Transcript ECON 2301 Spring 2003

Macroeconomics
ECON 2301
Spring 2009
Marilyn Spencer, Ph.D.
Professor of Economics
Introduction to course & Chapter 1
Book
 Miller, Economics Today, The Macro View,
14th edition (2006).
Course Description
 An overview of how the economy of the United States is
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organized and functions in a market system.
Market processes are used to show how resources and
incomes are allocated by households and businesses.
Determination of national income, employment, prices,
interest rates, and growth are the focus of simple analytical
techniques.
Monetary and fiscal policies are examined including their
international dimensions.
Satisfies the economics component of the University core
curriculum. (6 core skills)
Learning Objectives
Topics:
Introduction to course
Chapter 1, Economics:
Foundations and Models
Please fill out and return index card PRINT LEGIBLY:
1. Your name
6. Last math class
successfully
2. year in college (1st, 2nd,
completed in college etc.)
or “N/A”
3. major - or “deciding”
7. Usual source of local
4. ECON course in high
&
national
news
school - “yes” or “no”
8.
Any
particular
topic
5. If you’re working this
you’d like us to
semester, whether as
consider
as
part
of
volunteer or for pay,
this course
approx. # of hours/week,
- or “N/A”
Syllabus: http://faculty.tamucc.edu/mspencer/
 Contact information
 Text
 Course description
 Role of course in you undergraduate
curriculum
 Course methodology
 Course content
 Grades
 Course outline
Algebra competency
 Students need to be comfortable with:
Simple linear equations
Tables of numbers
Graphing
 Read Chapter 1, Appendix A to see if you
are comfortable with graphing that you’ll
be required to use.
Out-of-Class Quiz #1
Before class on Tuesday, Jan. 27:
1. Create an Islander email account.
2. Email me so that I will have your email address.
Include your name and your course & section
numbers.
My email address is
[email protected].
4 points
Out-of-Class Quiz #2
 Watch - live or taped, or read a transcript of, President
Obama’s inaugural address.
 In the body of your email to Dr. Spencer, write a 50-100
word summary of his remarks about the economy – using
YOUR OWN WORDS.
 Send this email to me at [email protected],
before class starts, January 27.
4 points possible
Chapter 1: The Nature of Economics
The Power of Economic
Analysis (cont'd)
 The economic way of thinking is a
framework to analyze solutions to economic
problems.
How much time to study
Choosing which courses to take
Whether troops should be sent abroad
Defining Economics
 Economics
The study of how people allocate
their limited resources to satisfy their unlimited
wants
The study of how people make choices
Defining Economics (cont'd)
 Resources
Things used to produce other things to satisfy
people’s wants
 Wants
What people would buy if their incomes were
unlimited
Defining Economics (cont'd)
 With limited income (resources),
people must make choices to satisfy their
wants.
 We never have enough of everything,
including time, to satisfy our
every desire.
Defining Economics (cont'd)
 Individuals, businesses, and nations face
alternatives, and choices must
be made.
 Economics studies how these choices are
made.
Microeconomics
versus Macroeconomics
 Microeconomics
The study of decision making undertaken by
individuals (or households) and by firms
Like looking though a microscope to focus on
the smaller parts of the economy
• Decision of a worker to work overtime or not
• A family’s choice of having a baby
• An individual firm advertising
Microeconomics
versus Macroeconomics (cont'd)
 Macroeconomics
The study of the behavior of the economy as a
whole
Deals with economy-wide phenomena
• The national unemployment rate
• The rate of growth in the money supply
• The national government’s budget deficit
Microeconomics v.
Macroeconomics (cont'd)
 Macroeconomics deals with aggregates, or
totals—such as total output in an economy.
 Modern economic theory blends micro and
macro concepts.
The Economic Person:
Rational Self-Interest
 Economists assume that individuals
act as if motivated by self-interest and
respond predictably to opportunities
for gain.
The Economic Person:
Rational Self-Interest (cont'd)
 Rationality Assumption
The assumption that people do not intentionally
make decisions that would leave them worse
off
The Economic Person:
Rational Self-Interest (cont'd)
 Responding to incentives
Rationality and the use of incentives
• Positive incentives
• Negative incentives
Making choices
• Balancing cost and benefits
The Economic Person:
Rational Self-Interest (cont'd)
 Some examples of incentives
Responding to positive incentives
• Schoolchildren getting gold stars, working to have a
“better life” for yourself
Responding to negative incentives
• Penalties, punishments, using credit cards to avoid
check overdrafts
The Economic Person:
Rational Self-Interest (cont'd)
 Defining self-interest
The pursuit of one’s goals, does not always
mean increasing one’s wealth
• Prestige
• Friendship
• Love
Economics as a Science
 Models or Theories
Simplified representations of the real
world used as the basis for predictions
or explanations
• A map is the quintessential model
• Other models you’ve worked with?
Economics as a Science (cont'd)
 Assumptions
The set of circumstances in which a model is
applicable
Every model, or theory, must be based on a set
of assumptions.
Economics as a Science (cont'd)
 Ceteris Paribus Assumption
[KAY-ter-us PEAR-uh-bus]
Nothing changes except the factor or factors
being studied.
“Other things constant”
“Other things equal”
Economics as a Science (cont'd)
 Economics is an empirical science.
Real-world data is used to evaluate the
usefulness of a model.
Models are useful if they predict economic
phenomena.
Economic models predict how people react, not
how they think.
Economics: Foundations and Models
In this textbook, economics is used to answer
questions such as the following:
“How are the prices of goods and services
determined?”
“How does pollution affect the economy, and how
should government policy deal with these effects?”
“Why do firms engage in international trade, and how
do government policies affect international trade?”
“Why does government control the prices of some
goods and services, and what are the effects of those
controls?”
Positive v. Normative Economics
 Positive Economics
Purely descriptive statements or scientific
predictions; “If A, then B,” a statement
of what is
 Normative Economics
Analysis involving value judgments; relates to
whether things are good or bad, a statement of
what ought to be
1-1
When Economists Disagree:
A Debate Over Outsourcing
Does outsourcing by U.S.
firms raise or lower
incomes in the United
States?
 What type of statement would “A minimum wage
actually reduces employment” be considered?


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a.
b.
c.
d.
A positive statement.
A marginal statement.
A normative statement.
An irrational conclusion.
Assignments to be completed
before class January 20:
 Having read Chapter 1, be able to answer Problems
1-1 through 1-7 & 1-11 on pp. 15-16.
 Read Chapter 2 & also read Problems 2-1 through
2-6, 2-9, 2-10, 2-12 & 2-13 on pp. 48-49.
Out-of-Class Quiz #1
Before class on Tues., Jan. 27, email me from your
Islander account, so that I will have your email
address. Include your name and your course &
section numbers.
My email address is
[email protected].
4 points