Principles of Macroeconomics
Economics 51
Spring 2014

Course Description

Syllabus

Macro Web Sites

Problem Sets and Lecture Slides

Essay Assignment

Course Description

Macroeconomics is a subject matter which is always timely and interesting. We will analyze the major determinants of national output, unemployment, inflation, and economic growth, along with aspects of the international economy like trade. The course is concerned with macroeconomics - with the economy in the aggregate rather than with the details of an individual market such as peanuts; with the behavior of total consumer spending rather than with that of an individual household. The issues raised are important because they affect everyone, directly or indirectly. Beyond its substantive material, this subject is of interest because it teaches you how economists think, how they go about solving problems.

This course is an introductory course with no prerequisites. However, since we will use graphs and elementary algebra extensively, it may be useful to review your high school notes. The requirements for the course include five problem sets, two midterm exams and a final exam. The midterm exams will be given in class on Thursday 27 February and Thursday 10 April. The final exam will be given on the afternoon of either Monday 12 May or Thursday 15 May depending on your section. The problem sets will count for 25%, each midterm exam 18%, the essay assignment 7%, and the final exam 32% of the final grade. In addition to the graded assignments, class attendance is essential in this course because the main “text” for the class is the lecture notes.

The main readings to supplement the lecture notes will be from Case, Fair and Oster, Principles of Macroeconomics, 11th edition, Pearson Publishing, 2014. The textbook is available for purchase at Huntley bookstore. All information for the course will be posted on this web page including the problem sets.

If any material is ever unclear, or even if everything is perfectly clear, please come chat with me about economics or anything for that matter. If you have a short question, please feel free to call. For longer and better explanations, come by my office during office hours or make an appointment to see me at your convenience. I can be reached at the following:

Office

Fletcher 216

Office Hours

Wed 8:30-10; Thurs 8:30-10

Phone

607-3769

Email

lyamane@pitzer.edu

You can leave voicemail at the office or send me email 24 hours a day.

I invite you to join me for Economics Lunch on Fridays during the semester. I will have lunch at McConnell Dining Hall, generally in the East Wing, from 12 noon to 1pm every Friday. We can talk about the problem set, economics, or anything you like.

Course Syllabus

PART I: INTRODUCTION TO ECONOMICS

            The Scope and Method of Economics                                                                            Ch 1
            The Economic Problem: Scarcity and Choice                                                                 Ch 2
            Demand, Supply, and Market Equilibrium                                                                     Ch 3
            Demand and Supply Applications                                                                                  Ch 4

Part II: CONCEPTS AND PROBLEMS IN MACROECONOMICS

            Introduction to Macroeconomics                                                                                    Ch 5
            Grossly Distorted Picture
            Measuring National Output and National Income                                                          Ch 6
            Study Ranks Joblessness Top Factor in Gang Toll
            Unemployment, Inflation, and Long-Run Growth                                                         Ch 7
            On the Twelfth Day of Christmas, You’ll Pay $114K
            MIDTERM #1                                                                                     Thursday 27 February

Part III: THE CORE OF MACROECONOMIC THEORY

            Aggregate Expenditure and Equilibrium Output                                                            Ch 8
            The Government and Fiscal Policy                                                                                 Ch 9
            The Money Supply and the Federal Reserve System                                                   Ch 10
            Money Demand and the Equilibrium Interest Rate                                                      Ch 11
            The Determination of aggregate output, the Price Level, and the Interest Rate          Ch 12
            Mishkin, What Should Central Banks Do?
            Policy Effects and Cost Effects in the AS/AD Model                                                 Ch 13
            The Labor Market In the Macroeconomy                                                                     Ch 14

            MIDTERM #2                                                                                           Thursday 10 April

Part IV: FURTHER MACROECONOMICS ISSUES
           
            Financial Crises, Stabilization, and Deficits                                                                 Ch 15
            Household and Firm Behavior in the Macroeconomy: A Further Look                       Ch 16
            Long-Run Growth                                                                                                        Ch 17
            A Brief History of Economic Time
            Alternative Views in Macroeconomics                                                                         Ch 18

