Modern Monetary Theory and Practice: An Introductory Text

Modern Monetary Theory and Practice: An Introductory Text is an introductory textbook for university-level macroeconomics students. It is based on the principles of Modern Monetary Theory (MMT) and includes the following detailed chapters: Chapter 1: Introduction Chapter 2: How to Think and Do Macroeconomics Chapter 3: A Brief Overview of the Economic History and the Rise of Capitalism Chapter 4: The System of National Income and Product Accounts Chapter 5: Sectoral Accounting and the Flow of Funds Chapter 6: Introduction to Sovereign Currency: The Government and its Money Chapter 7: The Real Expenditure Model Chapter 8: Introduction to Aggregate Supply Chapter 9: Labour Market Concepts and Measurement Chapter 10: Money and Banking Chapter 11: Unemployment and Inflation Chapter 12: Full Employment Policy Chapter 13: Introduction to Monetary and Fiscal Policy Operations Chapter 14: Fiscal Policy in Sovereign nations Chapter 15: Monetary Policy in Sovereign Nations It is intended as an introductory course in macroeconomics and the narrative is accessible to students of all backgrounds. All mathematical and advanced material appears in separate Appendices. Chapter 1: Introduction 16 1.1 What Is Economics? Two Views 17 1.2 What is Macroeconomics? 24 1.3 Macro and the Public Purpose 30 Appendix: Advanced Material 35 Chapter 2: How to Think and Do Macroeconomics 39 2.1 Introduction 2.2 Thinking in a Macroeconomic Way 40 2.3 What Should a Macroeconomic Theory be Able to Explain? 45 Appendix 56 Chapter 3: A Brief Overview of Economic History and the Rise of Capitalism 58 3.1 Introduction 3.2 An Introduction to Monetary Capitalism 59 3.3 Tribal Society 60 3.4 Slavery 61 3.5 Feudalism 62 3.6 Revolts and the Transition to Capitalism 63 3.7 Capitalism 65 3.8 Monetary Capitalism 67 3.9 Global Capitalism 68 3.10 Economic Systems of the Future? 69 Chapter 4: The System of National Income and Product Accounts 73 4.1 Measuring National Output 75 4.2 Components of GDP 78 4.3 Equivalence of Three Measures of GDP 80 4.4 GDP versus GNP 4.5 Measuring Gross National Income 81 4.6 GDP Growth and The Price Deflator 82 4.7 Measuring CPI inflation 84 4.8 Measuring National Inequality 88 Appendix: Advanced Material 90 Chapter 5: Sectoral Accounting and the Flow of Funds 95 5.1 Introduction 5.2 The Sectoral Balances View of the National Accounts 96 5.3 Revisiting Stocks and Flows 100 5.4 Integrating NIPA, Stocks, Flows and the Flow of Funds Accounts 104 5.5 Balance Sheets 109 5.6 The Flow of Funds Matrix 113 Appendix 115 Chapter 6: Introduction to Sovereign Currency: The Government and its Money 122 6.1 Introduction 6.2 The National Currency (Unit of Account) 124 6.3 Floating versus Fixed Exchange Rate Regimes 129 6.4 IOUs Denominated in National Currency: Government and Non-Government 130 6.5 Use of the Term ‘Money’: Confusion and Precision 134 Chapter 7: The Real Expenditure Model 135 7.1 Introduction 136 7.2 Aggregate Supply 137 7.3 Aggregate Demand 138 7.4 Private Consumption Expenditure 139 7.5 Private Investment 143 7.6 Government Spending 144 7.7 Net Exports 146 7.8 Total Aggregate Expenditure 147 7.9 Equilibrium National Income 150 7.10 The Expenditure Multiplier 153 Chapter 8: Introduction to Aggregate Supply 162 8.1 Introduction 8.2 Some Introductory Concepts 