Macroeconomics and New Macroeconomics

This book gives a comprehensive account of traditional and more recent developments in macroeconomic theory. It is primarily written for students at the intermediate level. The book differs from the customary expositions in that the authors do not discuss topic by topic, but doctrine by doctrine. Thus, the main approaches, such as Classical theory, Keynesian theory, theory of portfolio selection, monetarism, rational expectations theory, and Neokeynesian "disequilibrium" theory, are presented in historical order. Each of these approaches is substantiated and criticized in a self-contained chapter, and the authors have taken great efforts to bring out the relations and differences between them. A Mathematical Appendix contains reviews of those mathematical facts which are especially important to macroeconomic models and makes the text easy to read.

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Definitions of Variables.- One. Fundamentals.- I. Some Methodological Considerations.- §1 Economic Theories.- §2 Economic Models.- §3 Methods.- §4 Equilibrium and Disequilibrium. Stability.- §5 Statics, Comparative Statics, and Dynamics.- §6 Ex Post versus Ex Ante Analysis.- §7 Partial versus Total Analysis. The Ceteris Paribus Clause.- §8 Microeconomics versus Macroeconomics.- II. A Historical Survey.- §9 The Predecessors.- §10 The Classical Economists.- §11 The Neoclassical Economists.- §12 From Keynes to the Present.- Further Reading.- III. National Income Accounting.- §13 The Economy as a Circular Flow.- §14 The Circular Flow-Model of François Quesnay.- §15 The System of Income Accounts.- §16 Notions of Income in the System of Income Accounts.- Two. Macroeconomics.- §17 Introduction to Part Two.- IV. The Classical Theory.- §18 The Classical Vision. Plan of the Chapter.- §19 Production Functions.- §20 The Firms.- §21 The Households.- §22 The Labor Market.- §23 The Capital Market.- §24 The Commodity Market.- §25 The Quantity Theory of Money.- §26 Say's Law.- §27 The Classical Model.- §28 Digression: Walras' Model.- §29 Conclusion.- Further Reading.- V. The Keynesian Theory.- §30 The Crisis.- §31 The General Theory and Its Interpreters.- §32 The Effective Demand.- §33 Consumption Demand.- §34 Investment Demand.- §35 The Income-Expenditure Model.- §36 The Simple Multiplier.- §37 The Markets for Money and Bonds. The LM Curve.- §38 The Capital Market. The IS Curve.- §39 The IS/LM Model.- §40 The Complete Keynesian Model.- §41 First Scenario: The Investment Trap.- §42 Second Scenario: The Liquidity Trap.- §43 An Under-employment Equilibrium with a Flexible Real Wage?.- §44 Third Scenario: Sticky Wages.- §45 Conclusion.- Further Reading.- VI. Political Implications: A Comparison.- §46 The Role of Government. Goals and Means of Economic Policy.- §47 Fiscal Policy.- §48 Fiscal Policy in the Classical Case.- §49 Fiscal Policy in the Complete Keynesian Case.- §50 Fiscal Policy with an Investment or Liquidity Trap.- §51 Fiscal Policy with Sticky Wages.- §52 The Concept of Counter-cyclical Fiscal Policy.- §53 Monetary Policy.- §54 Monetary Policy in the Classical Case.- §55 Monetary Policy in the Complete Keynesian Case.- §56 Monetary Policy with an Investment or Liquidity Trap.- §57 Monetary Policy with Sticky Wages.- §58 Conclusion.- Further Reading.- Three. New Macroeconomics.- §59 Introduction to Part Three.- VII. The Real-Balance Effect.- §60 A Criticism of Classical Monetary Theory.- §61 A Criticism of Keynesian Monetary Thoery.- §62 Conclusion.- Further Reading.- VIII. The Theory of Portfolio Selection.- §63 Microeconomic Foundations.- §64 Macroeconomic Applications.- §65 Conclusion.- Further Reading.- IX. Monetarism.- §66 The Theoretical Foundations, or: Monetarism versus Keynesianism.- §67 The Empirical Investigations, or: Monetarism versus Fiscalism.- §68 The Political Inferences, or: Monetarism versus Activism.- §69 Conclusion.- Further Reading.- X. New Classical Economics.- §70 Expectations and Rational Expectations.- §71 The Phillips-Curve. Stagflation.- §72 The New Classical Vision.- §73 The New Classical Model.- §74 Political Inferences.- §75 Conclusion.- Further Reading.- XI. Neokeynesian Theory.- §76 The Evolution of Neokeynesian Economics.- §77 The Dual Decision Hypothesis.- §78 The Logic of the Fix Price-Method.- §79 A Reconsideration of the Consumption Function.- §80 The Neokeynesian Model.- §81 Political Inferences.- §82 Walras' Law with Quantity Constraints.- §83 Conclusion.- Further Reading.- Mathematical Appendix.- 1. Calculus of Functious of a Single Variable.- 1.1 Functions of a Single Variable.- 1.2 Derivatives.- 1.3 Taylor's Theorem.- 1.4 Differentials.- 1.5 Concavity and Convexity.- 1.6 Maxima and Minima.- 1.7 Profit Maximization.- 2. Linear Algebra.- 2.1 Vectors.- 2.2 Matrices and Determinants.- 2.3 Simultaneous Linear Equations.- 2.4 Characteristic Value Problems.- 2.5 Quadratic Forms.- 3. Calculus of Functious of Several Variables.- 3.1 Functions of Several Variables.- 3.2 Partial Derivatives. Gradients.- 3.3 Chain Rule.- 3.4 Taylor's Theorem.- 3.5 Partial and Total Differentials.- 3.6 Concavity and Convexity.- 3.7 Maxima and Minima.- 3.8 Maxima and Minima under Constraints.- 3.9 Profit Maximization.- 4. Implicit Functious.- 4.1 Explicit and Implicit Functions.- 4.2 Implicit Differentiation with Two Variables.- 4.3 Implicit Function Theorem.- 4.4 The Slope of Equilibrium Loci.- 4.5 Properties of Demand Functions.- 4.6 Fiscal Policy in the Keynesian Model.- 5. Ordinary Differential Equatious.- 5.1 Function Equations and Functional Equations.- 5.2 Solution of a Linear Differential Equation.- 5.3 Stability of a Market.- 5.4 Solution of Simultaneous Differential Equations.- 5.5 Stability of the IS/LM Model.- 5.6 Stability of the Neokeynesian Model.- Further Reading.- Author Index.