Macroeconomics, 11th Edition PDF by N Gregory Mankiw


Macroeconomics, Eleventh Edition

By N. Gregory Mankiw

Macroeconomics, 11th Edition


Media and Resources from Worth Publishers


Part I Introduction

Chapter 1 The Science of Macroeconomics

1-1 What Macroeconomists Study

► CASE STUDY The Historical Performance of the

U.S. Economy

1-2 How Economists Think

Theory as Model Building

The Use of Multiple Models

Prices: Flexible Versus Sticky

Microeconomic Thinking and Macroeconomic


FYI The Early Lives of Macroeconomists

1-3 How This Book Proceeds

Chapter 2 The Data of Macroeconomics

2-1 Measuring the Value of Economic Activity: Gross

Domestic Product

Income, Expenditure, and the Circular Flow

FYI Stocks and Flows

Rules for Computing GDP

Real GDP Versus Nominal GDP

The GDP Deflator

Chain-Weighted Measures of Real GDP

FYI Two Helpful Hints for Working with

Percentage Changes

The Components of Expenditure

FYI What Is Investment?

► CASE STUDY GDP and Its Components

Other Measures of Income

Seasonal Adjustment

2-2 Measuring the Cost of Living: The Consumer Price


The Price of a Basket of Goods

How the CPI Compares to the GDP and PCE


Does the CPI Overstate Inflation?

2-3 Measuring Joblessness: The Unemployment Rate

The Household Survey

► CASE STUDY Trends in Labor-Force


The Establishment Survey

2-4 Conclusion: From Economic Statistics to Economic


Part II Classical Theory: The Economy in the Long Run

Chapter 3 National Income: Where It Comes From and

Where It Goes

3-1 What Determines the Total Production of Goods and


The Factors of Production

The Production Function

The Supply of Goods and Services

3-2 How Is National Income Distributed to the Factors

of Production?

Factor Prices

The Decisions Facing a Competitive Firm

The Firm’s Demand for Factors

The Distribution of National Income

► CASE STUDY The Black Death and Factor Prices

The Cobb–Douglas Production Function

► CASE STUDY Labor Productivity as the Key

Determinant of Real Wages

3-3 What Determines the Demand for Goods and




FYI The Many Different Interest Rates

Government Purchases

3-4 What Brings the Supply and Demand for Goods and

Services into Equilibrium?

Equilibrium in the Market for Goods and Services:

The Supply and Demand for the Economy’s Output

Equilibrium in Financial Markets: The Supply and

Demand for Loanable Funds

Changes in Saving: The Effects of Fiscal Policy

Changes in Investment Demand

3-5 Conclusion

Appendix The Growing Gap Between Rich and Poor

Chapter 4 The Monetary System: What It Is and How It Works

4-1 What Is Money?

The Functions of Money

The Types of Money

► CASE STUDY Money in a POW Camp

The Development of Fiat Money

► CASE STUDY Money and Social Conventions on

the Islands of Yap

FYI Bitcoin: The Strange Case of a Digital Money

How the Quantity of Money Is Controlled

How the Quantity of Money Is Measured

FYI How Do Credit Cards and Debit Cards Fit

into the Monetary System?

