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Macroeconomics: Theory and Policy

Book Description

Macroeconomics: Theory and Policy provides students with comprehensive coverage of all the essential concepts of macroeconomics. A balanced approach between theoretical and mathematical aspects of the subject has been adopted to ensure ease and clarity in learning. The book brings classroom teaching directly to the student with the friendly language that it uses. The purpose behind this book is not only to make the study of macroeconomics simple for the students but to enable them to apply it to everyday situations and the prevailing economic state of affairs. The wide coverage of topics has been designed for use in courses on macroeconomics at the undergraduate level of Indian universities.

Table of Contents

  1. Cover
  2. Title Page
  3. Contents
  4. Dedication
  5. List of Figures
  6. Preface
  7. Unit I: Introduction
    1. 1. An Introduction to Macroeconomics
      1. Macroeconomics and Microeconomics
      2. Background of Macroeconomics
      3. Need to Study Macroeconomics
      4. Concepts in Macroeconomics
      5. Summary
      6. Review Questions
    2. 2. The Circular Flow of Income and Expenditure
      1. Introduction
      2. The Circular Flow of Income in a Two Sector Economy
      3. The Circular Flow in a Three Sector Economy
      4. The Circular Flow of Income in a Four Sector Economy
      5. Summary
      6. Review Questions
  8. Unit II: National Income and its Determination
    1. 3. National Income
      1. Introduction
      2. National Income Aggregates
      3. Measurement of National Income
      4. Summary
      5. Review Questions
    2. 4. The Classical Model of Income Determination
      1. Introduction
      2. Say's Law
      3. Output and Employment in the Classical Model
      4. A Criticism of the Classical Model
      5. Summary
      6. Review Questions
    3. 5. The Keynesian Model of Income Determination in a Two Sector Economy
      1. Introduction
      2. Aggregate Demand in a Two Sector Economy
      3. Consumption
      4. Saving as a Counterpart of the Consumption Function
      5. Determination of Equilibrium Income or Output in a Two Sector Economy
      6. Summary
      7. Review Questions
    4. 6. Shifts in the Aggregate Demand and the Multiplier
      1. Introduction
      2. Shifts in Aggregate Demand and the Multiplier
      3. Uses and Limitations of the Multiplier
      4. Applicability of the Multiplier to Less Developed Countries
      5. The Multiplier and the Paradox of Thrift
      6. Summary
      7. Review Questions
    5. 7. The Keynesian Model of Income Determination in a Three Sector Economy: Introduction of the Government Sector
      1. Introduction
      2. Determination of Equilibrium Income or Output in a Three Sector Economy
      3. Multipliers in a Three Sector Economy-The Fiscal Multipliers
      4. Summary
      5. Review Questions
    6. 8. The Keynesian Model of Income Determination in a Four Sector Economy: Introduction of the Foreign Sector
      1. Introduction
      2. Determination of Equilibrium Income or Output in a Four Sector Economy
      3. Equilibrium Income and Output
      4. Introduction of Government Transfer Payments in a Four Sector Model
      5. Multiplier in a Four Sector Economy-The Foreign Trade Multiplier
      6. Summary
      7. Review Questions
  9. Unit III: Theories of Consumption and Investment Spending
    1. 9. Theories of Consumption
      1. Introduction
      2. Absolute Income Hypothesis
      3. Relative Income Hypothesis
      4. Permanent Income Hypothesis
      5. Life Cycle Hypothesis
      6. Other Factors Influencing Consumption
      7. Summary
      8. Review Questions
    2. 10. Theories of Investment Spending
      1. Introduction
      2. Basic Concepts
      3. The Decision to Invest
      4. Changes in the Rate of Interest, the MEC and Capital Accumulation
      5. Theories of Investment
      6. Summary
      7. Review Questions
  10. Unit IV: An Analysis of the Monetary Sector
    1. 11. Money
      1. Introduction
      2. Evolution and Forms of Money
      3. Definition of Money
      4. Money and Near Money
      5. Functions of Money
      6. Significance of Money
      7. Summary
      8. Review Questions
    2. 12. Supply of Money
      1. Introduction
      2. Measures of Money Supply in India
      3. The Theory of Money Supply
      4. The Process of Credit Creation and the Deposit Multiplier
      5. Summary
      6. Review Questions
    3. 13. Demand for Money and the Rate of Interest: The Classical Approach
      1. Introduction
      2. Fisher's Transactions Approach to the Quantity Theory of Money
      3. The Cambridge Cash Balance Approach
      4. The Classical Theory of Interest
