Instructor: Eric
Zivot, Assistant Professor
Department of Economics
University of Washington
Office: 310F Savery
Phone: 543-6715
email: ezivot@u.washington.edu
Office Hours: M-W 4-5
(or by appointment)
This is an intermediate course in macroeconomics intended for economics majors. In this course we will develop theories for understanding key aspects of the macroeconomy including economic growth, employment and unemployment, wage determination, inflation, interest rates, budget deficit, and the trade deficit. The goals of the course are: (1) to present an overview of empirical macroeconomic facts; (2) to provide a general model and framework for thinking about the relationships among macroeconomic variables; (3) to illustrate the interaction between politics and economic policy making.
I will assume that everyone has had an introductory course in macroeconomics. However, I will start from scratch in the presentation of the material. I will not stress the use of calculus in the presentation of material but I will use formal algebraic representations of models and I will point out where calculus can be helpful. I will extensively use graphs of all kinds to develop the key ideas in the course. If you have any trouble reading or creating analytical graphs please seek help (either from me, your friends or others) otherwise this course will be very difficult.
There will be weekly homework assignments, two one hour midterm exams and a final exam. The grading breakdown is as follows:
Homework: 20% Midterms: 40% Final Exam: 40%
The homework assignments are primarily designed to give you practice with analytical questions. They are due at the beginning of class each Tuesday. I (or the grader) will not accept late homework. There are no exceptions.
I expect everyone to take the exams on the announced times. If there are any problems, see me before the exam so we can work something out. I will not reschedule an exam for you if you approach me after the exam unless the situation preventing you from taking the exam on time is out of your control (e.g. family emergency, car accident etc.).
Textbooks
1. Macroeconomics, Second Edition, by Andrew Abel and Ben Bernanke, Addison Wesley, 1995. This text is a very readable, modern treatment of intermediate macroeconomics with a somewhat Keynesian emphasis. It gives a nice balance of theory, real world applications and political considerations. The text stresses intuition over formal models and mathematics.
2. Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations, by Paul Krugman, Norton, 1994. This monograph is a more politically oriented discussion of economic conditions and policy during the 1980s and early 1990s than Krugman's other popular book The Age of Diminished Expectations. I suggest reading this book twice: once at the very beginning of the course and then go over it again at the end of the course. Paul Krugman is a professor of economics at Stanford and is thought of as one of the brightest economists of his generation. He is also a regular contributor to the online current affairs magazine Slate.
I also recommend several other short monographs on current issues in macroeconomics. The first is Memos to the President: A Guide through Macroeconomics for the Busy Policy Maker, by Charles L. Schultze, Brookings, 1992. Charles Schultz was on President Carter's Council of Economic Advisors and this monograph is a collection of "memos" briefing a hypothetical president on economic issues. The next is Hard heads, Soft Hearts, by Alan Blinder, Addison Wesley, 1987. Alan Blinder is a professor of economics at Princeton University and was recently on President Clinton's Council of Economic Advisors and was vice chairman of the Federal Reserve System. Also of interest is The Misunderstood Economy, by Robert Eisner, Harvard Business School Press, 1994. Robert Eisner is a professor of economics at Northwestern University and is a former president of the American Economic Association. Last, I recommend The Age of Diminished Expectations, Revised and Updated Edition, by Paul Krugman, MIT Press, 1994. This is a very well written short monograph on current economic conditions and economic policy.
WWW Page
The is a www page for the course at
http://weber.u.washington.edu/~ezivot/econ301/econ301.htm
I will post class announcements, lecture material, homework
assignments and solutions, old exams and other material relevant
to the course. Some homework assignments will utilize the
internet. I recommend that you visit the class web page often.
Note: AB denotes Abel and Bernanke's textbook
PP denotes "Peddling Prosperity"
Week 1: Macroeconomic Data, Basic Issues, National Income Accounting and a Framework for Macroeconomic Models Tu. 1/7 Topics: Introduction to macroeconomic data, issues and concepts Reading: AB ch. 1, 9; PP preface and introduction. Th. 1/9 Topics: National income accounting, real and nominal economic variables. Reading: AB ch. 2: PP preface and introduction Week 2: Important Accounting Identities; The Production Function and the Labor Market Tu. 1/14 Topics: Important accounting identities, balance of payments accounting Reading: AB chs. 2 and 5 (section 1 only). Th. 1/16 Topics: The production function, the labor market and the equilibrium real wage Reading: AB chs. 3 and 8 (skim section 5 - advanced) Week 3: Consumption, Saving and Investment; First Midterm Exam Tu. 1/21 Topics: Saving, investment and the equilibrium real interest rate Reading: AB chs. 4 and 8 (skim section 1-4 - advanced) Th. 1/23 First Midterm Exam Week 4:Long-Run Economic Growth Tu. 1/28 Topics: Growth accounting Reading: AB, ch 6 section 1; PP chs. 2-4. Th. 1/30 Topics: The Solow growth model Reading: AB, ch 6 section 2, PP chs. 2-4. Week 5: The Money Market and the Fed Tu. 2/4 Topics: The Money market, money demand, money supply and the Fed. Reading: AB ch. 7 sections 1-4 and ch. 9 sections 1-2. Th. 2/6 Topics: Money, inflation and the LM curve. Reading: AB ch. 7 section 5, ch. 10 section 3. Week 6: The IS/LM Model, the Classical Model Tu. 2/11 Topics: The FE line, the IS curve, goods market equilibrium and the aggregate demand curve. Reading: AB ch. 10 sections 1-2, 4-5, ch. 11 section 3 (to page 374 only) Th. 2/13 Topics: The classical model, money neutrality. Reading: AB ch. 11 sections 1-3; PP chapter 1. Week 7 Second Midterm Exam; The Misperception Theory Tu. 2/18 Second Midterm Exam Th. 2/20 Topics: Policy analysis with the classical model Reading: AB ch. 11 sections 1-3; PP chapter 1. Week 8 The Keynesian Model Tu. 2/25 Topics: Wage and price rigidities Reading: AB ch. 12 sections 1-2; PP chapter 8. Th. 2/27 Topics: Policy analysis with the Keynesian model Reading: AB ch. 12 sections 3-4; PP chapter 8. Week 9 Monetary Policy, Inflation and Unemployment Tu. 3/4 Topics: The Fed and Monetary Policy Reading: AB ch. 15 section 3. Th. 3/6 Topics: The problems of unemployment and inflation; The tradeoff between unemployment and inflation: The expectations augmented Phillips Curve. Reading: AB ch 13 sections 1 - 3; Week 10 Government Spending and Its Financing Tu. 3/11 Topics: The government budget in detail Reading: AB, chapter 16 sections 1-2; PP chapter 6. Th. 3/13 Topics: The economic effects of government deficits and debt. Reading: AB, chapter 16 sections 3-4; PP chapter 6.
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