ECONOMICS 256 MACROECONOMICS Fall 2015 Professor Olena Mykhaylova, omykhayl@holycross.edu Class meeting times Section 03: TR 9:30 10:45 am, Stein 315 Section 04: TR 11:00 12:15 pm, Stein 315 Required text Macroeconomics, 8 th ed., by N. Gregory Mankiw Prerequisites ECON 111 (Principles of Macroeconomics) ECON 112 (Principles of Macroeconomics) One year of calculus or equivalent Course material Will be posted on Moodle Office hours TRF 1:30 3:00 pm in Stein 540, and by appointment Course Description This course develops macroeconomic theory; as such it requires the use of economic models. You will develop analytical skills to be able to use the models to understand the U.S. economy. We will examine long-run economic performance (Solow model), business cycles and macroeconomic policy (IS-LM model), and the environments and institutions of macroeconomic policy. We will discuss current economic events and how they affect the economy. The course also contains an introduction to manipulating economic data: you will be asked to use Excel to create graphs and tables that illustrate the data to help relate the data to the theory. By taking this course, you will: (1) understand how individual consumers respond to the state of the economy and to government policy; (2) learn that all markets in the economy are interconnected and influence one another; (3) understand how to think analytically, using economic theory and models to analyze key macroeconomic indicators such as output, inflation, and unemployment; and (4) evaluate the impact of government policy on these variables. Attendance Your time is limited, and you must decide how to best allocate this scarce resource between classes, studying, and other activities. Therefore, attendance is not required; however, the opportunity cost of skipping a class is an increased probability of missing a pop quiz and a lower overall course grade. It is your responsibility to catch up on whatever material you missed by not attending a lecture. Moreover, since I do not accept late assignments, you should make arrangements to turn them in prior to the due date. There are no make-up exams; should an emergency prevent you from taking an exam, your final exam grade will be re-weighted accordingly. Additional Readings Throughout the course, I will post readings on Moodle that might be helpful in understanding some of the economic theory we cover during the lectures. The detailed list of these readings and the due dates can be found below. Reading these articles is not optional. I expect everyone to be able to participate when we discuss them in class, and I will assume you have read them when I write problems sets and exams. Page 1 of 5
You are also encouraged to regularly peruse publications such as the Economist, the New York Times, the Wall Street Journal, and the Financial Times to keep informed about current economic events. Take time to think about the real-world implications of the models we are studying in class. You will be asked to work through real-world problems on your problem sets and exams, and will have a chance to write three brief article analyses for extra credit (see below). Grading Your grade for the course will be based on your performance on three exams (two midterms and a cumulative final), seven homeworks, and five pop quizzes. Exams will include multiple choice questions and short and long answer essay questions, which will emphasize the material covered in class, as well as assigned readings. Homeworks can be done in groups. However, each student is expected to turn in his/her individual work to get full credit. Please don t copy and paste each other s answers be creative! Otherwise, I will take points off your work, and the one from which you copied it. I will drop your lowest homework grade when calculating your total grade (in case you get sick, for example). Each homework consists of three sections. In the first section, you will be asked to apply the concepts and theories discussed in class to solve graphical and numerical problems. In the second, you will have to extend the models developed during lectures by modifying their equations or graphs and comparing the resulting solutions to those obtained in class. In the third section, you will download and plot macroeconomic data to check whether its properties and patterns conform to the predictions of macroeconomic theories. Pop quizzes: I will give five unannounced five-minute in-class quizzes during the semester. The quizzes will test you on the material covered during the previous lecture or on the readings due that day. Each quiz is worth 1 extra point of the overall class grade. If you get the answer right, you will get 1 point; otherwise, you will get ½ point for being present. Extra credit assignments can boost your overall grade. You may take advantage of up to three such opportunities. Each extra credit paper will add up to 20 points to one of your homeworks (even if you ace it and get 100 points). Each extra credit report is