CHAPTER 1 Introduction KEY IDEAS IN THIS CHAPTER 1. The primary questions of interest in macroeconomics involve the causes of long-run growth and business cycles and the appropriate role for government policy in influencing the economic performance of a nation. 2. Modern macroeconomics analyzes issues associated with long-run growth and business cycles, using models that are based on microeconomic principles. 3. Macroeconomists rely primarily on abstract models to draw conclusions about how the macroeconomy works because it is usually very costly or impossible to experiment with the real world economy. 4. There is relatively little disagreement among macroeconomists concerning approaches to modeling economic growth, but there are contentious issues in modeling business cycles.
NEW IN THE SEVENTH EDITION 1. Charts and tables have been updated. 2. Revisions were required to include information on the Global Pandemic.
TEACHING GOALS Macroeconomics is a field of economics that primarily studies economic growth and business cycles. Over time, there has been an upward trend in the standard of living. However, such growth can be erratic. There are some periods of rapid growth, some periods of rather anemic growth, and also some periods of temporary economic decline. Explanations for the overall upward trend in standards of living are the subject of economic growth analysis. Explanations of variations in growth over shorter time horizons are the subject of business cycle analysis. Students should be able to distinguish between microeconomic topics and macroeconomic topics. Students should understand the distinction between growth analysis and business cycle analysis. Although microeconomics and macroeconomics are separate branches of study, both branches are guided by the same set of economic principles. Standard economic theory is guided by the assumption of maximizing behaviour. As a first approximation, we therefore view the macroeconomy as a collection of markets with maximizing Copyright Β© 2026 Pearson Canada Inc.
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