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Principles of Macroeconomics [HA HU3A] ISUP Course 2013 - Copenhagen Business School Department: ISUP Course level: Undergraduate_X__ Graduate___ Study board: (ISUP will enter the appropriate study board for proposal review) Course Main Category:. 17. Economics, Macro Economics and Managerial Economics, etc. Course Secondary Categories: Credits: 7.5 ECTS Instructor: Bradley K. Hobbs, Ph.D. E-mail address: [email protected]; [email protected] Course coordinator: Patricia Plackett Course prerequisites and restrictions: It is recommended that students have successfully completed a course in basic algebra. No other prerequisites are required. Course content, structure, and teaching: The Principles of Macroeconomics is the introductory, foundation course for all of macroeconomic theory. It provides the framework for subsequent intermediate macroeconomic theory courses and is any student's introduction to the analysis of economies at the aggregated (national or state) level. Macroeconomics is the study of the behavior of an entire economy aggregated across all of the individual decision-making units. It deals primarily with those factors affecting production, employment, and price levels. Topics which we will cover include: economic growth, business cycles, the national debt, interest rates, government spending, the measurement of economic aggregates, monetary policy, and fiscal policy. We will also introduce international economics and polciies along with international finance. There is relatively-wide agreement on the goals of macroeconomic policy: growth in real output, full employment, and price stability. However, macroeconomic theory is marked by diverse prespectives concerning the appropriate policy actions required to acheive these goals. A number of alternative schools of thought exist including Keynesianism, Monetarism, and Rational Expectations. Each stresses different paths and perpectives on the proper path(s) to acheiving the goals of macroeconomic success. Your understanding of the material will be greatly enhanced by following the economic and financial news over the period of this course. You should acquire the background necessary to be able to formulate your own informed opinions on the workings of a macroeconomy. The specific skills and competencies addressed in this course are explained in the two following sections: "Learning objectives" and "Personal competencies." 1 Preliminary Assignment: Read this novel: The Price of Everything: A Parable of Possibility and Prosperity, 224 pages. (Available at: http://www.amazon.com/dp/0691143358/ref=rdr_ext_sb_ti_sims_1) Author: Russell Roberts Publisher: Princeton University Press Publication Date: August 24, 2009 ISBN-10: 0691143358 ISBN-13: 978-0691143354 Mid-term Assignment: You will be required to write a 2-3 page paper which analyzes some news article pertaining to a change in supply, change in demand, or the effects of some price control on markets. Your paper must include a graphical analysis accompanied by a solid explanation of the issue, the assumptions, the change that you are modeling, and the observed or expected effects of the change. This project will be due at the beginning of Class Meeting 5. I am not looking for a summary of what a reporter writes but rather a critical reading of and commentary on what they write. This assignment means that you must have some contact with the financial/economics news of the world. Your sources might include: The Economist, The Wall Street Journal, Forbes, Business Week, Investor's Business Daily, or the financial/business section of a major newspaper such as the New York Times or the Washington Post or The Times of London. The paper should showcase your ability to relate course materials to the economic news of the day. All papers must be typed and double-spaced and accompanied by a short bibliography. If the analysis is from a specific article, a copy of that article needs to be attached. The course’s development of personal competences: Personal and Interpersonal Competences Self-motivation Ability to understand complex systems and connections Develop analytical prowess Build confidence in knowledge of the economy Build confidence in the handling new and varied tasks Attention to details Attention to the "big picture" Ability to meet deadlines Ability to access and interpret business and economic news Ability to work effectively with peers Build networking ability Teaching methods: The course is primarily lecture-based though short case studies are included in the textbook and these will be covered in class. Periodically, I will also use in-class group work focused on a specific short project such an analyzing a case or article. These sessions are designed to encourage critical thinking and analytical skills. All such exercises will be debriefed with the entire class to ensure that students are internalising the major points I am trying to address.. Required course readings and literature: 2 The Price of Everything: A Parable of Possibility and Prosperity, 224 pages. (Available at: http://www.amazon.com/dp/0691143358/ref=rdr_ext_sb_ti_sims_1) Author: Russell Roberts Publisher: Princeton University Press Publication Date: August 24, 2009 