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Macroeconomics cover

Economics

Economics

Macroeconomics

Paul Krugman; Robin Wells

A principles-level macroeconomics textbook known for explaining ideas through stories and real economic episodes. It builds the standard tools for thinking about output, unemployment, inflation and growth, and applies them to fiscal and monetary policy, inflation and disinflation, and the international economy, with algebra confined to short appendices.

Prerequisites: No prior economics is needed; basic graph reading and arithmetic are enough.

Difficulty Level
Beginner
Academic Level
Undergraduate
macroeconomicsgdp and inflationmonetary policyfiscal policyTextbook

01 / Reading Guide

Reading Guide

Citation

Krugman, P., & Wells, R. (2024). Macroeconomics (7th ed.). Worth Publishers (Macmillan Learning).

Chapter Summary

The seventh edition has an introduction and eighteen chapters in eight parts, with five short appendices; the international paperback runs to about 650 pages. Each chapter opens with a story, and the publisher's feature list names two recurring boxed features, Economics in Action applications and Business Cases. The publisher describes the approach as storytelling built on current events. The chapters are deliberately short, and the sequence follows the standard principles course: basics, then measurement, then the long run, then the short run and policy.

Introduction and Chapters 1–2: An Engine for Growth and Discovery; First Principles; Economic Models: Trade-offs and Trade

Part 1, "What is Economics?", opens with a short introduction and two chapters: one on the first principles of economic reasoning, and one on how economists use models, with trade-offs and trade as the cases named in its title. Appendix 2, Graphs in Economics, is a self-contained review of the graph reading the rest of the book assumes.

Chapters 3–5: Supply and Demand; Price Controls and Quotas: Meddling with Markets; International Trade

Part 2 is the shared microeconomic core of a principles course: the supply and demand model, government intervention in markets through price controls and quotas, and a first treatment of international trade.

Chapters 6–8: Macroeconomics: The Big Picture; GDP and the CPI: Tracking the Macroeconomy; Unemployment and Inflation

Part 3 introduces macroeconomics proper. Chapter 6 gives an overview of the field; Chapter 7 explains how the macroeconomy is tracked with GDP and the consumer price index; Chapter 8 introduces unemployment and inflation, the two headline problems the rest of the book returns to.

Chapters 9–10: Long-Run Economic Growth; Savings, Investment Spending, and the Financial System

Part 4 treats the long run before the short run. Chapter 9 is devoted to long-run economic growth; Chapter 10 links saving and investment spending through the financial system. Appendix 10 extends the chapter's treatment of present value.

Chapters 11–12: Income and Expenditure; Aggregate Demand and Aggregate Supply

Part 5 builds the short-run models. Chapter 11 develops the income–expenditure model and the multiplier (Appendix 11 derives the multiplier algebraically). Chapter 12 presents aggregate demand and aggregate supply. The publisher states that this chapter was thoroughly revised for the seventh edition: the model is now framed in terms of the inflation rate and GDP rather than the price level, to make it easier to discuss recent inflation and the Federal Reserve's response.

Chapters 13–16: Fiscal Policy; Money, Banking, and the Federal Reserve System; Monetary Policy; Inflation, Disinflation, and Deflation

Part 6 is the policy core. Fiscal policy comes first, with Appendix 13 on how taxes change the multiplier. Chapters 14 and 15 cover money, the banking system and the Federal Reserve, and the conduct of monetary policy; Appendix 15 reconciles the two models of the interest rate used in the book. Chapter 16 turns to the dynamics of inflation, including disinflation and deflation.

Chapter 17: Macroeconomics: Events and Ideas

Part 7 is a single chapter that steps back from the models to the events and ideas that have shaped macroeconomics.

Chapter 18: International Macroeconomics

Part 8 closes the book with the open economy, the macroeconomic counterpart to the trade chapter in Part 2.

Key Concepts

Chapters 1–5: Foundations

  • Trade-offs and trade: the two themes Chapter 2 uses to introduce economic models.
  • Graphs in economics: the graph-reading skills reviewed in Appendix 2 and used throughout.
  • Supply and demand: the basic model of a competitive market.
  • Price controls and quotas: government limits on prices and quantities, and how they disturb market outcomes.

