MACROECONOMICS

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Preface xix
part one
INTRODUCING THE ECONOMY: FACTS AND FIRST MODELS 1
1 Introduction 3 2 National Income Accounting 29 3 Income and Spending 55 4 Money, Interest, and Income 87 5 Monetary and Fiscal Policy 123 6 International Linkages 149
part two
AGGREGATE DEMAND, SUPPLY, AND GROWTH 187 7 Aggregate Demand and Supply: An Introduction 189 8 Aggregate Supply: Wages, Prices, and Employment 213 9 The Rational Expectations Equilibrium Approach 39 1O Long-Term Growth and Productivity 261
part three
BEHAVIORAL FOUNDATIONS 295
11 Consumption and Saving 297 12 Investment Spending 331 13 The Demand for Money 369 14 The Fed, Monev, and Credit 407 15 Stabilization Policy: Prospects and Problems 437

M acroeconomics is concerned with the behavior of the economy as a whole-with booms and recessions, the economy's total output of goods and services and the growth of output, the rates of inflation and unem- ployment, the balance of payments, and exchange rates. Macroeconomics deals bott with long-run economic growth and with the short-run fluctuations that constitute the business cycle.
Macroeconomics focuses on the economic behavior and policies that affect con- sumption and investment, the dollar and the trade balance, the determinants of changes in wages and prices, monetary and fiscal policies, the money stock, the federal budget, interest rates, and the national debt
In brief, macroeconomics deals with the major economic issues and problems of the day. To understand these issues, we have to reduce the complicated details of the economy to manageable essentials. Those essentials lie in the interactions among the goods, labor, and assets markets of the economy, and in the interactions among national economies whose residents trade with each other.
In dealing with the essentials, we go beyond details of the behavior of individual economic units, such as households and firms, and the determination of prices in particular markets, which are the subject matter of microeconomics. In macroeconomics we deal with the market for goods as a whole, treating all the markets for different goods-such as the markets for agricultural products and for medical services-as a single market. Similarly, we deal with the labor market as a whole, abstracting from differences between the markets for, say, unskilled labor and doctors. We deal with the assets markets as a whole, abstracting from differences between the markets for IBM shares and for Rembrandt paintings. The benefit of the abstraction is increased understanding of the vital interactions among the goods, labor, and assets markets. Passing over the details of thousands of individual markets allows us to focus more clearly on these key markets. The cost of the abstraction is that omitted details some- times matter.

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