BAYLOR UNIVERSITY
Economics 3307
MACROECONOMIC THEORY AND POLICY
Fall 2011
Dr. Thomas M. Kelly
Office: A.301.2 Hankamer
Phone: 710-4543
Fax: 710-6142
E-mail: tom_kelly@baylor.edu
Office Hours: TR 9:00 – 11:00 or by appointment
COURSE OBJECTIVES:
This course examines fundamental topics associated with an understanding of the
macroeconomy. Economic models are examined to illustrate relationships among endogenous
measures of economic performance and exogenous influences, including macroeconomic policy.
The first major topic examines the Solow and Romer models that explain how market economies
achieve economic growth in the volume of production over time. With a basic understanding of
forces affecting the potential output of an economy we will then focus on our second major topic
which is to develop a model to explain the dynamics of business cycle forces that affect
instability in short-run relative to potential output. The third major area applies our models in
order to understand various influences on aggregate output, such as the role of the central bank
and the government in affecting macroeconomic policy, the role of inflation expectations on real
versus nominal interest rates, causes of and solutions to the global financial crisis, the future
impact of the government debt-GDP ratio, and real versus nominal exchange rates in an open
economy
If we are successful in this class, at the end of the semester you should be able to:
(i) understand and evaluate media stories about the economy; (ii) analyze a wide range of
macroeconomic issues, including those not discussed in class; and (iii) communicate clearly your
understanding of macroeconomic facts, concepts, and reasoning techniques.
TEXTBOOK/CLASS PREPARATION:
Charles I Jones Macroeconomics, 2nd edition. W.W. Norton & Company, (2010)
Read the textbook chapter from the attached schedule before coming to class. Also, refer to
Supplements for ‘Students on the web site: http://www.wwnorton.com/college/econ Students
are advised to use the study plan for each chapter and to read current articles on Economics in the
News from the same location in preparation for class. I also would encourage you to read the
Wall Street Journal that may be accessed from the Baylor Business School web site.
GRADE DETERMINATION:
At the end of the term, I will compute a FINAL NUMERICAL TOTAL
following scores:
EXAM I:
EXAM II:
FINAL EXAM:
ASSIGNMENTS
based
on
the
100 points
100 points
100 points
20 points
The exam dates are given below. If you have a question about the grading of an exam, you
must see me about it within one week after I return the exam to you to be eligible for any
additional points that may be warranted.
I will ASSIGN COURSE GRADES on the basis of the distribution of final point totals. A final
total of 288 (90%) or over will guarantee a course grade of “A”, a final average 256 (80%) or
over will guarantee a course grade of “B”, 224 a “C”, etc. After reviewing the distribution these
guaranteed marginal requirements could be lowered. Grades near the threshold of the next
highest letter grade will received a + on their letter grade.
In AWARDING FINAL GRADES, I also give "consideration" to the following: class attendance,
class participation, and improvement over the semester. All such consideration must be fair to
other students and is made entirely at my discretion.
Over the course of the semester you will receive homework assignments. These assignments
are designed to reinforce and extend the basic concepts covered in class. Unless otherwise noted,
assignments will be due at the beginning of class period one week after receiving the assignment.
Late assignments will be penalized. Each assignment will be worth 5 points, resulting in 20
additional points No assignment grade will be dropped in this calculation.
MAKE-UP EXAMS:
I will permit a student to take a make-up exam if the reason for rescheduling the exam is a
compelling one, such as being out of town on a Baylor-related trip (letter from sponsor, coach, or
advisor required), serious illness (note from health center or personal physician required), death
in the family, or severe psychological or other problems.
ABSENCES:
Baylor policy requires you to attend at least 75% of the course meetings. A TuesdayThursday class meets 29 times, and 75% of that is 21.75. Thus the policy is that you must attend
at least 22 meetings of the course. In the absence of compelling circumstances, you will receive
a course grade of "F" for the course if you have 8 or more absences. “Compelling circumstances
must be accompanied by verification by a University, doctor, or some other official.
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SCHEDULE
The schedule below should be regarded as tentative. If necessary, I will update it as the semester
progresses. I will give you advance notice of at least one week prior to the date of an exam.
Class
Period
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Topic (Chapter in Jones)
Introduction & overview of the course (1)
Measuring the macroeconomy (2)
Overview of long-run economic growth (3)
A model of production (4)
The Solow growth model (5)
Growth and Ideas: the Romer model (6)
Exam I on chapters 1-6 (The Long Run Determinants of Output, Employment, and
Inflation)
The labor market, wages, and unemployment (7)
Inflation (8)
Introduction to the short run (9)
The Great Recession: A First Look (10)
The IS Curve (11)
The MP curve: monetary policy and Phillips Curve (12)
Stabilization Policy and the AS/AD framework (13)
Exam II on chapters 7-13 (Employment, Inflation and Determinants of Short-run
Output)
The Global Financial Crisis and the short-run model (14)
Microfoundations and applications: consumption (15)
Investment (16)
The government and the macroeconomy (17
International trade and foreign borrowing (18)
Exchange rates and international finance (19)
Parting thoughts (20)
Final Exam on macroeconomic issues (Chapters 14-20)
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