Mainstream Macroeconomic Theory and the Expectational Phillips Curve
Introduction
The last chapter discussed some of the main macroeconomic measurements, such as GDP, economic growth, inflation, unemployment, and the business cycle. This chapter examines the theoretical cause–effect relation among those economic indicators. This chapter considers some of the major factors that affect GDP, economic growth, unemployment, inflation, and the business cycle. Basic macroeconomic theory provides a foundation for an examination of political business cycle effects in later chapters.
A model is a mathematical or graphical representation of a theory. Economic models attempt to explain and predict cause–effect patterns among economic variables. ...
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