Page 16 - Krugmans Economics for AP Text Book_Neat

Contents

What Banks Do 243 Module 29 The Market for Loanable Funds 277
The Problem of Bank Runs 245 The Market for Loanable Funds 277
FYI: It’s a Wonderful Banking System 245 Reconciling the Two Interest Rate Models 284
Bank Regulation 246 The Interest Rate in the Short Run 284
Determining the Money Supply 247 The Interest Rate in the Long Run 285
How Banks Create Money 247 Module 29 AP Review 286
Reserves, Bank Deposits, and the Money Multiplier 248 Section 5 Review 288
The Money Multiplier in Reality 249
Module 25 AP Review 251 Section 6
Inflation, Unemployment, and Stabilization
Module 26 The Federal Reserve System— Policies 295
History and Structure 253
The Federal Reserve System 253 Module 30 Long-run Implications of Fiscal
An Overview of the Twenty-first Century American Policy: Deficits and the Public Debt 296
Banking System 253 The Budget Balance 296
Crisis in American Banking at the Turn of the The Budget Balance as a Measure of Fiscal Policy 296
Twentieth Century 254
The Business Cycle and the Cyclically Adjusted Budget
Responding to Banking Crises: The Creation of Balance 297
of the Federal Reserve 255
Should the Budget Be Balanced? 299
The Structure of the Fed 255
Long-Run Implications of Fiscal Policy 300
The Effectiveness of the Federal Reserve System 256
Deficits, Surpluses, and Debt 300
The Savings and Loan Crisis of the 1980s 257
Problems Posed by Rising Government Debt 300
Back to the Future: The Financial Crisis of 2008 258
Deficits and Debt in Practice 301
Module 26 AP Review 260
FYI: What Happened to the Debt from World War II? 303
Implicit Liabilities 303
Module 27 The Federal Reserve—Monetary
Policy 262 FYI: Argentina’s Creditors Take a Haircut 305
Module 30 AP Review 305
The Federal Reserve System 262
The Functions of the Federal Reserve System 262
Module 31 Monetary Policy and the Interest Rate 307
What the Fed Does 263
Monetary Policy and the Interest Rate 307
The Reserve Requirement 263
FYI: The Fed Reverses Course 309
The Discount Rate 263
Monetary Policy and Aggregate Demand 309
Open-Market Operations 264
Expansionary and Contractionary Monetary Policy 310
FYI: Who Gets the Interest on the Fed’s Assets? 265
Monetary Policy in Practice 310
Module 27 AP Review 266
Inflation Targeting 312
FYI: What the Fed Wants, the Fed Gets 313
Module 28 The Money Market 268
Module 31 AP Review 313
The Demand for Money 268
The Opportunity Cost of Holding Money 268
Module 32 Money, Output, and Prices in the
FYI: Long-term Interest Rates 270
Long Run 315
The Money Demand Curve 270
Money, Output, and Prices 315
Shifts of the Money Demand Curve 271
Short-Run and Long-Run Effects of an Increase in
Money and Interest Rates 273 the Money Supply 316
The Equilibrium Interest Rate 273 Monetary Neutrality 317
Two Models of the Interest Rate 274 Changes in the Money Supply and the Interest Rate
Module 28 AP Review 275 in the Long Run 317

xiv CONTENTS