Hallmark Features

• UPDATED! Figures and tables have been updated using the latest data available.

Content Changes by Chapter

• REVISED! Presentation of the IS-LM. The traditional treatment of monetary policy assumed that central banks chose the money supply and then let the interest rate adjust. Now however, central banks choose the interest rate and then let the money supply adjust. In terms of the IS-LM model used to describe the short run, the LM curve, instead of being upward sloping, should be treated as flat. This makes for a more realistic and a simpler model (Chapter 5).
• Focus on the role of the financial system in the economy. The text extends the IS-LM model to allow for two interest rates―the interest rate set by monetary policy and the cost of borrowing for people or firms, with the state of the financial system determining the relation between the two (Chapter 6).
• An IS-LM-PC (Phillips curve) model replaces the traditional aggregate supply and aggregate demand model, and gives a simpler and more accurate description of the role of monetary policy and of output and inflation dynamics (Chapter 9).
• Coverage of the constraints on monetary policy, coming from the zero lower bound, and the constraints on fiscal policy, coming from the high levels of public debt, has been added.
• UPDATED! Focus boxes, include:
  • Unemployment and Happiness (Chapter 2)
  • The Liquidity Trap in Action (Chapter 4)
  • Bank Runs (Chapter 6)
  • Changes in the U.S. Natural Rate of Unemployment since 1990 (Chapter 8)
  • Okun’s Law, and Deflation in the Great Depression (Chapter 9)
  • The Construction of PPP Numbers (Chapter 10)
  • The Long View: Technology, Education, and Inequality (Chapter 13)
  • The Yield Curve, the Zero Lower Bound, and Lift-off (Chapter 14)
  • The Disappearance of Current Account Deficits in Euro Periphery Countries: Good News or Bad News? (Chapter 18)
  • Euro Area Fiscal Rules: A Short History (Chapter 21)
  • Money Financing and Hyperinflations, and Should You Worry about U.S. Public Debt (Chapter 22)

Also Available with Pearson MyLab Economics^®

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• UPDATED! Real-time Data Analysis Exercises. Easy to assign and automatically graded, Real-Time Data Analysis exercises use up-to-the-minute, real-time macroeconomic data. These exercises communicate directly with the Federal Reserve Bank of St. Louis’s FRED site, so every time FRED posts new data, students see new data. As a result, Real-Time Data Analysis exercises offer a no-fuss solution for instructors who want to make the most recent data a central part of their macro course. Real-Time Data Analysis exercises are available in the latest Principles of Economics (all versions), Intermediate Macroeconomics, and Money & Banking courses.