Syllabus - The Unbroken Window

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Spring 2006 Syllabus
Course Information
Course:
Economics 110 – Introduction to Economics (Economics for the
Citizen and for the Aspiring Economist)
Meetings:
Section A: Mon., Wed., Fri. 11:30am - 12:30pm (Young 101)
Section B: Mon., Wed., Fri. 1:50pm - 2:50pm (Crounse 313)
Course Web Page:
http://web.centre.edu/rizzo/ (click on “Teaching” in
main menu on top of page)
Please get into the habit of accessing the web page regularly. Most
of your readings will be available right from the course page. I use
the webpage to keep the class abreast of current events in
economics and I also use it to make administrative announcements
and reminders in the event you didn’t write them down in class.
Instructor Information
Instructor:
Michael Rizzo
Office Hours:
(Official Hours) Monday, Wednesday, Friday 3:00pm – 4:30pm; or
by appointment.
Office Location:
Office Phone:
E-mail:
417 Crounse
238-5239
[email protected]
Home Phone:
236-5656 (I am more than happy to chat with you
from home if you need me. Please try not to call after
10:00pm. I urge you to leave a message if I do not answer, I am
often found with my hands full and neglect to charge after a ringing
phone due to concerns for my own, my wife’s, our animals’ and our
child’s safety!
Course Description
Each year thousands of students study economics. The work of millions of writers, politicians,
pundits and educators requires a basic proficiency in the fundamentals of economic analysis. Sadly,
few have been able to demonstrate such competence. A quick note of some recent quotations will
demonstrate this quickly: “I have a plan for energy independence within 10 years...we're going to
free ourselves from this dependency on Mideast oil”, “Hurricanes Boost Florida Economy”, “We are
running out of (insert resource name here)”, “The market is only creating bad jobs”, “Boycotting the
products produced by sweatshop laborers will teach (company name) a lesson”, “Farm to Cafeteria …
makes good economic sense”, etc.
Economics is about the everyday world around us. The study of economics is intended to equip you
with a set of tools to analyze the difficult decisions faced by individuals, firms and governments – it is
a theory of choice and its unintended consequences. In other words, the goal of this course is to
introduce you to a way of thinking, not simply to show you a set of principles that are an ends unto
themselves. The goal of this course is to enable you to analyze economic policies logically, and in a
way that you can illuminate an issue rather than rabble-rouse it. The goal is to enable you to take
positions of public affairs based on facts, knowledge and intelligent analysis of the consequences of
policy proposals.
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Spring 2006 Syllabus
These goals will be achieved through a careful study of economic theory mixed with a substantial
dose of real-world application. We will frequently visit common myths and misperceptions about
economics and understand why they have evolved, what the error in thinking is and how to move the
debate forward. The first ¾ of the course will focus on microeconomics – or the study of the choices
and constraints faced by individual decision making units. Example of questions to be answered
include: why support for the minimum wage is much stronger among politicians than economists;
when should a business decide to open or shut down; why do diamonds cost so much more than
water if water is necessary for human survival? The last ¼ of the course will introduce you to
macroeconomic analysis – that studies the consequences of microeconomic decisions on national
income, national employment levels, the overall price level in an economy, how government actions
affect the economy and how the Federal Reserve Bank impacts the economy.
While the course will not rely on as heavy a dose of graphics and algebra as one might expect from
an economic theory course, it will still nonetheless be an important tool to help illustrate difficult
economic concepts. I urge each of you to study the appendix to Chapter 2 for a review of basic
graphing, algebraic and analytic tools that are important. The course will combine a combination of
traditional lectures, classroom experiments, videos clips and discussions (or debates).
Finally, I’d like for you to understand that the study of economics is not an attempt to design the
world around us – it is far too complex a task. Rather, it is intended to have you appreciate this
marvelous complexity. In addition, the study of economics would be hollow if not supplemented with
a solid appreciation of philosophy, psychology, hard science, literature, culture, language and more.
This is why the study of economics at a liberal arts college is so important. It would be productive to
learn that nearly all of the “original” economists that you might have heard of were actually Moral
Philosophers. In fact, Adam Smith, best known as the “Father of Modern Economics” and for writing
“The Wealth of Nations” in 1776, actually wrote a classic, “The Theory of Moral Sentiments” in 1759.
