Labor strike, 129
Labor supply
shifts, of curve, 697–698
wages and, 696–697
work versusleisure, 695–696
Labor supply curve, shifts of,
697–698
Labor unions, 129–130
Laffer curve, 357
Land, 3
Land, capital markets and
demand in, 690–691
equilibrium in, 692
marginal productivity theory,
692–693
supply in, 691–692
Latin America
economic growth, 381–382
human capital, 386
transfer payments, 412
Law of demand,50, 173
income effect, 459–460
substitution effect, 458–459
Law of supply, 60
LeBron, James, 4–5
Lehman Brothers, 260
Leisure, 696
Level of prices, 134–138
Leverage, 258
Liability, 224
banks, 244
Federal Reserve, 264–265
implicit, 303–304
License, 88
Lieberman, Joseph, 393
Life insurance company, 228
Life-cycle hypothesis, 166
The Limits to Growth(Club of
Rome), 389
Linear curve, slope of, 37–38
Linear relationship, 36
Liquid, 226
Liquidity, 225–226
Liquidity preference model
of the interest rate,
273–274, 284–286
Liquidity trap,339–340, 347
Lira, Turkey, 322
Loan,224, 226
Loanable funds
capital inflow, 281, 413–415
demand for, 278
demand shifts, 280–281, 444
financial account, 413–414
Fisher effect, 283
government borrowing, 280
inflation, 282–284
interest rates, 277–286
supply of, 279
supply shifts, 281–282, 444
Loanable funds market,
277–286, 413–414, 444
Loanable funds model,
413 – 414
Loan-backed securities, 227
Long run, 542
Long-run aggregate supply
curve (LRAS),
184 –187, 444
classic model of the price
level, 322–323
long-run economic growth,
399–401
long-run macroeconomic
equilibrium, 194
money supply increase,
316 –317
versusshort-run, 186–187
Long-run average total cost,
562, 564
Long-run average total cost
curve,561–562
Long-run costs
concepts and measures, 564
returns to scale, 562–563
versusshort-run, 559–563
sunk costs, 563–564
Long-run economic growth,
365–371. See also
Economic growth
AD-AS model, 399–400
long-run aggregate supply
curve, 399–401
macroeconomic models,
396–401
production possibilities
curve, 396–400
productivity, 370–371
real GDP per capita, compar-
ison, 379–383
versusshort-run fluctuations,
400–401
sources, 370–371
Long-run industry supply
curve,601–605
Long-run macroeconomic
equilibrium,194 –196
Long-run market equilibri-
um,601–603, 605
Long-run Phillips curve
(LRPS), 335 –33 7
Long-Term Capital
Management (LTCM),
258
Long-term interest rates, 270
Loss, 533
Lost Decade, 340–341
Lottery, present value and, 241
LRAS.SeeLong-run aggregate
supply curve
LTCM (Long-Term Capital
Management), 258
Lucas, Robert, 352
Lump-sum tax,211, 508M
M1, M2, 234–235, 243, 268
Macroeconomic analysis
initial effects, 441–442, 445
long-run effects, 441–442,
445–446
pivotal event, 441– 445scenario analysis, 446–448
secondary effects, 441–442,
445–446
starting point, 441–443
structure for, 441–446
Macroeconomic models
classical, 343–344, 355–357
classicalversusKeynesian,
345
Keynesian, 344–347, 355–357
modern consensus, 355–359
monetarism, 355–357
monetary policy versusfiscal
policy, 355–357
natural rate hypothesis,
350–351
new classical economics, 351,
356
new Keynesian economics,
352, 356
political business cycle, 351
rational expectations, 352
real business cycle theory,
352–353
supply-side economics, 357
Macroeconomic policy
activism, 346
Macroeconomics, 5
exchange rates, 435–439
five key questions, 355–359
international business cycle,
438
introduction, 10–14
long-run economic growth,
396–401
versusmicroeconomics, 5
open-economy, 407
policy, 199–201
Mad Money, 295
Maddison, Angus, 385
Malthus, Thomas, 378, 389
Marc, 436
Marginal analysis, 3
Marginal benefit, 3, 537
Marginal cost, 3, 537, 550–552,
564
Marginal cost curve,
538–539, 554, 556–557
Marginal cost pricing, 757
Marginal decisions, 3
Marginal external benefit,
738
Marginal external cost,
739–740
Marginal factor cost, 703
Marginal factor cost of labor
(MFCL),700–702
Marginal physical product, 683
Marginal private benefit, 738
Marginal private cost,
739–740
Marginal product, 543
factor demand and, 684–686
value of, 682–684, 703
Marginal product of labor,
543–545, 682–683Marginal productivity
theory of income
distribution,692–693,
711
discrimination, 714–715
efficiency wages, 714
market power, 713 –714
objection to, 716–717
viability of, 717
wage disparities in practice,
715 –716
wage inequality and, 711–713
Marginal propensity to con-
sume (MPC),
159–160, 162–164
Marginal propensity to save
(MPS),159 –160
Marginal rate of substitution
(MRS),792–795,
797–799
Marginal revenue,537–538,
608–612
Marginal revenue curve,
538–539
Marginal revenue product, 703
Marginal revenue product of
labor (MRPL), 700
Marginal social benefit of a
good, 738
Marginal social benefit of
pollution,724–725
Marginal social cost of a
good,739–740
Marginal social cost of pollu-
tion, 724
Marginal utility, 513 –514
Marginal utility curve, 513
Marginal utility per dollar,
518–521
Marginally attached workers,
120
Market basket,142–145, 147,
425–426
Market, definition of, 48
Market demand curve, 55
Market economy, 2
Market equilibrium, 67
Market failure, government
and, 723
Market power, 713–714
Market price, 67–69, 590–592
Market share, 569
Market structure, types of,
567–575
Market supply curve, 64
Market-clearing price,66.See
alsoEquilibrium price
Martin, William McChesney,
255, 358
Mauritius, economic growth,
383
Maximum,of curve, 40
McCain, John, 393
McDonald’s, 54, 271–272
Big Mac index, 425–426
Montana, 124INDEX I-7