ECON 101 - Principles of Macroeconomics

Fall 2008

Instructor: Osman Suliman

Office: Room 331 McComsey

Phone: Ext. 3558/3679

E-mail: osman.suliman@millersville.edu

Office Hours: MWF 9:00 - 10:00 AM, MW 3:30 – 4:30 PM, or by appointment

PREREQUISITES: None.

REQUIRED TEXT: Case/Fair, Principles of Macroeconomics, 8^th ed, Prentice Hall

RECOMMENDED TEXT: Study Guide. Also take advantage of Prentice Hall's website for practice quizzes and tutorials.

INTRODUCTION AND OBJECTIVES:

Macroeconomics is concerned with the determination of the economy's total output, the level of unemployment, the price level (inflation), interest rates, the balance of payments, and exchange rates. Therefore, in macroeconomics we deal with the whole market for goods and services as one unit, the assets market, and the labor market. We ignore the behavioral differences of individual consumers and producers to focus our attention on the vital interactions among the goods, labor, and assets markets.

Inflation and unemployment dominate other problems facing different economies. In the U.S., for example, the average rate of inflation during the seventies and early eighties was about 9%. The seventies and eighties also experienced record levels of unemployment in the U.S., reaching 9% during the recession of 1974-75 and up to 11% in 1982-83, the worst recession period since the Great Depression. Also, in the early eighties the prime interest rate charged by commercial banks reached 20% and more. Now, unemployment is about 5% and inflation is below 3%. Given all these "macro" problems resulting from interactions of different markets and sectors of the economy, macroeconomics has a lot of explaining to do.

In this course we should learn: 1. How the market system works in isolation and with government intervention.

2. What the main issues are in macroeconomics: economic growth, inflation, unemployment, and business cycles.

3. How fiscal (government) and monetary (Federal Reserve) policies are used to stabilize the economy.

4. How all markets interact: goods and services (output) markets, financial(money) markets, and labor markets.

The Economics Department outcomes related to this course are:

A. A thorough and complete understanding of the role of markets, market forces, and government policy in our open macroeconomy.

1. Be able to identify and explain the fundamental concepts of the macroeconomy such as output, inflation, and unemployment.

2. Be able to critically analyze, explain, and model fluctuations in the macroeconomy.

3. Be able to critically analyze, explain, and model the impact of fiscal and monetary government policies in the macroeconomy.

4. Be able to apply macroeconomic theory to understand historical and current events in the macroeconomy.

B. Exposure to the open economy (e.g. in the international context). The ability to recognize, explain, and apply in a real-world context and critique:

1. fundamental theories and concepts of international trade such as comparative advantage and protectionism

2. various economic institutions of the open economy

3. fundamental theories and concepts associated with economic development.

C. Exposure to various perspectives within economic thought: The ability to recognize, explain, and apply in a real-world context and critique:

1. economic paradigms such as capitalism and market analysis, socialism, institutionalism, and feminist economics

2. various economic institutions and systems

3. economic theories derived from various economic paradigms and systems

4. the historical basis for economic paradigms, systems, theories, and institutions.

EXAMS AND POLICY:

There will be three exams, a group report, and several readings/assignments. No make-up exams or incompletes will be allowed in this class unless a student has supported evidence of an urgent reason. Attendance is required. Only documented excused absences are allowed. More than three unexcused absences (one for downtown section) will decrease your final grade by half a letter grade. The points are distributed as follows:

3 exams (100 points each) 300

3 Problem Sets 90

Class Participation 10

Total points 400

GRADING SYSTEM:

360-400 (90%) A

352-359 (88%) A-

340-351 (85%) B+

320-339 (80%) B

308-319 (77%) B-

280-307 (70%) C+

260-279 (65%) C

240-259 (60%) C-

220-239 (55%) D+

200-219 (50%) D

192-199 (48%) D-

0-191 F

HINT: Common sense ideas for more understanding of the theoretical analyses to be developed in this course can be gained by reading some of the economics--business-oriented magazines and watching relevant TV programs. Examples are:

1. The Wall Street Journal

2. The Economist

3. Fortune

4. Challenge

5. U.S. News and World Report

6. Business Week

7. "Wall Street Week": Public TV, Friday Evening

8. "Adam Smith World": Public TV, Sunday Afternoon

9. "The Nightly Business Report": Public TV

10. "CNN Business Report" and "Money Line": 6:30 PM and 11:00 PM everyday

TENTATIVE EXAM SCHEDULE:

Exam #1: September 29

Exam #2: November 10

Final Exam: Follow Final Exam Schedule

PROBLEM SET SCHEDULE:

Problem Set #1 due September 19

Problem Set #2 due October 31

Problem Set #3 due November 16

Note: 5 points will be deducted for each day late (including weekends).

TENTATIVE COURSE OUTLINE:

Introduction to Economics

1. The Scope and Method of Economics.

2. The Economic Problem: Scarcity and Choice.

3. Demand, Supply, and Market Equilibrium.

4. Demand and Supply Applications.

Concepts and Problems in Macroeconomics

5. Introduction to Macroeconomics.

6. Measuring National Output and National Income.

7. Long-Run and Short-Run Concerns: Growth, Productivity, Unemployment, and Inflation.

The Goods and Money Markets

8. Aggregate Expenditure and Equilibrium Output.

9. The Government and Fiscal Policy.

10. The Money Supply and the Federal Reserve System.

11. Money Demand, the Equilibrium Interest Rate, and Monetary Policy.

Macroeconomic Analysis

12. Money, the Interest Rate, and Output: Analysis and Policy.

13. Aggregate Demand, Aggregate Supply, and Inflation.

14. The Labor Market, Unemployment, and Inflation.

15. Macroeconomic Issues and Policy.

16. The Stock Market and the Economy.

17. Household and Firm Behavior in the Macroeconomy: A Further Look.

18. Long-Run Growth.

19. Debates in Macroeconomics: Monetarism, New Classical Theory, and Supply Side-Economics.