP. On the product side are two widely reported measures of overall production: Teach these boys and girls nothing but Facts. Stick to the Facts. The Depression emphasized the need for such measures and led to the develop- ment of a comprehensive set of national income accounts. Comprehensive measures of national income and output did not exist at that time.
GDP includes earnings in the United States of foreign residents or foreign-owned firms. During World War II. The product side measures production and sales.
GNP includes earnings of U.
The income side measures the distribution of the proceeds from sales. National Income and Its Composition. You can only form the minds of reasoning animals upon Facts. We begin by describ- ing the key variables measured in the national income accounts. These models are simplified representations of the economy that attempt to capture important fac- tors determining aggregate variables such as output.
Plant nothing else.
National Bureau of Economic Research. National income accounts data are pub- lished in the Survey of Current Business. GNP excludes those items.
They differ in their treatment of international transactions. Hard Times New York: See Simon Kuznets. Facts alone are wanted in life. GDP does not. Elements of the models are theoretical relationships among aggregative eco- nomic variables.
It also considers accounting relationships that exist among these varia- bles because we use these relationships to construct our models. Changes in Definitions and Classifications. As a prelude to understanding such rela- tionships. The GNP concept enters into the discussion at a later point.
Goods used to produce other goods rather than being sold to final purchasers—what are termed intermediate goods—are not counted separately in GDP. In On the income side of the national accounts. At a later point. Market transactions such as exchanges of previously produced houses. Some aspects of this definition require clarification. Not including capital goods separately in GDP would be other goods equivalent to assuming that they depreciated fully in the current time period.
In GDP. It is a flow measure of out- put per time period—for example. Counting them separately is double counting. Our explanation of the product side of the national accounts therefore concentrates on GDP. In a sense this is portion of the double counting because.
Additions to inventory stocks of final goods belong in GDP. Such capital goods are ultimately used up in the production process. The other type of intermediate goods that is part of GDP is inventory investment— the net change in inventories of final goods awaiting sale or of materials used in the production process. Exchanges of assets. Such goods show up in GDP because they contribute to the value of the final goods they are used to produce. This portion.
Bureau of Economic Analysis. To correct for this. This is the trick to being able to measure apples plus oranges plus rail- road cars plus. These additions should be counted in the current period as they are added to stocks so that the timing of national product is defined correctly.
The same physical output will correspond to a different GDP level as the average level of market prices varies. Department of Commerce. The way the latter calculation is made is discussed later in this chapter. But this does exclude from GDP goods that are not sold in markets.
Inventory investment in materials similarly belongs in GDP because it also represents currently produced output whose value is not embodied in current sales of final output.
An example is the services of owner-occupied houses. Components may not sum to the total due to rounding error. If final sales exceed production—for example.
Notice that inventory investment can be negative or positive. Government purchases of goods and services were approximately 20 percent of GDP in The cyclical volatility of investment has implications for the macroeconomic models considered later. The figures in Table are gross rather than net. Consumption is the largest component of GDP.
In the postwar period. Social Security payments government sector—the federal and government interest payments are examples of expenditures that are not government as included in GDP. Net exports equal total gross total gross exports minus imports. Gross exports are currently produced goods and exports minus services sold to foreign buyers. Imported goods and services are. The second subcomponent of investment is residential construction investment. In investment was The investment total in the table is gross investment.
As noted. Trends in the size of the government budget—both purchases of goods and services and other components not included in the national income accounts—are analyzed in a later chapter when we consider fiscal policy. This means that the capital stock declined in that year because gross investment was insufficient to replace the portion of the capital stock that wore out. Not surprisingly..
This is the share of the current output bought by the government sector. The final subcomponent of invest- construction ment is inventory investment. Imports are purchases by imports domestic buyers of goods and services produced abroad and should not be counted in GDP. Not all that are the part of government expenditures are part of GDP because not all government expenditures current output represent a demand for currently produced goods and services.
