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ECO 3202 APPLIED MACROECONOMICS – Spring 2009 Powered By Docstoc
					ECO 3202 - APPLIED MACROECONOMICS – Spring 2010
I.     Instructor:       José López-Calleja
                         Florida International University
                         Department of Economics
                         Phone: 348-1070

II.    Office Hours:     To be announced.

III.   Textbooks:        Mankiw, N. Gregory, Macroeconomics, 6th Edition, New York: Worth Publishers Inc., 2007.
                         (Required) – (also required is the Student Guide & Workbook)

IV.    Description:      Aggregate economic performance and business conditions analysis, nature and causes of
                         economic expansions and recessions, inflation, balance of trade, balance of payments, and
                         exchange rate problems, fiscal and monetary policies, short-run instability, and long-run

                         Students in this course will become familiar with the national income accounts and the
                         basic macroeconomic variables like GDP and its components, price indexes, and labor
                         market indicators. Students will then learn to use algebra and geometry to construct
                         models of the macroeconomy—at first simple and then more sophisticated and complex—
                         that can be used to analyze the interactions of the three basic markets of the economy:
                         goods and services, assets, and labor. Students will use the models to analyze how shocks
                         to the economy—either from fiscal or monetary policy, or from changes in exchange rates
                         or energy prices—will affect the main economic variables.
                         By the end of the course, students should be able to understand developments in the
                         macro economy as reported in the business media, but should also find that their ability to
                         think rigorously and analytically has significantly improved.

V.     Course Outline:

       A.       Introduction                                                             Chapter 1*

                1.       Macroeconomics Defined
                2.       An Overview:
                                 a)       Classical/Neoclassical Approach
                                 b)       Keynesian Approach
                3.       Macroeconomic Variables
                4.       General Discussion of Business Cycles
                                 a)       History of Economic Fluctuations in the U.S.

       B.       Measurement of Output, Income and Prices                                 Chapter 2*

                1.       Circular Flow of Income and Expenditure Model
                2.       Measuring Income and Prices
                3.       GDP and its components, GDP Deflator
                4.       Labor Market Measures – Employment and Unemployment

       C.       National Income Determination                                            Chapter 3* and 16-1*

                1.       Aggregate Demand and Equilibrium Output
                2.       The Production Function – Inputs and Outputs
                3.       Distribution of National Income
                4.       Consumption and Saving - a Basic Model                          Chapter 10-1* only
                5.       Investment and Saving
                6.       The Simple Multiplier
D.   Unemployment                                                         Chapter 6*

     1.      Natural Unemployment, Job Finding and Job Loss
     2.      Frictional Unemployment
     3.      Real-wage Rigidity and Unemployment
     4.      Efficiency Wages

E.   Economic Fluctuations                                                Chapter 9*

     1.      Aggregate Demand and Aggregate Supply
     2.      The Short-Run and the Long-Run
     3.      Stabilization Policy

F.   The Goods Market and Financial Market                                Chapter 10*

     1.      The Keynesian Model
     2.      An Introduction to the Investment-Saving (IS) Curve
     3.      Money and Commodity Markets
     4.      Theory of Liquidity Preference
     5.      An Introduction to the Liquidity-Money (LM) Curve
                     a) Income, Interest Rates and the Demand for Money

G.   The IS-LM Model in a Closed Economy                                  Chapter 11*

     1.      Applications of the IS-LM Model
     2.      Fiscal Policy - Government Budgets and the IS-LM Model
     3.      Monetary Policy
     4.      Monetary Policy and Fiscal Policy Interactions
     5.      Relationship to Aggregate Demand (AD)
     6.      Simple Algebraic Model of IS-LM                              Appendix Ch. 11*

H.   What is Money? And all that ...                                      Chapter 4* and 18*

     1.      Definitions of Money
     2.      Money - Supply and Demand
     3.      Keynesian and Classical Perspectives
     4.      The Quantity Theory of Money
     5.      Monetary Control and its Limitations
                       a)       The Role of the Federal Reserve System
                       b)       Instruments of Monetary Policy
     6.      Fractional Reserve Banking
     7.      Inflation and Interest Rates
     8.      Real and Nominal Interest Rates – The Fisher Effect

I.   Aggregate Supply and the Labor Market                                Chapter 13*

     1.      Wages and information
                     a)       The Sticky-Wage, Imperfect-Information, and Sticky-Price Models
     2.      Households decision to work
     3.      Labor Contracts
     4.      Unemployment and Inflation – A discussion of the Phillips Curve
       J.       Open Economy Macroeconomics                                             Chapter 5* and 12*

                1.       Balance of Payments
                2.       Saving and Investment in a Small Open Economy
                3.       Foreign Exchange Rates
                4.       Purchasing Power Parity
                5.       An IS-LM Model for an Open Economy
                6.       Analysis of a Large Open Economy
                7.       The Mundell-Fleming Model
                8.       The impact of Fixed and Floating Exchange Rates
                9.       IS-LM Model for an Open Economy

       K.       Economic Growth                                                         Chapter 7 and 8

                1.       Solow Growth Model
                2.       Capital Accumulation
                3.       The Impact of Savings on Growth
                4.       The Impact of Population Growth
                5.       Extensions – Technological Progress
                6.       Extensions – Impact of Savings & Investment on Growth
                7.       Endogenous Growth Theory

       L.       Macroeconomic Policymaking                                              Chapter 14**

                1.       Active vs. Passive Policy
                2.       Policy and Uncertainty
                3.       Issues to consider in Economic Policymaking

       M.       Investment

                1.       A Source of Instability in the Private Economy
                2.       Business Fixed Investment and Residential Investment

       N.       Government Spending                                                     Chapter 15**

                1.       Debates over Government Debt: Budgets, Spending and Taxation

       O.       What do we really know about Macroeconomics?                            Epilogue*

VI.    Examinations:              Examination #1 - 33.33%
                                  Examination #2 - 33.33%
                                  Examination #3 - 33.33%
       Grading Scale:

                A 100 – 90; B 89 – 80; C 79 – 70; D 69 – 60; F 59 – 0

       Pluses and minuses will be given at the instructor’s discretion. Other assignments contributing to your final
       grade may be given during the semester.