4-2 The Role of Banks in the Monetary System

100-Percent-Reserve Banking

Fractional-Reserve Banking

Bank Capital, Leverage, and Capital Requirements

4-3 How Central Banks Influence the Money Supply

A Model of the Money Supply

The Instruments of Monetary Policy

► CASE STUDY Quantitative Easing and the

Exploding Monetary Base

Problems in Monetary Control

► CASE STUDY Bank Failures and the Money

Supply in the 1930s

4-4 Conclusion

Chapter 5 Inflation: Its Causes, Effects, and Social Costs

5-1 The Quantity Theory of Money

Transactions and the Quantity Equation

From Transactions to Income

The Money Demand Function and the Quantity


The Assumption of Constant Velocity

Money, Prices, and Inflation

► CASE STUDY Inflation and Money Growth

5-2 Seigniorage: The Revenue from Creating Money

► CASE STUDY Paying for the American


5-3 Inflation and Interest Rates

Two Interest Rates: Real and Nominal

The Fisher Effect

► CASE STUDY Inflation and Nominal Interest


Two Real Interest Rates: Ex Ante and Ex Post

5-4 The Nominal Interest Rate and the Demand for


The Cost of Holding Money

Future Money and Current Prices

5-5 The Social Costs of Inflation

The Layperson’s View and the Classical Response

► CASE STUDY What Economists and the Public

Say About Inflation

The Costs of Expected Inflation

The Costs of Unexpected Inflation

► CASE STUDY The Free Silver Movement, the

Election of 1896, and the Wizard of Oz

One Benefit of Inflation

5-6 Hyperinflation

The Costs of Hyperinflation

The Causes of Hyperinflation

► CASE STUDY Hyperinflation in Interwar


► CASE STUDY Hyperinflation in Zimbabwe

5-7 Conclusion: The Classical Dichotomy

Chapter 6 The Open Economy

6-1 The International Flows of Capital and Goods

The Role of Net Exports

International Capital Flows and the Trade Balance

International Flows of Goods and Capital: An


The Irrelevance of Bilateral Trade Balances

6-2 Saving and Investment in a Small Open Economy

Capital Mobility and the World Interest Rate

Why Assume a Small Open Economy?

