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MACROECONOMICS

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We have designed this book to be a supplement to Robert J. Barro’sMacroeconomics, which is the textbook that is used in introductory macroeconomics courses at the University of Chicago. In teaching these courses, we have found that Barro’s treatment of the subject does not make use of the mathematical skills of our students. In particular, Barro relies almost exclusively on economic intuition and graphs to elucidate his subject. Since our students are familiar with calculus, we are able to work out formal models. This almost always allows greater concreteness and concision | MACROECONOMICS 1880 1900 1920 1940 1960 1980 2000 Matthias Doepke University of Chicago Andreas Lehnert Board of Governors of the Federal Reserve System Andrew W. Sellgren George Mason University This book was typeset in Palatino and Computer Modern using lAT X. Draft of 1 September 1999. Chapters 5 8 9 and 11 Copyright 1999 by Matthias Doepke. Chapters 10 12 13 14 17 18 and 19 Copyright 1999 by Andreas Lehnert. Chapters 1 2 3 4 6 and 15 Copyright 1999 by AndreW W. Sellgren. All rights reserved. No part of this work may be reproduced in any form by any electronic or mechanical means including but not limited to photocopying recording or information storage and retrieval without permission in writing from the copyright owner. The authors permit faculty students and staff of the University of Chicago to copy and distribute any part of this work for use in classes taught at the University of Chicago. Preface We have designed this book to be a supplement to Robert J. Barro s Macroeconomics which is the textbook that is used in introductory macroeconomics courses at the University of Chicago. In teaching these courses we have found that Barro s treatment of the subject does not make use of the mathematical skills of our students. In particular Barro relies almost exclusively on economic intuition and graphs to elucidate his subject. Since our students are familiar with calculus we are able to work out formal models. This almost always allows greater concreteness and concision. We have attempted to align our chapters with those in Barro s textbook. Sometimes our chapters present mathematical versions of the models that Barro introduces in his corresponding chapters as in Chapters 2 and 19 . Other times our chapters contain material that extends his work as in Chapters 5 and 17 . Throughout we have tried to add value to the treatment in Barro s book and to minimize redundancy. For example we have nothing to add to Barro s Chapters 7 16 and 20 so we have not covered those