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Intermediate Macroeconomics subject syllabus...

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ECON20001

Intermediate Macroeconomics Semester 2, 2021

Introduction Welcome to Intermediate Macroeconomics. This course has two main themes: 1- In the short-run, the macroeconomy experiences cyclical ups and downs (booms and recessions). To understand short-run fluctuations, we need to focus on changes in aggregate demand. 2- In the long-run, the underlying or trend rate of economic growth dominates. To understand long-run growth, we need to focus on changes in aggregate supply. We begin with short-run fluctuations and this naturally leads to a discussion of short-run macroeconomic policy (especially monetary and fiscal policy). We then turn to issues of macroeconomic adjustment, as the economy responds to shocks, and to long-run economic growth. We finish up with a brief introduction to open-economy macroeconomics and a discussion of macroeconomic policy.

Subject aims From the handbook. Intermediate macroeconomic analysis develops the tools, skills and knowledge base necessary to operate as a practicing macroeconomist. These may include: models of long run economic growth; an assessment of the evidence on economic growth and its implications; the flexible-price macroeconomic model in which markets continuously clear; an assessment of the evidence regarding whether prices and wages are flexible or sticky; the sticky price macroeconomic model in which markets do not always clear; assessment of the flexible and sticky price models; the analysis of macroeconomic policy making.

Prerequisites ECON10003 Introductory Macroeconomics

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Textbooks Olivier Blanchard (2021). Macroeconomics. eighth global edition. Pearson. Copies of the textbook are in the university bookstore and a few copies are in the library. You should also be able to find cheap second-hand copies of older editions. You can purchase the most cost-effective option. Be aware that specific page and chapter numbers might differ from edition to edition.

Alternative Texts. There are many textbooks on intermediate macroeconomics in the library. If you’d like an alternative take on the course material, you might want to consult: N. Gregory Mankiw (2016). Macroeconomics. ninth edition.

Assessment Important: All times and dates on this guide refer to Australian Eastern Standard Time (AEST). Due date Weight Online multiple choice test 1 9:00am August 23rd − 2:00pm August 24th 5% Online multiple choice test 2 9:00am October 18th − 2:00pm October 19th 5% Assignment #1 2:00pm, Monday September 13th 12.5% Assignment #2 2:00pm, Monday October 4th 12.5% Final exam examination period 65%

Multiple choice tests (10 marks). There will be two multiple choice tests each worth 5 marks. These will take the form of a feedback exam and will be administered online. The first test will be conducted on 9:00am August 23rd − 2:00pm August 24th AEST and will cover materials from lectures 1 to 6. The second test will be conducted on 9:00am October 18th − 2:00pm October 19th AEST and will cover materials from lectures 17 to 20. Once you start your test, you will have thirty minutes to complete it.

Assignments (25 marks). Two assignments, each worth 12.5 marks. The first assignment is due by Monday September 13th and the second by Monday October 4th. The assignment questions will also be practice exam questions. The assignments can be done in groups subject to the following rules: All members of the group will be given the same mark. No more than three students may make up a group. Students may choose to work and hand in an assignment on their own. No two groups may hand in the same assignment. Students are responsible for ensuring that their group composition is inputted correctly via the LMS. There will be no changes to group formation after the group formation deadline has passed.

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Final exam (65 marks). More details regarding the final exam will be provided via the LMS and in lectures prior to the exam period. The tutorial questions will all be practice examination questions. In the final exam, the approved calculator for all subjects is the Casio FX82. No equivalent models of calculators will be permitted.

Hurdle requirement. To pass this subject, students must pass the final exam. To pass the final exam, students must get at least 50%.

Submitting assignments. Assignments must be submitted in electronic format on Canvas. You will be required to submit the assignment by 2:00pm AEST on the due date. Moreover: • You must keep a copy of your assignment. • Plagiarism or other forms of academic dishonesty will result in discipline proceedings being brought against you. • 10% of the available marks will be deducted for each full hour of delay after the due date and time. • No extension will be considered. You can apply for special consideration if you cannot complete any assignment because of illness or other circumstances. In case that your application is successful, the weight of your missing assignment will be shifted to the final exam in the overall assessment.

