PART 1 IntroductionThere has never been a more exciting time to teach macroeconomics. The recent worldwidefinancial crisis cast a spotlight on macroeconomics and prompted instructorsworldwide to rethink their teaching of the course. Students today enter the intermediatemacroeconomics course knowing the relevance of the business cycle—it impactswhat is happening in their world right now, in the aftermath of the most severe recessionsince World War II. The silver lining of these trying economic times lies in our abilityto draw on this familiarity and the rich tapestry of recent economic events to enlivenmacroeconomic theory.Macroeconomics: Policy and Practice, Second Edition, focuses on the policy issuescurrently debated by the media and the public at large. Building on my expertise inmacroeconomic policy making at the Federal Reserve, I highlight the techniques usedby policy makers in practice. I ground this applied approach to intermediate macroeconomicswith a careful, step-by-step development of all models.