The Model

How Policies Influence the Trade Balance

Evaluating Economic Policy

► CASE STUDY The U.S. Trade Deficit

► CASE STUDY Why Doesn’t Capital Flow to Poor


6-3 Exchange Rates

Nominal and Real Exchange Rates

The Real Exchange Rate and the Trade Balance

The Determinants of the Real Exchange Rate

How Policies Influence the Real Exchange Rate

The Effects of Trade Policies

► CASE STUDY The Economic Consequences of

Mr. Trump

The Determinants of the Nominal Exchange Rate

► CASE STUDY Inflation and Nominal Exchange


The Special Case of Purchasing-Power Parity

► CASE STUDY The Big Mac Around the World

6-4 Conclusion: The United States as a Large Open


Appendix The Large Open Economy

Chapter 7 Unemployment and the Labor Market

7-1 Job Loss, Job Finding, and the Natural Rate of


7-2 Job Search and Frictional Unemployment

Causes of Frictional Unemployment

Public Policy and Frictional Unemployment

► CASE STUDY Unemployment Insurance and the

Rate of Job Finding

► CASE STUDY Unemployment Insurance During

the Great Shutdown of 2020

7-3 Real-Wage Rigidity and Structural Unemployment

Minimum-Wage Laws

Unions and Collective Bargaining

Efficiency Wages

► CASE STUDY Henry Ford’s $5 Workday

7-4 Labor-Market Experience: The United States

The Duration of Unemployment

► CASE STUDY The Increase in U.S. Long-Term

Unemployment and the Debate over

Unemployment Insurance

Variation in the Unemployment Rate Across

Demographic Groups

Transitions into and out of the Labor Force

7-5 Labor-Market Experience: Europe

The Rise in European Unemployment

Unemployment Variation Within Europe

The Rise of European Leisure

7-6 Conclusion

Part III Growth Theory: The Economy in the Very Long Run

Chapter 8 Capital Accumulation as a Source of Growth

8-1 The Basic Solow Model

The Supply and Demand for Goods

Growth in the Capital Stock and the Steady State

Approaching the Steady State: A Numerical


► CASE STUDY The Miracle of Japanese and

German Growth

How Saving Affects Growth

8-2 The Golden Rule Level of Capital

Comparing Steady States

Finding the Golden Rule Steady State: A Numerical


The Transition to the Golden Rule Steady State

8-3 Conclusion

Chapter 9 Population Growth and Technological Progress

9-1 Population Growth in the Solow Model

The Steady State with Population Growth

The Effects of Population Growth

► CASE STUDY Investment and Population Growth

Around the World

Alternative Perspectives on Population Growth

9-2 Technological Progress in the Solow Model

The Efficiency of Labor

The Steady State with Technological Progress

The Effects of Technological Progress

9-3 Beyond the Solow Model: Endogenous Growth


The Basic Model

A Two-Sector Model

The Microeconomics of Research and Development

The Process of Creative Destruction

9-4 Conclusion

Chapter 10 Growth Empirics and Policy

10-1 From Growth Theory to Growth Empirics

Balanced Growth


Factor Accumulation Versus Production Efficiency

► CASE STUDY Good Management as a Source of


10-2 Accounting for the Sources of Economic Growth

Increases in the Factors of Production

Technological Progress

The Sources of Growth in the United States

► CASE STUDY The Slowdown in Productivity


The Solow Residual in the Short Run

10-3 Policies to Promote Growth

Evaluating the Rate of Saving

Changing the Rate of Saving

Allocating the Economy’s Investment

► CASE STUDY Industrial Policy in Practice

► CASE STUDY Misallocation in India and China

Establishing the Right Institutions

► CASE STUDY The Colonial Origins of Modern


Supporting a Pro-growth Culture

Encouraging Technological Progress

► CASE STUDY Is Free Trade Good for Economic


10-4 Conclusion

Part IV Business Cycle Theory: The Economy in the Short Run

Chapter 11 Introduction to Economic Fluctuations

11-1 The Facts About the Business Cycle

GDP and Its Components

Unemployment and Okun’s Law

Leading Economic Indicators

11-2 Time Horizons in Macroeconomics

How the Short Run and the Long Run Differ

► CASE STUDY If You Want to Know Why Firms

Have Sticky Prices, Ask Them

The Model of Aggregate Supply and Aggregate


11-3 Aggregate Demand

The Quantity Equation as Aggregate Demand

Why the Aggregate Demand Curve Slopes


Shifts in the Aggregate Demand Curve

11-4 Aggregate Supply

The Long Run: The Vertical Aggregate Supply


The Short Run: The Horizontal Aggregate Supply


From the Short Run to the Long Run

► CASE STUDY A Monetary Lesson from French


11-5 Stabilization Policy

Shocks to Aggregate Demand

Shocks to Aggregate Supply

► CASE STUDY How OPEC Helped Cause

Stagflation in the 1970s and Euphoria in the 1980s

11-6 The Covid-19 Recession of 2020

Modeling the Shutdown

The Policy Response

The Recovery and the Road Ahead

11-7 Conclusion

Chapter 12 Aggregate Demand I: Building the IS–LM


12-1 The Goods Market and the IS Curve

The Keynesian Cross

► CASE STUDY Cutting Taxes to Stimulate the

Economy: From Kennedy to Trump

► CASE STUDY Increasing Government Purchases

to Stimulate the Economy: The Obama Stimulus

► CASE STUDY Using Regional Data to Estimate


The Interest Rate, Investment, and the IS Curve

How Fiscal Policy Shifts the IS Curve

12-2 The Money Market and the LM Curve

The Theory of Liquidity Preference

► CASE STUDY Does a Monetary Tightening Raise

or Lower Interest Rates?

Income, Money Demand, and the LM Curve

How Monetary Policy Shifts the LM Curve

12-3 Conclusion: The Short-Run Equilibrium

Chapter 13 Aggregate Demand II: Applying the IS–LM


13-1 Explaining Fluctuations with the IS–LM Model

How Fiscal Policy Shifts the IS Curve and Changes

the Short-Run Equilibrium

How Monetary Policy Shifts the LM Curve and

Changes the Short-Run Equilibrium

The Interaction Between Monetary and Fiscal


Shocks in the IS–LM Model

► CASE STUDY The U.S. Recession of 2001

What Is the Fed’s Policy Instrument — The Money

Supply or the Interest Rate?

13-2 IS–LM as a Theory of Aggregate Demand

From the IS–LM Model to the Aggregate Demand


The IS–LM Model in the Short Run and Long Run

13-3 The Great Depression

The Spending Hypothesis: Shocks to the IS Curve

The Money Hypothesis: A Shock to the LM Curve

The Money Hypothesis Again: The Effects of Falling


Could the Depression Happen Again?

