by Jagdish Handa (McGill University, Canada)

This book presents the stylized facts on the important variables (output, inflation, money supply and interest rates, etc.) of the macro economy and uses them to differentiate how well particular economic theories perform or fail to do so. On the determination of aggregate demand, this book presents two approaches: the traditional IS-LM analysis under the assumption that the money supply is exogenous because the central bank uses its monetary policy to control it, and the emerging IS-IRT analysis under the assumption that the interest rate is the exogenous monetary policy variable set by the central bank to manipulate aggregate demand in the economy. The IS-IRT analysis is important for the macro analyses of many economies, yet is totally neglected in most textbooks on macroeconomics. The chapter on Paradigms in Economics introduces students to the heritage of ideas in macroeconomics, and the evolution of ideas and approaches over the last two centuries. It also provides the justification for the simultaneous relevance of both Classical ideas and Keynesian ones. The two growth theory chapters go beyond the Solow growth model to cover the broad evolution of growth from Malthus's theory to the present endogenous approaches, and the link between money supply, inflation and growth over very long periods.

• Introduction: Output, Money Supply and Inflation, Balance of Payments and Exchange Rates
• Determinants of Aggregate Demand in the Open Economy Under an Interest Rate Target (IS-IRT Analysis) and a Money Supply Target (IS-LM Analysis)
• Output in the Long Run and the Short Run (Under Uncertainty, Expectations and Adjustment Costs)
• Actual Output, Disequilibrium and Interaction Among Markets
• Unemployment and Inflation
• Classical and Keynesian Paradigms in Economics
• Selected Open Economy Topics: J Curve, IMF, Globalization and Dollarization
• Classical Growth Theory
• Advanced Topics in Growth Theory: Endogenous Technical Change and Financial Factors in Growth
• Business Cycles and Economic Crisis
• The Role of Credit in the Economy, and Its Contribution to Financial and Economic Crisis