Written in an informal colloquial style, this student-friendly Principles of Macroeconomics textbook does not sacrifice intellectual depth in its quest for accessibility. The author’s primary concern is to instill “economic sensibility” in the student. Colander emphasizes the intellectual and historical context to which the economic models are applied.
Distinguishing features found within Colander’s text are:
Cutting Edge and Modern
Colloquial Style Narrative
Focus on Policy
Emphasis on the Importance of Institutions and History
Focus on Modeling: Economics is a method of reasoning, not truths.
Presents Alternative Perspectives in Economics
Selected Changes, by Chapter
Chapter 1: Economics and Economic Reasoning
A new section, “Modern Economics,” has been added. This section introduces methods of economic reasoning and the variety of ways modern economists develop models based on observed data. Modern economics uses a combination of inductive and deductive reasoning to gain insight into the economy. The combination of these two methods is called abduction.
Two new terms introduced in this chapter are: theorems and precepts.
Chapter 6, Thinking Like a Modern Economist
This is a new chapter whose key points are:
Models are the glue that holds economics together; economists differ in the models that they use.
The validity of models is often determined based on its ability to explain real-world data. Thus, models must be tested against the data. This is part of the scientific method.
Modern economists use multiple frames, and carefully distinguish theorems that follow from models, and precepts that rely on theorems, but also on judgments about history, institutions, and the limitations of the models.
Chapter 10, The Aggregate Demand / Aggregate Supply Model
This is Chapter 9 from the 7th edition.
Additional discussion of the historical development of the AS/AD model; emphasizes that AS/AD model does not highlight dynamic feedbacks effects.
Wealth effect is now more narrowly defined as the “money wealth effect.” That is, when price level rises one feels poorer because the money one holds becomes less valuable. This excludes other financial assets.
Add new section, “Dynamic Price Level Adjustment Feedback Effects” that explains how feedback effects from a changing price level (will shift aggregate demand curve) can overwhelm the standard effects (will change quantity of aggregate demand) and destabilize the economy. (See especially Figure 12-8 (29-8)).
New term: deflation
Chapter 11, The Multiplier Model
This is Chapter 10 from the 7th edition.
Introduction now emphasizes that while the AS/AD model downplays dynamic feedback effects, the multiplier model makes them central. Suggests that the AS/AD model is better when economic fluctuations are minimal and multiplier model is better when fluctuations are greater.
Adds example of worldwide recession of 2008 into 2009.
Introduces the multiplier-accelerator model in which changes in output are accelerated because changes in investment depend on changes in income.
New terms: multiplier-accelerator model, multiplier model
Chapter 12, Thinking Like a Modern Macroeconomist
This is a new chapter whose key points are:
Distinguish between the standard macro model and the modern macro model.
Trace the development of the standard and modern models of the economy.
Explain what assumption each of the letters in “DSGE” from the DSGE model represents.
Chapter 13, The Financial Sector and the Demand for Money
This is Chapter 11 from the 7th edition.
Chapter begins with discussion of derivatives, securitization and systemic risk; focus on recent financial crisis
Added section, “Endogenous Money and Credit” which explains how reserves and the money supply are mutually determined. The Fed does not target an interest rate and use the money multiplier to determine the amount of reserves needed.
Discusses increased importance of credit to the economy.
Chapter 14, Monetary Policy
This is Chapter 12 from the 7th edition.
Incorporates the Fed’s response to the financial crisis in 2008.
Updated material to include fact that the Fed began to pay interest on reserves.
New section, “Quantitative easing” discusses how the fed uses tools other than the standard tools to try to expand the economy. Quantitative easing tools includes buying bonds even when the Fed funds rate is already zero and buying other financial assets such as money market funds, corporate bonds, or mortgage-backed securities.
New term: quantitative easing.
Chapter 15, Financial Crises, Panics, and Macroeconomic Policy
This is a new chapter whose key points are:
Explain why economists worry more about the collapse of the financial sector than the collapse of other sectors.
List the three stages of a financial crisis and the three stages of what government must to do get an economy out a financial crisis.
Discuss how herding and leverage can lead to a bubble.
Chapter 17, Deficits and Debt
This is Chapter 15 from the 7th edition.
Section on “Social Security, Medicare, and Lockboxes” moved to an appendix to this chapter.
New section, “The Deficit, the Debt and the Crisis of 2008” that discusses economic situation in late 2008 and early 2009.
Chapter 18, The Modern Fiscal Policy Dilemma
This is Chapter 14 from the 7th edition with a significant revision. The chapter begins with a discussion of evolution of fiscal policy and continues with current fiscal policy problems facing policymakers.
Two main policy approaches are retained—functional finance (active policy when facing depression or hyperinflation) and sound finance (balance the budget).
Section on “New Classical” economics has been replaced with a section about fiscal policy in 2009 and beyond that discusses the financial bailout and stimulus package to address the recession.
Changes Common to All Chapters
“Issues to Ponder” Questions are a new type of question, positioned at the end of the chapters that really challenge the students to think critically at a deeper level and promote discussion of the topics presented.
Fully updated to keep the text as relevant as possible, the facts, figures, and end-of-chapter questions have all been updated with the latest data and examples. Additionally, discussions have been revised to match current interests in the profession, keeping up with the evolution of the economy and economics.
Thinking Like a Modern Economist Boxes have been added throughout the entire text.
Chapter Organization has been modified into a new, more logical order.
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An integrated eBook, allowing for anytime, anywhere access to the textbook.
Dynamic links between the problems or questions you assign to your students and the location in the eBook where that problem or question is covered.
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Connect Features available with this title:
Algorithmically Generated End-of-Chapter Problems
Personal Learning Plan
Student Study Center
Table of Contents
Part 1 Introduction: Thinking Like an Economist Chapter 1 Economics and Economic Reasoning Chapter 2 The Production Possibility Model, Trade, and Globalization Chapter 3 Economic Institutions Chapter 4 Supply and Demand Chapter 5 Using Supply and Demand Chapter 6 Thinking Like a Modern Economist Part 2: Macroeconomics I. Macroeconomic Problems Chapter 7 Economic Growth, Business Cycles, Unemployment, and Inflation Chapter 8 Measuring the Aggregate Economy II. The Macroeconomic Framework Chapter 9 Growth, Productivity, and the Wealth of Nations Chapter 10 The Aggregate Demand/Aggregate Supply Model Chapter 11 The Multiplier Model Chapter 12 Thinking Like a Modern Macroeconomist III. Finance, Money, and the Economy Chapter 13 The Financial Sector and the Economy Chapter 14 Monetary Policy Chapter 15 Financial Crises, Panics, and Macroeconomic Policy Chapter 16 Inflation and the Phillips Curve IV. Taxes, Budgets, and Fiscal Policy Chapter 17 Deficits and Debt Chapter 18 The Modern Fiscal Policy Dilemma V. International Policy Issues Chapter 19 International Trade Policy, Comparative Advantage, and Outsourcing Chapter 20 International Financial Policy Chapter 21 Macro Policy in a Global Setting Chapter 22 Macro Policies in Developing Countries
Study Guide to accompany Macroeconomics ISBN: 0077247272 Author(s): COLANDER
Macroeconomics with Connect Plus ISBN: 0077398084 Author(s): COLANDER