Economics
3307
Intermediate Macroeconomic
Analysis
Summer 2001
Office:
A.301.2 Hankamer
Phone: 710-4146
Fax: 710-1092
Office Hours:
M-F:
COURSE OBJECTIVES:
This course is a detailed
examination of the tendencies of market economies to (i) exhibit upward trends
in the volume of production over time and to (ii) fluctuate back and forth
between good times and bad times. Our
goals are (i) to describe the historical facts about these long-run trends and
short-run fluctuations; (ii) to explore the implications of these trends and
fluctuations for the decisions made by individuals, businesses, and
governments; and (iii) to examine the theories that attempt to explain why
market economies experience growth and why that growth is irregular and
unstable.
If
we are successful in this class, at the end of the semester you should be able
to: (i) understand and evaluate media
stories about the economy; (ii) analyze a wide range of macroeconomic issues,
including those not discussed in class; and (iii) communicate clearly your
understanding of macroeconomic facts, concepts, and reasoning techniques.
TEXTBOOK:
Mankiw,
N. Gregory. (2000). Macroeconomics,
4th ed.
Any other
reading materials will be accessible on the Internet or handed out in class.
CURRENT EVENTS:
You are strongly encouraged to
follow current macroeconomic developments using the source of your choice. Good options include the Wall Street Journal, the
Financial Times (which is especially good for foreign affairs and
international trade issues), the Economist
magazine, Barron's, Business Week, and "Moneyline"
on CNN (
GRADE DETERMINATION:
At the end of the term, I will
compute a FINAL NUMERICAL AVERAGE based on the following weights assigned
to three exams and class projects and presentations:
FIRST EXAM: 25%
SECOND EXAM: 25%
FINAL
EXAM: 35%
CLASS PROJECTS and CLASS PRESENTATION: 15%
The exam dates
will be given a week in advance.
I will assign course grades on
the basis of the distribution of final averages. A final average over 90 will guarantee a
course grade of “A”, a final average over 80 will guarantee a course grade of
“B”, etc., but the actual cutoffs might be a bit lower (e.g., 89 for an
A).
In awarding final grades,
I normally give "consideration" (i.e., move people up who are close
to but below a cut-off point for a higher course grade) for the following: a good grade on the comprehensive final, good
class attendance, good class participation, consistently excellent work on
assignments, and improvement over the semester.
All such consideration must be fair to other students and is made at my
discretion.
The CLASS PRESENTATION will
require you to analyze the economy of a country of your choice. You will determine present to the class
evidence concerning its past, current, and future economic performance and your
analysis of risks factors that might influence investment opportunities for
TWO projects
will require you to analyze and evaluate a published story about the economy
using the models developed in class.
Project #1 will involve an analysis of long-term issues and will use the
models in Chapters 4 and 5 of the textbook, while Project #2 will involve an
analysis of short-term issues and will use the model developed in Chapter
9. Your write-ups for these projects
will be about 4-5 pages each.
(The associated chapter from the textbook is given prior to the topic.)
A. Why Study Macroeconomics
1. The role of economic aggregates
2. The
historical performance of the
3. What is happening in other economies around the world?
B. How Economist Think
1. The role of theory as model building
a. Exogenous versus endogenous variables
b. The ability to ask “if, then” questions
2. A multitude of models: demand and supply in the goods sector versus the financial sector
3. The role of flexible prices (market clearing) versus sticky prices
Six Primary Concepts of Macroeconomics
A. Income, expenditure and circular flow
B. Real GDP versus nominal GDP
C. The components of expenditure
D. Measuring changes in the cost of living: CPI
E. Measuring joblessness: the unemployment rate
F. Key web sites on macroeconomic performance:
1. Bureau of Economic Analysis http://www.bea.doc.gov/
2. First
3. White House: http://www.whitehouse.gov/fsbr/esbr.html
Chapter 3. National Income: Where It Comes From and Where It Goes
A. What Determines the Total Production of Goods and Services?
1. Factors of Production: Capital, labor, and technology
2. The production function (with constant returns to scale)
3. Output with capital and technology fixed
4. The derived demand for labor and the real wage
5. The demand for capital and the real rental price of capital
B. What Determines the Demand for Goods and Services?
1. Consumption
2. Investment
3. Government purchases
4. Net Exports
C. What Brings the Supply and Demand for Goods and Services into Equilibrium?
1. Actual spending equals desired spending
2. The interest rate is given at equilibrium based on the supply and demand for loanable funds
3. Total leakages equals total injections
4. Exogenous
forces affecting equilibrium (Government spending and investment decisions)
Chapter 4. Economic Growth I
A. The Accumulation of Capital
1. The supply and demand for goods
2. Growth in the capital stock and the steady state
3. How savings affects growth
4. The golden rule level of capital
B. Population Growth
1. The steady state with population growth
2. The effects of population growth
Chapter
5. Economic Growth II
A. The efficiency of labor
B. The steady state with technological progress
C. Policies to promote growth
D. Beyond the Solow Model: endogenous growth theory
http://www.courses.fas.harvard.edu/~ec1011b/lectures/1999/Lecture_Notes_5.pdf
http://www.stanford.edu/~promer/Econgro.htm
Exam 1 on Chapters 3 – 5 Sample questions
Class Presentations of Media Stories on Long-run
economic impacts
Chapter 6. Unemployment
A. Job loss, job Finding and the natural rate of
unemployment
B. Job search and frictional unemployment
C. Real-wage rigidity and wait unemployment
D. Patterns in unemployment
Chapter 7. Money and Inflation
A. What is money?
B. The quantity theory of money
C. The velocity of money: the missing link
D. Inflation and interest rates
E. The demand for money and nominal interest rates
F. The social cost of inflation
G. Hyperinflation
Chapter 8. The Open Economy
A. The international flows of capital and goods
B. Savings and investment in a small open economy
C. Exchange rates
D. Economic policy under fixed and flexible exchange
rates
E. The United States as a large open economy
Chapter 9. Introduction to Economic Fluctuations
A. Time horizons in macroeconomics
B. Aggregate demand
C. Aggregate supply
D. Stabilization policy
Exam 2 on Chapters 6-9
Chapter 10. Aggregate Demand I
A. The goods market and the IS curve
B. The money market and the LM curve
C. Short-run equilibrium
Chapter 11. Aggregate Demand II
A. Explaining fluctuations with the IS-LM model
B. IS-LM as a Theory of Aggregate Demand
C. The Great Depression
Chapter 12. Aggregate Demand in an Open Economy
A. The Mundell-Fleming Model
B. The small open economy under floating exchange rates
C. The small open economy under fixed exchange rates
D. Interest rate differentials
E. Should exchange rates be floating or fixed?
F. The Mundell-Fleming Model with a changing price
level
Chapter 13. Aggregate Supply
A. Four models of aggregate supply
1. The sticky wage model
2. The worker-misperception model
3. The imperfect-information model
4. The sticky price model
B. Inflation, unemployment, and the Phillips Curve
Class Presentations on Media Stories of Short-run
Aggregate Impact
Final Exam on Chapters 10-13