Contact details

Yusuf Mercan (lecturer) Email:

[email protected]

Office hours:

TBD

Faisal Sohail (lecturer) Email:

[email protected]

Office hours:

TBD

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David Moreton (tutorial coordinator) Email:

[email protected]

Office hours:

TBD

Communication protocol. For questions related to course material, please follow the below steps in order. 1. Post your questions on the discussion forum that we will setup on Canvas. Tutors will take turns over the course of the semester to answer your questions online. 2. If there is still some confusion about a particular point, reach out to your tutor during their consultation hours. 3. Should some confusion remain, as a final step, email the lecturer to resolve the issue. We’re only able to respond to student emails coming from a University of Melbourne email address. Please do not use personal email addresses such as Gmail, Yahoo, Hotmail or even business email addresses. Emails from non-University email addresses may be filtered by the University’s spam filter, which means that we may not receive your email. All correspondence relating to this subject will only be sent to your University email address. Note that you must first activate your University email address before you can send or receive emails at that address. You can activate your email account at this link: http://accounts.unimelb.edu.au/. While academic staff try to address queries received via email, it is often more appropriate to resolve substantive questions during lectures and tutorials and during normal consultation hours. With this in mind, we encourage students to attend all lectures and tutorials and to familiarise themselves with the consultation hours offered by the lecturers and tutors in this subject.

Lecture timetable Mondays

10:00am AEST

Posted on Canvas LMS

Wednesdays

10:00am AEST

Posted on Canvas LMS

Lecture Delivery We will post pre-recorded lecture videos and slides on a regular basis following the lecture schedule. Yusuf will deliver lectures 1 to 12 and Faisal will deliver lectures 13 to 24.

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Lecture schedule — Part I: Yusuf Mercan —

1. Introduction and course overview – July 26th Reading: Blanchard, chapters 1 and 2

Topic 1. Short-run macroeconomics 2. The goods market – July 28th Reading: Blanchard, chapter 3 and chapter 5, pages 110–114 3. Financial markets, background on the financial crisis – August 2nd Readings: Blanchard, chapter 4 and chapter 6, sections 6.3, 6.5 4. IS/LM model, part one – August 4th Reading: Blanchard, chapter 5, sections 5.1–5.2 5. IS/LM model, part two – August 9th Reading: Blanchard, chapter 5, sections 5.3, 5.5 6. IS/LM model, part three: policy effectiveness – August 11th Reading: Blanchard, chapter 5, section 5.4

Topic 2. Labor markets and unemployment 7. Labor markets, part one: tour of the labor market – August 16th Reading: Blanchard, chapter 7, sections 7.1–7.2 8. Labor markets, part two: labor market dynamics and the natural rate of unemployment – August 18th Reminder: online multiple choice test administered over Monday August 23rd and Tuesday August 24th. The test covers Lectures 1–6.

Topic 3. Macroeconomic adjustment 9. Inflation, unemployment and the Phillips curve – August 23th Reading: Blanchard, chapter 8 10. Dynamic AS/AD model, part one – August 25th Reading: Mankiw, “A dynamic model of aggregate demand and aggregate supply,” (available from the LMS), sections 14.1–14.2

Intermediate Macroeconomics: Subject Guide 11. Dynamic AS/AD model, part two – August 30th Reading: Mankiw, “A dynamic model of aggregate demand and aggregate supply,” (available from the LMS), sections 14.3–14.4 12. Dynamic AS/AD model, part three: macroeconomic policy applications – September 1st

— Part II: Faisal Sohail —

Topic 4. Long-run macroeconomics 13. Economic growth facts – September 6th Reading: Blanchard, chapter 10 14. Growth theory, part one: Solow model – September 8th Readings: Blanchard, chapter 11, section 11.1–11.3 and chapter 12, section 12.1 Reminder: assignment #1 due by Monday September 13th. 15. Growth theory, part two: convergence and conditional convergence – September 13th Readings: Blanchard, chapter 12, section 12.1 16. Growth theory, part three: endogenous growth – September 15th Reading: Blanchard, chapter 11, section 11.4 and chapter 12, section 12.2, 12.4 17. Productivity and institutions – September 27th Reading: Blanchard, chapter 12, section 12.3 18. Productivity, wages and inequality – September 29th Reading: Blanchard, chapter 13, section 13.3 Reminder: assignment #2 due by Monday October 4th.

Topic 5. Open-economy macroeconomics 19. Openness in goods and financial markets – October 4th Readings: Blanchard, chapter 17 and chapter 18, sections 18.1–18.3 20. The goods market in an open economy – October 6th Readings: Blanchard, chapter 18, sections 18.4–18.6 and chapter 19, section 19.1 21. Interest rates, exchange rates and output – October 11th Readings: Blanchard, chapter 19, sections 19.2–19.5

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22. Exchange rate regimes – October 13th Readings: Blanchard, chapter 20 Reminder: online multiple choice test # 2 administered over Monday October 18th and Tuesday October 19th. The test covers Lectures 17–20.

23. Topics in macroeconomic policy – October 18th 24. Course review and wrapping-up. – October 20th Reminder: the final exam is cumulative. The final exam covers Lectures 1–24.

