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 This is a special edition of an established title widely used by colleges and
GLOBAL universities throughout the world. Pearson published this exclusive edition
for the benefit of students outside the United States and Canada. If you
GLOBAL
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EDITION
GLOB AL
that it has been imported without the approval of the Publisher or Author.

Macroeconomics builds on the strengths that have underlined the text’s enduring appeal over

Macroeconomics
the years. The eleventh edition features updated content, including new research and data,
with a focus on the economic impact of the COVID-19 pandemic.
The text is divided into five parts, each charting a different core topic. It begins with a focus
on productivity and savings, moves on to short-run economic fluctuations, and finally delves

Macroeconomics
into the issues and institutions of policymaking. It also includes review questions and problem
sets that allow students to apply their knowledge and test their understanding.

Key Features of This Edition

• Application boxes show students how they can use theory to understand important
economic episodes or issues like the 2008 oil price shock, supply-side economics, and the ELEVENTH EDITION
macroeconomic consequences of the boom and bust in stock prices.
• The emphasis on usage and analysis of macroeconomic data through In Touch with Data
and Research boxes explains the historical context behind certain momentous economic Andrew B. Abel • Ben S. Bernanke • Dean Croushore
events.
• The use of detailed, full-color graphs demonstrating the shifts in curves; worked numerical
problems at the end of selected chapters; real-world data from FRED; and end-of-chapter
self-test material encourage better comprehension and retention of the material.

ELEVENTH
EDITION
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unemployment rates, and consumption spending.
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hands-on experience in engaging with data to help them understand macroeconomic theory.

Available separately for purchase is MyLab™ Economics for Macroeconomics, the teaching
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 Macroeconomics
ELEVENTH EDITION
G LO BA L E D I T I O N

Andrew B. Abel
The Wharton School of the
University of Pennsylvania

Ben S. Bernanke
Brookings Institution

Dean Croushore
Robins School of Business
University of Richmond

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 This page is intentionally left blank

F01_Abel_11_GE_46127.indd 4 27/04/23 9:34 AM

 About the Authors
Andrew B. Abel
The Wharton School of the University of Pennsylvania
Ronald A. Rosenfeld Professor of Finance at The Wharton School and professor of economics at
the University of Pennsylvania, Andrew Abel received his A.B. summa cum laude from Princeton
University and his Ph.D. from the Massachusetts Institute of Technology.
He began his teaching career at the University of Chicago and Harvard University and has
held visiting appointments at both Tel Aviv University and The Hebrew University of
Jerusalem.
A prolific researcher, Abel has published extensively on fiscal policy, capital formation,
monetary policy, asset pricing, and Social Security—as well as serving on the editorial boards of
numerous journals. He has been honored as an Alfred P. Sloan Fellow, a Fellow of the Econometric Society, and a
recipient of the John Kenneth Galbraith Award for teaching excellence. Abel has served as a visiting scholar at the
Federal Reserve Bank of Philadelphia, as a member of the Panel of Economic Advisers at the Congressional Budget
Office, and as a member of the Technical Advisory Panel on Assumptions and Methods for the Social Security
Advisory Board. He is also a Research Associate of the National Bureau of Economic Research and a member of the
Advisory Board of the Carnegie-Rochester–NYU Conference Series.

Ben S. Bernanke
Brookings Institution
Ben Bernanke is currently Distinguished Fellow in Residence with the Economic Studies
Program at the Brookings Institution. From February 2006 to January 2014, he was
Chairman of the Board of Governors of the Federal Reserve System. Before that, he served
as Chair of the President’s Council of Economic Advisors from June 2005 to January 2006
and was a Governor of the Federal Reserve System from August 2002 to June 2005. Prior to
his work in public service, he was the Howard Harrison and Gabrielle Snyder Beck
Professor of Economics and Public Affairs at Princeton University. He received his B.A. in
economics from Harvard University summa cum laude—capturing both the Allyn Young
Prize for best Harvard undergraduate economics thesis and the John H. Williams prize for outstanding senior in
the Economics Department. Like coauthor Abel, he holds a Ph.D. from the Massachusetts Institute of Technology.
Bernanke began his career at the Stanford Graduate School of Business in 1979. In 1985, he moved to
Princeton University, where he served as chair of the Economics Department from 1995 to 2002. He has twice
been visiting professor at MIT and once at New York University, and has taught in undergraduate, M.B.A.,
M.P.A., and Ph.D. programs. He has authored more than 60 publications in macroeconomics, macroeconomic
history, and finance.
Bernanke has served as a visiting scholar and advisor to the Federal Reserve System. He is a Guggenheim
Fellow and a Fellow of the Econometric Society. He has also been variously honored as an Alfred P. Sloan Research
Fellow, a Hoover Institution National Fellow, a National Science Foundation Graduate Fellow, and a Research
Associate of the National Bureau of Economic Research. In 2022, he was one of the winners of the Nobel Prize in
Economics for his research on banks and financial crises, which helped lay the foundations for financial market
regulation. He has served as editor of the American Economic Review.

