Ec102 AA Syllabus PDF

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EC102 with Watson Fall 2019...

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EC 102, Section AA Introductory Macroeconomic Analysis

Boston University Fall, 2019

Professor: Bruce Watson [email protected] Lectures: Mondays, Wednesdays and Fridays, 1:25 – 2:15 Morse Auditorium Office Hrs: Wednesdays 2:30 – 4:30 Rajen Kilachand Center for Integrated Life Sciences and Engineering (right next to Morse) (Starting Wednesday, Sept. 11) Blackboard Site:

http://blackboard.bu.edu/

TFs and Sections: The economics department staffs a “TF Principles Center” in Room B17 (in the basement) of the Economics Department, 270 Bay State Road. A TF will ordinarily be there Mon. – Thurs. from 10 to 6, and Fri. from 10 to 5. It is best if you can go whenever one of the TFs assigned to our class is “on duty”; they are terrific and are obviously the most knowledgeable about exactly what our class is covering. The Principles Center office hours for our TFs are posted on the “Information” page of the class Blackboard site. However, if you cannot make it when one of our TFs is available, you can go to the Principles Center any time it is open to get some help. Sections are designed to review material presented in lecture, to go over example problems, and to prepare you for exams. They meet at specific times with your assigned TF. Sections in this course are optional. However, you will find it greatly to your advantage to attend. We are very fortunate to have fantastic TFs, and I’m sure their sections will be very helpful to you.

SYLLABUS This course provides an introduction to current economic issues and to basic macroeconomic principles and methods. The economist John Maynard Keynes wrote that "the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood." Economics is not primarily a set of answers, but rather a method of reasoning. By the end of the semester, you will be able to use the analysis practiced in the course to form your own judgments about many of the major economic problems faced by the United States and other countries. Macroeconomics is the study of the economy as a whole. We start with the three key macro variables: GDP, inflation and unemployment. We go on to study economic growth, financial markets, business cycles, and the impact government can have on the economy through monetary and fiscal policy. Along the way, we will cover such topics as interest rates, investment, the exchange rate, and international trade.

Course Requirements 

Exams

There will be three multiple choice exams given in the course—two midterms and a final. The dates of the exams are: First Midterm: Fri., Oct. 4 (covering the material from Fri. Sept. 6 through Fri., Sept. 27) Second Midterm:Fri., Nov. 8 (covering the material from Mon., Oct. 7 through Fri., Nov. 1) Final: Fri., Dec. 20 12:30 – 2:30 (cumulative, but slightly weighted toward material covered after the second midterm) After the midterms and final, your score will be available on the course Blackboard site as soon as possible. You will be able to log in and see only your score.

Please Note: 

It is your responsibility to plan your travel or other events around exam dates. In particular, the date of the final exam is determined by the Registrar and cannot be changed for any reason. Requests to take the final on a different day, including requests for a make-up final, in order to accommodate travel or other end-of-semester plans, will not be considered.



No makeup midterms will be given. The lower of each student’s two midterm scores will be dropped from the calculation of their semester grade. If you miss one of the midterms for any reason, you will receive a zero, and the score will be dropped from the calculation of your semester grade. NO MAKEUP EXAMS WILL BE GIVEN. If you miss both midterms for any reason, you will receive a grade of zero for your midterm score.



Problem Sets

There will be nine problem sets assigned during the term. These will be multiple choice sets completed on MyEconLab. Further instructions about MyEconLab will be given well before the first problem set. The due date on problem sets cannot be extended for any reason. However, the lowest two of the nine scores for the semester will be dropped from the calculation of each student’s semester grade. So, if you cannot do one of the problem sets some week, that will just be one of the scores that gets dropped.

Grading Grades will be determined by the final (40%), the higher your two midterm scores (30%), and the average of the highest seven of your nine problem sets (30%). After your semester weighted average has been determined, your letter grade will be calculated two ways, and if there’s any difference in the result, I’ll give you the higher of the two letter grades which result.



Curve

In the first calculation, semester grades will determined by a curve. The nature of a curve is that your grade is based on your performance relative to all other students in the class. It does not involve an “absolute standard,” e.g., 90 – 100 = A, 80 – 90 = B, etc., which you may be used to from high school or in some other courses. I believe that a curve is ultimately the fairest way to determine grades, since it does not set some arbitrary absolute standard, but judges students on their performance relative to their peers. With a curve, your grade is based on your percentile rank in the class, i.e., the percentage of students in the class who had a total semester weighted average below yours. If you are in the 60th percentile, for example, that means that 60% of students had a weighted average equal to or below yours, while 40% of students had a weighted average above yours. The curve applied will be as follows: Letter Grade

Percentile Rank Range of Letter Grade

A

80th %ile – 100th %ile

A-

65th %ile – 80th %ile

B+

55th %ile – 65th %ile

B

45th %ile – 55th %ile

B-

35th %ile – 45th %ile

C+

25th %ile – 35th %ile

C

20th %ile – 25th %ile

C-

10th %ile – 20th %ile

D

2nd %ile -- 10th %ile

F

0th %ile --

2nd %ile`

For example, if your semester weighted average is 86% and that average puts you in the 57th percentile overall (this will vary from class to class), that would be a B+.