► CASE STUDY The Financial Crisis and Great

Recession of 2008–2009

The Liquidity Trap and Unconventional Monetary


FYI The Curious Case of Negative Interest


13-4 Conclusion

Chapter 14 The Open Economy Revisited: The Mundell–

Fleming Model and the Exchange-Rate Regime

14-1 The Mundell–Fleming Model

The Key Assumption: Small Open Economy with

Perfect Capital Mobility

The Goods Market and the IS Curve

The Money Market and the LM Curve

Putting the Pieces Together

14-2 The Small Open Economy Under Floating

Exchange Rates

Fiscal Policy

Monetary Policy

Trade Policy

14-3 The Small Open Economy Under Fixed Exchange


How a Fixed-Exchange-Rate System Works

► CASE STUDY The International Gold Standard

Fiscal Policy

Monetary Policy

► CASE STUDY Devaluation and the Recovery from

the Great Depression

Trade Policy

Policy in the Mundell–Fleming Model: A Summary

14-4 Interest Rate Differentials

Country Risk and Exchange-Rate Expectations

Differentials in the Mundell–Fleming Model

► CASE STUDY International Financial Crisis:

Mexico 1994–1995

► CASE STUDY International Financial Crisis: Asia


14-5 Should Exchange Rates Be Floating or Fixed?

Pros and Cons of Different Exchange-Rate Systems

► CASE STUDY The Debate over the Euro

Speculative Attacks, Currency Boards, and


The Impossible Trinity

► CASE STUDY The Chinese Currency Controversy

14-6 From the Short Run to the Long Run: The

Mundell–Fleming Model with a Changing Price Level

14-7 A Concluding Reminder

Appendix A Short-Run Model of the Large Open Economy

Chapter 15 Aggregate Supply and the Short-Run Tradeoff

Between Inflation and Unemployment

15-1 The Basic Theory of Aggregate Supply

The Sticky-Price Model

An Alternative Theory: The Imperfect-Information


► CASE STUDY International Differences in the

Aggregate Supply Curve


15-2 Inflation, Unemployment, and the Phillips Curve

Deriving the Phillips Curve from the Aggregate

Supply Curve

FYI The History of the Modern Phillips Curve

Adaptive Expectations and Inflation Inertia

Two Causes of Rising and Falling Inflation

► CASE STUDY Inflation and Unemployment in the

United States

The Short-Run Tradeoff Between Inflation and


FYI How Precise Are Estimates of the Natural

Rate of Unemployment?

Disinflation and the Sacrifice Ratio

Rational Expectations and the Possibility of

Painless Disinflation

► CASE STUDY The Sacrifice Ratio in Practice

Hysteresis and the Challenge to the Natural-Rate


15-3 Conclusion

Appendix The Mother of All Models

Part V Topics in Macroeconomic Theory and Policy

Chapter 16 A Dynamic Model of Economic Fluctuations

16-1 Elements of the Model

Output: The Demand for Goods and Services

The Real Interest Rate: The Fisher Equation

Inflation: The Phillips Curve

Expected Inflation: Adaptive Expectations

The Nominal Interest Rate: The Monetary-Policy Rule

► CASE STUDY The Taylor Rule

16-2 Solving the Model

The Long-Run Equilibrium

The Dynamic Aggregate Supply Curve

The Dynamic Aggregate Demand Curve

The Short-Run Equilibrium

16-3 Using the Model

Long-Run Growth

A Shock to Aggregate Supply

A Shock to Aggregate Demand

FYI The Numerical Calibration and


A Shift in Monetary Policy

16-4 Two Applications: Lessons for Monetary Policy

The Tradeoff Between Output Variability and

Inflation Variability

► CASE STUDY Different Mandates, Different

Realities: The Fed Versus the ECB

The Taylor Principle

► CASE STUDY What Caused the Great Inflation?

16-5 Conclusion: Toward DSGE Models

Chapter 17 Alternative Perspectives on Stabilization Policy

17-1 Should Policy Be Active or Passive?

