Edward McPhail                                                                                                                                            Economics-112

Fall 2006                                                                                                                                                            MTh 1:30-2:45

Dana 101                                                                                                                                                                       3:00-4:15

Introduction to Macroeconomics

For many of you, Econ-112 will be your first and last course in macroeconomics.  During this time, with some effort on your part (and mine), you can come to know the rudiments of macroeconomic analysis and, more importantly, acquire the ability to use these principles as informed participating citizens.  Since human behavior does not follow simple, mechanical rules, Macroeconomics is, in many ways, even more complex and baffling than physical phenomena.  Predicting the weather is easier than predicting GDP from one quarter to the next.  Like the "harder" sciences, economics relies on mathematics to ensure the internal consistency of models and, like the "softer" social sciences, story telling (hopefully truthful) plays an important role.  A well thought out parable can convey economic intuition unlike any mathematical model. As you will see in this class the most successful theories are, time and again, those with a simple but intuitive metaphor. The following quote gives us one economist's view about the relative difficulty of economics.

An Indian-born economist once explained his personal theory of reincarnation to his graduate economics class.  "If you are a good economist, a virtuous economist," he said, "you are reborn as a physicist.  But if you are an evil, wicked economist, you are reborn as a sociologist." [1]

                                                                                                 Peddling Prosperity p. xi

 One of the most influential economists of this century, John Maynard Keynes, put it this way:  "The theory of economics does not furnish a body of settled conclusions immediately applicable to policy.  It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor to draw correct conclusions."

In this course we will pay particular attention to the impact that economic ideas have on policy and the lives of those who are affected by those policies.  Economic ideas have consequences.  As Keynes put it

 

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.  Indeed, the world is ruled by little else.  Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.  Madmen in authority, who hear voices in the air, in distilling their frenzy from some academic scribbler of a few years back . . . soon or late, it is ideas, not vested interests, which are dangerous for good or evil. 
                          John Maynard Keynes The General Theory of Employment,Interest, and Money pp. 383-384

 

Office Hours

Edward McPhail, Landis House #10

Office Phone: 245-1264 (message)

Hours: MTh 4:30 5:30 & by appointment.

email: mcphail@dickinson.edu

Home page: www.edwardmcphail.com

Class Lectures

               In class I will use a variety of different tools: overhead projector, computer presentations, handouts, and the ye olde trusty blackboard.  I will experiment with a variety of methods of presenting the material to see what works best and what does not.  Your input will play an integral role in this matter.  Helpful suggestions and constructive criticism are always welcome.

               The course home page is located at www.edwardmcphail.com.  Right now the page is under construction.  Over the course of the semester I will make class material available to you on the home page.  Any posted excerpts from class lectures are intended to improve the quality of your notes.  They are not substitutes for attending class and taking your own notes.   

Attendance

               Although I will not take attendance on a regular basis, I will note, from time to time, whether or not you show up for class.  When final grades are tabulated, class attendance and participation will play a role in determining the course grade for those students with a borderline grade.  I do not advise skipping class.  Lectures play a fundamental role in this class and although I may post excerpts from the lectures on the web, they are no substitute for the real thing.    

Texts

               The textbook is Macroeconomics by Krugman and Wells.

Worksheets

               Over the course of the session I will hand out worksheets that will help you prepare for the exams.  Your task, if you choose to accept it, is to answer all of the worksheet questions and to hand them in on time.  Late worksheets will not be accepted.  Worksheets make up 1/6 of your final grade.    

Presentations

               The class will form groups and each group will give a web-based presentation that will take place the last two weeks of class.  Presentations will consist of talks @20-30 minutes in length (we may make changes in this as time and class size dictate).  The point of this exercise is to give you some experience applying the tools that you have learned in class to real world events and to familiarize yourself with electronic media.  During the course of the semester I will suggest possible topics and you are free to suggest your own.  I must approve whatever topic you choose.  Your presentation will make up 1/6 of your final grade.

Course Grades

               Grading will be based on homework assignments, two in class exams, a class presentation and a cumulative final exam.  Exams will cover material from the lectures, the text, problem sets, and any class handouts (columns, newspaper clippings, on line material etc.).  The first test, the second test, the worksheets, and class presentations count 100 points each.  The final examination counts 200 points.  This is a total of 600 points.

Examination Schedule

Exams are tentatively scheduled to be held in class on

Section

In Class Exam #1

In Class Exam #2

Final Exam

1:30 PM MTh

Monday October 2

Thursday November 16

Friday, December 15 2:00 PM

3:00PM MTh

Monday October 2

Thursday November 16

Saturday, December 16 9:00 AM

There are no make-up exams scheduled.  If a medical emergency occurs, please prepare adequate documentation from the appropriate authorities.

The following tentative course outline gives the proposed order of topics for the course and the readings that will provide background for the lectures.

Tentative Course Outline

1.  Introduction to macroeconomics and review of microeconomics (supply and demand)

                                             chapters 1-3 Macroeconomics

2.    Measuring economic activity

                                             chapters 6 and 7 Macroeconomics

3.  Supply and demand in the labor market

                                             pp. 368-377  Macroeconomics

4.  Supply and demand in the loanable funds market

                                             chapter 9 Macroeconomics

5.    Aggregate supply and aggregate demand for goods and services: Classical and Keynesian foundations of aggregate supply and aggregate demand.

                                             chapters 10 and 11 Macroeconomics

Exam #1 tentatively scheduled for Monday October 2.

6.    Fiscal policy

                                             chapter 12 Macroeconomics

7.    Money and the banking system

                                             chapter 13 Macroeconomics

8.    Monetary Policy

                                             chapter 14 Macroeconomics

9.  The unemployment-inflation tradeoff and expectations - the Phillips Curve

                                             pp. 378-389 and chapter 16 Macroeconomics

10.  Stabilization policy

                                             class notes Macroeconomics

11.  Economic growth

                                             chapter  8 Macroeconomics

Exam #2 tentatively scheduled for Thursday November 16.

12.  The Great Depression and recent U.S. economic history

                                             pp. 142-144, 237-239,418-420, 245-246 Macroeconomics

13.  Models of the Business Cycle

                                             class notes  Macroeconomics                                                          

14.  Macroeconomic Policy Challenges

                                             chapter 16 Macroeconomics

15.  International trade

                                             chapter 18 Macroeconomics

16.  International finance

                                             chapter 19 Macroeconomics   

Section

Final Exam

1:30 PM MTh

Friday, December 15 2:00 PM

3:00PM MTh

Saturday, December 16 9:00 AM



[1] By this, he does not mean that sociology is useless or boring.  Rather, I take it that he means that sociology is even more difficult than economics.  The greater difficulty of conducting crucial experiments and quantifying phenomena, two hallmarks of the "harder" sciences, make sociology even more challenging than economics.