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University of Vermont
Department of Economics
EC 171 Macroeconomic Theory
TTH: 11:30am-12:45 pm
Lafayette 311
Spring 2010
Professor Stephanie Seguino
Old Mill 340
Telephone: 6-0187
Office Hours: T/Th 10-11am
Syllabus
Course Description
This class explores the theoretical background for understanding macroeconomic problems and
policy options. Topics include the IS-LM and AS-AD general equilibrium systems, money,
unemployment, inflation, and interest rates. We will be emphasizing the historical context of our
tools as well as highlighting real world applications of them. We will compare and contrast the
major macroeconomic theories, including Keynesian, Classical, New Classical, and PostKeynesian models.
The use of models to develop an understanding of how macroeconomies work requires algebra
and, from time to time, calculus. The models are used to explore a number of questions about the
price level, aggregate output, and unemployment. What explains recessions? What causes
inflation? What are the macroeconomic effects of tax cuts? Does increased income inequality
have macroeconomic effects? Can we raise wages and promote economic growth? It is assumed
that you have a good understanding of the fundamental concepts of Demand and Supply,
Unemployment, Inflation, Gross Domestic Product, Business Cycles, and Fiscal and Monetary
Policy.
Prerequisites
All students registering for this course must have taken EC 11 and 12 as well as Math 19 (or 21) in
order to have the level of preparedness in economic theory and math required to successfully
complete this course. You must have a valid UVM email account. If you have a private account,
you should forward your UVM email to that account.
Textbooks
This course has two books that can be purchased from the University bookstore. Additional
readings will be available from the library reserve desk or provided in class.
(1) Olivier Blanchard. 2000. Macroeconomics (Fifth Edition). Upper Saddle River, NJ: PrenticeHall. (Package includes Findlay, David. Study Guide and Tutorial for Blanchard. 2000. Upper
Saddle River, NJ: Prentice-Hall). ISBN-13: 9780138149215 .
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(2) Baker, Dean. 2009. Plunder and Blunder: The Rise and Fall of the Bubble Economy. Polipoint Press.
ISBN-10: 0981576990.
(3) Hand-outs will be given out from time to time, and these will be considered part of required
reading.
(4) The New York Times: To subscribe, you can call 1-800-NYTCOLL or visit this web site:
http://homedelivery.nytimes.com/HDS/StudentHome.do?mode=studHome
Class Requirements
Students will be evaluated based on their performance in the following categories:
(1) Class participation. You are required to attend all lectures, and to be prepared to participate
in class discussions and complete in-class problem solving exercises. I will call on people
randomly and so you should be prepared to respond to questions and speak in a modestly
knowledgeable way about current economic events. Preparation necessitates reading the
newspaper daily (those articles referring to macroeconomic issues), and doing the course
reading in advance.
(2) Two mid-term exams, February 18 and April 1. Please take note and arrange your travel
schedules accordingly. There are no make-up exams except in case of documented medical
emergency. There will also be a comprehensive final exam at the regularly scheduled time. I
would expect that to study well for these exams, you would need to put in at least 9-12 hours
of work.
(3) You should regularly read a major newspaper. See above for info on obtaining home delivery
of the New York Times.
(4) You should do questions in the Study Guide. These will help you to understand the material
with greater depth and to identify areas on which you need additional help. You are
encouraged to work in groups on these problems.
Weights of these course requirements in your final grade are:
Class participation
Exam 1
Exam 2
Final exam
20% of final grade
25% of final grade
25% of final grade
35% of final grade
Student responsibility
I have tried to give you a good idea of what the course involves and the timetable on which we
will work through the material. I reserve the right to change readings, times, and other aspects of
the syllabus as needed, however. You are responsible for reading your syllabus to keep abreast of
the schedule, and staying current on any other changes to the syllabus, which will be announced
in class.
For most students this is a challenging class, so doing well requires a sustained effort. That effort
includes coming to EVERY class, taking clear detailed notes, reading chapters before class
lectures, reading the newspaper every day (ok, skip Saturdays), and doing supplemental
questions in the study guide. Two important pieces of advice: 1) Come see me when you have
problems with the material. If you can’t understand something on your own, it is very
dangerous to just let it slide by rather then coming to get help; 2) Attend all classes; 3) Study at
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least 3 hours per week (which includes time for reading the newspaper), and at least 9 hours per
exam; 4) Form a study group to work on study guide questions.