F01_Abel_11_GE_46127.indd 5 27/04/23 9:34 AM

 6 About the Authors

Dean Croushore
Robins School of Business, University of Richmond
Dean Croushore is professor of economics and Rigsby Fellow at the University of Richmond.
He received his A.B. from Ohio University and his Ph.D. from Ohio State University.
Croushore began his career at Pennsylvania State University in 1984. After teaching for
5 years, he moved to the Federal Reserve Bank of Philadelphia, where he was vice president
and economist. His duties during his 14 years at the Philadelphia Fed included heading the
macroeconomics section, briefing the bank’s president and board of directors on the state of the
economy and advising them about formulating monetary policy, writing articles about the
economy, administering two national surveys of forecasters, and researching current issues in
monetary policy. In his role at the Fed, he created the Survey of Professional Forecasters (taking over the defunct
ASA/NBER survey and revitalizing it) and developed the Real-Time Data Set for Macroeconomists.
Croushore returned to academia at the University of Richmond in 2003. The focus of his research in recent years
has been on forecasting and how data revisions affect monetary policy, forecasting, and macroeconomic research.
Croushore’s publications include articles in many leading economics journals and a textbook on money and banking.
He is associate editor of several journals and a visiting scholar at the Federal Reserve Bank of Philadelphia and an
adjunct associate professor in the business school at Columbia University.

F01_Abel_11_GE_46127.indd 6 27/04/23 9:34 AM

 Brief Contents
Preface  21

PART 1 Introduction
1 Introduction to Macroeconomics   31
2 The Measurement and Structure of the National Economy   52

PART 2 Long-Run Economic Performance

3 Productivity, Output, and Employment   93
4 Consumption, Saving, and Investment   142
5 Saving and Investment in the Open Economy   205
6 Long-Run Economic Growth   239
7 The Asset Market, Money, and Prices   277

PART 3 Business Cycles and Macroeconomic Policy

8 Business Cycles  315
9 The IS–LM/AD–AS Model: A General Framework for Macroeconomic
Analysis  352
10 Classical Business Cycle Analysis: Market-Clearing
Macroeconomics  403
11 Keynesianism: The Macroeconomics of Wage and Price Rigidity   444

PART 4 Macroeconomic Policy: Its Environment and Institutions

12 Unemployment and Inflation   487
13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the
Open Economy  520
14 Monetary Policy and the Federal Reserve System   573
15 Government Spending and Its Financing   613

Appendix A: Some Useful Analytical Tools   653

Glossary  661
Name Index  673
Subject Index  675

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 This page is intentionally left blank

F01_Abel_11_GE_46127.indd 8 27/04/23 9:34 AM

 Detailed Contents
Preface  21 2.3 Saving and Wealth  67
Measures of Aggregate Saving   67
The Uses of Private Saving   69
PART 1 Introduction Relating Saving and Wealth   71
2.4 Real GDP, Price Indexes, and Inflation  74
1 Introduction to Macroeconomics  31 Real GDP   74
Price Indexes   77
1.1 What Macroeconomics Is About  31
In Touch with Data and Research: The Computer
Long-Run Economic Growth   32
Revolution and Chain-Weighted GDP   78
Business Cycles   34
In Touch with Data and Research: Does CPI Inflation
Unemployment  35 Overstate Increases in the Cost of Living?   81
Inflation  36 Application: The Federal Reserve’s Preferred Inflation
The International Economy   37 Measures  83
Macroeconomic Policy   38
Aggregation  40 2.5 Interest Rates  84
CHAPTER SUMMARY AND PROBLEMS   87
1.2 What Macroeconomists Do  40
Macroeconomic Forecasting   40
Macroeconomic Analysis   41
Macroeconomic Research   41
Data Development   42
PART 2 Long-Run Economic
In Touch with Data and Research: Developing and Performance
Testing an Economic Theory   43