The “Wealth of Nations” cannot be treated as a separate work from it, but rather as an extension of
it. The essence of the two is that free-markets and a global economy work only when a majority of
citizens have a concern for justice and the cultivation of virtue. That these essentials are often
overlooked by critics of the market system and Smith himself has led to widespread
misunderstanding of economics.
Course Materials and Resources
There are two required books for the course and one additional recommended selection. The course
readings will come from the required books and there will be an optional paper / extra credit
assigned from the recommended selection.
1. The text is by N. Gregory Mankiw and is called Essentials of Economics (3rd edition). This is
an excellent introductory level textbook and whether I cover the material directly or not it will
be an excellent resource for you. The textbook is fairly expensive. The bookstore is selling it
new for $133.50 and used for $100.25. With the purchase of the book, you will have access
to an outstanding support website for the book. It really is an excellent practice and study
guide. With purchase, you will also have access to an e-Book for a larger book called
“Principles of Economics” that contains all of the chapters in our Essentials book.
2. The second required book is called The Undercover Economist by Tim Harford. This will be
read in conjunction with several of the text chapters. I am positive you will find this more
accessible and interesting than the text. Among other things Tim Harford writes the “Dear
Economist” column for the Financial Times. The book is selling for $26.00 new and $19.50
used in the bookstore.
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3. The recommended, but not required, book is the 50th anniversary edition of The Road to
Serfdom, by 1974 Nobel Prize winning economist Friedrich August von Hayek. The Adam
Smith Institute describes the book as such:
For over half a century, it has inspired politicians and thinkers around the world,
and has had a crucial impact on our political and cultural history. Hayek argues
that, while socialist ideals may be tempting, they cannot be accomplished except
by means that few would approve of. Addressing economics, fascism, history,
socialism and the Holocaust, Hayek unwraps the trappings of socialist ideology.
He reveals to the world that little can result from such ideas except oppression
and tyranny. Today, more than 50 years on, Hayek's warnings are just as valid
as when "The Road to Serfdom" was first published.
This book is really the precursor of a longer line of more theoretically well developed and
disciplined approaches to the topic of central planning. You will be offered the option of
writing a paper on this book and there may be other extra credit opportunities based on your
insights from its reading as well. The book sells at the campus bookstore for $14.00 new
and $10.50 used.
During the course of the semester I will periodically assign articles and papers to read that have not
yet been listed on the syllabus. In all cases, you will have access to PDF or other online formats on
the course web page in order for you to be able to access the readings anywhere a computer is
available.
Class Policies
1. Attendance – missed classes
We are all adults and I will treat you as such. While attendance is not mandatory, I would
obviously prefer it if you came to each session as I believe the material is easier to digest the
more times you get to see it. I have been known to call students up to see how they are
feeling when they do not show up for class. Further, the registrar asks that I submit an
attendance sheet to him at the end of the semester. While attendance will not be directly
factored into your grade for the course, I will be evaluating you on things that happen inside
the classroom, which can obviously not be “made up” when a class is missed.
2. Attendance – late for class
Class time is limited and students entering class late provide a distraction for both fellow
students and the instructor. Students arriving late for class will therefore suffer a penalty of
1/3 of a grade on the most recent homework or writing assignment score for each day you
show up late for class. It’s not OK to show up late for a job and it will not be OK to show up
late for a class either.
3. Missed Classes for College Sponsored Events
You will be excused from the regular term equivalent of THREE classes during the course of
the term if I receive notification that you have an obligation to attend another college
sponsored event (e.g. performance, athletic event, field trip, etc.). Though these missed
classes will not count against your grade, I do expect you to get notes and any missed
assignments from your classmates. If you let me know early enough in the semester when
you will be away, I may be able to get assignments and other materials to you earlier.
4. Rescheduling Assignments
If the timing of a certain assignment is extraordinarily difficult for you to satisfy, please see
me BEFORE the assignment is due so that we can work out a solution together. When I say
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BEFORE, I do not mean midnight on the evening it is due, but three or more days advance
notice is sufficient.
5. Late Work
Unanticipated late work will not be accepted and will receive a grade of zero. This policy is in
effect in order to be fair to those students that do complete their work on time. Once again,
late work on a job is not acceptable, nor is it acceptable in this class. Of course, students
with medical or other emergencies will not be penalized if a note from Health Services or
Student Support Services has been provided to me.
