Principles of macroeconomics for ap® courses

OpenStax

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0.1 About openstax

0.2 About openstax’s resources

0.3 Customization

0.6 About Principles of Macroeconomics for AP ® Courses

0.7 Coverage and scope

0.8 Pedagogical foundation

0.9 Questions for each level of learning

0.10 Updated art

0.11 About our team

0.12 Senior contributing author

0.13 Senior content expert

0.14 Senior contributors

0.16 Ancillaries

1 The use of mathematics in principles of economics

1.1 Algebraic models

1.2 Growth rates

1.3 Displaying data graphically and interpreting the graph

1.4 Key concepts and summary

1.5 Review questions

2 Indifference curves

2.1 What is an indifference curve?

2.2 Utility-maximizing with indifference curves

2.3 Changes in income

2.4 Responses to price changes: substitution and income effects

2.5 Indifference curves with labor-leisure and intertemporal choices

2.6 Sketching substitution and income effects

2.7 Key concepts and summary

2.8 Review questions

3 Present discounted value

3.1 Applying present discounted value to a stock

3.2 Applying present discounted value to a bond

3.3 Other applications

Welcome to economics!

1 What is economics, and why is it important?

2 Microeconomics and macroeconomics

2.1 Microeconomics

2.2 Macroeconomics

2.3 Key concepts and summary

3 How economists use theories and models to understand economic issues

3.1 Key concepts and summary

4 How economies can be organized: an overview of economic systems

4.1 Regulations: the rules of the game

4.2 The rise of globalization

4.3 Key concepts and summary

Choice in a world of scarcity

Introduction to choice in a world of scarcity

1 How individuals make choices based on their budget constraint

2 The production possibilities frontier and social choices

2.1 The shape of the ppf and the law of diminishing returns

2.2 Productive efficiency and allocative efficiency

2.3 Why society must choose

2.4 The ppf and comparative advantage

2.5 Key concepts and summary

3 Confronting objections to the economic approach

3.1 First objection: people, firms, and society do not act like this

3.2 Second objection: people, firms, and society should not act this way

3.3 Key concepts and summary

Demand and supply

Introduction to demand and supply

1 Demand, supply, and equilibrium in markets for goods and services

2 Shifts in demand and supply for goods and services

3 Changes in equilibrium price and quantity: the four-step process

4 Price ceilings and price floors

5 Demand, supply and efficiency

5.1 Consumer surplus, producer surplus, social surplus

5.2 Inefficiency of price floors and price ceilings

5.3 Key concepts and summary

Labor and financial markets

Introduction to labor and financial markets

1 Demand and supply at work in labor markets

1.1 Equilibrium in the labor market

1.2 Shifts in labor demand

1.3 Shifts in labor supply

1.4 Technology and wage inequality: the four-step process

1.5 Price floors in the labor market: living wages and minimum wages

1.6 The minimum wage as an example of a price floor

1.7 Concepts and summary

2 Demand and supply in financial markets

3 The market system as an efficient mechanism for information

3.1 Key concepts and summary

The macroeconomic perspective

Introduction to the macroeconomic perspective

1 Measuring the size of the economy: gross domestic product

2 Adjusting nominal values to real values

3 Tracking real gdp over time

4 Comparing gdp among countries

5 How well gdp measures the well-being of society

Economic growth

Introduction to economic growth

1 The relatively recent arrival of economic growth

2 Labor productivity and economic growth

3 Components of economic growth

3.1 Capital deepening

3.2 Growth accounting studies

3.3 A healthy climate for economic growth

3.4 Key concepts and summary

4 Economic convergence

Introduction to unemployment

1 How the unemployment rate is defined and computed

2 Patterns of unemployment

3 What causes changes in unemployment over the short run

4 What causes changes in unemployment over the long run

4.1 The long run: the natural rate of unemployment

4.2 Frictional unemployment

4.3 Structural unemployment

4.4 Natural unemployment and potential real gdp

4.5 Productivity shifts and the natural rate of unemployment

4.6 Public policy and the natural rate of unemployment

4.7 The natural rate of unemployment in recent years

4.8 The natural rate of unemployment in europe

4.9 A preview of policies to fight unemployment

4.10 Key concepts and summary

4.12 References

Introduction to inflation

1 Tracking inflation

2 How changes in the cost of living are measured

3 How the u.s. and other countries experience inflation

4 The confusion over inflation

5 Indexing and its limitations

The international trade and capital flows

Introduction to the international trade and capital flows

1 Measuring trade balances

1.1 Components of the u.s. current account balance

