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P rincipIes o f E c o n o m i c s: MACRO EC0-2020 Section 200 DuanG030 Call # 42209 ll :00-12:15TR Spring 1990 Instructor: Ralph T. Byrns, Ph.D. Adjunct Professor of Economics University of Colorado - Boulder Office: Econ 202 Phone: 492-7740 Hours: 09:45-11:00 TR or by appointment Emergencies: Home: 779-0907 Off ice: 794-8520 # Hour /weekday Room T/A Office 211 09:00-09:50 M Hlms 341 A. Algaz Econ 401 X 26875 443-9988 212 09:00-09:50 W Econ 205 A. Algaz 213 02:00-02:50 R Econ 119 M. Lewis Econ 306 X 26875 469-8083 214 I 0:00-10:50 W Econ 2 A. Algaz 215 11:00-11:50 M Econ 119 C. Knudsen Econ 401 X 26875 447-9260 216 10:00-10:50 T Muen 0346 A. Konan 217 08:00-08:50 R Hims 241 A. Konan Econ 313 X 26653 786-0433 2 18 04:00-04:50 T Gugg 3 A. Konan 219 02:00-02:50 F Econ 205 A. Konan 220 05:00-05:50 M Econ 2 A. Algaz 221 09:00-09:50 M Econ 13 C. Knudsen 222 08:00-08:50 R Hims 263 C. Knudsen Hours Phone(s) Principles of Macroeconom1cs This course introduces such important economic concepts as: the market system and its alternatives, s upply and demand, the measurement and determination of a nation's output and income, the determinants of unemployment and inflation, both demand-side and supply-side aspects of fiscal and monetary policies, the federal debt, and international trade and finance. A key feature of the course is the application of economic analysis to such real world problems as persistent federal deficits and massive international debt. TEXTBOOKS AND MATERIALS Materials required for this course include: ... l) Ralph T. Byrns and Gerald W. Stone, Economics, 4/e OR Macroeconomics, 4/c . both with Economics Software (Glenview, II: Scott, Foresman & Co.) 1989, 2) Ralph T. Byrns and Gerald W. Stone, Student Guide for Learning Economics (OR Macroeconomics), 4/c, (Glenview, II: Scott, Foresman & Co.), 1989. 3) Economics through TIME (A Class Hand-out) Strongly recommended: A subscription to The Wall Street Journal. Study Suggestions: "TO THE STUDENT" in the Preface of the text provides helpful study hints that you should consider before you begin working on other materials. GRADES Grades are based on performance on 12 weekly quizzes (given in-class on Thursdays unless a major exam is scheduled), two major exams, a comprehensive final, and performance in your recitation. Students caught cheating receive automatic Fs, and other measures may be taken. The top score on each major exam and the final will receive maximum potential points; other grades will then be adjusted accordingly. Grade Scale A= 900 B = 800 C = 700 D = 600 Potential Points 12 weekly quizzes (25 ea.) 2 major exams (150 ea.) Recitations Comprehensive final exam 300 300 100 300 TOTAL 1000 F = 599 or less Examinations: Lectures may not repeat reading assignments. All lectures and assignments arc fair game for scheduled quizzes and exams. Quizzes = 12 multiple choice questions, major exams = 50 questions, and the comprehensive final = 100 questions. Exemption from the First Two Exams: Students cumulatively scoring in the top 5% on the four quizzes given during each of the first two five-week modules are exempt from that major exam, with an automatic grade of 150 points. All students must take the comprehensive final exam to receive credit in this course. ATTENDANCE AND MAKE-UPS Attendance is strongly suggested. Most students perform satisfactorily if they attend class regularly, read the text thoroughly, and work through the Study Guide. Some topics covered in class are not i n the text or reading material. You are responsible for all ma terials covered in missed classes, and should acquire copies of notes from students who were present. Failure to keep up in this course can be fatal to your grade. Missed exams or quizzes will be made-up through added weight on the comprehensive final exam. **** NO OTHER MAKE-UP EXAMS WILL BE GIVEN **** OPTIONAL ASSIGNMENT