ECON 319.01 -- Intermediate 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

 

PREREQUISITE: ECON 101

 

TEXT: Abel, Andrew B. and Ben S. Bernanke.  Macroeconomics, 6th ed. Boston:  Addison Wesley, 2008.

 

Take advantage of practice quizzes in myeconlab.

 

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 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% or more. Now unemployment is below 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. As much as possible, a dynamic version of the macroeconomic model will be discussed.

 

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.

5. What happens when expectations and open market issues are added to the model.

 

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.

 

D. Develop and apply economic modeling skills, including:

1. determination of main variables involved in an economic problem

2. specifying relationships between variables

3. specifying direction of causation between variables

4. recognition of interdependence and inter-linkages across relationships

 

EXAMS AND POLICY: There will be three exams.  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 will decrease your final grade by half a letter grade.  The points for the course 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   October 1

Exam #2   November 12

Final     Follow final exam schedule

 

PROBLEM SET SCHEDULE:

 

Problem Set #1 due September 22

Problem Set #2 due November 3

Problem Set #3 due December 3

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

 

 

TENTATIVE COURSE OUTLINE:

 

Introduction

Ch. 1 Introduction to Macroeconomics

Ch. 2 The Measure and Structure of the National Economy

 

Long-Run Economic Performance

Ch. 3 Productivity, Output, and Employment

Ch. 4 Consumption, Saving, and Investment

Ch. 5 Saving and Investment in the Open Economy

Ch. 6 Long-Run Economic Growth

Ch. 7 The Asset Market, Money, and Prices

 

Business Cycles in Macroeconomic Policy

Ch. 8 Business Cycles

Ch. 9 the IS-LM/AD-AS Model:  A General Framework for Macroeconomic Analysis

Ch. 10 Classical Business Cycle Analysis:  Market-Clearing Macroeconomics

Ch. 11 Keynesianism:  The Macroeconomics of Wage and Price Rigidity

 

Macroeconomic Policy:  Its Environment and Institutions

Ch. 12 Unemployment and Inflation

Ch. 13 Exchange Rates, Business Cycles, and Macroeconomic Policy in the Open Economy

Ch. 14 Monetary Policy and the Federal Reserve System

Ch. 15 Government Spending and Its Financing