Absolute Scale

In the second calculation, grades will be determined by the standard scale you may be familiar with from high school. In this approach, your letter grade is based simply on your weighted average for the semester. Here is the scale: A

93.0%

A-

90.0%

B+

87.0%

B

83.0%

B-

80.0%

C+

77.0%

C

73.0%

C-

70.0%

D

65.0%

E/F

0.0%

To continue the example from above, if your weighted average for the semester is 86%, your grade based on the absolute scale, would be a B. Between the two grading systems, the curve would give you the higher letter grade (B+ for the curve vs. B for the absolute scale), so your semester grade in this case would be a B+.

Readings Most of the readings listed below are drawn from the textbook: Macroeconomics (7th ed.), by Glenn Hubbard and Anthony O’Brien. The majority of the reading in the text reinforces material you'll learn in class, but some of the topics we cover may not appear in the book. Conversely, some of the reading is purely for background, and will not be covered explicitly in class. You should consider the textbook to be most useful as a reference, or as an additional source of review for material we have presented in class. In short, you are not required

to buy the book. The readings listed in the course calendar below are merely supplementary material, and are not assignments. You will not be responsible-on problem sets or exams-for material in the book that we have not covered in class. If you have purchased a used copy of an earlier edition of Hubbard and O’Brien, you should still find it useful. However, the page numbers given below refer to the latest, 7th, edition. The rest of the readings listed below will be drawn from recent newspaper and magazine articles. These will all be available on the course web site. You will be responsible on problem sets and exams for some of the newspaper and magazine articles.

Academic Conduct It is your responsibility to know and understand the provisions of the CAS Academic Conduct Code (copies are available in CAS Room 105). Cases of suspected academic misconduct will be referred to the Dean's Office. In addition, anyone found cheating on an exam will receive a zero grade for the exam.

COURSE CALENDAR Wed., Sept. 4 Course Introduction MyEconLab Registration

Fri., Sept. 6 Course Overview and Policies: Syllabus Review Key Macro Variables: Gross Domestic Product (GDP) Hubbard & O’Brien: Section 8.1

Mon., Sept. 9 GDP (cont.) Measurement Components of GDP Potential GDP Per Capita GDP

Wed., Sept. 11 Real vs. Nominal GDP Key Macro Variables: Inflation GDP Deflator Hubbard & O’Brien: Section 8.3

Fri., Sept. 13 Inflation (cont.) The Consumer Price Index (CPI) Criticisms of the CPI CPI vs. GDP Deflator Hubbard & O’Brien: Section 9.4

Mon., Sept. 16 Inflation vs. Deflation Inflation and Interest Rates Costs of Inflation Converting a Past Amount Into Current Dollars Hubbard & O’Brien: Sections 9.5 – 9.7

Wed., Sept. 18 Key Macro Variables: Unemployment Measurement Kinds of Unemployment Causes of Unemployment Hubbard & O’Brien: Sections 9.1 – 9.3 PS 1 Available on MyEconLab

Fri., Sept. 20 The Economy in the Long Run: Introduction to Growth Calculating Growth Rates The Rule of 70 Hubbard & O’Brien: Section 10.1 Section 11.1

Mon., Sept. 23 Growth (cont.) The Sources of Growth The Per Worker Production Function Technological Change Hubbard & O’Brien: Section 11.2 “The poor and the rich,” The Economist, May 25, 1996

Wed., Sept. 25 Growth (cont.) New Growth Theory Growth Across Countries Convergence Hubbard & O’Brien: Section 11.4 PS 1 Must Be Completed by 11:45 PM PS 2 Available on MyEconLab

Fri., Sept. 27 Economic Development: The Three Alternative Approaches Development Debates Hubbard & O’Brien: Section 11.5 Jeffrey Sachs, “Institutions Matter, but Not for Everything,” Finance and Development, June, 2003. Kenneth Rogoff, “Unlocking Growth in Africa,” Finance and and Development, June, 2003. Tim Harford, The Undercover Economist, Chap. 8, “Why Poor Countries are Poor”

Mon., Sept. 30 Review Session for Midterm 1

Wed., Oct. 2 No Class—Extended Office Hours for Midterm 1 Office Hours from 10 – Noon and 2:30 – 4:30 Room TBA PS 2 Must Be Completed by 11:45 PM

Fri., Oct. 4 Midterm 1 (covering the material from Fri. Sept. 6 through Fri., Sept. 27)

Mon., Oct. 7 Some Development Success Stories China Tim Harford, The Undercover Economist, Chap. 10, “How China Grew Rich” “Reading the tea leaves,” The Economist, Jan. 25, 2007 “How China Could Yet Fail Like Japan,” Financial Times, June 14, 2011

Wed., Oct. 9 Some Development Success Stories (cont.) India “Can India Overtake China,” Foreign Policy, July/August, 2003 “Catching up,” The Economist, Aug. 21, 2003 PS 3 Available on MyEconLab