6. Please be Respectful of your Fellow Classmates
Please turn off all cell phones, beepers, etc. during class. If a phone or beeper as much as
vibrates during class, I will enjoy speaking with the person that calls you to let them know
you are in the middle of class. If the problem persists, I will enjoy the use of that device
until the next time class meets - which will include me answering all calls on your behalf
during that time!
Please present yourself neatly in class and be prepared to share any snacks or meals with
your classmates. Of course, feel free to bring water with you.
7. Students with Special Needs
If you need special accommodation for classes and / or assignments, please see me BEFORE
the assignment is due or class meets so we can work out something that will make you
comfortable. You must also see Mary Gulley or Ann Young in order to receive the proper
documentation. I am unable to help you out without this documentation finding its way to
me first. New policy at Centre requires that you meet with me so that I can sign the
laminated form that you will receive from the Assistant Dean.
8. Feedback
I urge each of you to provide me with feedback throughout the term. You may simply e-mail
me or see me or place a note in my mailbox or under my office door (anonymously if you
like). I have also placed a lecture evaluation link on the course website if you prefer your
critique be publicly viewable.
Course Requirements
I have randomly assigned you into working groups for the course. These groups will be very
important so I urge you to get familiar with your fellow classmates and get all of the appropriate
contact information from them that you will need to successfully work together for 14 weeks. The
groups will be used for two purposes. First, I will allow each of the groups to turn in common
problem sets. I will assign problem sets throughout the term which are to be submitted by your
group as a single problem set. Second, there may be opportunities inside and outside of class when
working in a group will be helpful.
The groups are:
Section A – 11:30am Class
Group 1: Bentley, Kris; Eggers, Ashley; Griffin, Morgan; Pilkington, Taylor
Group 2: Brickman, Trevor; Dove, Jillian; Ezell, Chase; Gray, Taylor
Group 3: Banks, Hannah; Henry, Michael; Jozwiak, Barbara; Koeninger, Kelly
Group 4: Akridge, Matt; Beard, Stephanie; Menard, Erin; Placido, Andy
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Group 5: Ames, Phillip; Atha, Chris; Coffey, Kathleen; Garrett, Wilson; Miller, Sarah
Group 6: Boggan, Josh; Campbell, Leah; Dean, Landon; Evans, Josh
Group 7: Allen, Catherine; Gash, Alex; Griffith, Tyler; Murphy, Erin; Ottley, Jonah
Section B – 1:50pm Class
Group 8: Chadwick, Jason; Schatz, Jessie; Steinmetz, Kevin; Ubelhart, Alex
Group 9: Allen, Kendall; Dahlman, Rachael; ido, Andy; Restrepo, Cassie
Group 10: Arave, Erica; Herrick, Chris; Lopp, Christine; Zimmerman, Chris
Group 11: Bouvier, Katie; Davies, Dan; Greer, Andy; Link, Ethan
Group 12: Braden, Beau; Droste, Jessica; Keller, Amanda; Mullins, Elijah; Rodes, Nelson
Group 13: Brooks, Zach; Cotterell, Sarah; Foote, Tyler; Stevens, Joshua
Group 14: Allison, Drew; Calitri, Chris; Chaffin, Jesse; Saneii, Sarah; Schuhmann, Laura
A. Examinations (70% of course grade)

You will have three examinations during this course.

Each of the two midterm exams will count as 17.5% of the course grade. The final exam
will count as 35% of the course grade. The first midterm will be in-class on Friday, March
10th. The second midterm will be in-class on Friday, April 14th (this is Good Friday, so I
may change the date of this exam).

The final examination will count as 35% of your course grade and will be a three-hour
written examination. For Section A, the exam is scheduled for Wednesday, May 17th
from 8:30-11:30 in Young 101. For Section B, the exam is scheduled for Tuesday, May
16th from 1:30-4:30 in Crounse 313.

There will be NO MAKEUP examinations offered. An unannounced missed exam will
result in a grade of U. If you are excused from an examination, your final and remaining
midterm examinations will make up larger portions of your course grade.
