Abel & Bernanke Ch. 8, 10 - 11 Key Macroeconomic Theories of the Business Cycle

Abel & BernankeCh. 8, 10 - 11

Key Macroeconomic Theories of the Business Cycle

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Figure 1.1 Output of the U.S. economy, 1869–2002


Figure 1.2 Average labor productivity in the United States, 1900–2002


Figure 1.3 The U.S. unemployment rate, 1890–2002


Figure 1.4 Consumer prices in the United States


Figure 1.5 U.S. exports and imports, 1869–2002


Figure 1.6 U.S. Federal government spending and tax collections, 1869–2002


Figure 8.1 Business cycles (Ch. 8)


Figure 8.2 Index of industrial production, January 2000–April 2003


Figure 8.3 Total nonfarm employment, January 2000–April 2003

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Figure 8.5 Cyclical behavior of consumption and investment

Total Output = Y = C + I + G + NX


Figure 8.12 The aggregate demand–aggregate supply model


Figure 8.13 An adverse aggregate demand shock


Figure 8.14 An adverse aggregate supply shock


Neoclassical / Real Business Cycles (Ch. 10): Figure 10.3 Small shocks and large cycles


Figure 10.4 Effects of a temporary increase in government purchases


Figure 10.6 The aggregate supply curve in the misperceptions theory


Figure 10.7 An unanticipated increase in the money supply


Figure 10.8 An anticipated increase in the money supply


Key Diagram 8 The misperceptions version of the AD–AS model


Keynesianism (Ch. 11): Figure 11.1 Determination of the efficiency wage


Figure 11.2 Excess supply of labor in the efficiency wage model


Table 11.1 Average Times Between Price Changes for Various Industries


Figure 11.3 The effective labor demand curve


Figure 11.4 An increase in the money supply


Figure 11.4 An increase in the money supply (cont’d)


Figure 11.5 An increase in government purchases


Figure 11.5 An increase in government purchases (cont’d)


Figure 11.6 An increase in government purchases in the Keynesian AD–AS framework


Figure 11.7 A recession arising from an aggregate demand shock


Figure 11.8 Stabilization policy in the Keynesian model


Figure 11.9 An oil price shock in the Keynesian model


Key Elements of Monetary and Fiscal Policies

• Monetary Policy is controlled by the Federal Reserve which has two, competing goals:

– Stimulate healthy economic growth, and– Control inflation at a manageable level.

• Fiscal Policy is controlled by the Federal Government which has three key tools:

– Discretionary government spending,– Ability to enact new taxes (to increase Govt. Revenue), and– Automatic Stabilizers (e.g., income taxes, unemployment

benefits).

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Abel & Bernanke Ch. 8, 10 - 11 Key Macroeconomic Theories of the Business Cycle