a one-page (typed, double-spaced) analysis of a recent article that relates to the topics covered in class. I will grade your report on your ability to apply the theories developed during lectures to real world issues, and on the clarity of your exposition. As such, you should clearly indicate to which model/theory the article is referring, and explain how it applies, supports, extends, or contradicts the model/theory. You may pick articles from credible sources such as newspapers and magazines mentioned above or academic journals. You may not use articles which are assigned as class readings. You must attach a copy of the article to your report. The deadlines for the three extra credit papers are as follows: Extra credit 1: September 29 Extra credit 2: October 29 Extra credit 3: November 24 Page 2 of 5
Project Weighting and Dates Midterm exam 1 20% October 6 Midterm exam 2 20% November 12 Final exam 35% TBA Homeworks 20% See lecture schedule below Pop quizzes 5% Unannounced Academic Honesty All students are expected to comply with the College s Academic Honesty Policy, which can be found here: http://catalog.holycross.edu/node/1381#ahp. The penalty for scholastic dishonesty (including, but not limited to, receiving or giving help on exams, plagiarizing, or sabotaging another student s work) in this course will be failure (grade of zero) on the entire assignment or exam. Page 3 of 5
Lecture Schedule This schedule is approximate and subject to change. All chapters refer to the Mankiw textbook. All readings (posted on Moodle and marked below as R1, R2, etc.) should be completed before the lectures for which they are assigned; the last page of the syllabus provides additional details. Date Lecture Readings and Assignments Sept. 3 1. Introduction Ch. 1 Sept. 8 2. Measurement, GDP Ch. 2.1, R1 Sept. 10 2. Measurement, CPI Ch. 2.2 Sept. 15 2. Measurement, Unemployment Ch. 2.3, 7.1-4, H1 Sept. 17 3. Growth: Facts and the Solow Model Ch. 8.1, 8.3 Sept. 22 3. Growth: Solow Model, cont d R2, H1 due Sept. 24 3. Growth: Golden Rule, Growth Accounting Ch. 8.2, R3 Sept. 29 3. Growth: International Income Disparity Ch. 9.2-3, H2 Oct. 1 4. Business Cycles: Theory and Facts Ch. 10.1-2, R4, R5, H2 due Oct. 6 Midterm Exam 1 Oct. 8 5. Micro Foundations: Intratemporal Model FALL BREAK Oct. 20 5. Micro Foundations: Intratemporal Model R6, H3 Oct. 22 6. Micro Foundations: Intertemporal Choice Ch. 16.1-2 Oct. 27 6. Micro Foundations: PIH Ch. 16.3-4, H3 due Oct. 29 6. Micro Foundations: Ricardian Equivalence Ch. 19.4 Nov. 3 6. Micro Foundations: the Goods Market Ch. 3, H4 Nov. 5 7. The Asset Market, Money and Prices Ch. 4.1, 5.1 Nov. 10 7. The Role of Inflation Ch. 5.2-7, R7, H4 due, H5 Nov. 12 Midterm Exam 2 Nov. 17 8. IS, LM, and LRAS Curves Ch. 11 Nov. 19 8. IS-LM Model and Shocks Ch. 12.1, H5 due, H6 Nov. 24 9. Classical RBC Model Ch. 12.2, R8, H6 due THANKSGIVING BREAK Dec. 1 10. Keynesian Model R9, R10 Dec. 3 11. Macro Debate: Keynesians vs. Classicals Ch. 4.2-3, 12.3, R11, H7 Dec. 8 12. Policy Conduct Ch. 18 Dec. 10 13. Government Debt, Multiplier Ch. 19, R12, R13, H7 due Page 4 of 5
Outline of Readings by Chapter Optional/additional readings are marked with an asterisk. All other readings are mandatory. Readings should be completed before the lectures for which they are assigned. Introduction and Measurement 1. The Economist (August 3, 2013). Boundary Problems. Long-Term Economic Growth 2. Paul Krugman (1994). The Myth of Asia s Miracle. Foreign Affairs, 73, 62-78. 3. The Economist (January 12, 2013). Has the Ideas Machine Broken Down? Matthew Shane and Fred Gale (2004). China: A Study of Dynamic Growth. United States Department of Agriculture. Business Cycles: Theory and Facts 4. The Economist (September 11, 2008). Redefining Recession. 5. The Economist (December 30, 2008). Diagnosing Depression. Micro Foundations of Macro Models 6. The New Yorker (November 28, 2005). No Work and No Play. 7. Michael White and Kurt Schuler (2009). Who Said Debauch the Currency : Keynes or Lenin? Journal of Economic Perspectives, 23, 213-222. George Goodman (1981). Paper money. Excerpt on the German hyperinflation of 1923. IS-LM Model and Extensions 8. Daniel Yergin and Joseph Stanislaw (1998). The Commanding Heights. Excerpt on the Chicago School. 9. Daniel Yergin and Joseph Stanislaw (1998). The Commanding Heights. Excerpt on the Keynesian economic theory. 10. Time (February 12, 2009). Resolving the Paradox of Thrift. 11. Paul Krugman (September 6, 2009). How Did Economists Get it So Wrong? The New York Times. Michael Woodford (2008). Convergence in Macro: Elements of the New Synthesis. Remarks for a panel discussion at the AEA meeting. Advanced Topics: Policy Conduct and Government Debt 12. CBO Economic and Budget Issue Brief (July 27, 2010). Federal Debt and the Risk of a Fiscal Crisis. 13. The Economist (October 27, 2012). No Short Cuts. The Washington Post (October 29, 2011). The Debt Fallout: How Social Security Went Cash Negative Earlier Than Expected. Page 5 of 5