B. Problem Sets and Writing Assignments (30% of course grade)
There will be several problem sets and writing projects assigned throughout the term. The
problem sets are to be completed with your group while the writing assignments are to be
completed individually.
1. Problem Sets: There will be at least four problem sets assigned designed to help you
prepare for the exams and to think about the text and class materials in a different
way. These assignments are meant to be truly cooperative. In other words, each of
you is supposed to work the entire problem set on your own. Then the group is to
get together to discuss each question and answer and construct a best answer. The
group is to turn in one problem set for the group and then provide evidence that
each individual worked the problem sets and contributed to the group discussion.
Part of the grading of these problem sets will be a function of your fellow group
members evaluation of your work at the end of the year.
2. Writing Assignments: There will be semi-regular writing assignments throughout the
term. These will be handed out in class. All of the writing assignments are to be
completed individually. Examples of these assignments include identifying signs of
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Spring 2006 Syllabus
economic illiteracy in the press or other external sources (e.g. in a conversation you
had over lunch, etc.) or providing insights into interesting economic questions of the
day (e.g. where does competition come from?).
C. Paper on The Road to Serfdom (optional / discretionary). You have the option of writing a 2,000
to 3,000 word essay (described below) on F.A. Hayek’s classic work. If you choose to write the
paper, you can have the paper take the place of one of the two midterm exams or you may have
the paper count for extra credit. If you choose the later option, I’ll count it for 20% of your final
grade and reduce the remainder of the course weights proportionally if the paper grade exceeds
your remaining course average. If the paper grade does not exceed the remaining course
average, I may use it purely on an extra credit basis to adjust your final grade upward. Of
course, you are not obligated to write this paper. Intrepid students that choose to undertake this
project with seriousness of purpose may elect to write a version of no longer than 6,000 words
and may have it take the place of the final exam.
The paper is composed of two pieces. The first is observational. I’d like you to identify and
briefly describe four major critiques levied against socialism in the book. Rather than address the
atrocities of “Hot Socialism” as Hayek describes it (e.g. the brutal situation that prevails in North
Korea and that prevailed under Mao, Stalin and others, but is largely extinct today), address
these critiques while assuming that “socialists” are well intentioned. The second piece of the
paper is analytical. Using what you have written in the first part of the paper, and from your
observations of the world today and what you are learning in other courses, analyze whether
Hayek’s critiques are as effective against the “statist” attacks on markets and freedom as they
are against the socialist attacks on markets and freedom.
For those wishing to write the longer paper, you should include a third section. First, I’d like you
to read and reproduce Article I, Section 8 of U.S. Constitution. It stipulates exactly 18 powers
that the national legislature is allowed to exercise. If Congress goes at all beyond those 18
powers, they are in “violation of law”. After considering this section, comment on what
government activities in the 21st century U.S. seem to violate this section. From this, assess
whether we are experiencing “creeping socialism” (as Hayek describes it) today in the U.S.
Finally, I’d like for you to tie the lessons of the paper in with the lessons from this course to
answer: Can the modern welfare state really create social justice? How does it produce “more
just” outcomes than those which are produced by the market (as if “the market” actually
produces anything)? Are the critiques levied against “the market” really a criticism of something
inherent in capitalist systems, or is it something else? (Consider that as strange as it sounds
Marxists and classical liberals actually agree on many things – particularly as it pertains to
exploitation theories – it’s just that the source of the critiques differs between these two schools)
To help you start thinking about the paper, I’ve excerpted comments from a talk given by
Virginia Postrel in 1999 below. For the full version of the talk, see here:
http://reason.com/9911/fe.vp.after.shtml.
 The goal of socialism is a fairer allocation of economic resources, which its advocates often
claim will also be a less wasteful one. Socialism is about who gets the goods and how. Socialism
objects to markets because markets allocate resources in ways socialists believe to be unfair on
both counts: both the who and the how.
 We must keep in mind what socialism is, and therefore what it is not. Socialism, creeping or
galloping, is an ideological concept with a particular sense of what is important. What
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distinguishes socialism is its appeal to economic fairness. It declares that markets do not allocate
wealth and power fairly, and that political processes will do a better job. Socialism is not simply
about moving money from the powerless to the powerful--a goal as old as politics--but about
flattening the distribution of income and wealth. Pork-barrel spending is not socialism. Farm
subsidies are not socialism. "Corporate welfare" is not socialism. These programs are not
ideological in nature. They are about competing interest groups.