Tutorial enrollment There will be weekly tutorials starting in the second week of classes. Allocation to tutorials is determined by the University’s class registration system. You must enroll in a tutorial going to your student portal. Tutorial timetable can be viewed accessing the University Timetable (SWS). https://sws.unimelb.edu.au/2021/ If students have any issues related to tutorial enrollment and wish to change into a different tutorial, they should make a request through MyTimetable. Any further enquiries related to class registration should be taken to STOP1. Please note that subject coordinators or tutors cannot authorize a transfer from one tutorial to another. Tutors cannot permit a transfer not even from one of their own tutorials to another of their own tutorials. Tutorials are an integral and important part of the subject. There will be online and on-campus tutorials, and they will be used to complement and supplement the lectures and other reading material. The tutorials will follow closely the system you are familiar with from other subjects, with pre-tutorial sheets (containing a reading guide, a set of key concepts to be understood and work to be done before the tutorial) made available on LMS one week before the tutorial and in-tutorial sheets (containing tasks to be done in the tutorial) distributed each week on Canvas.

Further assistance There are lots of ways to get help if and when you need it. Lecturer consultation. Both Yusuf and Faisal have regular office hours, see contact details above. Tutor consultation. Once tutorials begin each tutor will have a fortnightly consultation hour in addition to their regular tutorial. Your tutor will notify you of their regular consultation time and they will also be posted to the LMS.

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Online discussion. Tutors will answer online questions on an online forum called Ed Discussion (ED), when not holding an online consult (i.e., every other week). Tutors will attempt to answer your question within 24 hours (weekdays only). All students in the subject can view your questions and the tutor’s answers, allowing everyone to benefit from the question and answer. Even if you don’t want to ask a question, you can still view existing questions and answers. Note that the online forum is not designed to replace attendance at tutorials, but rather to complement the tutorial process. Also, simple questions that can be answered by referring to the prescribed readings will not usually be answered. You can access the online forum through the LMS.

Learning outcomes Subject objectives. The principal objective of Intermediate Macroeconomics is for students to become well-versed in understanding, conceptually, how to distinguish between short-run demandside macroeconomic fluctuations on the one hand and long-run supply-side economic growth on the other. Students should be able to fluently discuss how changes in aggregate output and interest rates are determined in the short run for a given level of inflation, and how output, interest rates, and inflation (and other key macro variables) are determined in the medium-long run. Moreover, students should be able to discuss under what circumstances monetary and fiscal policy can affect macro outcomes in the short- and long-run.

Generic skills. These include:

In this subject you will have the opportunity to develop important generic skills.

• High level of development: written communication; collaborative learning; problem solving; team work; application of theory to practice; critical thinking; synthesis of data and other information; evaluation of data and other information. • Moderate level of development: oral communication; interpretation and analysis; accessing data and other information from a range of sources; receptiveness to alternative ideas. • Some level of development: statistical reasoning; use of computer software.

Awareness issues. This subject will increase your awareness the sources and consequences of macroeconomic fluctuations, the foundations of economic growth, the role of expectations in macroeconomics, and international linkages between economies, amongst other issues.

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Plagiarism and collusion Plagiarism is the presentation by a student of an assignment identified as his or her own work even though it has been copied in whole or in part from another student’s work, or from any other source (e.g., published books, web-based materials or periodicals), without due acknowledgement in the text. Plagiarism is heavily penalised. Penalties for plagiarism can include a mark of zero for the piece of assessment or a failing grade for the subject. Collusion is the presentation by a student of an assignment as his or her own work when it is, in fact, the result (in whole or in part) of unauthorised collaboration with another person or persons. Both the student presenting the assignment and the student(s) willingly supplying unauthorised material are considered participants in the act of academic misconduct. The Centre for Excellence in Learning and Teaching has developed a web-based ‘Academic Honesty Module’ that allows you to learn more about and test your knowledge of plagiarism and collusion. I strongly encourage you to complete this module.

Late submission No extension of assignments is considered. Late assignments will be penalised at the rate of 10% of the available marks per full hour late, for up to 10 hours, at which time a mark of zero will be given. You can apply for special consideration if you cannot complete any assignment because of illness or other circumstances. In case that your application is successful, the weight of your missing assignment will be shifted to the final exam in the overall assessment.

Special consideration Students who have been significantly affected by illness or other serious circumstances during the semester may be eligible to apply for Special Consideration online (link below). The following website contains detailed information relating to who can apply for Special Consideration and the process for making an application: https://students.unimelb.edu.au/admin/special You should not approach the lecturers or the tutors about special consideration.

Referencing All sources used for a written piece of assessment must be referenced. This is to acknowledge that your material is not based entirely on your own ideas, but is based, in part, on the ideas, information, and evidence of others. You will be required to use the American Psychological Association (APA) system or the ‘Harvard’ system of referencing.

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It is important that all material you present for assessment is referenced correctly. Material that has not been referenced correctly may be considered to be plagiarised, and as such may be penalised (as discussed above). We will also look for evidence that material included in the bibliography has been used in the assignment. Including references that have not been used may also result in your assignment being penalised....