Over the years covered by Table Business fixed investment consists of purchased by the purchases of newly produced plant and equipment—the capital goods discussed previ- business sector ously. They are a part of GDP. Intercountry comparisons of GDP over. Policymakers use GDP costs of production. If it is not a welfare measure. Because goods and services are evaluated at mar- ket prices in GDP. Read Perspectives Net exports were still negative but smaller in magnitude in As the table shows.
It is hard to estimate ter. In the Himalayan kingdom of Bhutan. Activities not reported to avoid paying of happiness. Net exports remain as the net direct effect of foreign-sector transactions on GDP. In surveys early in this century. For one thing. People in Ghana are more satisfied with their lives than people in Also left out of GDP are illegal economic activi- the Unites States.
Perhaps relative income in a society taxes take many forms. In recent trialized countries and less-developed nations. Rough estimates for the United States their lives. Alterna- who are paid in cash for services may underreport tively.
If we all began to work hour weeks. Although surveys may be avoid paying taxes—the underground economy. In fact. Their incomes had on average range from 5 to 15 percent of GDP.
It water pollution and dying forests. Surveys show that GDP and happiness. The United Nations provides it is not a measure of welfare or even of material indices of social welfare as alternatives to stand- well-being. It would take us too far leisure. GNP includes income earned abroad by U. GNP and national income would be equal.
Each dollar of GNP is one dollar of final sales. The reason is that. The adjustments required to go from GNP to national income. Making this subtraction gives us net national product NNP. In computing national income. The first charge against GNP that is not included in national income is deprecia- tion.
Corporate profits were between 12 and 14 percent of national income in both years. The portion of the capital stock used up must be subtracted from final sales before national income is computed. As noted previously.
Depreciation 1. Statistical discrepancy We then subtract earnings in the United States by foreign residents and firms. This is not much different from the percentage in Factor earnings are incomes of factors of production: Figure shows the components of national income factor payments as shares of the total for and for the year before the most recent recession. This is the proper starting point because we want a measure of the income of U.
Today a greater part of labor compensation is. In brief. We then subtract personal. When we subtract personal tax payments from personal income. With these adjustments. The first of the main items subtracted from national income in going to personal income are the parts of corporate profits in the national income accounts that are not paid out as dividends to persons. Survey of Current Business April The other item added in going from national income to personal income is interest payments by the government to persons.
These payroll taxes are included in the employee compensation term in national income but go to the government. Also subtracted from national income in computing per- sonal income are contributions to Social Security by both the employer and employee. Personal measure of income income is the national income accounts measure of the income received by persons received by persons from all sources.
To go from national income to personal income. The items added in going from national income to personal income are payments to persons that are not in return for current production of goods and services.
These portions include corporate profits tax payments and undistributed profits retained earnings. For some purposes. Government interest pay- ments are made on bonds previously issued by federal. The relevant income concept is all income received by per- personal income sons.
These are predominantly government transfer payments such as Social Security payments. The first item is transfer payments. The details of the necessary adjust- ments are not central to our focus. Personal saving is the part of personal disposable income that is not spent. Household wealth was reduced. British Economic Growth: Cambridge University Press. Most of it was spent for consumption. There were two other expenditures.. This was a high saving rate relative to the recent past.
These are of interest in chart. They economic life of a country. Although it is only in were compiled by Gregory King.
In terms of from previous eras. The first was interest paid to business installment credit and credit card interest. Table shows how U. The recession of —09 had been characterized by falling asset prices. We assume that national income and national product or output are the same.
The foreign sector is reintroduced into our models later. Wages and salaries were 37 percent of for England and Wales today. The in We assume that all corporate profits are paid out as dividends. It is estimated eign trade. We assume that all taxes. The simplifications we impose are as follows: In excluding the foreign sector.
Indirect taxes and the other discrepancies between GNP and national income are ignored see Table But it was an open econ- national income show that in England and Wales omy. The terms national income and output are used interchangeably throughout this book. Letting net taxes T equal tax payments minus transfers.