163 8.3 Price Determination 167 8.4 The General Aggregate Supply Function 170 8.5 Some Properties of the General Aggregate Supply Function (AS) 171 8.6 Factors Affecting Aggregate Output per Hour 172 Chapter 9: Labour Market Concepts and Measurement 179 9.1 Introduction 9.2 Measurement 180 9.3 Categories of Unemployment 186 9.4 Broad Measures of Labour Underutilisation 188 9.5 Flow Measures of Unemployment 191 9.6 Duration of Unemployment 193 9.7 Hysteresis 195 Appendix: Advanced Material 197 Chapter 10: Money and Banking 201 10.1 Introduction 10.2 Some Definitions 202 10.3 Financial Assets 203 10.4 What do Banks Do? 205 Appendix: Advanced Material 213 Chapter 11: Unemployment and Inflation 215 11.1 Introduction 217 11.2 What is Inflation? 218 11.3 The Quantity Theory of Money 219 11.4 The Phillips Curve 223 11.5 The Accelerationist Hypothesis and the Expectations-Augmented Phillips Curve 227 11.6 Hysteresis and the Phillips Curve Trade-Off 232 11.7 Underemployment and the Phillips Curve 234 11.8 Demand-Pull and Cost-Push Inflation 237 11.9 The Conflict Theory of Inflation 240 11.10 Raw Material Price Increases 11.11 Cost-Push and Demand-Pull Inflation Summary 243 11.12 Incomes Policies 244 Appendix: Advanced Material 246 Chapter 12: Full Employment Policy 259 12.1 Introduction 261 12.2 Full Employment as a Policy Goal 262 12.3 Unemployment Buffer Stocks and Price Stability 264 12.4 Employment Buffer Stocks and Price Stability 267 12.5 Alternative Policies for Promotion of Employment 276 Appendix: Advanced Material 279 Chapter 13: Introduction to Monetary and Fiscal Policy Operations 292 13.1 Introduction 13.2 The Central Bank 293 13.3 The Treasury 295 13.4 Coordination of Monetary and Fiscal Operations 298 13.5 Taxes and Sovereign Spending 303 13.6 Currency Sovereignty and Policy Independence 305 Appendix: Advanced Material 307 Chapter 14: Fiscal Policy in Sovereign Nations 312 14.1 Introduction 14.2 Functional Finance versus Sound Finance 313 14.3 Fiscal Policy Debates: Crowding Out and (Hyper)Inflation 318 14.4 The Debt Sustainability Debate 327 14.5 Conclusion: MMT and Fiscal Policy 329 Chapter 15: Monetary Policy in Sovereign Nations 332 15.1 Introduction 15.2 Modern Banking Operations 334 15.3 Interest Rate Targets versus Monetary Targets 335 15.4 Liquidity Management 337 15.5 Implementation of Monetary Policy 339 15.6 Unconventional Forms of Monetary Policy 340 15.7 Monetary Policy in Practice 342 15.8 The Advantages and Disadvantages of Monetary Policy 343 15.9 Central Bank Independence 344 15.10 Horizontal and Vertical Operations: An Integration 345 Chapter 16: Policy in an Open Economy: Exchange Rates, Balance of Payments and Competitiveness 350 16.1 Introduction 16.2 The Balance of Payments 352 16.3 Essential Concepts 356 16.4 Aggregate Demand and the External Sector – Revisited 363 16.5 Trade in Goods and Services, Product Market Equilibrium and the Trade Balance 365 16.6 Currency Crises 369 16.7 Capital Controls Appendix: Advanced Material 379 Appendix: Methods, Tools and Techniques 382 A.1 Overview 383 A.2 Basic Rules of Algebra 384 A.3 A Simple Macroeconomic Model 386 A.4 Graphical Depiction of a Macroeconomic Model 388 A.5 Power Series Algebra and The Expenditure Multiplier 391 A.6 Index Numbers 392 A.7 Annual Average Growth Rates 396 A.8 Textbook Policy Regarding Formalism 397 25