Christopher T.S. Ragan - Macroeconomics, Sixteenth Canadian Edition, 16/e

SIXTEENTH CANADIAN EDITION

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Applying Economic Concepts image: Krizde/Shutterstock

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Extensions in Theory image: Den Rise/Shutterstock

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978-0-13-483582-2

Library and Archives Canada Cataloguing in Publication

Ragan, Christopher T. S., author Macroeconomics / Christopher T.S. Ragan, McGill University. Sixteenth Canadian edition.

Includes index.

Issued in print and electronic formats.

ISBN 978-0-13-483582-2 (hardcover).ISBN 978-0-13-522072-6 (looseleaf).

ISBN 978-0-13-523344-3 (HTML)

1. MacroeconomicsTextbooks. 2. MacroeconomicsCanada

Textbooks. 3. Textbooks. I. Title. II. Title: Ragan macroeconomics.

HB172.5.R35 2019 339 C2018-905868-4 C2018-905869-2

1. Applying Economic Concepts

2. Lessons from History

3. Extensions in Theory

Economics is a living discipline, changing and evolving in response to developments in the world economy and in response to the research of many thousands of economists throughout the world. Through sixteen editions, Macroeconomics has evolved with the discipline. Our purpose in this edition, as in the previous fifteen, is to provide students with an introduction to the major issues facing the worlds economies, to the methods that economists use to study those issues, and to the policy problems that those issues create. Our treatment is everywhere guided by three important principles:

1. Economics is scientific, in the sense that it progresses through the systematic confrontation of theory by evidence. Neither theory nor data alone can tell us much about the world, but combined they tell us a great deal.

2. Economics is relevant and it should be seen by students to be so. An understanding of economic theory combined with knowledge about the economy produces many important insights about economic policy. Although we stress these insights, we are also careful to point out cases in which too little is known to support strong statements about public policy. Appreciating what is not known is as important as learning what is known.

3. We strive always to be honest with our readers. Although we know that economics is not always easy, we do not approve of glossing over difficult bits of analysis without letting readers see what is happening and what has been assumed. We take whatever space is needed to explain why economists draw their conclusions, rather than just asserting the conclusions. We also take pains to avoid simplifying matters so much that students would have to unlearn what they have been taught if they continue their study beyond the introductory course. In short, we have tried to follow Albert Einsteins advice:

   Everything should be made as simple as possible, but not simpler.

In writing the sixteenth edition of Macroeconomics, we have tried to reflect the major economic issues that we face in the early twenty-first century.

One of the most fundamental economic issues is the determination of overall living standards. Adam Smith wondered why some countries become wealthy while others remain poor. Though we have learned much about this topic in the 240 years since Adam Smiths landmark work, economists recognize that there is still much we do not know.

Technological change plays a central role in our discussion of long-run economic growth in . We explore not only the traditional channels of saving, investment, and population growth, but also the more recent economic theories that emphasize the importance of increasing returns and endogenous growth.

We are convinced that no other introductory economics textbook places as much emphasis on technological change and economic growth as we do in this book. Given the importance of continuing growth in living standards and understanding where that growth comes from, we believe this emphasis is appropriate. We hope you agree.

The collapse of U.S. housing prices in 2007 led to a global financial crisis the likes of which had not been witnessed in a century, and perhaps longer. A deep recession, experienced in many countries, followed quickly on its heels. These dramatic events reawakened many people to two essential facts about economics. First, modern economies can and do go into recession. This essential fact had perhaps been forgotten by many who had become complacent after more than two decades of economic prosperity. Second, financial markets are crucial to the operation of modern economies. Like an electricity system, the details of financial markets are a mystery to most people, and the system itself is often ignored when it is functioning properly. But when financial markets cease to work smoothly and interest rates rise while credit flows decline, we are all reminded of their importance. In this sense, the financial crisis of 20072008 was like a global power failure for the world economy.