Macroeconomic Essentials - 2nd Edition: Understanding Economics in the News - page 2

cover32648.jpg

 

Contents
Preface
xi
1
Introduction
1
1.1 Media Economics
2
1.2 Up-and-Down Economics
3
1.3 Policy Evaluation
4
1.4 A Picture Can Be Worth a Thousand Words
4
1.5 Really Important Macroeconomic Ideas
5
2
Measuring GDP and Inflation
11
2.1 What Is GDP?
12
Curiosity 2.1: What Is the Difference between GDP and GNP?
13
2.2 Estimating GDP
14
Curiosity 2.2: Where Can These Numbers Be Found?
15
2.3 GDP as Gross Deceptive Product
16
2.4 Real versus Nominal GDP
17
2.5 Measuring Inflation
19
Curiosity 2.3: How Do the GDP Deflator and the CPI Differ?
21
2.6 The Costs of Inflation
22
Curiosity 2.4: What Level of Inflation Should We Aim For?
24
Media Illustrations
24
Appendix 2.1: Measuring GDP by Adding Up Incomes
32

 

1—
Introduction
There are three kinds of economics: curve-shifting, pop-art, and media. Formal theorizing favored by academic economists usually involves shifting curves on diagrams, so is called curve-shifting economics. Its technical character makes it suitable mainly to those seeking a university degree in economics. Pop-art economics is found in economics best-sellers. Although fun, it is too often harebrained. Media economics is the economics encountered on the business pages of newspapers or on television. This is what business people and interested laypersons need to know about economics and what undergraduate students should be learning about economics in addition to curve-shifting. It is the kind of economics a reader will learn from this book.
These types of economics each have two variants: microeconomics and macro-economics. The former analyzes the behavior of individual firms and consumers, with attention focused on issues such as how consumers make choices, how firms determine prices, and the implications of government-imposed sales taxes or quotas. The latter, the subject of this book, looks at the big picture, analyzing economy-wide variables such as inflation, unemployment, interest rates, and exchange rates. Attention focuses on issues such as what determines business cycles, how interest rates are set, and the implications of the government's printing more money or fixing the exchange rate.
The purpose of this chapter is to introduce the reader to media economics and provide a summary of the major macroeconomic concepts expounded in this book.