Principles of Macroeconomics (12th Edition)

Book Preface

Our goal in the 12th edition, as it was in the first edition, is to instill in students a fascination with both the functioning of the economy and the power and breadth of economics. The first line of every edition of our book has been “The study of economics should begin with a sense of wonder.” We hope that readers come away from our book with a basic understanding of how market economies function, an appreciation for the things they do well, and a sense of the things they do poorly. We also hope that readers begin to learn the art and science of economic thinking and begin to look at some policy and even personal decisions in a different way.

What’s new in This edition?

• The 12th edition has continued the changes in the Economics in Practice boxes that we began several editions ago. In these boxes, we try to bring economic thinking to the concerns of the typical student. In many cases, we do this by spotlighting recent research, much of it by young scholars. Some of the many new boxes include:

– Chapter 3 uses behavioral economics to ask whether having unusually sunny weather increases consumer purchasess of convertible cars.

– In Chapter 7 we look at new research on how individuals unemployed as a result of a recession spend their time. How much of that new time goes to job search versus other activities?

– In Chapter 14 we describe recent research on how well recessions can be predicted.

– In Chapter 20 we describe work that uses children’s height in India to examine hunger and gender inequality. – Chapter 21, our new chapter, contains three boxes, examining the Moving to Opportunity program, birth weight and infant mortality, and the effects of the minimum wage. In other cases we use recent events or common situations to show the power and breadth of economic models. For example:

– In Chapter 25 we illustrate the role of banks in creating money by describing bank runs in two classic movies and in the legend of Wyatt Earp. It is our hope that students will come to see both how broad the tools of economics are and how exciting is much of the new research in the field. For each box, we have also added questions to take students back from the box to the analytics of the textbook to reinforce the underlying economic principles of the illustrations.

• As in the previous edition, we have reworked some of the chapters to streamline them and to improve readability. In this edition, Chapter 20 has been revised to include more of the modern approach to economic development, including discussion of the millennium challenge.

• A major change in macro in the last edition was to replace the LM curve with a Fed interest rate rule, where the money supply now plays a smaller role in the analysis. Continuing in this spirit, in the current edition we have merged the supply of money and demand for money chapters into one chapter, Chapter 10. This streamlines the analysis and eliminates material that is no longer important.

• We have added a new chapter, Chapter 21, “Critical Thinking About Research,” which we are quite excited about. It may be the first time a chapter like this has been included in an introductory economics text. This chapter covers the research methodology of economics. We highlight some of the key concerns of empirical economics: selection issues, causality, statistical significance, and regression analysis. Methodology is a key part of economics these days, and we have tried to give the introductory student a sense of what this methodology is.

• All of the macro data have been updated through 2014. The slow recovery from the 2008–2009 recession is still evident in these data, as it was in the 11th edition. This gives students a good idea of what has been happening to the economy since they left high school.

• Many new questions and problems at the end of the chapters have been added.