Download University of the Faroe Islands Introductory Course in Economics

University of the Faroe Islands
Department of History and Social Sciences
Introductory Course in Economics
(1) Bologna compliant course description
(2) Detailed learning outcomes
(3) Course plan
(4) Bibliography
(1) Bologna compliant course description
Course Number
2622.14
Title
Introduction to economics
Búskapur og Samfelag
ECTS
10 ECTS
Prerequisites
Students are required to hold an upper secondary education diploma or
equivalent qualification. English language competence is also required.
Level
Bachelor. Required course on the Bachelor Degree Programmes in History,
Social Sciences and Political Science. Individual course (fee-paying)
Purpose
The purpose of the course is to give students of history, political science
and social sciences insight into:
 fundamentals of economics as a discipline, including key concepts
and models
 the role of economics in political practice, as well as the current
and past role of the economy in social change
The course offers an introduction to some of the key concepts and models
in economics. The major topics are supply and demand, the market
mechanism, market intervention, productivity and economic growth,
cyclical economic fluctuations and economic policy, international trade.
Content
Learning and
Teaching Approaches
In accordance with the ECTS standards, on a course with 30 teaching
hours 8 hours of self-study are required for each taught hour. Regular
organised group work is recommended as part of preparing for lectures.
Teaching hours will be used for short lectures, answering questions and
dialogues, as well as student presentations, including regular indicative
tests with 15 to 20 minute oral presentations by students based on the
University of the Faroe Islands
Department of History and Social Sciences
detailed learning outcomes.
Learning Outcomes
Assessment methods
Students who successfully complete Introduction to economics as part of
their BA/BS degree can demonstrate ability to explain, describe and/or
assess the socioeconomic topics listed below:
 The market economy as a driver of production, division of labour
and international trade
 The market mechanism with supply, demand and price
determination
 Reasons why the market mechanism sometimes does not function
optimally and potential political solutions
 Economic sectors and the economic cycle, measuring
unemployment, inflation and inequality
 The national economy, including balance of payment and foreign
trade
 Revenue generation, economic growth
 Economic cycles and economic crises
 Different types of short-term economic policies, underlying
theories, instruments and purposes
 International trade
Oral examination with preparation time. The oral examination will last 20
minutes. 40 minutes of preparation time will be allowed with access to all
study aids, except the internet and mobile phones.
Examination
Passing at least one student presentation is a prerequisite for examination
enrolment. The examination focuses on the learning outcomes. The
examination emphasises students’ ability to explain, describe, assess,
provide added perspective and contextualise. The examination is
externally assessed.
Marking Scale
Marking scale in force
Contact
Jóannes Jacobsen, PhD., Assistant Professor
University of the Faroe Islands
Department of History and Social Sciences
(2) Detailed learning outcomes. Learning outcomes will be emphasised.
The learning outcomes will be the bases for student presentations in
class, as well as any group work organised to prepare for lectures
Students who successfully complete Introduction to economics as part of their BA/BS degree can
demonstrate ability to explain, describe and/or assess the socioeconomic topics listed below:
1. Part: What is economics?
1. Basic concepts
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Definitions of economy and economics
Economic concepts about how individual actors make choices in an economic environment
Economic concepts about how the economy operates through the interplay of economic
choices made by individual actors
Economic concepts about aggregate economic interplay
2. Economic models
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The decisive role of models in economics
Two fundamental models
The cyclical model of the economy
The difference between positive and normative economic analyses
Why do economists sometimes disagree?
2. Part: Supply and demand
3. Supply and demand
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‘Perfect market’
Supply curve and demand curve
Equilibrium price and equilibrium quantity
Price as a mechanism of equilibrium
4. Market mechanism interventions
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Consumer surplus
Producer surplus
Total surplus and the value of trade
Price or quantity interventions and their consequences
Who gains and who looses from interventions in the market mechanism
University of the Faroe Islands
Department of History and Social Sciences
5. Elasticity and taxation
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The concept of elasticity and why economists use it
How elasticities demonstrate behavioural changes in response to the economic
environment
Which factors affect the value of elasticities
How does the value of elasticity determine the impact of taxes and levies
3. Part: Production decisions
6. Means and costs of production
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Correlation between the quantity of production material and quantity produced
Why additional production often diminishes per added unit of production material
Why long-term production costs differ from short-term production costs
How production technology can yield more for less
7. Perfect competition and the supply curve
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Meaning of the concept perfect competition
Company behaviour under perfect competition
How to assess a company’s financial performance and why underperforming companies can
continue to operate in the short term
What determines an industry’s total output – in the short and long term
4. Part: Outside ‘perfect competition’
8. Monopoly, oligopoly, and monopolistic competition
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The significance of monopoly
How a monopolist fixes supply and price
The extent of oligopoly and why oligopolists find it difficult to cooperate
How authorities can tackle the challenges of monopolies and oligopolies
What ‘monopolistic competition’ means how companies differentiate their production from
that of competitors in this form of competition
9. Externalities and public goods
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What are externalities and why do they cause inefficiency
The difference between positive and negative externalities
The Coase Theorem
Why some political measures to counter externalities are sensible, while others are not
The difference between private goods for which the market is best at determining supply,