Lags in the Implementation and Effects of Policies

The Difficult Job of Economic Forecasting

► CASE STUDY Mistakes in Forecasting

Ignorance, Expectations, and the Lucas Critique

The Historical Record

► CASE STUDY How Does Policy Uncertainty

Affect the Economy?

17-2 Should Policy Be Conducted by Rule or Discretion?

Distrust of Policymakers and the Political Process

The Time Inconsistency of Discretionary Policy

► CASE STUDY Alexander Hamilton Versus Time


Rules for Monetary Policy

► CASE STUDY Inflation Targeting: Rule or

Constrained Discretion?

► CASE STUDY Central-Bank Independence

17-3 Conclusion

Appendix Time Inconsistency and the Tradeoff Between

Inflation and Unemployment

Chapter 18 Government Debt and Budget Deficits

18-1 The Size of the Government Debt

► CASE STUDY The Troubling Long-Term Outlook

for Fiscal Policy

18-2 Measurement Problems

Problem 1: Inflation

Problem 2: Capital Assets

Problem 3: Uncounted Liabilities

Problem 4: The Business Cycle

Summing Up

18-3 The Traditional View of Government Debt

FYI Taxes and Incentives

18-4 The Ricardian View of Government Debt

The Basic Logic of Ricardian Equivalence

Consumers and Future Taxes

► CASE STUDY George H. W. Bush’s Withholding Experiment

Making a Choice

FYI Ricardo on Ricardian Equivalence

18-5 Other Perspectives on Government Debt

Balanced Budgets Versus Optimal Fiscal Policy

Fiscal Effects on Monetary Policy

Debt and the Political Process

International Dimensions

18-6 Conclusion

Chapter 19 The Financial System: Opportunities and Dangers

19-1 What Does the Financial System Do?

Financing Investment

Sharing Risk

Dealing with Asymmetric Information

Fostering Economic Growth

FYI The Efficient Markets Hypothesis Versus

Keynes’s Beauty Contest

19-2 Financial Crises

The Anatomy of a Crisis

FYI The TED Spread

► CASE STUDY Who Should Be Blamed for the

Financial Crisis of 2008–2009?

Policy Responses to a Crisis

Policies to Prevent Crises

► CASE STUDY The European Sovereign Debt Crisis

19-3 Conclusion

Chapter 20 The Microfoundations of Consumption and Investment

20-1 What Determines Consumer Spending?

John Maynard Keynes and the Consumption Function

Franco Modigliani and the Life-Cycle Hypothesis

Milton Friedman and the Permanent-Income Hypothesis

► CASE STUDY The 1964 Tax Cut and the 1968 Tax Surcharge

► CASE STUDY The Tax Rebates of 2008

Robert Hall and the Random-Walk Hypothesis

► CASE STUDY Do Predictable Changes in Income

Lead to Predictable Changes in Consumption?

David Laibson and the Pull of Instant Gratification

► CASE STUDY How to Get People to Save More

The Bottom Line on Consumption

20-2 What Determines Investment Spending?

The Rental Price of Capital

The Cost of Capital

The Cost-Benefit Calculus of Investment

Taxes and Investment

The Stock Market and Tobin’s q

► CASE STUDY The Stock Market as an Economic Indicator

Financing Constraints

The Bottom Line on Investment

20-3 Conclusion: The Key Role of Expectations

Epilogue What We Know, What We Don’t

The Four Most Important Lessons of Macroeconomics

Lesson 1: In the long run, a country’s capacity to

produce goods and services determines the

standard of living of its citizens.

Lesson 2: In the short run, aggregate demand

influences the amount of goods and services that a country produces.

Lesson 3: In the long run, the rate of money growth

determines the rate of inflation, but it does not

affect the rate of unemployment.

Lesson 4: In the short run, policymakers who

control monetary and fiscal policy face a tradeoff

between inflation and unemployment.

The Four Most Important Unresolved Questions of Macroeconomics

Question 1: How should policymakers try to

promote growth in the economy’s natural level of output?

Question 2: What is the best way to stabilize the economy?

Question 3: How costly is inflation, and how costly is reducing inflation?

Question 4: Are government budget deficits a big problem?




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