1.3 Why Macroeconomists Disagree  44 3 Productivity, Output, and

Classicals Versus Keynesians   45 Employment  93
A Unified Approach to Macroeconomics   47
3.1 How Much Does the Economy Produce? The
CHAPTER SUMMARY AND PROBLEMS   49 Production Function  94
Application: The Production Function and Changes in
Productivity in the European Union   95
2 The Measurement and Structure of The Shape of the Production Function   97
the National Economy  52 The Marginal Product of Capital   98
The Marginal Product of Labor   100
2.1 National Income Accounting: The Measurement Supply Shocks   101
of Production, Income, and Expenditure  52
In Touch with Data and Research: The National 3.2 The Demand for Labor  103
Income and Product Accounts in Malaysia   54 The Marginal Product of Labor and Labor Demand:
Why the Three Approaches Are Equivalent   55 An Example   104
A Change in the Wage   106
2.2 Gross Domestic Product  56
The Marginal Product of Labor and the Labor
The Product Approach to Measuring GDP   56 Demand Curve   106
In Touch with Data and Research: Natural Factors That Shift the Labor Demand Curve   108
Resources, the Environment, and the National Income
Aggregate Labor Demand   110
Accounts  59
The Expenditure Approach to Measuring 3.3 The Supply of Labor  110
GDP  61 The Income–Leisure Trade-Off   111
The Income Approach to Measuring GDP   64 Real Wages and Labor Supply   112

F01_Abel_11_GE_46127.indd 9 27/04/23 9:34 AM

 10 Detailed Contents

Application: The Gig Economy in the ASEAN Application: Measuring the Effects of Taxes on
Nations  114 Investment  164
The Labor Supply Curve   115 From the Desired Capital Stock to Investment   166
Aggregate Labor Supply   116 Investment in Inventories and Housing   168
In Touch with Data and Research: Investment and the
3.4 Labor Market Equilibrium  117
Stock Market  169
Full-Employment Output   119
Application: Output, Employment, and the Real Wage 4.3 Goods Market Equilibrium  171
During Oil Price Shocks   119 The Saving–Investment Diagram   172
Application: Macroeconomic Consequences of the
3.5 Unemployment  121
Boom and Bust in Stock Prices   176
Measuring Unemployment   121
Changes in Employment Status   122 CHAPTER SUMMARY AND PROBLEMS   180
In Touch with Data and Research: Labor Market Data Appendix 4.A: A Formal Model of Consumption and
in Kazakhstan  122 Saving  188
How Long Are People Unemployed?   123

5
Application: Unemployment During the European
Debt Crisis  125 Saving and Investment in the Open
Why There Always Are Unemployed People   126 Economy  205
In Touch with Data and Research: Alternative 5.1 Balance of Payments Accounting  206
Measures of the Unemployment Rate   128
The Current Account   206
Application: Recent Trends in Labor Supply   129
In Touch with Data and Research: The Balance of
3.6 Relating Output and Unemployment: Okun’s Payments Accounts in Malaysia   208
Law  130 The Financial Account   209
CHAPTER SUMMARY AND PROBLEMS   133 The Relationship Between the Current Account and
the Financial Account   210
Appendix 3.A: The Growth Rate Form of Okun’s Net Foreign Assets and the Balance of Payments
Law  141 Accounts  212
Application: The United States as International

4
Debtor  213
Consumption, Saving, and
5.2 Goods Market Equilibrium in an Open
Investment  142
Economy  215
4.1 Consumption and Saving  143
5.3 Saving and Investment in a Small Open
The Consumption and Saving Decision of an
Economy  217
Individual  144
The Effects of Economic Shocks in a Small Open
Effect of Changes in Current Income   145
Economy  220
Effect of Changes in Expected Future
Income  146 5.4 Saving and Investment in Large Open
Application: The Impact of the Pandemic Recession Economies  221
of 2020 on Consumption   147 Application: The Impact of Globalization on the U.S.
Effect of Changes in Wealth   148 Economy  223
Effect of Changes in the Real Interest Rate   149 Application: Recent Trends in the U.S. Current
Fiscal Policy   151 Account Deficit  225
In Touch with Data and Research: Interest 5.5 Fiscal Policy and the Current Account  227
Rates  152 The Critical Factor: The Response of National
Application: How Investors Respond to Tax Saving  227
Incentives  156 The Government Budget Deficit and National
4.2 Investment  158 Saving  228
The Desired Capital Stock   158 Application: The Twin Deficits   229
Changes in the Desired Capital Stock   161 CHAPTER SUMMARY AND PROBLEMS   232

