THE AMERICAN UNIVERSITY
DEPARTMENT OF ECONOMICS
ECON 301.002
Intermediate Macroeconomics
Spring 2009
MTH 12:45-2:00 PM
Professor Ghazi Joharji
Office: Roper 207
Phone: (202) 885-2573
email: gjoharji@american.edu
Office Hours: MTH 2:10-3:10 pm
and by appointment
COURSE OBJECTIVES
Macroeconomics is the study of the economy as a whole and is concerned with some of
the most important questions in economics and society. Why are some nations rich while
others are poor? Why do some economies grow faster than others? Why did the US
economy enter into a recession starting in December 2007? Have policymakers done
enough to promote an economic recovery? Why has the risk of inflation turned into a risk
of deflation? How did the global credit crisis begin? What factors have caused the value
of the dollar to fluctuate in international currency markets? Is our long-term economic
well-being threatened by the growing US budget and trade deficits? Our goal in this
course is to answer these questions using the various models developed by
macroeconomists and to understand the strengths and limitations of each model.
After introducing the tools that will be used throughout the semester, we will analyze the
economy in the long run when prices are flexible. Next, we will learn the growth model,
associated with Robert Solow. Finally, we will learn the model used for analyzing
fluctuations in the business cycle and will also discuss different approaches to
macroeconomic policy debates such as stabilization policies and handling government
debts.
By the end of this course, you should be able to explain how to measure economic
activity and how to evaluate economic performance; use the Solow growth model and its
extensions to discuss reasons for the long-term improvement in the standard of living;
evaluate the significance of a trade deficit or surplus for an economy; analyze the short
run fluctuations in the economy using models of aggregate demand (IS-LM) and
aggregate supply; decide if the Federal Reserve and other central banks have been
effective in using monetary policy to promote economic recovery in the past year; assess
the role of the “stimulus package” being proposed by the incoming Obama
administration; and apply macroeconomic theory to a major event such as the Great
Depression and the recession which began at the end of 2007.
PREREQUISITES
Econ-100, introductory macroeconomics, and Econ-200, introductory microeconomics or
the equivalent courses at another university.
REQUIRED TEXTS
Mankiw, N. Gregory, Macroeconomics. (New York: Worth Publishers, 2007) Sixth
edition.
The text is accompanied by an excellent web site: bcs.worthpublishers.com/mankiw6.
You must also regularly check the Blackboard site for this course at
https://blackboard.american.edu. All assignments will be posted there. It is your
responsibility to configure your email properly so that you can receive email messages
from Blackboard about this course.
REQUIRED READINGS: ARTICLES LINKED TO BLACKBOARD
Most of these articles can be accessed via the Blackboard site for this course. They are
listed under course documents, external links, or e-reserves. You should be able to
connect to the articles from either an on-campus or off-campus computer.
1.
2.
3.
BERNANKE, Ben, “Liquidity Provision by the Federal Reserve,” a speech
given May 13, 2008, The Federal Reserve Board of Governors. (under
“external links”)
WARSH, Kevin, “The Federal Funds Rate in Extraordinary Times,” a
Speech given May 21, 2008, The Federal Reserve Board of Governors.
(under “external links”)
BERNANKE, Ben, “The recent Financial Turmoil and its Economic and Policy
Consequences,” a speech given October 15, 2007, The Federal Reserve Board of
Governors. (under
“external links”)
4.
BERNANKE, Ben, “Federal Reserve Policies in the Financial Crisis,”
a speech given December 1, 2008, The Federal Reserve Board of
Governors. (under “external links”)
5.
BOSWORTH, Bany and Susan M. Collins, “Accounting for Growth:
Comparing China and India,” Journal of Economic Perspectives, Winter
2008.
6.
“Mission Creep at the Fed,” The Economist, Aug. 7, 2008.
7.
NBER “Establishing the Date of the End of the 2001 Recession,” at
www.nber.org (connect via Blackboard-look under external links)
2
8.
NBER “Determination of the December 2007 Peak In Economic Activity,”
at www.nber.org (connect via Blackboard-look under external links)
9.
FRIEDMAN, Milton. (no title) in Lives of the Laureates, Fourth edition,
William Breit and Roger W. Spencer eds., Cambridge: The MIT Press,
2004, pp. 65-77. (on e-reserve)
10.
TOBIN, James. “Beginning with Keynes at Harvard,” in Lives of the
Laureates, Fourth edition, William Breit and Roger W. Spencer eds.,
Cambridge: The MIT Press, 2004, pp. 95- 113. (on e-reserve)
11.
SOLOW, Robert M. (no title) in Lives of the Laureates, Fourth edition, William
Breit and Roger W. Spencer eds., Cambridge: The MIT Press, 2004, pp. 153- 170.
(on e-reserve)
12.
BLAUG, Mark. “Talking to Leading Economists about Keynes,” pp. 55-89. (on
e-reserve)
13.
Congressional Budget Office. “The Budget Outlook,” September 2008, pp. 1-22.
(under “external links”)
14.
Monetary Policy Report to the Congress, Testimony on July 15, 2008, The
Federal Reserve Board of Governors. (under “external links”)
15.
ROMER, Christina. “The Nation in Depression,” Journal of Economic
Perspectives, Spring 1993, pp. 19-39.
EVALUATION
You will be evaluated in a variety of ways over the semester. The combination of
problem sets, writing assignments, and class discussions along with the midterms and
final exam should allow each student to demonstrate her or his understanding of
macroeconomics in many different dimensions. Also, remember that your attendance and
participation in group exercises are very important to your learning in this course. Lack
of regular attendance could significantly lower your final grade. If you have questions
about the ways in which you are being evaluated during the semester, please stop by and
visit with me during office hours.
