Download Lecture 1 -- Welcome - The WA Franke College of Business

Welcome to ECO 285
Principles of Macroeconomics
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Please pick up a copy of the syllabus
Make a name card for yourself
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This is your first in-class assignment
You will be graded on your penmanship and for correctly
following directions
Use the 8.5” x 11” cardstock provided
Fold it lengthwise.
Wait for the marker. Print your first and last names in
large letters, with your last name above the fold and your
first name below the fold as in the example shown.
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How to Contact Me
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Mr. John D. Eastwood
Office CBA Room 247
Phone: 523-7353
Fax: 523-7331
E-mail: [email protected]
Office Hours
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Monday, Wednesday and Friday, 10:15 – 11:15 AM
Tuesday and Thursday, 4:00 – 5:00 PM
Also by appointment
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Prerequisite
Eligible to take MAT 110 or a higher course
 If you lack the prerequisite, contact me as
soon as possible!
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Course Objectives
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Topics:
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Measurement of national economic variables;
the determination of output, income,
employment, and price levels through aggregate
supply and demand analysis and related
graphical techniques; business cycles, fiscal and
monetary policy and international economics. .
Successful students will learn to analyze
economic issues in an objective manner.
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The Required Text Package
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Text (required): Robin Bade and Michael
Parkin, Foundations of Macroeconomics,
Second Edition, Pearson Publishing
(Addison-Wesley), 2004. This text is
packaged with a subscription to the
course web site and a news magazine,
The Economist.
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Announcements & Calendar
www.cba.nau.edu/facstaff/eastwood-j/
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Graded Work:
Exams are 65% of your grade
 Homework, quizzes, attendance and writing
assignments are 35% of your grade
 Your grade is computed as a weighted
average of your scores
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Writing assignments
Individually prepared analysis of news
articles
 About 300 words in length, double spaced,
plus a graph and a copy of the original
article
 Three summaries during the semester,
graded for content, grammar and style
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Grading Scale
90% or better earns an “A”
 80% to 89% earns a “B”
 70% to 79% earns a “C”
 60% to 69% earns a “D”
 59% or less earns an “F”
 If the average on an exam falls below a C, I
may curve that exam.
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Academic Dishonesty
1. Plagiarism: any attempt to pass off other’s work as your
own
2. Cheating: any attempt to gain an unfair, hidden advantage
over one’s fellow students
3. Fabrication: any attempt to present information that is not
true
4. Fraud: any attempt to deceive an instructor or
administrative officer of the university
5. Any attempt to facilitate academic dishonesty
Excerpt from the NAU Student Handbook, Appendix F
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Questions?
Why Study Economics?
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The purpose of studying
economics is not to acquire a
set of ready-made answers to
economic questions, but to
learn how to avoid being
deceived by economists.
– Joan Robinson, 1903-1983
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Why Not?
Within business colleges, Economics is
sometimes referred to as the “Mother
Discipline.”
 Accounting, Finance, Marketing, and
Management are disciplines that apply
economic principles.
 Many political issues concern Economics.
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B.S.B.A. in Economics
extended major
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Degree requirements
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Economics courses
24 hours
Other major requirements 18 hours
Business Core
42 hours
Liberal Studies
35 hours
General Electives
1 hours
Total
120 hours
see page 131 of 2001-2003 catalog
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B.S. in Economics
extended major
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Degree requirements
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Major
Liberal Studies
General Electives
Total
57 hours
35 hours
28 hours
120 hours
see page 201 of 2001-2003 catalog
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Minor in Economics
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Minor in Business Economics
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Requires 18 credit hours
ECO 284, and ECO 285 +
Four upper-division economics courses
see page 133 of 2001-2003 catalog
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Certificate
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Certificate in Business Economics
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Requires 15 credit hours
ECO 284, and ECO 285 +
Three upper-division economics courses
see page 131 of 2001-2003 catalog
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Other Business Majors
Accounting
 Computer Information Systems
 Finance
 Management
 Marketing
 B.A. in Liberal Studies
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Enterprise in Society Emphasis
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The Basics of Economics
What is Economics?
