This dissertation focuses on three prominent areas of macroeconomic policy: fiscal stimulus, bail-outs and industrial policy, and monetary policy. In each case, I analyze the nature of the problem without intervention first before turning to why and how policy can be used to improve outcomes. In the first chapter, I study how relative demand shocks for different goods and services propagate through the economy to affect aggregate employment – and I use these insights to show how fiscal stimulus should be designed to achieve the greatest bang for buck in terms of employment. In the second chapter, I study how firm entry and exit in one industry can affect other industries and the economy as a whole through input-output relationships. I characterize which firms and industries are systemically important, show that the equilibrium is generically inefficient, and study when and how bailouts can be used to improve welfare. In the final paper, I provide a new microfoundation for downward wage rigidity, show that this microfoundation yields predictions that are consistent with the data, and study how monetary policy should behave given this microfoundation.Economic