ASSIGNMENTS AND EXAMS
Weight in final grade
Class attendance and participation/presentations
10%
Two writing assignments (3-4 pages each)
25%
Problem sets (3)
10%
Exams I and II
30%
Final exam (comprehensive)
25%
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IMPORTANT DATES
Monday, Feb. 2
Monday, Feb. 16
Monday, Feb. 23
Thursday, Mar. 19
Thursday, Mar. 30
Thursday, Apr. 9
Monday, Apr. 20
Thursday, Apr. 30
PROBLEM SET # 1 DUE
PROBLEM SET # 2 DUE
EXAM # 1
WRITING ASSIGNMENT # 1 DUE
PROBLEM SET # 3 DUE
EXAM # 2
WRITING ASSIGNMENT # 2 DUE
FINAL EXAM 11:20 AM – 1:50 PM
POLICY ON LAPTOPS:
Please limit your use of laptops to work directly related to this course while you are in
class. For example, do not surf the internet or check your email.
ACADEMIC INTEGRITY: Standards of academic conduct are set forth in the
University’s Academic Integrity Code. By registering at the university, you have
acknowledged your awareness of the Academic Integrity Code and you are obliged to
become familiar with your rights and responsibilities as defined by the Code. Violations
of the Academic Integrity Code will not be treated lightly, and disciplinary actions will
be taken should such violations occur. Please see me if you have any questions about the
academic violations described in the Code in general or as they relate to particular
requirements for this course.
IF YOU NEED HELP
Please contact me as soon as possible either by e-mail, by telephone, or by visiting my
office. Together we can develop a plan to address whatever problems you may be
experiencing.
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SCHEDULE OF TOPICS
Monday, Jan. 12
Welcome, Introduction, and Overview
Chapter 1, Introduction to Macroeconomics
Chapter 2, The Data of Macroeconomics
Thursday, Jan. 15
Chapter 2 (continued)
Monday, Jan. 19
Martin Luther King Jr. Day (no class)
CLASSICAL THEORY: THE ECONOMY IN THE LONG RUN
Thursday, Jan. 22
Chapter 3, The Aggregate Production Function
(pp. 44 – 58)
Monday, Jan. 26
Chapter 3, The Loanable Funds Model (pp. 59 – 75)
and
READINGS: Friedman, Tobin, and Solow (Lives of the
Laureates)
Thursday, Jan. 29
Chapter 4, The Quantity Theory of Money (pp. 76 – 90)
Monday, Feb. 2
Chapter 4, Inflation, Interest Rates and the Demand for
Money (pp. 91 – 111)
PROBLEM SET # 1 DUE: Monday, Feb. 2 (in class)
Thursday, Feb. 5
Chapter 5, The Open Economy: Capital Flows and the
Trade Balance (pp. 115 – 131)
Monday, Feb. 9
Chapter 5, Real and Nominal Exchange Rates
(pp. 131 – 148)
Thursday, Feb. 12
Chapter 6, Unemployment
GROWTH THEORY: THE ECONOMY OVER 100 YEARS
Monday, Feb. 16
Chapter 7, The Solow Growth Model
PROBLEM SET # 2 DUE: Monday, Feb. 16 (in class)
Thursday, Feb. 19
Chapter 7 (continued)
and
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READING: Bosworth and Collins, “Accounting for
Growth”
Monday, Feb. 23
EXAM # 1
Thursday, Feb. 26
Chapter 8, Technology in the Solow Model (pp. 216 – 234)
Monday, Mar. 2
Chapter 8, Endogenous Growth Theory (pp. 235 – 243)
BUSINESS CYCLE THEORY: THE ECONOMY IN THE SHORT RUN
Thursday, Mar. 5
Chapter 9, Introduction to Economic Fluctuations
and
READINGS: NBER “Establishing the Date of the End of
the 2001 Recession” and “Determination of the December
2007 Peak in Economic Activity” and “Monetary Policy
Report to Congress”
SPRING BREAK
Monday, Mar. 16
Chapter 10, The IS/LM model
Thursday, Mar. 19
Chapter 10 (continued)
and
READING: Blaug, “Talking to Leading Economists about
Keynes”
WRITING ASSIGNMENT # 1 DUE:
Thursday, Mar. 19 (in class)
Monday, Mar. 23
Chapter 11, Fiscal and Monetary Policy
Thursday, Mar. 26
Chapter 11, Application to the Great Depression
and
READING: Romer, “Nation in Depression”
Monday, Mar. 30
Chapter 11 (continued)
PROBLEM SET # 3 DUE: Monday, Mar. 30 (in class)
Thursday, Apr. 2
Chapter 12, The Open Economy Revisited: The Role of the
Exchange Rate Regime
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Monday, Apr. 6
Chapter 12 (continued)
Thursday, Apr. 9
EXAM # 2
Monday, Apr. 13
Chapter 12 (continued)
Thursday, Apr. 16
Chapter 14, Stabilization Policy and
Chapter 18, Money Supply and Money Demand,
pp. 524 - 525
and
READINGS: “Mission Creep at the Fed” and Bernanke,
“Recent Financial Market Turmoil” and “Federal Reserve
Policies in the Financial Crisis”
Monday, Apr. 20
Chapter 14 (continued)
and
READINGS: Bernanke, “Liquidity Provision” and Warsh
“The Federal Funds Rate"
WRITING ASSIGNMENT # 2 DUE:
Monday, Apr. 20 (in class)
Thursday, Apr. 23
Chapter 15, Government Debt
and
READING: “The Budget Outlook,” Congressional Budget
Office
Monday, Apr. 27
Chapter 15 (continued)
Thursday, Apr. 30
FINAL EXAM 11:20 AM – 1:50 PM
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