F01_Abel_11_GE_46127.indd 10 27/04/23 9:34 AM

 Detailed Contents 11

6 Long-Run Economic Growth  239

Interest Rates   293
The Money Demand Function   294
6.1 The Sources of Economic Growth  240 Other Factors Affecting Money Demand   295
Growth Accounting   242 Application: Bitcoin and Cryptocurrencies   297
Application: Waves of Productivity Growth over Velocity and the Quantity Theory of Money   299
Time  245
7.4 Asset Market Equilibrium  301
Application: The Rebound in U.S. Productivity
Growth  246
Asset Market Equilibrium: An Aggregation
Assumption  302
6.2 Long-Run Growth: The Solow Model  249 The Asset Market Equilibrium Condition   303
Setup of the Solow Model   250
7.5 Money Growth and Inflation  304
The Fundamental Determinants of Long-Run
Application: Money Growth and Inflation in European
Living Standards   257
Countries in Transition   305
Economic Models, Endogenous Variables, and
Exogenous Variables   261 The Inflation Rate and the Nominal Interest Rate   307
Application: Measuring Inflation Expectations   308
Application: The Growth of China   263
CHAPTER SUMMARY AND PROBLEMS   311
6.3 Endogenous Growth Theory  265
6.4 Government Policies to Raise Long-Run Living
Standards  267 PART 3  usiness Cycles and
B
Policies to Affect the Saving Rate   267
Policies to Raise the Rate of Productivity Macroeconomic Policy
Growth  268
Application: Trends in Income Distribution in 8 Business Cycles  315
South Africa  269
8.1 What Is a Business Cycle?  316
CHAPTER SUMMARY AND PROBLEMS   272
8.2 The American Business Cycle: The Historical
Record  318
7 The Asset Market, Money, and The Pre–World War I Period   318
Prices  277 The Great Depression and World War II   318
Post–World War II U.S. Business Cycles   320
7.1 What Is Money?  277 The “Long Boom”   321
In Touch with Data and Research: Money in a The Great Recession   321
Prisoner-of-War Camp  278 Have American Business Cycles Become Less
The Functions of Money   279 Severe?  322
In Touch with Data and Research: The Monetary Application: Do Economic Expansions Die of Old
Aggregates  281 Age?  325
In Touch with Data and Research: Where Have All the
Dollars Gone?  282 8.3 Business Cycle Facts  326
The Cyclical Behavior of Economic Variables:
7.2 Portfolio Allocation and the Demand for Direction and Timing   326
Assets  284 Production  327
Expected Return   284 Expenditure  329
Risk  285 Employment and Unemployment   330
Liquidity  285 Application: The Job Finding Rate and the Job Loss
Time to Maturity   285 Rate  331
Types of Assets and Their Characteristics   287 Average Labor Productivity and the Real
In Touch with Data and Research: The Housing Crisis Wage  334
of 2007 to 2011   289 Money Growth and Inflation   335
Asset Demands   291 Financial Variables   336
7.3 The Demand for Money  292 International Aspects of the Business Cycle   337
The Price Level   292 In Touch with Data and Research: Coincident and
Real Income   293 Leading Indexes  338

F01_Abel_11_GE_46127.indd 11 27/04/23 9:34 AM

 12 Detailed Contents

8.4 Business Cycle Analysis: A Preview  342

In Touch with Data and Research: The Seasonal
10 Classical Business Cycle Analysis:
Cycle and the Business Cycle   343 Market-Clearing Macroeconomics  403
Aggregate Demand and Aggregate Supply: A Brief 10.1 The Real Business Cycle Theory  404
Introduction  344 Application: Calibrating the Business Cycle   407
CHAPTER SUMMARY AND PROBLEMS   349 10.2 Fiscal Policy Shocks in the Classical Model  413
10.3 Unemployment in the Classical Model  417
Jobless Recoveries   420