      5. The Loanable Funds Theory
      6. Summary
      7. Review Questions
    4. 14. Demand for Money: The Keynesian Approach
      1. Introduction
      2. The Keynesian Theory of the Demand for Money
      3. The Keynesian Theory of Interest
      4. Variations in the Interest Rate
      5. A Criticism of the Keynesian Approach
      6. Summary
      7. Review Questions
    5. 15. Demand for Money: The Post-Keynesian Approach
      1. Introduction
      2. Portfolio Theories of Demand for Money: Tobin's Port Folio Balance Theory
      3. Transactions Theories of Demand for Money: Baumol Tobin Model of Cash Management
      4. Modern Quantity Theory of Money: Friedman's Model
      5. Summary
      6. Review Questions
  11. Unit V: The IS-LM Framework: Equilibrium in the Goods and Money Markets
    1. 16. The IS-LM Model for a Two Sector Economy
      1. Introduction
      2. The IS-LM Model in a Two Sector Economy
      3. The Goods Market Equilibrium in a Two Sector Economy: The IS Curve
      4. The Money Market Equilibrium in a Two Sector Economy: The LM Curve
      5. Equilibrium in the Two Markets: The Goods Market and Money Market
      6. Disequilibrium to Equilibrium: The Process of Adjustment
      7. A Shift in the IS–LM Curves
      8. Summary
      9. Review Questions
    2. 17. The IS-LM Framework for a Three Sector Model
      1. Introduction
      2. The IS-LM Model for a Three Sector Economy
      3. The Goods Market Equilibrium in a Three Sector Economy: The IS Curve
      4. The Money–Market Equilibrium in a Three Sector Economy: The LM Curve
      5. Equilibrium in the Goods and the Money Market in Three Sector Economy
      6. Shifts in the IS Curve Due to Changes in Fiscal Policy
      7. Shifts in the LM Curve Due to Monetary Policy
      8. The Elasticities of IS and LM Curves and the Effectiveness of Monetary and Fiscal Policies
      9. Summary
      10. Review Questions
    3. 18. Aggregate Demand and Aggregate Supply
      1. Introduction
      2. The Aggregate Demand Curve
      3. The Aggregate Supply Curve
      4. The Aggregate Demand and Aggregate Supply Model
      5. The Effects of a Monetary Expansion
      6. Effects of a Decrease in Government Budget Deficit
      7. Effects of a Shift in Aggregate Supply: Supply Shocks
      8. The Supply Side Economics
      9. Summary
      10. Review Questions
  12. Unit VI: Inflation and Unemployment
    1. 19. Inflation
      1. Introduction
      2. Meaning of Inflation
      3. Measurement of Inflation
      4. The Economic and Social Effects of Inflation
      5. Inflation in India
      6. Summary
      7. Review Questions
    2. 20. Theories of Inflation
      1. Introduction
      2. Monetarist Approach to Inflation
      3. Keynesian Approach to Inflation
      4. Modern Approach to Inflation
      5. Control of Inflation
      6. Summary
      7. Review Questions
    3. 21. Unemployment
      1. Introduction
      2. Unemployment and Related Terms
      3. Types of Unemployment
      4. Costs of Unemployment
      5. Relationship Between Inflation and Unemployment
      6. Modern Phillips Curve
      7. Sacrifice Ratio
      8. Summary
      9. Review Questions
  13. Unit VII: The Open Economy Macroeconomics and the Framework of Macroeconomic Policies
    1. 22. Foreign Exchange
      1. Introduction
      2. Foreign Exchange Market
      3. Exchange Rate Systems
      4. Exchange Rate Determination
      5. Fixed Versus Flexible Exchange Rate
      6. Summary
      7. Review Questions
    2. 23. Balance of Payments
      1. Introduction
      2. Meaning and Structure of Balance of Payments
      3. Double Entry Book Keeping
      4. A Disequilibrium in the Balance of Payments
      5. Kinds of Disequilibria in the Balance of Payments
      6. The Process of Adjustment in the Balance of Payments
      7. Analysis of Performance of Indian Economy in the External Sector
      8. Summary
      9. Review Questions
    3. 24. Macroeconomic Policies
      1. Introduction
      2. Meaning and the Advent of Macroeconomic Policy
      3. Objectives of Macroeconomic Policy
      4. The Formulation of Macroeconomic Policy
      5. Summary
      6. Review Questions
    4. 25. Monetary Policy and Fiscal Policy
      1. Introduction
      2. Meaning of Monetar Policy
      3. Instruments of Monetary Policy
      4. Monetary Policy Developments in India
      5. Limitations of Monetary Policy
      6. Meaning of Fiscal Policy
      7. Instruments of Fiscal Policy
      8. Fiscal Policy and Stabilization in the Economy
      9. Full Employment Budget Surplus
      10. Limitations of Fiscal Policy
      11. Crowding Out and its Importance
      12. Summary
      13. Review Questions
  14. Appendix A
  15. Appendix B
  16. Appendix C
  17. Glossary
  18. Acknowledgements
  19. Copyright