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The first ed. was published in 1998. Professor Solow, the 1987 Nobel Laureate in economics, emerged as one of the luminaries of mainstream economics when that science started developing a tradition of rigorous mathematical modeling. His work on growth theory, the Solow-Swan model, is particularly well known. In this book, which incorporates a series of lectures sponsored by the Bank of Italy and the University of Rome and a paper published earlier in a widely quoted volume of essays in Honor of Kenneth Arrow, Professor Solow is giving his views on the subject of macroeconomics, a topic which has lately attracted most of his interest. His motivation is his dissatisfaction with the new-classical macroeconomics especially as embodied in the real business cycle theory, currently a very influential line of research of macroeconomics. New-classical macroeconomics took the ascendancy over the ISLM tradition in the late 1970's when traditional Keynesian recipes seem unable to stem the rise of unemployment while provoking spiraling inflation, the phenomena of stagflation which quite defeated Keynesian economists at the time. The shortcomings of the ISLM analysis was blamed on its ad-hoc nature, in particular its crude modeling of how economic agents form expectations. Economists, belonging to a tradition diametrically opposed to the Keneysian premises of the salutary effects of systematic government intervention, took advantage of this perceived weakness to develop models that took individual optimization at its starting point to describe macroeconomic phenomena and achieve what Keynesian theory had never been interested in before: provide microeconomic foundations to macroeconomics. Professor Solow, with many others, is unimpressed by this new-classical macroeconomics, at least as a useful tool for understanding real-life economic phenomena or as a source of inspiration for economic policy. Although he concedes the theoretical inferiority of former ISLM analysis, he feels it captured the essence of the forces that shape our economies much better than these later theories. Where did the new-Classical economists go wrong? In Professor Solow's opinion, they were let down by the crudity of their assumptions, in particular by their maintained assumptions of a representative agent and of perfect competition. In this book, he explains how a shift from perfect to monopolistic competition would naturally induce Keynesian-like features (chapter 1), and he presents two models of economies with imperfect competition to illustrate his point (chapter 2 and 3). The first model delivers monetary policy effectiveness and the second model fiscal policy effectiveness, i.e. both the central bank and the government can affect output and the real wage through increasing money supply and increasing autonomous spending, respectively. Furthermore, a multiplier effect is present in each case, i.e. economic policy can not only change output, it can change it substantially. These results are in contrast to the predictions of the neo-classical models in which both economic policy tools lost their effectiveness. Hence, Professor Solow attacks strongly the ideology of laisser-faire, which permeates the writings of the new-classical school, and upholds the interventionist Keynesian tradition.