S Six optional Macrosim assignments may each add as much as 15 points to your point total. Assignments not in accord with all directions will receive ZERO credit. Students receiving maximum points on all six will ge awarded a 10 point bonus. Thus, unless your cumulative score from examinations is below 500 or above 900, maximum optional points will definitely raise your final course grade. FORMAT AND DUE DATES Your objective in each Macrosim scenario is to. optimize the function specified for it. Usually, this entails maximizing real economic growth while minimizing unemployment and inflation. Some scenarios also require controlling such things as run-away budget deficits. Optional Title Objective #l #2 Stable Recession Inflation Depression Deficit Stagflation MAX MAX MAX MAX MAX MAX #3 #4 #5 #6 where y p u d = = = = [(Y8 - YO)*IOO]/YO [(PO - P8)* 100]/PO [(UO - U8)* 100]/UO [(DO - 08)* 100]/DO (y (y (y (y (y (y + + + + + + p p p p p p + + + + + + Y P U D =real-GNP = inflation rate = unemployment rate = federal deficit u) u) u) u) u + d) u) In essence, these formulae reward economic growth and reductions in the deficit, or in the rates of unemployment or inflation. You will need to calculate real Y, but p, u, and d are calculated for you and reported by Macrosim at the end of the eighth period. You must hand in your results as printed by the program after the eighth round of a scenario, with a cover sheet on which you will TYPE your (a) your name and student number, (b) the week day and hour your recitation section meets, (c) the name of your teaching assistant, and (d) the name of the scenario and a correctly calculated score for it according to the appropriate formula. Assignments must be turned in during your recitation section in the week specified below (weeks 10-15). Late assignments will not be a ccepted. Incorrect calculations of your score also eliminates credit. OUTL I NE WEEK DATES Jan 17 - Jan 19 ASSIGNMENT: 2 Jan 22 - Jan 26 ASSIGNMENT: AND TOP ICS ORIENT A TION 1. Course Requirements INTRODUCTION TO ECONOMICS 1. Macro vs. Micro 2. Positive vs. Normative 3. Theories/ Methods of Economics Text and SG: Software: Text and SG: Software: Jan 29 - Feb 2 ASSIGNMENT: Chapter 1 Graph-Tutor PRODUCTION POSSIBILITIES CUR VE 1. The Economic Problem 2. Production Possibilities Frontiers ALTERNATIVE ECONOMIC SYSTEMS 1. Criticisms of Capitalism a. Socialism b. Marxism 2. Comparative Systems a. USSR, China, Fr ance, Sweden b. Yugoslavia, Britain INTRODUCTION TO DEMAND & SUPPLY ANALYSIS I. The Demand Curve a. Determi nants of Demand b. Shirting the Curve c. Market Demand Curves TIME: 3 S CHE DULE Chapters 2, 22 (38 in Economics), and beginning of 3 7-f-29, 9-21-36, 10-14-57, 1-1-58, 12-1-58, 8-4-67, 7-5-68, 8-6- 73, 4-4-83 Study-Cale - pp. 11-20 and PPF DEMAND & SUPPLY ANALYSIS (cont.) 1. The Supply Curve a. Determinants and Supply Shifters b. Market Supply Curves PRICES AND MARKETS 1. Market Equilibrium a. Equilibrium Price and Quantity b. Shifts of Demand and Supply c. Shortages and Surpluses 2. Government Policies and Markets a. Price Controls b. Tax Wedges and Regulations Text and SG: Time: Software: Chapters 3 and 4 12-21-42, 6-28-43, 1-29-51, 11 - 19-51, 10-18-71, 1-14-74 Mail Room - Work for BEE Study-Cale - Exercise 2 and Market 4 Feb 5 - Feb 9 HOUSEHOLDS AND THE ECONOMY l. Circular Flows 2. Income Distribution 3. Labor Institutions BUSINESS AND FINANCIAL INSTITUTIONS I. Legal Forms of Business 2. Corporate Goals THE PUBLIC SECTOR I. The Need for Government 2. Paying for Government Chapter 5 5-11-31, 5-11-42, 4-4-46, 12-25-50, 4-16-65, 5-6-65, 5-21-65, 5-13-66, 8-6-73, 8-13-79, 1-17-83, 4-22-85, 1-18-82 Software Mai/Room (Hand in print-out when CEA starts) Text and SG: TIME: ASSIGNMENT: ------------------------------------------------------------5 UNEMPLOYMENT AND INFLATION I. Aggregate Demands and Supplies 2. Measuring Unemployment 3. Types of Unemployment 4. Costs