Several simplifications are made in the relationship between national income and personal disposable income. Depreciation is ignored except where explicitly noted.
Esti- smaller fraction and rents. The foreign sector will be omitted. In deriving these identities. This means that we drop the net exports term from GDP see Table and the net foreign transfers item from personal outlays in breaking down the disposition of personal income see Table Using T With these simplifications.
We can write 2. Such a measure would be most closely related to employment. GDP meas- current dollars ured at current market prices will change when the overall price level changes as well as when the volume of production changes.
Changes in GDP in valued dollars then provide a measure of quantity changes between these years. For many purposes. The traditional way of constructing real GDP is to measure output in terms of constant prices from a base year. Identities are relationships that follow from accounting or other definitions and therefore hold for any and all values of the variables. The GDP measure that changes only when quantities.
Measuring real GDP in terms of prices from a base year. From the income side of the national income accounts. It is a measure of the of goods and aggregate or overall price level.. Because the same goods and services appear at the top and bottom.
Column 2 shows the value of real GDP as measured in prices for each of these years. The ratio of nomi- level relative to a nal GDP to real GDP is a measure of the value of current production in current prices chosen base year e. The table shows.
In prior years.
We explain the two procedures in turn. Real GDP. The discussion of the theoretical models in Parts Two and Three of the book has been revised to reflect this experience. Many examples have been added to show how the models explain recent events. The way the crisis and deep recession affect an evaluation of the different macroeconomic theories is examined. Chapters in Part Five on Economic Policy have been extended to consider policy responses to the financial crisis and recession.
Throughout the book major policy initiatives are described and evaluated. Chapters 16 and 17 have been revised to include more detail on banks and other parts of the financial sector. The freezing up of credit markets during the financial crisis is explained within the context of deposit and credit creation.
Material has been added on the new monetary policy instruments and initiatives that come under the heading of quantitative easing. The zero-bound problem that led to the need for these new policy initiatives is explained. Chapter 14 on the open economy includes an updated discussion of the evolution of current account imbalances over the period and new coverage of the European sovereign debt crisis. The discussion of fiscal policy in chapter 18 now includes material on the United States public debt.
The debt burden issue is considered. New Perspectives boxes have been added and others expanded on topics including: Share a link to All Resources. Instructor Resources. Previous editions. Macroeconomics, 9th Edition. Relevant Courses. Intermediate Macroeconomics Economics. Sign In We're sorry! Username Password Forgot your username or password?
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On-line Supplement. Adobe Reader. This book makes you see Economics a This book renders the evolution of the major schools of Macroeconomic thought. This book makes you see Economics as an evolving thing whose mutations depend on what the technological, cultural and socio-political environments look like when the theories are formed. Professor Froyen's renditions of the models are intellectually refreshing and clear, I particularly appreciate the way he discusses the differences between them throughout the book.
I think any social scientist economist, historian, or other will find the book intellectually enriching. It only requires basic skills in algebra as the main analytical tool used is graphing.
For the non-economist it also has a glossary of economic terms at the end of the book. May 04, Samiarahamn rated it it was ok. Oct 18, Uzair Hashmi rated it it was amazing. Richard T. Awesome book. View 1 comment. Jun 27, Nazar added it. Dec 23, is currently reading it. May 09, Sani Rh rated it it was amazing. Tanmay Trivedi rated it it was amazing Jul 26, Shivam Sitoke rated it it was amazing Nov 01, Violet Rosee rated it it was amazing Aug 29, JP Nesseth rated it liked it Aug 18, Nick Pacheco rated it liked it Sep 03, Ed rated it it was amazing Aug 05, Jessica Joseph rated it really liked it Oct 01, Kathryn rated it liked it Nov 30, Caroline rated it it was ok Jul 23, Hanie Ramezani rated it it was amazing Oct 18, Ziya rated it it was amazing Aug 10, Parvathy Kalesan rated it liked it Sep 30, Red rated it it was amazing Mar 01,