Macroeconomics

I N D E X

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break-even, 212

business fixed. See Business fixed

investment

capital stock and, 195

components of, 525, 526f

crowding out of, 69

definition of, 28

demand for. See Investment demand

international variation in, 202f,

202–203

inventory, 525, 526f, 543–544

IS curve and, 298–299, 299f

neoclassical model of, 527

net, 530

residential. See Residential investment

in United States, 202f, 203

Investment demand, shifts in, 72–73,

73f, 130f, 130–131

in large open economies, 159, 159f

Investment function, 63, 63f

Investment tax credit, 533

Ireland, government debt of, 468t

IS curve, 289–301. See also IS–LM

model

fiscal policy and, 296–298, 299–301,

300f, 312f, 312–313, 314f

interest rate and investment and,

298–299, 299f

Keynesian cross and, 289–295

shocks to, 327–328

IS* curve, goods market and, 341–343,

342f

IS–LM model, 271, 287–308, 288f,

311–336. See also IS curve; IS*

curve; LM curve; LM* curve

as aggregate demand theory, 321–325

credit crunches and, 539

fluctuations explained by, 312–321

Great Depression and, 326t–327t,

326–334

shocks in, 318–320

in short- and long-run, 324f,

324–325

short-run equilibrium and, 306–308,

307f

Israel

inflation and nominal interest rate in,

96f

inflation targeting in, 458

Italy

exchange rate of, 354

government debt of, 468t, 469

legal tradition in, 234

real GDP in, 237t

unemployment in, 180, 181f

Jamaica, population growth and income

per person in, 215f

Japan

Big Mac price and exchange rate in,

148t

collective bargaining in, 173t

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Japan (continued)

economic growth in, 200, 201, 229

economic slump of 1990s in, 538

government debt of, 468t, 469

inflation in, 145f

investment rate in, 202f, 203

real GDP in, 237t

standard of living in, 192t

Johnson, Lyndon B., tax surcharge

under, 516

Johnson, Simon, 235

Jones, Charles I., 227n, 239n

Jordan, population growth and income

per person in, 215f

Jorgenson, Dale W., 35, 533n

Junk bonds, interest rates and, 64

Katz, Lawrence F., 169n, 171n, 175n

Kehoe, Patrick J., 478n

Kennedy, John F., tax cut under, 296

Kennickell, Arthur, 513n

Keynes, John Maynard, 287–288, 289,

326, 452, 460–461, 496

consumption function and, 496–500

on stock market speculation, 537

Keynesian cross, 289–295

equilibrium and, 291f, 291–292, 292f

government purchases and, 292–294,

293f, 297–298

planned expenditure and, 289–291,

290f

taxes and, 294–296, 295f

King, Robert G., 234n

King, Stephen R., 396n

Klenow, Peter J., 227n

Knowledge spillovers, 233

Kochin, Levis A., 71n

Kremer, Michael, 217

Kremerian model, 217

Krueger, Alan, 171n

Krugman, Paul R., 182n, 334n

Kuznets, Simon, 498–499

Kydland, Finn E., 463n

Labor, 47. See also Unemployment;

Unemployment rate; Unions

efficiency of, 222–223

increases in, economic growth and,

248–249

marginal product of, 51–53, 52f, 54f

ratio of labor income to total income

from 1960-2007 in United States

and, 58, 59f

Labor augmentation, 223

Labor-augmenting technological

progress, 223

Labor force

definition of, 36

transitions into and out of, 179–180,

180t

in United States, 178

Labor-force participation rate

definition of, 37

trends in, 38f, 38–39

in United States, 38f, 38–39

Labor hoarding, 253

Labor productivity

depletion of ideas and, 238

measurement of, 236–237

oil prices and, 237

real wages and, 59–60, 60t

slowdown of, 236–238, 237t

unemployment and, 178–179

worker quality and, 237–238

Lags in implementation and effects of

policies, 447–448

Laibson, David I., 521n

instant gratification and, 519–521

Laidler, David, 563n

La Porta, Rafael, 234n

Large open economies, 153–161

fiscal policy and, 375f, 375–376

model of, 155–157

monetary policy and, 376f, 376–377

net capital inflow and, 153–155, 154f

short-run model of, 373–378, 374f

United States as, 149–150

Laspeyres indexes, 33–34

Latin America. See also specific countries

defaults of, 488

legal tradition in, 234

Law of one price, 145–146

Leading indicators, 261–264, 448

index of, 263

Learning by doing, 233

Lebow, David E., 268n

Legal system, 234

Leisure, rise in Europe, 184f, 184–186

Lender of last resort, 554

Lesotho, population growth and

income per person in, 215f

Level effect, 201

Leverage, 555–556

Leverage ratio, 555

Levine, Ross, 234n

Liabilities

contingent, 474

uncounted, measurement of govern-

ment debt and, 474

Life-cycle hypothesis, 509–513

consumption and saving of the

elderly and, 512–513

implications of, 511f –513f, 511–512

Lilien, David M., 179n

Liquidity, 81

Liquidity constraint, 507–509, 508f, 509f

Liquidity preference, theory of,

301–303, 302f, 303f

Liquidity trap, 334

Littlefield, Henry M., 105n

Living standard. See Gross domestic

product (GDP); Standard of living

LM curve, 289, 301–305. See also

IS–LM model

income and money demand and,

304–305, 305f

monetary policy and, 303–304, 305,

306f, 313–315, 314f

shocks to, 328–331

theory of liquidity preference and,

301–303, 302f, 303f

LM* curve, money market and, 343,

344f

Loanable funds, 67–68

market for, in large open economy,

155–156, 156f

Long run, short run versus, 265–266

Long-run aggregate supply curve

(LRAS), 272f, 272–273, 273f

Long-run equilibrium

AD-AS model and, 418

IS –LM model and, 324f, 324–325

Long-run growth, AD-AS model and,

423f, 423–424

Lopez-de-Silanes, Florencio, 234n

Loss function, 463

LRAS. See Long-run aggregate supply

curve (LRAS)

Lucas, Robert E., Jr., 14, 135n, 239n,

384, 385, 450–451

Lucas critique, 450–451

Luddites, 243

Luxembourg

government debt of, 468t, 469

investment rate in, 202f

population growth and income per

person in, 215f

MacCulloch, Robert J., 184n

Macroeconomic models, policy analysis

with, 317–318, 318t

Macroeconomics

definition of, 3

most important lessons of, 

567–570

questions studied by, 3–6

unresolved questions of, 570–574

Madison, James, 467

Madrian, Brigitte, 521n

Malaysia

Big Mac price and exchange rate in,

148t

direction of flow and, 134

Malthus, Thomas Robert, 216

Mankiw, N. Gregory, 227n, 231n, 232n,

254n, 384n, 385n, 518n

Mann, Catherine L., 134n

Marginal product, diminishing, 52

Marginal product of capital (MPK),

53–54, 57–58

Marginal product of labor (MPL),

51–53, 52f, 54f, 57–58

Marginal propensity to consume

(MPC), 62, 496

Marginal rate of substitution, 503

Market clearing, 12–13