Prentice Hall
Olivier Blanchard  
Total pages
September 2005
Related Titles


For courses in intermediate macroeconomics.


Blanchard presents a unified view of macroeconomics, enabling students to see the connections between the short run, medium run, and long run.


For courses in intermediate macroeconomics.


Blanchard presents a unified view of macroeconomics, enabling students to see the connections between the short run, medium run, and long run.  - - - - -


"Do your students have a hard time conceptualizing macroeconomics as a unified whole?  Do they understand how short run, medium run, and long run models fit together?"

  • Blanchard builds a unifying view of macroeconomics in the part of the book he calls “The Core", where hehelps students to see the connections between the short run, the medium run, and the long run.  
      • Flow Chart Inside Front Cover: students are introduced to “The Core” with a flow chart in the inside front cover of the book.  
      • In Section 2-3 (p. 34), Blanchard provides a roadmap for students as they ask, “What determines the level of aggregate output?”  Providing three potential answers to consider, Blanchard explains that in fact, they all are correct, but each applies over a different time frame.   This segues directly into a definition of the short run, the medium run, and the long run, followed by a thorough explanation of “The Core” of macroeconomics and a general explanation of the book's organization.
      • Chapter 13 - Technological Progress, Wages, and Unemployment (p. 267) - In Chapter 13, students explore the effects of tecnological progress across the short run, the medium run, and the long run, applying what they have learned, and reinforcing the idea of a unified view in macroeconomics.



"Are there particular macroeconomic concepts, theories, and applications that you like to cover to a greater depth?  Are there some that you would prefer to present at a more basic, introductory level? 

  • While providing more content, more chapters, and a more flexible design, Blanchard provides professors with a great deal of flexibility on when and to what extent specific topics are covered.  As mentioned before, The Core provides students with a unified view of macroeconomics.  However, professors are given a great deal of leway on- if, when, and where to integrate the Extensions.  For example, many Blanchard users choose to pull introductory chapters from an extension forward, to be covered in context with The Core. Other users, wishing to provide deep topical covereage on an Extension, will assign all chapters within an Extension sequentially and as a unit.  Another way that professors can use the Extensions to provide more basic introduction to an subject, is to simply assign the first chapter or two from an Extension and quickly transition out to other topics.
      • Page XV of the preface outlines a variety of alternative course outlines that can be applied to courses ranging from 15 lectures course, to courses with as many as 20 or 25 lectures.

 "What do you do to keep the course up-to-date each semester?"

  • Recent events, from the introduction of the Euro in Western Europe, to the recent U.S. recession, to the long Japanese economic slump, to the crisis in Argentina, are described in the text or in detailed Focus Boxes. Each Focus Box shows how you can use what you have learned to get an understanding of these events.  The boxes not only convey the “life” of macroeconomics, but also reinforce the lessons from the models, making them more concrete and easier to grasp.
      • See pg. XII in the Preface for a complete listing of Focus Boxes

      • For a complete listing of updates and changes to the new edition, please click on the "New to This Ediiton" tab.

  • Subscriptions - Staying on top of current economic issues is critical to understanding and applying macroeconomic theory, in and out of class.  Keep your students engaged by packaging a semester long subscription to The Wall Street Journal, The Financial Times, or The with each student text.  Simply order one of the following discounted packages with your bookstore:  
      • Order Package ISBN 0-13-226279-7 To package Blanchard's Macroeconomics 4/e with a 10-week subscription to the Wall Street Journal both print and online formats.
      • Order Package ISBN 0-13-187809-3 To package Blanchard's Macroeconomics 4/e with a 15-week subscription to the Wall Street Journal both print and online formats.
      • Order Package ISBN 0-13-226280-0 To package Blanchard's Macroeconomics 4/e with a 15-week subscription to the Financial Times in student's choice of print or online formats.
      • Order Package ISBN 0-13-226281-9 - To package Blanchard's Macroeconomics 4/e with a 12-week subscription to The online.

