Macroeconomics Principles

Stonehill College


Department of Economics


Macroeconomics Principles Professor Mark Kazarosian
EC 178 Office: Duffy 249, Ext. 1249
Spring 1999 Office Hours: Wed, 4:00-6:00
Fri, 12:30-3:30
e-mail: kaz@stonehill.edu (school) Also by appointment
e-mail: kaz@mediaone.net (home)

Macroeconomics Principles

Course Description: Macroeconomics Principles is designed to enable students to understand macroeconomic events and government policies that influence the real-world environment in the US and the international economy. Students are taught how to interpret and understand macroeconomic theory and data and how to translate this understanding into more fulfilling day-to-day interactions--financial as well as social and intellectual. Ethical and political issues as related to macroeconomic policy decisions are frequent topics of class discussions.

For example, inflation, exchange rates, interest rates, prices, consumer expenditures, company investment, government expenditure, and unemployment, are some of the concepts that we will learn about. Even more important, we will learn how these concepts are interrelated and how to gain a clear understanding of news reports that discuss these issues.

Required Text:

Principles of Macroeconomics by Richard W. Tresch. All readings on the reading list refer to Tresch. Other short readings will be passed out in class.

Supplementary Readings:

Any major newspaper. Suggestions: Wall Street Journal, Boston Globe, New York Times.

In addition to the readings from the text, you should follow current events on the decision making process of federal, state and local gvt., local businesses (small and large), local community groups, and the interaction and motivation of these decisions. E.g.-- decisions on business location, transportation and education funding, externality concerns, and rent control. It is also interesting and important to follow international policy issues, on output, employment, inflation, fiscal and monetary policy, the budget deficit, the trade deficit, and other issues of macroeconomic policy. These macroeconomic policies often influence microeconomic decisions.

Course Requirements:

Grading will be based upon:

Two Midterms (25% each): 1) Wednesday March 3. 2) Wednesday April 14.
Problem Sets and Class Participation (15%).
Final Exam (35%). Exam Week.

If school happens to be canceled (e.g. snow day) on the day of a scheduled exam, the exam will be given the next class meeting. There are no make up exams. If there is an excused absence from a test, i.e. documentation from a dean, the following exam(s) will be weighted more heavily.
Suggestions:

Come to class regularly since most of my exam questions will be based on topics we discuss in class. Many of these topics are covered in the text, some are not. Ask questions early and often. If you are confused about an issue, the odds are that a bunch of other people are confused also. Questions spur interesting discussions. I encourage everyone to participate in class discussions. Come to office hours if you have additional questions. Please, for your own good, don't wait until the day before a test to come see me.

Suggested Reading:

On Reserve--For Reference: Various readings listed below in the course outline. Please note that these readings are not all required. They are there for your reference (for now and after the class has finished) to give you the ability to go to a variety of sources for various perspectives on the topic. I strongly suggest that you read at least one outside reading within each topic--many of the papers touch on the international, social and ethical dimensions of the course material.

Course Outline:

I. Introduction (Review): First Principles, The Economic Problem, Market Prices.

Scarcity, Micro and Macro, Production Possibilities, Efficiency, Chs 1-5
Equity, Opportunity Cost, Incentives, Objectives,
Alternatives, and Constraints, Rationing and
the Allocation of Scarce Resources, Supply and Demand.

Applications: A PPF view of International Trade, Discrimination, Unemployment, Inflation, and Economic Growth.

II. The Macroeconomic Policy Goals I: Long-Run Growth and Full Employment.

Macro policy goals, Full employment, Cyclical, frictional, Ch 6
structural unemployment, Natural rate of unemployment, Rule of 72. (Ch 25)

Readings
Alan S. Blinder, "The Challenge of High Unemployment," American Economic Review,
May 1988, pp. 1-15.


III. The Macro Policy Goals II: Price Stability and Stable International Relations.

Inflation, Consumer price index, Imports and exports, Ch 7
dollar depreciation etc. (Ch 26)

Readings
Adrian W. Throop, "Accelerating Inflation?", FRBSF Weekly Letter, July 29, 1988.

Ellen Rissman, "Why is Inflation So Low?", Chicago Fed Letter, August 1988.

Michelle R. Garfinkel, "What is an "Acceptable" Rate of Inflation?--A review of the
Issues," FRB St. Louis Review, July/August 1989, pp. 3-15.

Bharat Trehan and Carl Walsh, "Optimal Inflation," FRBSF Weekly Letter, August 4, 1989.

IV. The National Income and Product Accounts.

Gross Domestic Product--Expenditure Approach, Disposable Income Ch 8
Real GDP and the standard of living. (Ch 27)


Readings
C. Carson and G. Jaszi, "The National Income and Product Accounts of the United States: An Overview," Survey of Current Business, February 1981.

Edward Denison, "Welfare Measurement and the GNP," Survey of Current Business,
January 1971.

V. Modeling The Macro Economy: New Classical and Keynesian Perspectives.

The business cycle, Fiscal and monetary policy, Classical, Ch 9
Keynesian Econ, Aggregate Demand and Supply. (Ch 28)

Readings
Paul Craig Roberts, "Supply Side Economics--Theory and Results," The Public Interest,
Fall 1988, pp. 16-36.

Anne Sibert and Stuart E. Weiner, "Maintaining Central Bank Credibility," FRBKC

VI. National Income Determination.

Consumption, and saving function, Ch 10, & Appendix
Marginal propensity to consume, (Ch 29, & Appendix)
Life-Cycle Hypothesis, Equilibrium national income.

Readings
Stephen K. McNees, "Which Forecast Should You Use?," New England Economic
Review, July/August 1985.

VII. The Spending Multiplier, Fiscal Policy, and Unemployment.

Fiscal policy, The multipliers, Recessions, Ch 11, 12 & Appendices
Auto stabilizers. (Ch Chs 30, 31 & Appendices)


Martin Feldstein, "Tax Policy for the 1990s: Personal Saving, Business Investment, and
Corporate Debt," American Economic Review, May 1989, pp. 113-117.

VIII. The US Monetary System, and Monetary Policy. Ch 14-16 (Chs 33-35)

John P. Judd, "Deficits: Twins or Distant Cousins?," FRBSF Weekly Letter, Oct. 6, 1989.

Stephen A. Meyer, "The U.S. as a Debtor Country: Causes, Prospects, and Policy
Implications," FRB Philadelphia Business Review, Nov./Dec. 1989, pp.19-31.

Robert Eisner, "Will the Federal Deficit Stand Up?," Challenge, May-June 1986.
Carl E. Walsh, "Selling Government Assets," FRBSF Weekly Letter, May 16, 1986.

Milton Friedman, "The Taxes Called Deficits," Wall Street Journal, April 26, 1984.

Kevin Hoover and Joseph Bisignano, "Classical Reflections on the Deficit," FRBSF
Weekly Letter, October 14, 1983.

Carl E. Walsh, "Do Deficits Matter?," FRBSF Weekly Letter, January 15, 1988.

Reuven Glick, "How Good is PPP?," FRBSF Weekly Letter, June 9, 1989.

IX. Aggregate Supply and Demand. Ch 17, 18 (Ch 36,37)

We will refer to material in chapter 18 throughout the semester. Please begin to read it now.