This textbook is intended to serve courses in monetary economics, advanced macroeconomics, or macroeconomic policy. Students will feel comfortable with this material if they have completed an intermediate course in macroeconomics relying on one of the more demanding textbooks in this field.

The book focuses primarily on the role of money in the macroeconomy and on the place of monetary policy as an instrument for controlling inflation and unemployment. From beginning to end there is only one macroeconomic model that the student must understand: the now common IS-LM-AS model. The three behavioral relationships in this model determine the three important variables in the macroeconomy: the rate of inflation, the interest rate, and income or output.

Although there is great temptation to take sides on the ideological issues in macroeconomics, the IS-LM-AS model is a middle-of-the-road approach that allows both monetarist and institutionalist views of the world to be incorporated. In fact, these views are allowed to confront each other, especially in Chapters 3 and 4, but no winner can be declared in this debate. This may be frustrating to an undergraduate student who expects only indisputable facts in a textbook, but controversy cannot be avoided, because macroeconomics now relies so heavily on unobservable variables such as expected inflation and the natural rate of unemployment. If we cannot measure these variables with any confidence, then we cannot verify or reject competing hypotheses that involve behavioral relationships among these and other variables, and we cannot conclude that empirical evidence favors one side or the other.