Macroeconomics for Life: Smart Choices for All?

Core Focus

There is considerable agreement among economists about the core of macroeconomic theory. But it’s no secret that economists disagree far more about macro than microeconomics. Consider a few examples:

• Prices and markets adjust towards equilibrium, but how long do the adjustments take?
• Do models focus more on short-run business cycles, or long-run growth?
• Government must enforce property rights, but how big a policy role should government take?

Principles students, who struggle to master basic concepts like GDP, growth, unemployment, inflation, and exchange rates, cannot absorb the disagreements among the differing models of modern macroeconomists. But it is important for students, as citizens, to understand policy differences that they will hear from economists and politicians for the rest of their lives.

Macroeconomics for Life: Smart Choices for All? simplifies and consolidates the disagreements, providing a framework for understanding macroeconomics and thinking about the appropriate role for government policy.

The disagreements are incorporated into what we call the fundamental macroeconomic question:

If left alone by government,
how quickly do the price mechanisms of market economies
adjust to maintain steady growth in living standards, 
full employment, and stable prices?

The two main answers are:

• Markets Quickly Self-Adjust, so Government Hands-Off
• Markets Fail Often, so Government Hands-On

The possibility of two answers is what’s behind the question mark of the subtitle — Smart Choices for All? When macroeconomic smart choices of individual households and businesses are aggregated, does Adam Smith’s invisible hand continue to produce optimal macroeconomics outcomes — steady growth in living standards, full employment and stable prices? Or, with the incorporation of money, banks, expectations, and exchange rates, do markets fail often and produce undesirable outcomes that Keynes highlighted — unemployment, financial bubbles, bankruptcies, and inflation?

Macroeconomic Policy Choices

Macroeconomics for Life covers the traditional, agreed-upon macroeconomic concepts and core theory, using the expanded circular flow (Y = C + I + G + X – IM) and AS/AD models. We encourage students to think about the differing positions not as right or wrong, but as exposing two contrasting ways of looking at the macro economy. Topic by topic, we then present the best arguments behind economists’ Hands-Off and Hands-On positions. These icons reappears as we explore different topics.

Informed and engaged citizens must be able to think critically about these policy differences. Students will hear these policy arguments from politicians for the rest of their lives, and as citizens, must make up their own minds about which position (or combinations of positions) they support.

Beyond helping students master basic concepts and core theory, Macroeconomics for Life: Smart Choices for All?, engages students by giving them agency in thinking about the fundamental macroeconomic question, the answers to which will affect their job prospects, standard of living, investment decisions, mortgage choices … In short, the macroeconomics that will affect their lives.

For more details, request an Instructor Copy and look at the Macro Preface for Instructors.