9 The IS–LM/AD–AS Model: A General 10.4 Money in the Classical Model  422

Framework for Macroeconomic Monetary Policy and the Economy   422
Monetary Nonneutrality and Reverse
Analysis  352
Causation  422
9.1 The FE Line: Equilibrium in the Labor The Nonneutrality of Money: Additional
Market  353 Evidence  423
Factors That Shift the FE Line   353
10.5 The Misperceptions Theory and the Nonneutrality
9.2 The IS Curve: Equilibrium in the Goods of Money  425
Market  355 Monetary Policy and the Misperceptions
Factors That Shift the IS Curve   357 Theory  428
Rational Expectations and the Role of Monetary
9.3 The LM Curve: Asset Market Equilibrium  359
Policy  430
The Interest Rate and the Price of a Nonmonetary
In Touch with Data and Research: Are Price Forecasts
Asset  360
Rational?  432
The Equality of Money Demanded and Money
Supplied  360 CHAPTER SUMMARY AND PROBLEMS   434
Factors That Shift the LM Curve   363 Appendix 10.A: Worked-Out Numerical Exercise
for Solving the Classical AD–AS Model with
9.4 General Equilibrium in the Complete IS–LM
Misperceptions  441
Model  367
Applying the IS–LM Framework: A Temporary Appendix 10.B: An Algebraic Version of the Classical
Adverse Supply Shock   368 AD–AS Model with Misperceptions  442
Application: The Oil Price Shock of 2008   370
In Touch with Data and Research: Econometric
Models and Macroeconomic Forecasts for Monetary
11 Keynesianism: The Macroeconomics
Policy Analysis  370
of Wage and Price Rigidity  444
11.1 Real-Wage Rigidity  445
9.5 Price Adjustment and the Attainment of General
Equilibrium  372 Some Reasons for Real-Wage Rigidity   445
The Effects of a Monetary Expansion   372 The Efficiency Wage Model   446
Classical Versus Keynesian Versions of the Wage Determination in the Efficiency Wage
IS–LM Model   376 Model  447
Employment and Unemployment in the Efficiency
9.6 Aggregate Demand and Aggregate Supply  377 Wage Model   448
The Aggregate Demand Curve   378 Efficiency Wages and the FE Line   450
The Aggregate Supply Curve   380 In Touch with Data and Research: Henry Ford’s
Equilibrium in the AD–AS Model   383 Efficiency Wage  451
Monetary Neutrality in the AD–AS Model   383
11.2 Price Stickiness  452
CHAPTER SUMMARY AND PROBLEMS   386 Sources of Price Stickiness: Monopolistic
Competition and Menu Costs   452
Appendix 9.A: Worked-Out Numerical Exercise for
Solving the IS–LM/AD–AS Model  393 11.3 Monetary and Fiscal Policy in the Keynesian
Model  458
Appendix 9.B: Algebraic Versions of the IS–LM/
Monetary Policy   458
AD–AS Model  396
Fiscal Policy   461

F01_Abel_11_GE_46127.indd 12 27/04/23 9:34 AM

 Detailed Contents 13

11.4 The Keynesian Theory of Business Cycles and

Macroeconomic Stabilization  465
13 Exchange Rates, Business Cycles,
Keynesian Business Cycle Theory   465 and Macroeconomic Policy in the
Macroeconomic Stabilization   467 Open Economy  520
Supply Shocks in the Keynesian Model   470 13.1 Exchange Rates  521
In Touch with Data and Research: DSGE Models and Nominal Exchange Rates   521
the Classical–Keynesian Debate   472 In Touch with Data and Research: Exchange
CHAPTER SUMMARY AND PROBLEMS   474 Rates  522
Real Exchange Rates   523
Appendix 11.A: Labor Contracts and Nominal-Wage
Appreciation and Depreciation   524
Rigidity  480
Purchasing Power Parity   525
Appendix 11.B: Worked-Out Numerical Exercise for In Touch with Data and Research: McParity  526
Calculating the Multiplier in a Keynesian Model  483 The Real Exchange Rate and Net
Appendix 11.C: The Multiplier in the Keynesian Exports  528
Model  485 Application: The Value of the Dollar and U.S. Net
Exports  530

13.2 How Exchange Rates Are Determined:

PART 4 Macroeconomic Policy: A Supply-and-Demand Analysis  532
Macroeconomic Determinants of the Exchange
Its Environment and Institutions Rate and Net Export Demand   534