 A large subject — How do we approach it?
 Heilbroner’s analogy: think of the economy
as an unexplored continent.
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Enter the continent on foot...
and study at close range the persons and
firms whose activities (when combined)
form the economy.
 Microeconomics is the study of how
consumers, firms, and resource owners
interact in individual markets.
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Fly over the continent...
and note the characteristics of the economy
as a whole.
 Macroeconomics is the study of the entire
economy.
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A third approach...
It focuses first on how the "economic
continent" came to be there in the first
place, and on what forces have shaped and
continue to shape its landscape.
 This approach is known as economic
history.
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Primarily Macroeconomics
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Economic history adds perspective on
contemporary problems such as ...
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De-regulation,
Environmental degradation,
International trade,
Monopoly power, and
Welfare reform.
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History of Economic Thought
The study of how economic ideas and
philosophies have evolved
 Keynes suggested that these ideas have had
a powerful influence on human history.
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What is Economics?
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Woody Allen:“ Economics is about money and
why it is good,"
Heilbroner: “Economics is the process of
providing for the material well-being of society.”
However, because many goods are scarce, society
must make choices.
Thus Economics is often defined as the study of
how scarce resources are best allocated among
competing ends.
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The Setting
The human body, by itself, is not a highly
efficient mechanism for survival.
 Each 100 calories eaten delivers about 20
calories of mechanical energy.
 That amount of work must first be applied
to sustain the human.
 Only what is left over can be used to build a
civilization.
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The Problem
 Scarcity
Time
Money
Goods
Food
 Survival
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The individual and society
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Economic history must focus on the central
problem of survival and on how humans
have solved that problem.
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The division of labor
We survive because the tasks we cannot do
for ourselves are done for us by an army of
others.
 Enhances our capacity a thousand-fold.
 With this gain comes a degree of risk.
 Our well-being depends on others.
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Economics and scarcity
Is human nature or mother nature the source
of most of our economic problems?
 The scarcity of nature's resources.
 Our desires and wants.
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Economics and Society
What are the tasks which social
organization must perform to bring human
nature into harness?
 A society must assure the production of
enough goods for its own survival.
 Society must also distribute these goods so
that more production can take place.
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Three basic questions
What to produce?
 How to produce it? and
 For Whom?
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Economizing
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The production problem, in part, is one of
applying technical skills to the resources at
hand, avoiding waste, and using effort as
efficiently as possible.
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Mobilizing effort
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Before society may concern itself about
using its resources efficiently, it must first
devise social institutions that will mobilize
human effort for production
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Failure to mobilize effort
The Great Depression.
 The poorest nations.
 Thus the production problem is in part a
physical and technical problem, and in part
a challenge to social organization.
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Allocating effort
Putting people to work is the first step in
solving the production problem. But they
must be put to work at the right tasks.
 Failures emphasize that a society must not
only produce goods, it must produce the
right goods.
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Distributing output
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to assure continued production
Distributive failures need not entail a total
economic collapse.
Societies can exist with badly distorted
distributive efforts.
Problems in distribution most often reveal
themselves as social and political unrest.
A society must sustain and motivate its workers.
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Three solutions
Tradition
Command
Markets
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Tradition.
Workable
 But static
 Tradition solves the economic problem,
 at the cost of economic progress.
 What is Tradition’s role in the US
economy?
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Command
Also workable
 Often superimposed on a traditional society
 An effective tool for economic change
 What is the role of command in the US
economy?
 Is it moral?
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The Market
Because we live in a largely market-run
society, we are apt to take for granted the
puzzling nature of the market solution to the
economic problem.
 Quote from R. L. Heilbroner's The
Economic Problem.
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Perplexed?
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The perplexity which the market idea would
rouse in the mind of someone unacquainted
with it may serve to increase our own
wonderment in the most sophisticated and
interesting of all economic mechanisms.
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