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About the Book

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    Principles of Macroeconomics is focused on the material that students need to cover in a first introductory course. It is slightly more compact than the majority of introductory macroeconomics books in the Canadian marketplace. Decades of teaching experience and textbook writing has led the authors to avoid the encyclopedic approach that characterizes the recent trends in textbooks.

    Consistent with this approach, there are no appendices or ‘afterthought’ chapters. If important material is challenging then it is still included in the main body of the text; it is not relegated elsewhere for a limited audience; the text makes choices on what issues and topics are important in an introductory course. This philosophy has resulted in a Macro book of just 13 chapters, with three introductory chapters common to both our Principles of Microeconomics and Principles of Macroeconomics books.

    Examples are domestic and international in their subject matter and are of the modern era – financial markets, monetary and fiscal policies aimed at inflation and debt control, globalization and the importance of trade flows in economic structure and concerns about slow growth and the risk of deflation are included. 1 2 About the Authors The title is intended to be informative. Students are introduced to the concepts of models early, and the working of such models is illustrated in every chapter. While this book avoids calculus and uses algebra sparingly, it still aims to be rigorous. In contrast to many books on the market that simply insert diagrams and discuss concepts in a diagrammatic framework, our books develop and analyze key concepts and relations by introducing numerical and empirical examples at the outset. Students are introduced immediately to the practice of taking a set of data, examining it numerically, plotting it and thinking about how it illustrates a concept or relationship. The process is not difficult but it is rigorous and stresses the link between empirical observation, economic theory, models and policy. Hence numerical examples, diagrams, and straight line equations and are introduced early and are used throughout.

    Structure of the Text

    Principles of Macroeconomics provides complete, concise coverage of introductory macroeconomic theory and policy. It examines the Canadian economy as an economic system, and embeds current Canadian institutions and approaches to monetary policy and fiscal policy within that system. Particular attention is given to the recent structure, performance, and evolution of the Canadian economy, and to the current targets and instruments of Canadian monetary and fiscal policy. These are exciting and challenging times in which to study macroeconomics. We focus on shortrun macroeconomic performance, analysis, and policy motivated by the recessions of the early 1980s and 1990s, the financial crisis and recession of 2008-2009, and the prolonged recovery that is still incomplete in several industrial countries in 2017. To that end, the text examines macroeconomic institutions, performance, and policies in ways that help students understand and evaluate critically the news media coverage and broader public discussion of:

    • Recessions and recoveries, unemployment, inflation, deflation and conditions in financial markets—topics of ongoing reporting, discussion, and debate.
    • Monetary and fiscal policy announcements and discussions focused on inflation targets, interest rate settings, budget balances, tax rates, expenditures, and public debt targets as these affect economic performance.
    • Exports, imports, international capital flows, foreign exchange rates, commodity prices and the importance of the international sector of the Canadian economy.
    • Economic growth, productivity growth, and the importance of productivity growth for standards of living in Canada and other countries.

    A basic modern Aggregate Demand and Supply model of real GDP and the inflation rate is developed based on:

    • Expenditure decisions by households and businesses in an open economy.
    • Government sector expenditures, taxes and budgets.
      • Current Canadian monetary policy based on inflation targets, interest rate policy in- 3 struments, and current Bank of Canada operating techniques, including the potential for quantitative or credit easing.
      • Current Canadian fiscal policy based on deficit and debt control targets, the government’s budget function, the temporary shift to fiscal stimulus in 2009, the subsequent fiscal austerity designed to achieve a balanced budget by 2015 and the implications for economic performance and the public debt.

    Numerical examples, diagrams, and basic arithmetic are used in combination to illustrate and explain economic relationships. Students learn about: The importance of consumption, capital expenditures, and government budgets; money supply; financial asset prices, yields, and interest rates; employment and unemployment; and other key relationships in the economy. Canadian and selected international data are used to provide real world examples and comparisons.

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