Macroeconomics

Significant Content Updates: The financial crisis and the subsequent slow recovery and the COVID-19 recession increased both student and faculty demand for principles-level content geared toward explaining directly and intuitively why markets and governments fail—sometimes spectacularly—in delivering optimal social outcomes. To satisfy that demand, the presentation of market failures, government failure, and public choice theory has been significantly restructured in Chapters 4 and 5 to allow students to quickly absorb the key lessons regarding externalities, public goods provision, voting paradoxes, the special-interest effect, and other problems that hinder either markets or governments from achieving optimal social outcomes. Faculty teaching macroeconomics will also find that new material on the COVID-19 impact on the Canadian economy.

Improved Efficiency for Instructors Faculty time is precious. To preserve as much of it as possible for the faculty adopting Macroeconomics, the author team went sentence by sentence and section by section, pulling out extraneous examples, eliminating unnecessary graphs, and—in some cases—removing entire sections that faculty reported they didn’t have time to teach. This streamlined presentation frees up faculty time for more advanced classroom activities, including experiments, debates, simulations, and various forms of peer instruction and team-based learning.

"Consider This" and "Last Word" boxed features drive home key ideas in an accessible, student-oriented manner. New examples include "Bitcoin and Cheap Electrons," "Hasta la Vista, Venezuela," and "Fiscal Policy During the COVID-19 Recession."

Guided Peer Instruction (or GPI) is a student-focused, interactive teaching method that has been shown to more than double student understanding relative to “chalk and talk” and other lecture-based presentation formats. Hundreds of in-class questions and answers that can be used to facilitate the peer instruction teaching method pioneered by Eric Mazur of Harvard University.

Application-Based Activities (ABAs) These immersive decision-making simulations are delivered digitally within the Connect platform and put students in the role of everyday economists. Students practice their economic thinking and problem-solving skills as they apply course concepts and see the implications of their decisions as they go. Each activity is designed as a 15-minute experience that can be replayed by eager students to build intuition.

Fundamentals of the Market System Many economies throughout the world are making difficult transitions from planning systems to market systems. Our detailed description of the institutions and operation of the market system in Chapter 2 (The Market System and the Circular Flow) is even more relevant than before. We pay particular attention to property rights, entrepreneurship, freedom of enterprise and choice, competition, and the role of profits, because these concepts are often misunderstood by beginning students.

Early and Extensive Treatment of Government The public sector is an integral component of modern capitalism. This book introduces the role of government early. Chapter 4 (Market Failures Caused by Externalities and Asymmetric Information) systematically discusses public goods and government policies toward externalities. Chapter 5 (Public Goods, Public Choice, and Government Failure) details the factors that cause government failure.

Step-by-Step, Two-Path Macro As in the previous edition, our text continues to be distinguished by a systematic step-by-step approach in developing ideas and building models. Explicit assumptions about price and wage stickiness are posited and then systematically peeled away, yielding new models and extensions, all in the broader context of growth, expectations, shocks, and degrees of price and wage stickiness over time.
In crafting this step-by-step macro approach, we took care to preserve the two-path macro that many instructors appreciated. Instructors who so choose can bypass the immediate short-run model (Chapter 11) and proceed without loss of continuity directly to the short-run AD-AS model (Chapter 12), fiscal policy, money and banking, monetary policy, and the long-run AD-AS analysis.

Emphasis on Technological Change and Economic Growth This edition continues to emphasize economic growth. Chapter 1 (Limits, Alternatives, and Choices) uses the production possibilities curve to show the basic ingredients of growth. Chapter 8 (Economic Growth) discusses the causes of growth, looks at productivity growth, and addresses some controversies surrounding economic growth. The Last Word in that chapter examines how the substantial rise in the number of women in the paid labour force has increased economic growth in Canada. Bonus Chapter 18B focuses on developing countries and the growth obstacles they confront.