Preface to the Second Edition

Macroeconomics is designed to explain the developments in the world economy and to predict its future course. Significant changes that have occurred in the macroeconomic world since the publication of our first edition in 2001, along with encouraging feedback from the users of the text have prompted us to go for a revision of the first edition in such a short period of time.

The revised edition presents a thorough overhaul of the earlier version. Among the major aspects of this revision include:

(a) Addition of a new chapter on Business Cycles, Stabilisation Policies and Economic Models (Chapter 10)

(b) Addition of new topics/concepts like:

• Public Goods and Externalities (Chapter 1),
• New Money Measures and Liquidity Measures (Chapter 4),
• Hall Consumption Theory (Chapter 5),
• Globalisation and Business Process Outsourcing (Chapter 7),
• International Financial Institutions (Chapter 7),
• Interest Parity Theorems (Chapter 7),
• Ideal Foreign Exchange Rate System (Chapter 7),
• Current and Capital Account Convertibility (Chapter 7),
• Dollarisation, Currency Board and Currency Union (Chapter 7),
• Exchange Rate Systems (Chapter 7),
• Overshooting Theory (Chapter 7),
• Regulation of Money Supply (Chapter 8),
• Liquidity Adjustment Facility and Repo Rate (Chapter 8),
• Applications of the Keynesian Model (Chapter 11),
• International Trilemma and Pump Priming (Chapter 12),
• Foreign Exchange Rate Mechanism (Chapter 12),
• Fiscal Policy vs. Monetary Policy (Chapter 12),
• Core Inflation (Chapter 14),
• Evidences on Sources of Economic Growth (Chapter 15),
• Limits to Economic Growth (Chapter 15), and
• Economics as a Dismal Science (Chapter 16)

(c) Addition of new graphs, particularly in chapters on Consumption (Chapter 5), Investment (Chapter 6), Foreign Trade and Exchange Rate (Chapter 7), and Money Demand and Supply functions (Chapter 8)

(d) Incorporation of new developments in theory and real life examples from a cross section of countries through all the chapters in the text

(e) Elaboration of hitherto rather briefly explained topics/ideas through out the text, like

• Methodology in Economics (Chapter 1),
• Macroeconomic Goals and Instruments (Chapter 1),
• Income and Welfare (Chapter 2),
• Determinants of Consumption (Chapter 5),
• Determinants of Investment (Chapter 6),
• Foreign Exchange Rate System (Chapter 7),
• Instruments of Monetary Policy (Chapter 8),
• Phillips Curve (Chapter 9),
• Open Economy (Chapter 11),
• Fiscal Policy and Public Debt (Chapter 11),
• Endogenous Growth Theory (Chapter 15),

(f) Updating of all the data and inclusion of relevant additional data from a cross- section of countries

(g) A reorganisation of the text—hitherto Chapter 14 on Unemployment and Inflation: Causes, Consequences and Cures now precedes the chapter on Economic Growth and form a part of part III

(h) Learning tools:

• A new Appendix (Appendix-II) with 51 fill in the blanks questions;
• Expansion of Appendix-I with the addition of 51 multiple choice questions; and
• Addition of new questions/problems at the chapter-end discussion question section.

The new release is significantly larger in coverage and size, and I am confident that the students and faculty would find it very satisfying.

Acknowlegements

No good work flows without the help from professional colleagues, clients, complementary organisations, friends and family members. My colleagues and students at IIM (Ahmedabad), IIT (Bombay) and Institute of Management, Nirma University of Science and Technology (Ahmedabad), and professional friends all over the country, among many others, had offered critical suggestions for this review. Useful suggestions were also received from three anonymous reviewers whose comments were solicited by my publishers.

I would also like to thank my publisher Tata McGraw-Hill, particularly the cooperation and encouragement provided by Mr Biju Kumar, Mr Tapas K Maji, Mr Niju Sreedharan, Ms Somomita Taneja and Ms Deepa NK.

I am also thankful to my family members, especially my son-in-law Raghav and son Manish who not only provided the useful infrastructure, but also the necessary assistance in drawing all the new graphs and handling other technical matters. My wife Lalita’s support, as always, remained invaluable not only in all the logistic but also in correspondence and proofs. Mention should also be made about my other children and grandchildren who had provided all the emotional support while working on this revision amidst them. The whole revision work was carried out while I was on leave without pay from the Nirma University.

Working on this edition has surely added value to my understanding of economics as well as to my typing and computer skills. As usual, I solicit critical observations and suggestions from all professionals and students. Needless to say, I am very happy to see this work going to the press and I sincerely hope that it pleases my audience.

G S GUPTA