Fri., Oct. 11 The Economy in the Short Run: Aggregate Expenditure Components of Aggregate Expenditure: Consumption Hubbard & O’Brien: pp. 394 – 403

Tues., Oct. 15 Components of Aggregate Expenditure: Investment What Do Economists Mean By Investment? Where Do Companies Get Funds for Investment? Hubbard & O’Brien: pp. 404 – 407

Wed., Oct. 16 Components of Aggregate Expenditure: Net Exports Nominal Exchange Rates Real Exchange Rates Exchange Rates and Interest Rates Hubbard & O’Brien: Section 18.2 PS 3 Must Be Completed by 11:45 PM PS 4 Available on MyEconLab

Fri., Oct. 18 Net Exports (cont.) Real Exchange Rates (Review) Purchasing Power Parity Hubbard & O’Brien: pp. 678 – 681 “McCurrencies,” The Economist, May 25, 2006 http://www.economist.com/content/big-mac-index

Mon., Oct. 21 Net Exports (cont.) Determinants of Exports Determinants of Imports Determinants of Net Exports

Wed., Oct. 23 Current Account, Financial Account, and Balance of Payments Hubbard & O’Brien: Section 18.1 PS 4 Must Be Completed by 11:45 PM PS 5 Available on MyEconLab

Fri., Oct. 25 Putting the Components Together: Aggregate Expenditure (AE) and Aggregate Demand (AD) Why Does the Aggregate Demand Curve Slope Down? Hubbard & O’Brien: Section 13.1

Mon., Oct. 28 Movements Along the AD Curve vs. Shifts in the AD Curve What Causes the AD Curve to Shift?

Wed., Oct. 30 Aggregate Supply Long-Run Aggregate Supply (LRAS) Short-Run Aggregate Supply (SRAS) Negative and Positive Supply Shocks Hubbard & O’Brien: Section 13.2 PS 5 Must Be Completed by 11:45 PM PS 6 Available on MyEconLab

Fri., Nov. 1 Putting AD, LRAS and SRAS Together: Macroeconomic Equilibrium and the Business Cycle Comparative Statics Inflationary Gaps and Recessionary Gaps Hubbard & O’Brien: Section 13.3

Mon., Nov. 4 Review Session for Midterm 2

Wed., Nov. 6 No Class—Extended Office Hours for Midterm 2 Office Hours from 10 – Noon and 2:30 – 4:30 Kilachand 106D PS 6 Must Be Completed by 11:45 PM

Fri., Nov. 8 Second Midterm Exam (covering the material from Mon., Oct. 7 through Fri., Nov. 1)

Mon., Nov. 11 The Tradeoff Between Unemployment and Inflation: The Phillips Curve Hubbard & O’Brien: Sections 17.1 – 17.2

Wed., Nov. 13 Monetary Policy Introduction to Money and Banking Bank Accounting Hubbard & O’Brien: Sections 14.1 – 14.2 PS 7 Available on MyEconLab

Fri., Nov. 15 Monetary Policy (cont.) The Deposit Multiplier Hubbard & O’Brien: Section 14.3

Mon., Nov. 18 Monetary Policy (cont.) The Federal Reserve System Open Market Operations Other Tools of the Fed Hubbard & O’Brien: Section 14.4

Wed., Nov. 20 Monetary Policy (cont.) Money Supply and Money Demand Equilibrium in the Money Market Hubbard & O’Brien: Section 15.2

Fri., Nov. 22 Monetary Policy (cont.) Monetary Policy and Economic Activity Short-run Economic Fluctuations Revisited The Phillips Curve and Monetary Policy Hubbard & O’Brien: Section 15.3 PS 7 Must Be Completed by 11:45 PM PS 8 Available on MyEconLab

Mon., Nov. 25 Monetary Policy (cont.) Monetary Policy in the Long Run The Quantity Theory of Money Hyperinflation Hubbard & O’Brien: Section 14.5

Mon., Dec. 2 Fiscal Policy Introduction and Overview Some Facts and Figures The Role of Social Security Hubbard & O’Brien: Section 16.1

Wed., Dec. 4 The Government Spending and Tax Multipliers Fiscal Policy and Demand Management in the Short Run Hubbard & O’Brien: Section 16.2 Section 16.4 PS 8 Must Be Completed by 11:45 PM PS 9 Available on MyEconLab

Fri., Dec. 6 Fiscal Policy (cont.) Fiscal Policy in the Long Run: Crowding Out Controversies in Fiscal Policy Hubbard & O’Brien: Section 16.5 – 16.7

Mon., Dec. 9 Review Session for the Final Exam

Wed., Dec. 11 No Class—Extended Office Hours for Final Exam Office Hours from 10 – Noon and 2:30 – 4:30 Kilachand PS 9 Must Be Completed by 11:45 PM

Fri., Dec 20 12:30 – 2:30

Final Exam (cumulative, but slightly weighted toward material covered after the second midterm)...