and public goods, which the free market does not supply in sufficient quantity
5. Part: Introduction to macroeconomics
University of the Faroe Islands
Department of History and Social Sciences
10. Macroeconomics: Overview
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The difference between microeconomics and macroeconomics
What is cyclical variation and why do the authorities try to reduce it
How long-term economic growth determines a country’s standard of living
What are inflation and deflation, and why is price stability desirable
The significance of open-economy economics, and how economies affect each other
through balance of payments surpluses and deficits
11. GDP and the price index: Monitoring the national economy
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How economists use aggregate statistics to monitor trends in the aggregate economy
Gross domestic product (GDP) and the three methods used to measure it
The difference between real and nominal GDP, and why real GDP is the correct
measurement of economic activity
The definition of the price index and how it is used to measure inflation
12. Unemployment and inflation
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How unemployment is measured and how unemployment percentages are calculated
The impact of unemployment percentages on the economy
The link between unemployment percentages and economic growth
Factors determining the ‘natural’ level of unemployment
The economic costs of inflation
Who gains and who looses economically from inflation and deflation
Why do the authorities strive to stabilise inflation
6. Part: Economic growth and economic fluctuations
13. Long-term economic growth
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Why long-term economic growth is measured as an increase in real GDP per capita, how
real GDP per capita has changed over time, and how much real GDP per capita differs
between countries
Why productivity is the key to long-term economic growth and how physical capital, human
capital and technological development drive productivity
The reasons why long-term growth differs so greatly between countries
How economic growth has differed between different regions of the world and why the
hypothesis on confluence in economic growth applies to developed countries
The issue of sustainability and the challenges posed by finite quantitates of natural
resources and environmental degradation in the generation of economic growth
14. Aggregate demand and aggregate supply
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How the aggregate demand curve demonstrates the link between the aggregate price index
University of the Faroe Islands
Department of History and Social Sciences
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and total demand for goods and services in the economy
How the aggregate supply curve demonstrates the link between the aggregate price index
and total supply of goods and services in the economy
Why the aggregate supply curve differs in the short and long term
How the ‘aggregate demand-aggregate supply model’ is used to analyse cyclical fluctuations
How monetary policy and financial policy can reduce cyclical fluctuations
7. Part: Short-term economic policy
15. Financial policy
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What is financial policy and why is it an important instrument in smoothing cyclical
fluctuations
Which financial policy measures are pro-cyclical and which are counter-cyclical
Why financial policy has a multiplier effect and how the multiplier effect itself is affected by
‘automatic stabilisers’
Why do the authorities calculate the structural financial balance of the public sector
Why large public debt can be a problem
Why implicit public debt can also be a problem
16. Money and the banking system
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Different types of money and the roles of money in the economy
How private banks and central banks determine the supply of money
How central banks change the monetary base
17. Monetary policy
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What is the money demand curve
How the liquidity preference model determines the short-term interest rate
How central banks lead monetary policy and thereby change the level of interest in order to
influence aggregate supply in the economy
Why many countries use monetary policy as the main instrument to stabilise cyclical
fluctuations
Why economists believe that monetary policy has no long-term impact on real activity in
the economy, but only affects the price level
18. Crises and their consequences
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The difference between deposit banks and shadow banks
Why both types of banks can come under attack
What happens during financial shocks and banking crises
Why the impact of shocks and crises is so great and lasts so long
How loopholes in financial regulations and the rise in shadow banking activities lead to the
2008 financial crisis
How new financial regulations attempt to prevent new crises
University of the Faroe Islands
Department of History and Social Sciences
8. Part: International Economy
19. International trade, capital transfers and exchange rates
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How comparative advantages lead to mutually beneficial trade
Sources of comparative advantages
Who benefits and who looses from international trade, and why total gains outweigh total
losses
How tariffs and import quotas lead to inefficiency and reduce the total gains generated by
trade
What is balance of payment, and which factors influence international capital flows
The role of currency markets and exchange rates
University of the Faroe Islands
Department of History and Social Sciences
(3) Course plan (subject to change)
Lesson
Date Required reading
0
Chapter 1 in Krugman,
Wells and Graddy
1
Chapter 2 and 3 in
Krugman, Wells and
Graddy
2
Chapter 4 and 5 in
Krugman, Wells and
Graddy
3
Chapter 6 and 7 in
Krugman, Wells and
Graddy
4
Chapter 8 and 9 in
Krugman, Wells and
Graddy
5
Chapter 10 and 11 in
Krugman, Wells and
Graddy
6
Chapter 12 and 13 in
Krugman, Wells and
Graddy
7
Chapter 14 and 15 in
Krugman, Wells and
Graddy
8
Chapter 16 and 17 in
Krugman, Wells and
Graddy
9
Chapter 18 and 19 in
Krugman, Wells and
Graddy
10
Review of chapters 1-9
in Krugman, Wells and
Topics set out as learning outcomes
Review the distributed course materials
The FirstClass system
Conversation with each student
Organise working groups; start teaching
University of the Faroe Islands
Department of History and Social Sciences
Graddy
Review of chapters 1019 in Krugman, Wells
and Graddy
EXAM
University of the Faroe Islands
Department of History and Social Sciences
(4) Bibliography. Some of the materials may be read selectively and
cursorily; students will be advised on this in class. A final list will be
drawn up before the examination.
Powerpoint files used in lectures, which will be uploaded to FirstClass
Paul Krugman, Robin Wells and Kathryn Graddy (2013). Essentials of Economics, 3rd edition. Worth
Publishers