Equivalence of the Two Approaches

Equivalence of the Two Approaches Now we have calculated GDP by the upper loop flow-of-product approach and by the lower-loop earnings-flow approach. Which is the better approach? The surprise is that they are actually the same. In fact, the two approaches are...

The Role of Economic Policy

The Role of Economic Policy How does macroeconomic policy fit to the picture? Even though. the economic environment in the United States was favorable in the 1990s, there were still heated debates about macroeconomic policies. A major debate in the United States...

The Growth Century

The Growth Century The final act in our macroeconomic drama concerns the growth of output and prices over the entire period since 1900. Output has grown by a factor of almost 20 since the turn of the century. How can we explain this phenomenal increase? A careful look...

Tight Money, 1979-1982.

Tight Money, 1979-1982. By 1979 the economy had recovered from the 1973 supply shock. Output had returned to its potential. But unrest in the Middle East led to another oil shock as the Iranian revolution produced a jump in oil prices from $14 per barrel in early 1978...

Supply Shocks and Stagflation

Supply Shocks and Stagflation During the 1970s, the industrial world was struck. by a new macroeconomic malady, supply shocks, a supply shock is a sudden change in input costs or productivity which shifts aggregate supply sharply. Supply shocks occurred with...

Wartime Boom

Wartime Boom The American economy entered the 1960 s having experienced numerous recessions. John Kennedy took over the presidency hoping to resuscitate the economy. This was the era when the “New Economics,” as the Keynesian approach was called, came to...