12 Unemployment and Inflation  487 13.3 The IS–LM Model for an Open Economy  537
The Open-Economy IS Curve   537
12.1 Unemployment and Inflation: Is There a Factors That Shift the Open-Economy IS
Trade-Off?  487 Curve  540
The Expectations-Augmented Phillips Curve   490 The International Transmission of Business
The Shifting Phillips Curve   493 Cycles  542
12.2 Macroeconomic Policy and the Phillips 13.4 Macroeconomic Policy in an Open Economy with
Curve  498 Flexible Exchange Rates  543
In Touch with Data and Research: The Lucas A Fiscal Expansion   543
Critique  499 A Monetary Contraction   546
The Long-Run Phillips Curve   500
13.5 Fixed Exchange Rates  549
12.3 The Problem of Unemployment  501 Fixing the Exchange Rate   549
The Costs of Unemployment   501 Monetary Policy and the Fixed Exchange
The Long-Term Behavior of the Unemployment Rate  552
Rate  502 Fixed Versus Flexible Exchange Rates   555
12.4 The Problem of Inflation  504 Currency Unions   555
The Costs of Inflation   505 Application: Is Either the United States or Europe an
Optimum Currency Area?   557
In Touch with Data and Research: Indexed
Contracts  507 Application: European Monetary Unification   558
CHAPTER SUMMARY AND PROBLEMS   561
12.5 Fighting Inflation: The Role of Inflationary
Expectations  509 Appendix 13.A: Worked-Out Numerical Exercise for
In Touch with Data and Research: The Sacrifice the Open-Economy IS–LM Model  567
Ratio  511
Appendix 13.B: An Algebraic Version of the
The U.S. Disinflation of the 1980s and 1990s  513
Open-Economy IS–LM Model  570
CHAPTER SUMMARY AND PROBLEMS   515

F01_Abel_11_GE_46127.indd 13 27/04/23 9:34 AM

 14 Detailed Contents

14 Monetary Policy and the Federal

15.2 Government Spending, Taxes, and the
Macroeconomy  621
Reserve System  573 Fiscal Policy and Aggregate Demand   621
14.1 Principles of Money Supply Determination  574 Government Capital Formation   624
Open-Market Transactions   575 Incentive Effects of Fiscal Policy   624
Bank Runs   577 Application: Supply-Side Economics  627

14.2 Monetary Control in the United States  578 15.3 Government Deficits and Debt  629
The Federal Reserve System   578 The Growth of the Government Debt   629
The Federal Reserve’s Balance Sheet   579 Application: Social Security in the United Kingdom:
Open-Market Operations   580 How Can It Be Fixed?   631
Reserve Requirements   580 The Burden of the Government Debt on Future
Discount Window Lending   581 Generations  633
Application: The Lender of Last Resort   582 Budget Deficits and National Saving: Ricardian
Interest Rate on Reserves   583 Equivalence Revisited   634
New Monetary Policy Tools Developed in the Great Departures from Ricardian Equivalence   637
Recession  583 In Touch with Data and Research: Measuring the
Impact of Government Purchases on the
Application: Is There Really a Zero Lower Bound?   584
Economy  638
Application: The Financial Crisis of 2008: Some
Implications for the Global Economy   588 15.4 Deficits and Inflation  640
Monetary Policy in Response to the Pandemic of The Deficit and the Money Supply   640
2020  589 Real Seignorage Collection and Inflation   642
14.3 Setting Monetary Policy Targets  590 CHAPTER SUMMARY AND PROBLEMS   646
Targeting the Federal Funds Rate   590
Appendix 15.A: The Debt–GDP Ratio  651
Monetary Policy with Abundant Reserves   594
14.4 Making Monetary Policy in Practice  596
Lags in the Effects of Monetary Policy   596 Appendix A:
Conducting Monetary Policy Under Uncertainty   598
Some Useful Analytical Tools  653
14.5 The Conduct of Monetary Policy: Rules Versus
A.1 Functions and Graphs  653
Discretion  600
The Monetarist Case for Rules   601 A.2 Slopes of Functions  654
Rules and Central Bank Credibility   603 A.3 Elasticities  655
The Taylor Rule   604 A.4 Functions of Several Variables  656
Other Ways to Achieve Central Bank Credibility   607 A.5 Shifts of a Curve  656
Application: Inflation Targeting  607
A.6 Exponents  657
CHAPTER SUMMARY AND PROBLEMS   609 A.7 Growth Rate Formulas  657
Problems  658

15 Government Spending and Its Glossary  661

Financing   613 Name Index  673
15.1 The Government Budget: Some Facts and Subject Index  675
Figures  613
Government Outlays   613
Taxes  615
Deficits and Surpluses   619

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