"What about international coverage?  Do you want students to understand macroeconomics from a global perspective?"

  • More than any other intermediate macroeconomics text, Blanchard's provides students and professors with ample opportunity to learn about macroeconomics from a global perspective.  Depending on the nature of their course, professors can choose exactly when, and how much of their course will focus on international topics and examples. 
      • Chapter 1 - A Tour of the World (Begining on p. 3) - Blanchard introduces students to the key issues confronting macroeconomists today, through a unique tour of the The United States, Europe, and Japan, and the economic issues facing each of these economic powers, which together account for close to three-quearters of world output.
      • Extension: The Open Economy (p.373) - After developing the foundations of macroeconomics in "The Core" Blanchard provides four chapters on The Open Economy (Chs. 18, 19, 20, and 21).  For in depth coverage of the open economy, cover all of these chapters as a unit.  For lighter treatment, choose to cover 18 and 19 only.  For earlier coverage of the open economy, professors many professors choose to cover Ch. 18 and Ch. 19 immediately after Ch. 5 of the core. 
      • Numerous international Focus Boxes.
        • p. 30 - Did Spain Really Have a 24% Unemployment Rate in 1994
        • p. 175 - The Japanese Unemployment Rate
        • p. 189 - Okun's Law across Countries
        • p. 230 - Capital Accumulation and Growth in France in the Aftermath of World War II
        • p. 263 - The Importance of Institutions: North and South Korea
        • p. 282 - European Unemployment, Productivity Growth, and Technological Change
        • p. 308 - Nominal Interest Rates and Inflation across Latin America in the Early 1990's
        • p. 328 - Famous Bubbles: From Tulipmania in Seventeenth-Century Holland to Russia in 1994
        • p. 366 - Can a budget Deficit Reduction Lead to an Output Expansion? Ireland in the 1980's
        • p. 388 - GDP versus GNP: The Example of Kuwait
        • p. 391 - Buying Brazilian Bonds
        • p. 406 - The French Socialist Expansion, 1981-1983
        • p. 434 - German Unification, Interest Rates, and the EMS
        • p. 447 - The Return of Britian to the Gold Standard: Kenyes versus Churchill
        • p. 456 - The Euro: A Short History
        • p. 458 - Argentina's Currency Board
        • p. 488 - The Japanese Banking Problem
        • p. 506 - The Bolivian Hyperinflation of the 1980's

Do you think that animated figures and graphs could help your students understand macroeconomic concepts better?  Are you looking for new ways to engage your students with technology?

  • Blanchard's Macroeconomics 4/e comes complete with 49 ActiveGraph™ exercises that use Flash™ animation to bring text figures to life!  When you see the ActiveGraph™ icon beside a text figure, simply visit to take the learning experience beyond the printed page.  Once online, the ActiveGraph™ program prompts users to shift curves, adjust variables, and analyze the associated effects on equilibrium.  It is a fun and effective way to bring macroeconomics to life!
      • For a complete listing of the ActiveGraphs in Macroeconomics 4/e please see pgs. XIX and XX in the preface. 

New to this Edition

  • New definition of exchange rate. It is customary to define the exchange rate as the price of foreign currency in terms of domestic currency. This implies that a decrease in the exchange rate corresponds to an appreciation of the currency, and that an increase in the exchange rate corresponds to a depreciation. Blanchard adopted this definition in previous editions, but found it to be a source of confusion for students and teachers alike. In this edition, the exchange rate is defined as the price of domestic currency in terms of foreign currency: An increase in the exchange rate corresponds to an appreciation, and a decrease corresponds to a depreciation. After trying this approach on his students, Blanchard quickly concluded that this new definition makes the treatment of the open economy much easier for students. The author and reviewers all firmly agree that gains in overall students comprehension far outweigh any switching costs incurred by professors.  
      • EXTENSION: THE OPEN ECONOMY - Chapters 18 through 21.