Part V: THE WORLD ECONOMY

            International Trade, Comparative Advantage, and Protectionism                               Ch 19
            Krugman, What Do Undergraduates Need to Know about Trade?
            Open-Economy Macroeconomics: The Balance of Payments and Exchange Rates     Ch 20
            Economic Growth in Developing and Transitional Economies                                    Ch 21

            FINAL EXAM Monday 12 May

Macro Web Sites

 

Internet Resources for Economists
  Career Information for Economists
  Nobel Prize Winners
  Bureau of Labor Statistics
  Economic Report of the President
  Federal Reserve Bank of St. Louis (FRED)
  Economic Statistics Briefing Room - White House
  Board of Governors of the Federal Reserve
  National Debt Clock
  Hyperinflation in Hell

Problem Sets

    Problem Set #1    Due Thursday 6 February

    Problem Set #2     Due Thursday 20 February

    Problem Set #3     Due Thursday 13 March Mackerel Economics

    Problem Set #4     Due Thursday 3 April 

    Problem Set #5     Due Thursday 1 May

  
Lecture Slides

week one 1/21

week two 1/28

week three 2/4

week four 2/11

week five 2/18

week six 2/25

week seven 3/4

week eight 3/11

week nine 3/25

week ten 4/1

week eleven 4/8

week twelve 4/15

week thirteen 4/22

week fourteen 4/29

Case Fair Oster Macroeconomics Problem Solutions

You can download a copy of Adobe Acrobat Reader 11.0 to read these PDF files.

Essay Assignment

Throughout the 1900s, per capita GDP grew about 2.1% per year. Though 2.1% may not sound like a lot, it means that per capita GDP increases by almost a factor of 8 every 100 years! The standard of living rose steadily through the century. Each generation could expect to have a higher standard of living than the previous generation, so most kids could expect to do at least as well economically as their parents. The quality of your lives today is substantially higher than the quality of your grandparents' lives when they were your age.

But since 2000 per capita GDP growth has been very sluggish, less than 1% per year. Even in the 1930s we did better. This period of sluggish growth has been called “secular stagnation” or “the great stagnation.” Should we expect these slower growth rates going forward? We had the “Great Recession” from December 2007 to June 2009 in the U.S. But is there more to the slow growth in this century than the great recession? Are we in an extended period of much slower growth? And if so, why? Or are we just recovering very slowly from a very deep recession? What economic policy recommendations would you make? Write an essay of approximately 1000 words addressing one or more of these questions.

When the size of the pie is growing, it is easy to give everyone more pie. But when the pie stops growing, more pie for me means less pie for you. This can explain the unprecedented fighting between and within the political parties in Washington, D.C.

Do not merely parrot back the text or lectures. Do read some of the supplementary readings. If you want additional views on these issues, you can read some journals of opinion like Business Week, The New York Times, The Wall Street Journal, The Economist, The New Republic, National Review, as well as more scholarly journals like Challenge and Brookings Papers on Economic Activity, or books from the American Enterprise Institute and the Brookings Institution. This essay is due on Tuesday 6 May.

References:

John Cassidy, “Is Larry Summers Right About “Secular Stagnation”?”, The New Yorker, January 8, 2014.
Tyler Cowen, The Great Stagnation, Dutton, 2011.
Robert Gordon, "Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds," NBER Working Paper 18315, August 2012.
Paul Krugman, “Secular Stagnation, Coalmines, Bubbles, and Larry Summers,” The New York Times, November 16, 2013.
Lawrence Summers, “Preempting economic stagnation,” The Washington Post, December 20, 2013.
Lawrence Summers, “Strategies for growth,” The Washington Post, January 6, 2014.
Matthew Yglesias, “Understanding the “Secular Stagnation” Debate,” Slate, January 6, 2014.
CBO, Revisions to CBO's Projections of Potential Output Since 2007, February 2014.