Economics 157b Economic History, Policy, and Theory Short Description The course is designed to consider major topics in macroeconomic history with a particular emphasis on policy and the analytical background. The course will particularly emphasize und - PowerPoint PPT Presentation

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Economics 157b Economic History, Policy, and Theory Short Description The course is designed to consider major topics in macroeconomic history with a particular emphasis on policy and the analytical background. The course will particularly emphasize und

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Keynes central insight on macroeconomics The resources of nature and man s devices are just as fertile and productive as they were. – PowerPoint PPT presentation

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Title: Economics 157b Economic History, Policy, and Theory Short Description The course is designed to consider major topics in macroeconomic history with a particular emphasis on policy and the analytical background. The course will particularly emphasize und


1
Economics 122a. Macroeconomics
2
Course Syllabus
  • DESCRIPTION AND PREREQUISITES
  • The course covers business cycles, economic
    growth, major macro topics, and their application
    to fiscal and monetary policy and history.
  • Highlights
  • the major tools of macroeconomic analysis,
    particularly understanding business cycles and
    economic growth and
  • Some major historical and policy issues.
  • This course is to be taken after completing both
    terms of Introductory Economics. Exceptions will
    be rare. Calculus will be used.
  • Course web page is
  • http//www.econ.yale.edu/nordhaus/homepage/
    Econ122.htm

3
 
  • Readings
  •  
  • TEXTBOOK.
  • N. Gregory Mankiw, Macroeconomics, 7th edition,
    Worth, 2010.
  • For textbook options, see web page.
  • There are many supplemental readings, available
    online or on the course web site.

4
 
  • Schedule
  • We will generally meet M W 1135-1250
  • Because of schedule conflicts, we will meet here
    on
  • Friday Sept 10 instead of Wed Sept 8
  • Also in November there will be one Friday
    meeting.
  • Class will generally run 60-65 minutes.
  • Lectures will be posted after the class.

5
  • Tests  and Grading
  • There will be one mid-term examination, which
    will take place in class on Wednesday, October
    13. The final examination will be three hours and
    is Dec 13 (to be checked).
  • There will be four graded problem sets, four
    ungraded but required problem sets, and a short
    paper due at the end of the semester.
  • The grade is approximately based 45 percent on
    the final exam, 25 percent on the hour tests, and
    30 percent on the problems and paper.
  • Grade distribution (given verbally in class).

6
  • Sections
  •  
  • There will be sections led by teaching fellows
    from Department of Economics. Each student will
    be assigned to a section.
  • Sections will go over the analytical material
    from the course, cover questions raised by
    students, and review problems and exams.
  • Tentative section times are
  • Wednesday 400-450 and 500-550 pm
  • Thursday 400-450 and 500-550 pm
  • Wed or Thurs 700-750 and 800-850 pm

7
  • Alternatives
  •  
  • Alternative macroeconomics courses
  • Econ 122b (Bruegemann). Roughly the same with
    emphasis on labor economics.
  • Econ 126b (Moscarini). Intensive version. More
    analytical and mathematical.

8
Limited enrollment
  • Limit to 120 students.
  • The following is the priority list
  • all those who got bumped last year all
    seniors and juniors economics majors other
    seniors and juniors all sophomores who are
    declared economic majors as of 7 pm Monday.
  • The balance of shoppers will be selected by
    lottery. Freshmen are not eligible.

9
For those who have had enough macroeconomics for
today...
10
What is macroeconomics?
  • Macroeconomics is the study of the overall
    behavior of economies (output, inflation,
    unemployment, trade balance, financial markets,
    )
  • The interesting point is that the total behaves
    differently from simple adding up of the parts
    (think riots and bank runs).

11
Major themes
  • There are two major recurrent themes running
    through macro
  • Business cycles
  • Economic growth
  • Virtually every macroeconomic issue revolves
    around these issues, or a confusion concerning
    them.

12
Business cycles
  • One major set of issues involves the business
    cycle. What are business cycles? What are some
    examples?
  • The Great Recession.

13
Real GDP over the cycle
Shaded areas are NBER recessions. No declared end
of current recession.
14
Unemployment over the cycle
BUT, even though the 1980-82 recession looks
superficially similar to the 2008-2010 period,
the causes and policy responses were completely
different.
Shaded areas are NBER recessions. No declared end
of current recession.
15
The Great Recession.
  • Housing prices peaked in mid 2006 and have fallen
    about 40 percent.
  • In 2007, investors suddenly discovered that
    subprime mortgages were much riskier than had
    been supposed.
  • This led to financial problems, especially for
    highly leveraged financial intermediaries (banks,
    hedge funds, etc.), bankruptcies, bank runs, and
    other crises
  • Risk premiums increased, credit was tightened,
    and there was a financial panic in the fall of
    2008.
  • The Fed responded forcefully.
  • The Congress passed in 2009 a major stimulus
    package
  • But the economy is stuck at high unemployment and
    relative stagnation .

16
Todays major dilemma
  • The major tool that governments have to stimulate
    the economy is fiscal policy (tax cuts and
    expenditure increases)
  • But these measures will increase the large and
    growing government debt.
  • How should we balance recovery today and debt
    tomorrow?

17
The exploding government debt
18
Economic growth
  • Economic growth concerns the trend in output over
    the long run.
  • In macroeconomics, we use the neoclassical growth
    model to understand economic growth.

19
Asias economic renaissance
Source McKinsey (but not to be taken as good
data).
20
Per capita growth trends in 3 big regions
21
International macro
  • A final slant on these issues that is important
    is international macroeconomics -- a new and
    fascinating branch of economics.
  • Role of exchange rates, international trade,
    currencies.
  • Biggest issues now are the huge current account
    deficit of the US and the big surplus of China.
    How will these resolve? In a gradual unwinding?
    Or in a financial meltdown?

22
U.S. Trade Deficit Net exports/GDP
  • What does this mean? That US is consuming more
    than it is producing.
  • Major questions how long can this go on, and
    how will it end (gradual adjustment or hard
    crash)?

23
Keynes central insight on macroeconomics
  • The resources of nature and mans devices are
    just as fertile and productive as they were.
  • The rate of our progress towards solving the
    material problems of life is not less rapid. We
    are as capable as before of affording for
    everyone a high standard of life and will soon
    learn to afford a standard higher still.
  • But today we have involved ourselves in a
    colossal muddle, having blundered in the control
    of a delicate machine, the working of which we do
    not understand.
  • J.M. Keynes, The Great Slump of 1930

24
Why study macroeconomics?
Because you, yes YOU, may be the next Ben
Bernanke in charge of rescuing the world
economy from the wreckage of some future
depression!
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