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Manufacturer warranty may not apply Learn more about Amazon Global Store. K; ed. From the Back Cover The world has changed dramatically in recent years and so has the field of economics, but many introductory economics textbooks have remained stuck in the past.
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No customer reviews. Share your thoughts with other customers. Write a customer review. Most helpful customer reviews on Amazon. September 7, - Published on Amazon. Verified Purchase. PROS: 1 Organization: This book is unlike other textbooks which features many short sections that do not connect to each other well.
Transition from one concept to the next is very smooth and it helped me to understand that each idea is closely related to the other. Plus, I also liked that each chapter ends with a nice summary. Droman's writing style is quite unique. He has truly done the impossible: blending wit with Econ. Except that pages bleed through a little when you use a highlighter.
I recommend this text for freshman who want a supplementary text for their principles of macro econ class. Lastly, I spotted a tiny typo in a formula 4. The left hand should be Y - C, not Y. Any given household will be increasing or decreasing its holdings of liquid assets at any given time because of that history. Most of the time these are in "detailed balance": households increasing equals households decreasing.
However, any individual household wouldn't point to the falling inflation. And it's not even true that inflation is influencing household behavior -- falling inflation is simply the most likely macro state where liquid asset holdings are increasing in the AD-AS model. Since there are millions of households, the law of large numbers kicks in.
Higher inflation doesn't cause individual households to increase their demand for iPads. The higher inflation macro state is consistent in the AD-AS model with a macro state in which more iPads are being consumed. Sorry for the long comment.
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Can you briefly comment on how the model can be used in this way? Because I can't see it. Get hold of David Romer's lecture notes on macro, easy to find online. Maybe he fixes the worst by using inflation rather than price level , but to be honest, there is nothing in that document that tells me anything meaningful about reality.
There is merely a lot of reverse engineering an explanations for observed events into the model, and not discussion of mechanisms eg. To be honest, this only reinforces my concern about the training of economists. How can most textbooks say the AD-AS model relates the price level to output, and another the inflation rate? Imagine in physics if some textbooks said energy was half mass times position squared, and other said half mass times velocity?
No one would take it seriously. And nor should they. Yet this is exactly the situation in macro economics. Get a better textbook. The author of yours is highly flawed. Some guy once wrote: "The well-known, but unavoidable, element of vagueness which admittedly attends the concept of the general price-level makes this term very unsatisfactory for the purposes of a causal analysis To say that net output to-day is greater, but the price-level lower, than ten years ago or one year ago, is a proposition of a similar character to the statement that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth — a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus.
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Our precision will be a mock precision if we try to use such partly vague and non-quantitative concepts as the basis of a quantitative analysis. Had to check whether this was April 1st post, but apparently not So here's the debunking of the debunking: 1. As we saw in Chapter 8 on Inflation, price levels are not absolute but relative to some base year" So?
Obviously the whole model is worked out assuming some particular base year. Choosing a different base year would merely rescale the P axis, and bear no relevance to qualitative predictions of the model.
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Moreover, even if the model includes one relationship between two variables, it can include also another relationship, with both being true simultaneously. Like you know, the supply and demand model has both positive and negative relationship between price and quantity. Real incomes don't have to. Here all the households find themselves with too little money real money balances have decreased , thus they all prefer to adjust their portfolios towards holding currency. If the CB doesn't adjust the money supply, equilibrium must be restored by decrease in bond prices, i.
First, the budget doesn't have to be balanced. Even if it is, the two shocks don't have to have exactly same countervailing effects exercise: derive balanced budget multiplier in the Keynesian cross model. How can there simultaneously be both an effect and no effect? In subsequent periods, the effect will start to dissipate, and eventually the economy will converge back to the original equilibrium.
It's not so hard to get. First, the inputs of one firm are the outputs of another firm, hence in aggregate input and output prices cannot differ systematically. Last time I checked, labor is not produced as output by any firm. I don't see it as a fallacy that macroeconomics as a whole must take into account feedback that microeconomics can ignore.
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That just says that the aggregate supply and demand curves don't explain the whole picture, which you can note after discussing what the graph is supposed to represent. And I don't see what's wrong with telling students that in the current real world, aggregate price levels are measured in terms of fiat currency units. I don't know which way around you put the axes, but I will do my best to suggest a couple of useful examples of the use of the aggregate supply and demand curves without using terms like "down" and "up".
Example number one: traditional Keynesian demand side stimulus, which is an increase in central government spending, fully monetized such that it results in an increase in nominal debt and no increase in nominal taxation. This moves the demand curve in the direction of increasing quantity. The net effect is that the equilibrium quantity is higher than it was initially, by less than the amount of the spending, and the equilibrium price is also higher than it was initially.
Point out that amounts of the changes in quantity and price depend on the local slopes of the demand and supply curves.
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Relate this to s inflation. The discussion to this point should ignore feedback effects. At this point, though, you can point out that the feedback effects may exist. You can talk about how there may be a multiplier effect if the sellers to the government use the money to increase their own demand, resulting in a "multiplier" effect under some conditions. You can talk about how inflation expectations may change the effective shape of the supply curve and maybe the demand curve.