In the past decade macroeconomic theory has undergone a remarkabletransformation. At the forefront has been the "rationalexpectations revolution," and this school's most brilliant exponentis Robert E. Lucas.In this elegant and relatively non-technical survey, Lucas reviewsthe nature and consequences of recent developments in monetary andbusiness cycle theory. He discusses the usefulness of alternativemodels in determining the effects of economic policy on consumptionstreams and individual welfare. Drawing on a specific model ofaggregate activity which represents the current frontier inbusiness cycle research, he then examines the contemporary theoryof unemployment. Finally and most controversially, he explores therole of monetary disturbances.