Chapters 6–10: Measurement and the Long Run

  • GDP and the CPI: the main measures of aggregate output and of the price level.
  • Unemployment and inflation: the two headline indicators of macroeconomic performance and their costs.
  • Long-run growth: sustained growth in output per person and its sources.
  • Present value: the tool for comparing payments at different dates, central to saving and investment decisions.

Chapters 11–18: Fluctuations, Policy and the Open Economy

  • Multiplier: the amplification of a change in spending through the income–expenditure process.
  • Aggregate demand and aggregate supply: the short-run model of output and, in this edition, inflation.
  • Fiscal and monetary policy: government spending and taxation, and central-bank management of money and interest rates.
  • Disinflation and deflation: reducing inflation, and a falling price level, as distinct policy problems.

Critical Analysis

Strengths

  • Narrative approach. Every chapter begins with an opening story, and the recurring Economics in Action and Business Case features tie models to real episodes and firms. The publisher's endorsements from instructors single out the applications and stories as the book's best feature.
  • Short, focused chapters. Topics are broken into many short chapters rather than a few long ones, which an instructor quoted by the publisher describes as easier for students to digest. Long-run growth comes before short-run fluctuations, so students see what the economy does on average before studying departures from it.
  • Current macroeconomic framing. The revised AD–AS chapter frames the model in terms of inflation rather than the price level, which brings the principles model closer to how central banks discuss policy. Data and examples are updated for the edition, and the publisher's eBook updates add recent material.
  • Math support kept separate. The algebra is confined to short appendices (the multiplier, taxes, present value), and the graph appendix allows students to review the basics in their own time.

Limitations

  • A principles book, not an intermediate one. Despite its place on this course list, the publisher presents it as an introductory principles textbook, its chapter list is that of a first course (supply and demand, price controls, trade) and the algebra is confined to appendices. Students who need the formal models of an intermediate course will have to move on to another text.
  • US institutions. The monetary chapters are built around the Federal Reserve System, as the chapter title shows; students elsewhere will need to map the institutions to their own central bank.
  • Interactive features are digital. The interactive graphs and topic reviews that the publisher highlights for this edition belong to the e-book and the publisher's Achieve platform, not to the printed book.

Where It Fits in the Course

Among the books for this macroeconomics course, Krugman and Wells is a principles-level text and the natural starting point for students who have not taken introductory macroeconomics, or who need to rebuild their intuition. Its closest counterpart is CORE Econ's The Economy 2.0: Macroeconomics, also introductory but starting from data and historical episodes and freely available online; students may use either, and comparing their treatments of inflation and unemployment is instructive.

The core intermediate texts follow. Mankiw's Macroeconomics is a foundational intermediate textbook covering national income, growth, unemployment, inflation and fluctuations with more formal models; Carlin and Soskice build their book around a three-equation model of output, inflation and central-bank policy rules, which the inflation-based AD–AS chapter here prepares for. David Romer's Advanced Macroeconomics and Ljungqvist and Sargent's Recursive Macroeconomic Theory are graduate texts and should come much later.

How to Use This Book

The book assumes no prior economics; basic arithmetic and the ability to read graphs are enough, and Appendix 2 covers graphs from scratch.

  • If this is your first economics course: read the chapters in order. Part 2 (supply and demand) can be skimmed if you have already taken principles of microeconomics.
  • If you are preparing for intermediate macroeconomics: concentrate on Chapters 7–16. Chapters 9–10 (growth, saving and investment) and 11–12 (income–expenditure and AD–AS) are the foundations the intermediate texts build on; Chapters 14–15 on money and monetary policy prepare for the central-bank models in Carlin and Soskice.
  • Use the appendices: work through Appendix 11 (the multiplier) and Appendix 15 (the two interest-rate models), which bridge to more formal treatments.
  • Read Chapter 17 after Part 6, when the models are familiar; it makes the most sense once the debates it describes are recognisable.

For each chapter, redraw the diagrams by hand and use the opening story and the Business Case as test cases: predict how the model says the episode should unfold, then check against the text. Students using an older edition should note that the AD–AS chapter changed substantially in the seventh edition.