Macroeconomics

Introduction
Advice on Organizing the Course
vii
X
A Note to Canadian Instructors
xii
xix
Chapter 1.
Vhat is Macroeconomics?
1
Chapter 2.
The Measurement of Income and Prices
7
Chapter 3.
Commodity-Market Equilibrium and the Multiplier
16
Chapter .
Spending, the Interest Rate, and Money
29
Chapter 5.
Strong and Weak Effects of Monetary and Fiscal Policy
37
Chapter 6.
Flexible Prices and the Self-Correcting Economy
46
Chapter 7.
Allowing Both Prices and Output to Change Together
53
Demand Inflation: Its Causes and Cures
62
Chapter 8.
Supply Inflation: Its Causes and Cures
72
Chapter 9.
Unemployment: Causes, Costs, and Policy Options
83
Chapter 10.
The Consequences of Inflation
91
Chapter 11.
The Monetar ist-Nonmonetarist Debate on Policy Activism
99
Chapter 12.
Instability in the Private Economy: Consumption
107
Chapter 13.
Instability in the Private Economy: Investment
115
Chapter 14.
The Demand for Money and the Choice of Monetary Investments
122
Chapter 15.
Federal Reserve Monetary Control and its Limitations
131
Chapter 16.
Introduction
Resding Suggestions by Robert J. Gordon
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INTRODUCTION
About Gordon's Text
The third edition of Robert J. Gordon's Macroeconomics continues to provide an innovative approach to the intermediate macroeconomics course. The text retains the essentials of the conventional IS-LM model but departs from the usual approach in three important ways:
(1) Inflation, unemployment, and their interdependence are accorded the primary attention they deserve. The central core of the text, Part III Chapters 7-11), deals directly with these problems and provides the reader with the analytic tools to understand the problems and performance of the economy in the 1970s and 1980s.
(2) The interpretation of the monetarist-nonmonetarist debate is much approach found than the simplistic inelastic vs. elastic demand-for-money more meaningful in many other texts and puts the controversy into the proper perspective. _This interpretation provides the theme for Parts IV and V (Chapters 12-7) so that the chapters on consumption, investment, money demand, and monetary and fiscal policy are oriented to this debate.
(3) Case studies and examples are used extensively in each chapter. The case studies are integrated with the material in the chapters and the theory is applied to particular historical episodes in illustrative graphs and accompanying text. The reader is made aware that the theoretical models can be applied to the actual economy and are not mere intellectual playthings. Case studies are not developed only for chapters on employment and inflation, but also for the more traditional chapters on the IS-LM model, consumption, investment, and the demand for money.
The success of the first two editions of the text demonstrates that in spite of its sophistication the book is easily comprehensible by upper division under- graduate students. There is not any mathematics above simple algebra and hardly any of that other than in Chapter 3 (Keynesian model) and the appendices to Chapters 3, 5, and 9. Most of the analysis is treated graphically; the clearly labeled curves allow the reader to identify the main variables and under stand how shifting parameters cause the curves to shift.
The third edition contains some significant changes and improvements. New case studies have been added and the examples and data have been revised and updated. Gordon has further clarified the text without loss of any of the text's rigor. A major change is in Chapter 7 where the aggregate supply curve is derived. The concept of the equilibrium real wage is now introduced in that chapter, and the difference between the actual real wage rate and the equilibrium real wage rate and the resulting adjustments is used as a device to
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