of Unemployment 5. Measuring Inflation 6. Costs of Inflation Feb 12 - Feb 16 Text and SG: Software: ASSIGNMENT: Chapter 6 Macrosim - Exercise I Mai/Room - Begin work for CEA ---- ----------------------------------------------------------6 Feb 19 - Feb 23 MEASURING GROSS NATIONAL PRODUCT I. GNP Defined 2. Three Approaches to GNP 3. Limitations of GNP Accounting 4. GNP as a Measure of Social Welfare Text and SG: Software: ASSIGNMENT: Chapter 7 Mai/Room - Print-out for CEA =--=====-==-----=====================================--======-====== *** Feb 22 FIRST MAJOR EXAM *** ==================================================================== 7 Feb 26 - Mar 2 ASSIGNMENT: EARLY BUSINESS CYCLE THEORIES I. The Nature of Business Cycles 2. Early Business Cycle Theories 3. Classical Theory 4. Social Aspects of the Business Cycle 5. American Business Cycle Record 6. The Keynesian Revolution Text and SG: TIME: Chapter 8 The 1920s and 1930s 8 Ma r 5 - Mar 9 SOURCES OF AGGREGATE DEMAND 1. Consumption (C) and Saving (S) 2. Investment (I) 3. Government Purchases (G) 4. The Foreign Sector (X-M) 5. Keynesian Aggregate Demand (C+I+G+X-M) 6. The Economy's Aggregate Demand Curve Text and SG: TIME: ASSIGNMENT: EQUILIBRIUM OUTPUT, EMPLOYMENT AND INCOME 1. Aggregate Expenditures = Aggregate Output 2. Savings = Investment Approach 3. Equilibrium Income and the Multiplier 4. Potential vs. Equilibrium Income 5. The Economy's Aggregate Supply and Demand Curves 9 Mar12-Mar16 Text and SG: Software: · ASSIGNMENT: 10 Mar 19 - Mar 23 Chapter 9 The 1940s Chapter JO StudyCalc - Exercise 3, Problem I and Keynes GOVERNMENT SPENDING AND TAXATION I. Discretionary Fiscal Policy 2. Automatic Stabilizers 3. Fiscal Policy in Practice 4. Supply-side Fiscal Policy ASSIGNMENT: Text and SG: TIME: Software: Chapter 11 All remaining material Macrosim - Exercise 2 (5 points) StudyCalc - Exercise 3, Prob. 2 and La/fer OPTIONAL #l DUE =================================================================== Mar 26 - Mar 30 ***** SPRING BREAK ***** =------------------================================================= 11 Apr 2 - Apr 6 ASSIGNMENT: MONEY I. Functions of Money 2. The Supply of Money 3. Banks and the Creation of Money Text and SG: Chapter 12 Software: Macrosim - Exercise 3 OPTIONAL #2 DUE -------------------================================================= April 5 ******SECOND MAJOR EXAM****** =====----=========================================================== 12 Apr 9 - Apr 13 THE FEDERAL RESERVE SYSTEM I. The Federal Reserve System 2. The FED's Tools and Objectives MONETARY THEORY AND POLICY 1. Demand for Money 2. Keynesian Monetary Theory 3. Classical and Modern Monetarism 4. Rules vs. Discretionary Policies ASSIGNMENT: 13 Apr 16 - Apr 20 Text and SG: Chapters 13 and 14 Software: StudyCa/c - Exercise 4 and Money OPTIONAL #3 DUE DEFICITS AND DEBT 1. Financing Government and Crowding-out 2. T he Public Debt AGGREGATE DEMANDS AND SUPPLIES 1. Foundations 2. Inflation/Recession: 1960 - present ASSIGNMENT Text and SG: TIME: Software: Chapters 15 and 16 The 1960s, 1970s, and 1980s Macrosim - Exercise 4 StudyCalc - Exercise 5 and AGD-AGS OPTIONAL #4 DUE 14 Apr 23 - Apr 26 MODERN MACRO THEORY AND ST AG FLA TION 1. The Phillips Curve 2. Natural Rate Theories LIMIT A TIO NS OF STABILIZATION POLICY 1. Lags and Insulation 2. Political Cycles and New Classical Macroeconomics ASSIGNMENT: Text and SG: Software: Chapters 17 and 18 Macrosim - Exercise 5 StudyCa/c - Exercise 6 and Phillips OPTIONAL #5 DUE 15 Apr29-May3 INTERNATIONAL TRADE AND FINANCE 1. The Gains from Trade 2. Commercial Policies and Trade Barriers 3. Balances of Payments 4. Exchange Rate Determination ASSIGNMENT: 16 May6-7 Text and SG: Chapters 20 and 21 (36 and 37 in ECO) Software: StudyCalc - Exercise 11 and Trade OPTIONAL #6 DUE Catch-up and Review -------------================================================ I7 May IO - May 16 REVIEW and COMPREHENSIVE FINAL