 The statist attack can be summed up simply by people being uncomfortable when “no one is
at the controls” of complicated processes. These attacks being: First, it argues that we should
not let people take chances on new ideas that might have negative consequences and second, is
the argument against externalities … Most of us have been willing to grant the problem of
externalities in such areas as air pollution and to look for ways of addressing it with minimal
disruption of market processes. But it's not that hard to declare that every market action has
potentially negative spillover effects. The infinitely elastic version of the externality argument
turns the language of market-oriented economics against the essential nature of commerce.
Indeed, we increasingly see the externality argument aimed not at producers, the traditional
target, but at consumers. My choice of which movies to watch creates cultural pollution. My
purchase of convenient packaging produces environmental waste. My house color or garage
facade does not please the neighbors. My purchase of consumer goods leads to "luxury fever"
that hurts everyone. We are all connected in the marketplace, and therefore, in this view, our
actions must be tightly regulated to contain spillovers.
 What's the single most important thing to learn from an economics course today? What I tried
to leave my students with is the view that the invisible hand is more powerful than the hidden
hand. Things will happen in well-organized efforts without direction, controls, plans. That's the
consensus among economists. That's the Hayek legacy.
D. Course Contributions and Classroom Productivity (my discretion)
This is not simply a verbal class participation requirement. A small portion of your final course
grade will be a function of how well you are making use of your time outside of class. Due to the
very short time span in which a large amount of the material is covered, it will be nearly
impossible for you to appreciate the complexities of economics without doing all of the assigned
readings and exploring in detail the many questions I will be asking. This is particularly the case
given that the amount of reading you might do to introduce yourself to economics is infinite plus
I do not like to follow the textbook precisely. That does not mean you are not responsible for all
of that material. Your hard work and seriousness of purpose will benefit all of your classmates as
it will vastly expand the number of things we can discuss and learn in class, but also enhance the
depth of the debates that will take place. To the extent that you are able to raise the level of the
conversations we have in class by your preparation and your asking of serious questions in class,
you will be rewarded in your grades. To the extent that you demonstrate a lack of respect for
your classmates and the instructor by either not preparing fully for class, by not being fully
attentive in class or by not pulling your weight in completing the assignments, your course grade
will be negatively affected.
Grading Policy
To summarize from above, your course grade will be comprised of:
I.
Two Midterm Exams (each worth 17.5%)
II.
Final Exam
III.
Problem Sets and Writing Assignments
IV.
Course contributions and productivity
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35%
35%
25%
my discretion
Spring 2006 Syllabus
Grades will be based on your demonstration and mastery of knowledge and skills learned throughout
the formal course meetings and on your ability to think critically about and to analyze the situations
you encounter outside of the classroom.
Though the total of the above scores is 100% there will be ample opportunities to either improve
upon or damage your grades. I will point these out as we move through the semester.
You are NOT in competition with your fellow classmates for grades. Economics is NOT a zerosum game, nor is learning. I have no limits on the number of A’s I will award. At the same time,
I do not have a target number of scores to award either. You will receive the grade that you earn.
While effort alone is not sufficient to secure a top grade, students that demonstrate a continued
effort throughout the course will have many opportunities to improve upon a poor grade.
The grades will not be curved. Your total score for the course will be converted into a percentage
(properly rounded). Then, I will use the following grade scale to determine your letter grade:
94% - 100%
90% - 93%
88% - 89%
83% - 87%
80% - 82%
78% - 79%
73% - 77%
70% - 72%
60% - 69%
below 60%
A
AB+
B
BC+
C
CD
U
Regrading Policy
In cases where clear grading mistakes have been made (e.g. points are added up incorrectly) please
notify me immediately and I will correct them.
In cases where there is a dispute over a grade, I ask that students not just “barge into my office”
with a complaint. I will listen to all disputes as long as the student submits a written (or e-mailed)
description to me as to why she/he feels the grade is incorrect before you come to see me. If it is
clear that I have made a mistake, I will make the change. In cases where complaints are nonspecific and your submission does not address the economics of the question asked, I will not
consider the request.
