A Concise Guide to Macroeconomics: What Managers, Executives, and Students Need to Know

David A. Moss

Language: English

Pages: 208

ISBN: 1422101797

Format: PDF / Kindle (mobi) / ePub


Now more than ever before, executives and managers need to understand their larger economic context. In A Concise Guide to Macroeconomics, David Moss leverages his many years of teaching experience at Harvard Business School to lay out important macroeconomic concepts in engaging, clear, and concise terms. In a simple and intuitive way, he breaks down the ideas into “output,” “money,” and “expectations.” In addition, Moss introduces powerful tools for interpreting the big-picture economic developments that shape events in the contemporary business arena. Detailed examples are also drawn from history to illuminate important concepts.

This book is destined to become a staple in MBA courses—as well as the go-to resource for executives and managers at all levels seeking to brush up on their knowledge of macroeconomic dynamics.

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Japanese- JapaneseUS-made US-made made made ¥/$ ER ­calculator ­calculator c ­ alculator ­calculator Before After 100 $10 ¥1,000 ¥900 $9.00 80 $10 ¥800 ¥900 $11.25 48 Country from which calculators bought Japan US Money rate after controlling for inflation) had actually appreciated, because its inflation rate (relative to Japan’s) had increased by more than 20 percent. The relationship between real and nominal exchange rates in this example can be expressed in the following

law.4 Since production generates income equal to the full value of the product that is sold, total income should always be sufficient to buy all the output that is produced. Unfortunately, negative expectations sometimes intrude on this happy circle of production and consumption. If individuals anticipate bad times ahead, they may hold back on their expenditure, including both consumption and investment, thus opening up a gap between potential GDP (i.e., feasible supply) and actual GDP (effective

times ahead and thus begin to get things moving again by spending more than it received in taxes and thus running a large budget deficit. As individuals and firms saw the government aggressively creating new demand (by buying goods and services itself), their expectations about the future would turn brighter and they themselves might begin spending again. In this way, the vicious spiral that had taken the economy down could be reversed to bring the economy back up to full employment. The key role

−814.6 −825 −502.5 −642.2 Exports 1,042.2 1,168.2 1,312.7 1,072.9 1,292.4 Imports 1,875.1 1,982.8 2,137.6 1,575.4 1,934.6 Services balance 79.6 118 126.6 121.3 142.2 Exports 418.5 488.2 532.5 504.8 546.8 Imports 338.9 370.2 405.9 383.6 404.7 44.2 101.5 147.1 128 165.2 Current account balance Goods ­balance Primary income ­balance Receipts Payments Secondary income (transfers) balance 693 843.9 823.5 607.2 670.7 648.9 742.4 676.4 479.2 505.5 −91.5

than in Britain, Americans would discover that a dollar purchased more in Britain than in the US (since US prices were now higher as a result of US ­inflation). For purchasing power parity to be restored, the dollar 133 Ch07.indd 133 19/05/14 11:23 PM Selected Topics—Background and Mechanics 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 would have to depreciate relative to the pound, until a dollar could once again purchase the same quantity of

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