1.2 Key concepts and summary

2 Trade balances in historical and international context

3 Trade balances and flows of financial capital

4 The national saving and investment identity

5 The pros and cons of trade deficits and surpluses

6 The difference between level of trade and the trade balance

The aggregate demand/aggregate supply model

Introduction to the aggregate demand/aggregate supply model

1 Macroeconomic perspectives on demand and supply

2 Building a model of aggregate demand and aggregate supply

3 Shifts in aggregate supply

4 Shifts in aggregate demand

4.1 How changes by consumers and firms can affect ad

4.2 How government macroeconomic policy choices can shift ad

4.3 Key concepts and summary

5 How the ad/as model incorporates growth, unemployment, and inflation

6 Keynes’ law and say’s law in the ad/as model

The keynesian perspective

Introduction to the keynesian perspective

1 Aggregate demand in keynesian analysis

2 The building blocks of keynesian analysis

3 The expenditure-output (or keynesian cross) model

3.1 The axes of the expenditure-output diagram

3.2 The potential gdp line and the 45-degree line

3.3 The aggregate expenditure schedule

3.4 Building the aggregate expenditure schedule

3.5 Consumption as a function of national income

3.6 Investment as a function of national income

3.7 Government spending and taxes as a function of national income

3.8 Exports and imports as a function of national income

3.9 Building the combined aggregate expenditure function

3.10 Equilibrium in the keynesian cross model

3.11 Where equilibrium occurs

3.12 Recessionary and inflationary gaps

3.13 The multiplier effect

3.14 How does the multiplier work?

3.15 Calculating the multiplier

3.16 Calculating keynesian policy interventions

3.17 Multiplier tradeoffs: stability versus the power of macroeconomic policy

3.18 Key concepts and summary

4 The phillips curve

5 The keynesian perspective on market forces

The neoclassical perspective

Introduction to the neoclassical perspective

1 The building blocks of neoclassical analysis

2 The policy implications of the neoclassical perspective

3 Balancing keynesian and neoclassical models

3.1 Key concepts and summary

Money and banking

Introduction to money and banking

1 Defining money by its functions

2 Measuring money: currency, m1, and m2

2.1 Key concepts and summary

3 The role of banks

4 How banks create money

4.1 Money creation by a single bank

4.2 The money multiplier and a multi-bank system

4.3 Cautions about the money multiplier

4.4 Money and banks—benefits and dangers

4.5 Key concepts and summary

Monetary policy and bank regulation

Introduction to monetary policy and bank regulation

1 The federal reserve banking system and central banks

2 Bank regulation

3 How a central bank executes monetary policy

4 Monetary policy and economic outcomes

5 Pitfalls for monetary policy

Exchange rates and international capital flows

Introduction to exchange rates and international capital flows

1 How the foreign exchange market works

2 Demand and supply shifts in foreign exchange markets

3 Macroeconomic effects of exchange rates

4 Exchange rate policies

Government budgets and fiscal policy

Introduction to government budgets and fiscal policy

1 Government spending

3 Federal deficits and the national debt

4 Using fiscal policy to fight recession, unemployment, and inflation

5 Automatic stabilizers

6 Practical problems with discretionary fiscal policy

7 The question of a balanced budget

The impacts of government borrowing

Introduction to the impacts of government borrowing

1 How government borrowing affects investment and the trade balance

2 Fiscal policy, investment, and economic growth

2.1 Crowding out physical capital investment

2.2 The interest rate connection

2.3 Public investment in physical capital

2.4 Public investment in human capital

2.5 How fiscal policy can improve technology

2.6 Summary of fiscal policy, investment, and economic growth

2.7 Key concepts and summary

3 How government borrowing affects private saving

4 Fiscal policy and the trade balance

4.1 Twin deficits?

4.2 Budget deficits and exchange rates

4.3 From budget deficits to international economic crisis

4.4 Using fiscal policy to address trade imbalances

4.5 Key concepts and summary

Macroeconomic policy around the world

Introduction to macroeconomic policy around the world

1 The diversity of countries and economies across the world

2 Improving countries’ standards of living

3 Causes of unemployment around the world

3.1 Unemployment from a recession

3.2 The natural rate of unemployment

3.3 Undeveloped labor markets

3.4 Key concepts and summary

4 Causes of inflation in various countries and regions

5 Balance of trade concerns

Source: OpenStax, Principles of macroeconomics for ap® courses. OpenStax CNX. Aug 24, 2015 Download for free at http://legacy.cnx.org/content/col11864/1.2

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