VII.   Prerequisites:    ECO 2013 and ECO 2023 or equivalent and other university mandated prerequisites.
VIII.   General Notes to the Student:

        Welcome to Applied Macroeconomics! This course is intended to be a stimulating and positive learning
        experience for you.

        It is assumed that all of you have taken the equivalent of the Principles of Macroeconomics (ECO 2013 or
        equivalent) taught at this university and have completed all required prerequisites. A basic understanding of
        College Algebra and some basic mathematical concepts, as they apply to economics, will be helpful. Please
        note that this course does not count toward a Minor in Economics. If you are pursuing a Minor in Economics,
        please enroll in ECO 3203 – Intermediate Macroeconomics.

        Your grade for this course will be based on your individual exam performance and class participation. It is of
        utmost importance that you are present for each scheduled examination.

        I urge you to form small study groups that meet on a regular basis. It is amazing how much you can learn from
        dialogue and discussion with your classmates.

        If you have any specific questions please feel free to discuss them with me at any time before, during, or after
        class. I am also available during office hours to address any course-related questions or issues. If necessary,
        you may contact me via email. Please use email judiciously. Do not use email to ask for exam results, detailed
        questions, or to discuss administrative matters. Office hours and individual meetings are to be used for such
        matters. Additionally, do not use emails to ask for the material that was covered in a missed lecture. In these
        cases, ask one of your classmates for the lecture notes. When sending email please title them as follows:
        ECO3202 – Student Name. Email not titled in this manner will be deleted.

        Regular class attendance and participation is presupposed and strongly recommended. Past experience indicates
        that those who participate in class and regularly attend lecture generally perform better in the course. If you
        should miss a lecture, it is your responsibility to keep fully informed about notes, class material discussed
        (including syllabus adjustments, additional reading assignments, changes in examination material and dates,
        etc.). Students who miss more than two classes will automatically fail the course. Students who stop attending
        class will receive a letter grade of "F" for the course unless they submit a drop card to the Registrar's office prior
        to the withdrawal deadline date.

        Electronic devices such as cellular telephones (including accessories), should be turned off at all times. Other
        electronic devices such as tape recorders, cameras, audio/video recording devices, or similar recording devices
        are not permitted in the classroom. Recording of lectures using any recording device(s) is not permitted unless
        you have written permission from the instructor.

        Please note that all the topics discussed in lecture are not always covered in the textbook. In these cases, I urge
        you to follow the lecture notes closely and complete all assigned readings (i.e., textbook, journal articles, other
        specific articles, Internet sources, etc.). The course outline is subject to change due to time constraints, policy
        changes, or any other reason, which in the instructor’s professional judgment will be of benefit to the students.
        At the discretion of the instructor, there may be adjustments to the syllabus and/or course material, exam dates,
        including additional assignments, etc.

        I strongly recommend that you read the required textbook, readings, and lecture notes carefully. I also
        recommend that you regularly use the study guide that accompanies your textbook. Remember that I am here to
        facilitate learning and assist you with any course-related questions you may have. Do not hesitate to ask for
        assistance and let’s work together to ensure that the course is a meaningful and worthwhile learning experience
        for you. Good Luck!
IX.        Key Dates – Fall 2010

           Monday, January 4                    Classes Begin
           Monday, January 18                   Martin Luther King, Jr. Holiday (University Closed)
           Tuesday, February 2                  Tentative Exam #1 **
           Friday, February 26                  Last Day to drop course w/ DR or WI grade.
           Tuesday, March 9                     Tentative Exam #2 **
           March 15 – March 20                  Spring Break (No classes held)
           Thursday, April 15                   Classes End
           April 19 – 24                        Tentative Exam #3 ** (Official Examination Period)
                                                Grades available to students by web or at kiosks. Do NOT
           Thursday, April 29th
                                                email the professor for final grades.
           ** - Please note that exam dates are tentative and could move one period forward or backward.

XI.        Useful Websites








XII.       Homework Textbook Problems & Exercises

                       TEXTBOOK                            STUDY GUIDE
 Chapter       Problems & Applications           Fill-In    M-C          Exercises            Problems        Data
    1     1, 3, 4                                 All       All      1,2, 3
    2     1, 2, 3, 4, 5, 6, 7, 8                  All       All      1, 2, 3, 4, 6       1, 5, 6, 7, 8        1, 2
    3     4, 5, 6, 7                              All       All      1, 2, 3*, 4, 5, 6   3 (a-e)
  16-1                                           1 to 5     1, 2     1, 2                1, 5                 1, 2
    6     1                                       All       All      1, 2                1, 5                  1
    9     1, 2, 3, 4                              All       All      3
   10     1, 2, 4, 5                              All       All      1, 2, 4, 6, 7       3, 4, 5
   11     1, 3, 4, 6                              All       All      1, 2, 3, 4          1 (a-e), 3
   13     TBD
    4     1, 2, 4, 5                              All        All     1, 3, 5, 6          1, 2, 4
   18     1                                       All      1 to 15   2, 3                1, 2
    5     1,2, 3, 8*                              All      1 to16    1, 2, 3             1, 3, 5, 6, 9, 12
   12     1, 2, 3, 7                              All      1 to 20   1,2,3,4,5           1, 4, 7
   14    x3                                       All        All     1
   15    x6                                       All        All     2, 4                                    1 (a-b)