ISBN-13: 978-0691143354 Modern Principles: Macroeconomics, Second Edition ©2012, 481 Pages Authors: Tyler Cowen and Alex Tabarrok Publisher: Worth Publishers ISBN-13: 978-1-4292-3998-1 Course Outline Class Meeting 1 - Introduction Introductory Discussion of The Price of Everything: A Parable of Possibility and Prosperity, 1. The Big Ideas in Economics 2. The Power of Trade and Comparative Advantage Class Meeting 2 - Supply and Demand, Price Controls 3. Supply and Demand 4. Equilibrium: How Supply and Demand Determine Prices 5. Price Ceilings and Price Floors Class Meeting 3 - Economic Growth, National Income Accounting 6. GDP and The Measurement of Progress 7. The Wealth of Nations and Economic Growth Appendix: The Magic of Compound Growth: Using a Spreadsheet Class Meeting 4 - Economic Growth and Productivity 8. Growth, Capital Accumulation and the Economics of Ideas: Catching Up vs. The Cutting Edge Appendix: Excellent Growth 9. Savings, Investment, and the Financial System Appendix: Bond Pricing and Arbitrage Class Meeting 5 - Personal Finance, Political Economy and Public Choice 10. Stock Markets and Personal Finance 21. Political Economy and Public Choice Class Meeting 6 - Business Fluctuations, Employment, Money, and Inflation 11. Unemployment and Labor Force Participation 12. Inflation and the Quantity Theory of Money Appendix: Get Real! An Excellent Adventure Class Meeting 7 - Business Fluctuations, Aggregate Demand and Aggregate Supply, the Transmission of Policy 13. Business Fluctuations: Aggregate Demand and Supply 14. Transmission and Amplification Mechanisms Appendix: Business Fluctuations and the Solow Model 3 Class Meeting 8 - Macroeconomic Policy and Institutions - Monetary Policy and the Fed 15. The Federal Reserve System and Open Market Operations Appendix: The Money Multiplier Process in Detail 16. Monetary Policy Class Meeting 9 - Macroeconomic Policy and Institutions - Fiscal Policy and Congress 17. The Federal Budget: Taxes and Spending 18. Fiscal Policy Class Meeting 10 - International Economics - Trade, Finance, and Exchange Rates 19. International Trade 20. International Finance Class Meeting 11 - Macroeconomics Course Review Analysis of Current Economic Conditions and Policies in Europe or America This exercise is designed to incorporate the materials that have been developed throughout the course. Your inquiry should be within the framework of what you have learned in this course. What are the major problems in the selected economy? What are the current fiscal and monetary policies? Why are policy makers choosing these policies? Are the policies having their intended effects? If not, why not? What role is politics playing in the current choice of macroeconomic tools? What "storm clouds" sit on the horizon and what might policy makers we do about them? Learning objectives: Analytical Skills Articulate and discuss the concepts covered in the preliminary assignment The Price of Everything: A Parable of Possibility and Prosperity Explain the broad conceptual nature of economics, its connections to human flourishing, its broad and general goals, and the reasons for these goals Be able to explain comparative advantage Be able to explain gains from exchange Understand and discuss cost-benefit analysis within a basic supply and demand framework Analyze the effects of price controls on a market Articulate the microeconomic foundations of macroeconomics Understand the basic framework of National Income Accounting Interpret the importance of changes in major economic indicators including GDP and unemployment data Explain basic economic growth models and the effects of economic growth and productivity on standard-of-living Explain the business cycle and its effects on labor and capital Understand the major theoretical models explaining the macro economy (Keynesianism, Monetarism, and Rational Expectations) Articulate the appropriate timing of expansionary and restrictive monetary and fiscal policies with respect to the phase of the business cycle Analyze and explain the tools, purpose, and timing of monetary policies Analyze and explain the intended and unintended effects of monetary policies Analyze and explain the tools, purpose, and timing of fiscal policies 4 Analyze and explain the intended and unintended effects of fiscal policies Explain the various transmission effects associated with monetary and fiscal policy Use the Aggregate Demand and Aggregate Supply Model to show the effects of monetary and fiscal policies Able to analyze and explain political support and opposition to fiscal and monetary policy Address the major features of the international trading system Address the effects of globalization on businesses Explain exchange rates Explain trade deficits Exam format: The assessment for the course will be a four-hour, closed-book, computer based examination. It will be comprised of a combination of multiple choice, short answer, and essay questions. It will be administered on a CBS computer and the Microsoft PC calculator will be all that is required. Language dictionaries are allowed, as are writing utensils and a ruler or straight edge, if desired. This examination is analytical in nature; it will require analysis using graphs. Paper will be provided for graphical analysis. 5