Transcript Economics 157b Economic History, Policy, and Theory Short

Economics 122a. Macroeconomics
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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
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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.
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Schedule
We will generally meet M W 11:35-12:50
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.
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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).
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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 4:00-4:50 and 5:00-5:50 pm
Thursday 4:00-4:50 and 5:00-5:50 pm
Wed or Thurs 7:00-7:50 and 8:00-8:50 pm
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Alternatives
Alternative macroeconomics courses:
Econ 122b (Bruegemann). Roughly the same with emphasis
on labor economics.
Econ 126b (Moscarini). Intensive version. More analytical
and mathematical.
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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.
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For those who
have had enough
macroeconomics
for today...
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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).
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Major themes
There are two major recurrent themes running through
macro:
i) Business cycles
ii) Economic growth
Virtually every macroeconomic issue revolves around
these issues, or a confusion concerning them.
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Business cycles
One major set of issues involves the business cycle. What
are business cycles? What are some examples?
The Great Recession.
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Real GDP over the cycle
Real GDP growth (4 quarters)
.10
.08
.06
.04
.02
.00
-.02
-.04
-.06
60
65
70
75
80
85
90
95
00
05
10
Shaded areas are NBER recessions. No declared end of current recession.
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Unemployment over the cycle
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10
9
8
7
6
5
4
3
2
BUT, even though the 1980-82 recession looks
superficially similar to the 2008-2010 period,
the causes and policy responses were
completely different.
1950
1960
1970
1980
1990
2000
2010
Shaded areas are NBER recessions. No declared end of current recession.
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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 ….
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Today’s 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?
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The exploding government debt
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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.
Asia’s economic renaissance
Source: McKinsey (but not to be taken as good data).
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GDP per capita (2007 international US dollars)
Per capita growth trends in 3 big regions
20,000
China
US
SubSaharanAfrica
2,000
200
1980
1985
1990
1995
2000
2007
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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?
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U.S. Trade Deficit: Net exports/GDP
Net exports/GDP
.02
.01
.00
-.01
-.02
-.03
-.04
-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)?
-.05
-.06
-.07
60
65
70
75
80
85
90
95
00
05
10
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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.
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
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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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