Intermediate Macroeconomics

Ecn 302 Intermediate Macroeconomics Fall 2004

Class Schedule: M: 6:30 - 9:20 p.m., 239 EH Instructor: Dr. Nivedita Mukherji, Associate Professor of Economics Office: 410 Elliott Hall Phone: 248-370-4087 e-mail: [email protected] Internet: http://www.sba.oakland.edu/faculty/mukherji Office Hours: M: 5:00 - 6:00 p.m., W: 12:15 - 1:00 p.m. and by appointment

Prerequisites: Ecn 200 and 201, OR 210, and Mth 121, 122 Text: Macroeconomics by N. Gregory Mankiw (5th Edition). Publisher - Worth Supplemental Reading: Study Guide, The Wall Street Journal.

Course Description The primary objective of this course is to study the aggregate economic behavior of national economies and governments. Some of the key issues we will address are: why some economies grow faster than others; why national output, employment, prices, and interest rates fluctuate over time; how different national economies are linked; what should be the role of governments.

Course Grade The course grade will be based on class participation and presentation (15%), homeworks (25%), a midterm examination (30%), and a final examination (30%).

The following is a tentative schedule for in-class exams:

Midterm Exam: Oct. 25

Final: Monday, Dec 13, 7:00 - 10:00 p.m. Unless otherwise mentioned, the midterm will cover everything taught till the end of class on October 18 and the final exam is cumulative.

Make-up exams for the midterm and final will be given only in extenuating circumstances. A student requesting a make-up exam must, however, obtain the instructor's permission before the scheduled exam. Homework assignments will not be accepted after the due date except in extenuating circumstances and prior approval of the instructor will be necessary.

Academic Conduct: All work submitted for grading must be a student's own work unless otherwise specified by the instructor. All violators will be referred to the Academic Conduct Committee.

Course Outline

Introduction

1. The Data of Macroeconomics (Chapter 2) –Weeks 1, 3

GDP and GNP accounting Real versus Nominal GDP CPI and GDP deflator Unemployment Okun’s Law

Additional Reading: “Unemployment and Labor Market Rigidities: Europe versus North America,” Journal of Economic Perspectives - Vol. 11, No.3, Summer 1997.

Behavior of the Economy in the Long Run

2. National Income (Chapters 3, 16, 17) – Weeks 3, 4

Factors of Production Production Function The Supply of Goods and Services Distribution of Income to Factors Firm’s Demand for Factors and Division of Income Demand for Goods and Services Consumption – Ch 16 Investment – Ch 17 Equilibrium in the Goods and Loanable Funds Markets Some Comparative Statics

3. Money and Inflation (Chapter 4) – Week 5

Functions and Types of Money The Quantity Theory of Money Money Demand Money Growth and Inflation Seignorage Inflation and Interest Rates Costs and Benefits of Inflation

Additional Reading: “Some Monetary Facts” by G. McCandless and W. Weber – Federal Reserve Bank of Minneapolis Quarterly Review Vol. 19, No. 3, 1995

4. The Open Economy (Chapter 5 including Appendix) – Week 6

International Flows of Goods and Capital Saving and Investment in a Small Open Economy Exchange Rates – Nominal and Real Exchange Rate and the Trade Balance Nominal Exchange Rate and the Purchasing Power Parity The Large Open Economy (Appendix)

Additional Reading: “Is the Large U.S. Current Account Deficit Sustainable?” by J. Holman, Economic Review – Federal Reserve Bank of Kansas City, 1st Quarter 2001.

5. Economic Growth (Chapter 7, 8 including Appendix) – Weeks 7, 9

The Solow Model The Golden Rule Population Growth Technological Progress Policies to Promote Growth Growth Empirics Endogenous Growth Theory Growth Accounting (Appendix)

Economic Fluctuations – The Short Run

6. Economic Fluctuations (Chapters 9, 10, 11) – Weeks 10, 11

Aggregate Demand and Supply Stabilization Policies The IS and LM Curves Short Run Equilibrium Shifts of IS and LM Curves IS-LM and the Aggregate Demand Curve

Additional Reading: “A Closer Look At Jobless Recoveries,” S. Schreft and A. Singh – Federal Reserve Bank of Kansas City – 2 nd Quarter 2003.

7. Aggregate Supply (Chapter 13) – Week 12

The Sticky Wage, Sticky Price and Imperfect Information Models of Aggregate Supply The Phillips Curve

8. Stabilization Policy (Chapter 14) – Week 13

Active versus Passive Policies Rules versus Discretion

9. Government Debt (Chapter 15) – If time permits Week 14