Last modified Wed, Nov 28, 2007 10:40 AM

Overview

This course develops the basic techniques and fundamental concepts used to study the overall macroeconomy and policies that affect it. We study the determinants of national income and long-run growth; the causes and consequences of unemployment, inflation and business cycle fluctuations; the determination of foreign exchange rates and current account imbalances; and the role of government policy in various settings. Throughout the course, an underlying goal is that students develop skill in critical economic reasoning.

We begin studying the long run behavior of the economy by developing the classical model of national income. In this model, prices are perfectly flexible, and the real interest rate equilibrates the supply and demand for goods and services. Next, we use the Solow growth model to examine the dynamic issues of growth in living standards, savings differentials, and differential growth rates around the world. Using classical models of unemployment and the determination of prices we can discuss how government policy influences the long run (natural) rates of inflation and unemployment. Finally, our long run analysis is extended to include international trade and capital flows in a model of the open economy.

During the second half of the course, our focus is on the short run behavior of the economy when prices are slow to adjust. The sticky price, Keynesian IS-MP model is used to explain economic fluctuations (business cycles) and aggregate demand. By combining the IS-MP model with a model of supply in the short run, we can deal with issues such as the short-run trade off between inflation and unemployment, stagflation, etc. As always, we are interested in how policy might, or might not, be useful in guiding the economy. We complete our treatment of the short run economy by studying the Mundell-Flemming open economy macro model.

Prerequisites

E131.

Required Text

Mankiw, Greg N. (2006) Macroeconomics, 6th edition, Worth Publishers.

Examinations

Weighting of Course Grade

Problem Sets (average after dropping lowest score)

15%

Pop Quizzes (average after dropping lowest score)

15%

Midterm

35%

Final

35%

Policies


Course Schedule

Below is a plan for the course, including (firm) exam dates, a lecture schedule (tentative), and required readings. All chapter appendices are required unless I tell you otherwise. I will assign additional readings to accompany some chapters. Although some of these readings will not always be covered in class in detail, they are required. In addition, any class handouts are required reading don't miss class.

Date

 

Begin Discussion of:

Chapt

Aug.

20

I. Introduction
The Science of Macroeconomics

1

 

22

The Data of Macroeconomics
2

29

II. The Economy in the Long Run
National Income: Where it Comes From and Where it Goes

3

Sept.

19

Money and Inflation

 
4

Oct.

3

The Open Economy

5

 

15

Midterm Exam: Chpts 1-5

1-5

Oct.

17

Unemployment

6
 

 

24

II. Growth Theory
Economic Growth I

7

Nov.

5

Economic Growth II

8

Nov.

7

II. The Economy in the Short Run
Introduction to Economic Fluctuations

9
 
14
Aggregate Demand I
and David Romer's Short Run Fluctuations Sec. I
Ch 10 pp 257-8, 268-71
(pdf) Sec. I
and figures

Nov

28

Agg Supply in Sec III of
David Romer's Short Run Fluctuations (Replaces Mankiw Ch 10-13)

Dec

14

Final Exam 2:15 - 4:15 PM

Everything Listed Here