Some other thoughts on grades:
For those of you that are nostalgic about higher education, I pulled the following grading guidelines
from a professor at an elite liberal arts college in the early 20th century:
Students shall receive a letter grade of:
A when students have excellent command of the subject matter and demonstrate an ability to apply
their knowledge beyond the specificity of the course materials. Their knowledge of the subject
matter includes some of the finer points of economics and may include information not specifically
addressed in any one lecture. These students would be able to break down this material and explain
it to people with no prior knowledge of the subject. This presentation often takes a different form
than the way it was presented to them in class;
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Spring 2006 Syllabus
B when students have a very good command of the main ideas of the subject matter. These
students would be able to give out the course material in a manner similar to which it was given to
them;
C they are similar to a B student accept that command of the main ideas is rudimentary and
fragmented;
D when students have very little knowledge of the subject matter, but demonstrate at the very least
that they recognize some of the material that has been presented to them;
U when students have clearly made no effort to learn. Their performance is indicative of such and
their work shows no interest in the subject matter and does not demonstrate that the material is
even familiar to them.
Please read pages 22 and 23 of the 2005 Student Handbook. These are the sections on Academic
Honesty and Dishonesty.
Course Topics
We have 13+ weeks of class and only 39 class hours to work with. In order to keep the pace of the
course flexible and the content adaptable, I will include an outline of the topics and text readings I’d
like to cover, but the specific dates (as well as the topics) and relevant readings are subject to
change. I will put the supplemental readings on the course readings section of the webpage. The
mandatory text readings can be found in the list below.
1. The Economic Way of Thinking - What's Different About Economics?
a. Mankiw - Chapter 2
b. Harford - Chapter 1
c. Mankiw - Chapter 1
d. Harford - Chapter 10
2. Economic Fundamentals - Scarcity, Choice, Trade, Systems
a. Mankiw - Chapter 3
b. If you want to read ahead, you can also read Harford, Chapter 9, but we may cover
it in section 5.
3. Understanding Demand and Supply
a. Mankiw - Chapter 4 pp. 63-71; Chapter 5 pp. 89-100; Chapter 7 pp. 137-143
b. Mankiw - Chapter 4 pp. 71-75; Chapter 5 pp. 100-104; Chapter 7 pp. 143-147
c. Mankiw - Chapter 4 pp. 75-85; Chapter 5 pp. 104-109
4. Demand and Supply Applications and Government Policies
a. Mankiw – Chapter 6
b. Harford – Chapter 3
5. Evaluation of the Market Mechanism and More Applications
a. Mankiw – Chapter 7 pp. 147-154
b. Harford – Chapter 8
c. Mankiw – Chapter 8
d. Mankiw – Chapter 9
e. Harford – Chapter 9
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Spring 2006 Syllabus
6. Special Section: Risks and Uncertainty
a. See website for suggested readings.
7. Entrepreneurs, Profits and Losses
a. Harford – Chapter 6
b. Mankiw – Chapter 12 pp. 243-247
8. Business Costs – How to Produce in the Short and the Long Run; Firm Behavior in Markets
Absent Market Power
a. Mankiw – Chapter 12 pp. 247-260
b. Harford - Chapter 2
c. Mankiw – Chapter 13
9. Special Section: The Economics of Health Care
a. Harford – Chapter 5
b. See website for additional recommended readings.
10. When the “Invisible Hand” Develops Extra Thumbs: Price Searching and Market Power
a. Mankiw – Chapter 14
11. When the “Invisible Hand” Develops Extra Thumbs: Externalities
a. Mankiw – Chapter 10
b. Harford – Chapter 4 pp. 79-102
c. Mankiw – Chapter 11
d. Harford – Chapter 4 pp. 102-108
12. The “Distribution” of Income
a. Mankiw Lecture Notes – see course readings for pdf
b. See website for additional recommended readings.
13. Macroeconomics: Measuring Output
a. Mankiw - Chapter 15
14. Macroeconomics: Measuring Prices
a. Mankiw - Chapter 16
15. Macroeconomics: The Monetary System, Money Growth, Inflation and the Gold Standard
a. Mankiw - Chapter 21
b. Mankiw – Chapter 22
16. Macroeconomics (unlikely, but time permitting): Ch17 to Ch 20; Production & Growth, the
Financial System, Financial Tools, Unemployment and the Natural Rate
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