Macroeconomics by Dornbusch, Fischer, and Startz: A Review
Macroeconomics is a textbook that covers the theory and practice of macroeconomics, the study of the economy as a whole. The book is written by three renowned economists: Rudiger Dornbusch, Stanley Fischer, and Richard Startz. The book has been a leading intermediate macroeconomic theory text since its introduction in 1978[^1^]. The 11th edition of the book was published by McGraw Hill in 2010.
The book aims to provide a comprehensive and balanced view of macroeconomics, using a middle-of-the-road approach that incorporates both classical and Keynesian perspectives. The book also reflects the latest research and developments in the field, such as the global financial crisis, the European debt crisis, and the role of monetary policy. The book covers topics such as national income accounting, growth, aggregate supply and demand, inflation, unemployment, fiscal policy, monetary policy, exchange rates, international trade and finance, and economic development.
The book is organized into six parts: Part I introduces the basic concepts and tools of macroeconomics; Part II examines the determinants of output and growth; Part III analyzes the behavior of aggregate demand and supply; Part IV discusses the issues of inflation, unemployment, and stabilization policies; Part V explores the open economy and its interactions with the rest of the world; and Part VI deals with long-run issues such as economic development and sustainability.
The book is suitable for undergraduate students who have completed a course in principles of economics. The book assumes some familiarity with basic algebra and graphs, but does not require advanced mathematics. The book uses clear explanations, examples, diagrams, tables, and charts to illustrate the concepts and theories. The book also includes end-of-chapter questions, problems, case studies, and applications to help students test their understanding and apply their knowledge to real-world situations.
Macroeconomics by Dornbusch, Fischer, and Startz is a classic and authoritative text that offers a comprehensive and rigorous introduction to macroeconomics. The book is well-written, well-organized, well-researched, and well-updated. The book is ideal for students who want to learn the fundamentals of macroeconomics as well as the current issues and debates in the field.In this section, we will review some of the main topics and concepts covered in the book.
National Income Accounting
National income accounting is the method of measuring the total output and income of an economy. The most common measure of national income is the gross domestic product (GDP), which is the market value of all final goods and services produced within a country in a given period of time. GDP can be calculated using three approaches: the expenditure approach, the income approach, and the value-added approach. The expenditure approach adds up the spending by different sectors of the economy, such as consumption, investment, government purchases, and net exports. The income approach adds up the income earned by different factors of production, such as wages, rents, interest, and profits. The value-added approach sums up the value added by each stage of production in the economy.
GDP is a useful indicator of the size and performance of an economy, but it has some limitations. For example, GDP does not account for non-market activities, such as household work and leisure; GDP does not measure the distribution of income or welfare among different groups; GDP does not adjust for changes in the quality or variety of goods and services; and GDP does not reflect the environmental or social costs of production and consumption. Therefore, other measures of national income and well-being, such as gross national product (GNP), net national product (NNP), national income (NI), personal income (PI), disposable income (DI), real GDP, nominal GDP, GDP deflator, consumer price index (CPI), and human development index (HDI) are also used to complement GDP.
Growth is the increase in the output and income of an economy over time. Growth is important because it can improve the living standards and welfare of people. Growth can be measured by the growth rate of GDP or per capita GDP. The growth rate of GDP is the percentage change in GDP from one period to another. The growth rate of per capita GDP is the percentage change in GDP divided by the population from one period to another. Per capita GDP is a better measure of growth than GDP because it accounts for changes in population size.
The sources of growth can be analyzed using a production function, which shows how output depends on inputs such as capital, labor, human capital, natural resources, and technology. The production function can be written as Y = F(K,L,H,N,A), where Y is output, K is physical capital, L is labor, H is human capital, N is natural resources, and A is technology. The production function exhibits diminishing returns to scale, which means that increasing all inputs by a certain proportion will increase output by a smaller proportion. The production function also exhibits diminishing marginal product of each input, which means that adding more of one input while holding other inputs constant will increase output by less and less.
The growth rate of output depends on the growth rates of inputs and technology. The growth rate of inputs depends on factors such as saving, investment, population growth, education, health, and institutions. The growth rate of technology depends on factors such as research and development (R&D), innovation, diffusion, and spillovers. The growth theory models how these factors interact to determine the long-run growth path of an economy. There are two main types of growth models: exogenous growth models and endogenous growth models. Exogenous growth models assume that technology grows at a constant rate that is determined outside the model. Endogenous growth models assume that technology grows at a variable rate that depends on endogenous factors such as R&D and human capital. 9160f4acd4