  • Chapter 9 has been substantially simplified: Because the study of disinflation is less topical today than it was when the third edition was written, this chapter has been rewritten to focus on the interactions between inflation, output and unemployment more generally.
  • New topic on the Central Bank introduced in Chapter 4: A discussion of whether we should think of the central bank as choosing the money stock or the interest rate has been introduced to spark student thought and interest.
      • pgs. 77-80
  • Expanded discussion of inflation targeting and interest rate rules in Chapter 25
      • pgs. 541-544
  • Many new boxes and discussions that focus on recent events and research: Each box shows how you can use what you have learned to get an understanding of these events.  The boxes not only convey the “life” of macroeconomics, but also reinforce the lessons from the models, making them more concrete and easier to grasp.
      • Chapter 5 (p. 104) - Focus Box on the U.S. recession of 2001
      • Chapter 11 (p. 235) - Focus Box on Social Security
      • Chapter 24 (p. 526) - Focus Box on the Stability and Growth Pact in the Euro Area
      • Chapter 26 (p. 528-529) - Discussion of U.S. budget deficits
      • Chapter 10 (p. 214) - Focus Box on happiness and growth
      • Chapter 12 (p. 263) - Focus Box on institutions and growth, looking at North and South Korea


Table of Contents


Chapter 1. A Tour of the World

Chapter 2. A Tour of the Book



The Short Run (IS-LM)

Chapter 3. The Goods Market.

Chapter 4. Financial Markets

Chapter 5. Goods and Financial Markets:  The IS-LM Model

The Medium Run (AD-AS)

Chapter 6. The Labor Market

Chapter 7. Putting All Markets Together. The AS-AD Model

Chapter 8. The Natural Rate of Unemployment and The Phillips Curve

Chapter 9. Inflation, Activity, and Nominal Money Growth

The Long Run

Chapter 10. The Facts of Growth

Chapter 11. Saving, Capital Accumulation, and Output

Chapter 12. Technological Progress and Growth

Chapter 13. Technological Progress, Wages, and Unemployment



Chapter 14. Expectations: The Basic Tools Chapter 15. Financial Markets and Expectations

Chapter 16. Expectations, Consumption, and Investment

Chapter 17. Expectations, Output, and Policy



Chapter 18. Openness in Goods and Financial Markets

Chapter 19. The Goods Market in an Open Economy

Chapter 20. Output, the Interest Rate, and the Exchange Rate

Chapter 21. Exchange Rate Regimes

Chapter 22. Depressions and Slumps



Chapter 23. High inflation

Chapter 24. Should Policy Makers Be Restrained?



Chapter 25. Monetary Policy: A Summing Up

Chapter 26. Fiscal Policy: A Summing Up



Chapter 27. Epilogue: The Story of Macroeconomics


About the Author

Olivier Blanchard is the Class of 1941 Professor of Economics at MIT. He did his undergraduate work in France, and received a Ph.D. in economics from MIT in 1977. He taught at Harvard from 1977 to 1982, and has taught at MIT since 1983. He has frequently received the award for best teacher in the department of economics.

He has done research on many macroeconomic issues, from the effects of fiscal policy, to the role of expectations, to price rigidities, to speculative bubbles, to unemployment in Western Europe, transition in Eastern Europe, and more recently, on labor market institutions. He has done work for many governments and many international organizations, including the World Bank, the IMF, the OECD, the EU commission and the EBRD. He has published over 150 articles and edited or written over 15 books, including Lectures on Macroeconomics with Stanley Fischer.

He is a research associate of the National Bureau of Economic Research, a fellow and a council member of the Econometric Society, a member of the American Academy of Arts and Sciences, and a past Vice President of the American Economic Association. He is also a member of the French Council of Economic Advisers.

He lives in Cambridge, with his wife, Noelle. He has three daughters, Marie, Serena, and Giulia.