Course Schedule
Date
Jan. 19
Day
Lecture
1
Reading
Blanchard, Chs. 1-2, and Appendices
Stiglitz, et al, Chs. 1-2. E-reserve.
3
Topic
Introduction, Measurement
of Macroeconomic
Performance
Lecture 1 continued, and
calculus review
The Short Run: The Goods
Market
Financial Markets
T
Jan 21
TH
Jan. 26-28
T, TH
2
Feb. 2-4
T, TH
Feb. 9-16
T, TH,
T
4
The IS-LM Model
Blanchard, Ch. 5
Feb. 18
Feb. 26-28
TH
T,TH
5
March 2-4
T, TH,
6
March 1623
T, TH,
T
7
The Phillips Curve and the
Keynesian-Monetarist
Debate
March 2530
April 1
April 6-13
TH, T
8
TH
T, TH,
T
9
April 15
TH
Open Economy Macro:
Goods Market Implications
Exam 2
Lecture 8 continued and
Interest and Exchange
Rates in the Open
Economy; Exchange rate
regimes
Inflation Targeting
April 20-22
T, TH
10
Exam 1
The Medium Run: The
Labor Market
The Aggregate SupplyAggregate Demand Model
Economic Growth
3
Blanchard, Ch.3
Blanchard, Ch. 4, and Ch. 22-1.
Blanchard, Ch. 6 (including appendix)
Blanchard, Ch. 7.
Stiglitz, et al, Ch. 3. E-reserve
Blanchard, Ch. 8, 9, 27.
Kalecki, M. E-reserve.
Mishkin, F. E-reserve.
Darity and Goldsmith, E-reserve.
Yom and Saleh, E-reserve.
Blanchard, Ch. 18, 19
Blanchard, Ch. 20, 21
Epstein, G. 2003. E-reserve or
http://wwwx.oit.umass.edu/~peri/html/
5/25.html
Blanchard, Ch. 10, 12
April 27-29
T, TH
The global economic crisis
May 4
May ?
T
Tying up loose ends
Comprehensive Final
Exam
Dean Baker (2009), all.
www.crisisofcredit.com
Hall, L. E-reserve.
Film: Capitalism Hits the Fan: A Lecture
on the Economic Meltdown
Websites on the Global Economic Crisis of 2008 to ?
1.
2.
3.
Asian Development Bank on the Global Economic Crisis: http://www.adb.org/EconomicCrisis/default.asp.
European Union: http://ec.europa.eu/financial-crisis/index_en.htm
World Bank: http://ec.europa.eu/financial-crisis/index_en.htm
Resources on Macroeconomics, International Finance, and
Globalization
1.
2.
3.
4.
5.
6.
7.
Network Ideas home page (New Delhi, India)—International and developing country
focus on development and macroeconomic issues. Click onto “themes” to search for
articles on international finance, macroeconomics, and growth. www.networkideas.org
Economic Policy Institute (Washington, DC). US based think tank, with emphasis on
trade issues and US macroeconomic. Click onto “government and the economy, living
standards and labor markets, or trade and globalization. http://www.epinet.org/
Center for Economic Policy Research (Washington, DC) –Think tank focused on US and
global macroeconomics, globalization, and trade issues. There are numerous categories to
click onto here. www.cepr.org
Levy Economics Institute at Bard College (Annandale-on-Hudson, NY)—Economics
think tank, largely focused on US issues. This site takes some work to navigate. Click
onto “Public Policy Briefs” and “Policy Notes” to search for articles on the US
macroeconomy. http://www.levy.org
Roubini Global Monitor- This was Nouriel Roubini’s homepage at NYU. This site was
first developed in response to debates on the Asian financial crisis. It has continued and
diversified, as you see. It is a good source of news. You can click onto “news” at the top,
and select from a variety of categories, including country-specific news, and news about
the Fed, all of which will be useful for this course. On the left, see the heading “Macro
Resources.” http://www.stern.nyu.edu/globalmacro/
American Enterprise Institute (Washington, D.C.) This site is also takes some work to
navigate. You have to spend some time searching for macroeconomics articles, but it is
worth it since it provides an alternative perspective to some of the other sites on this list.
http://www.aei.org/
For a website that will link you to a wide variety of macroeconomic data sources, see
Resources for Economists on the Internet: http://www.aeaweb.org/RFE
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8.
World Development Indicators (World Bank): Over 500 economic variables for 180
countries from 1960 to 2005. Available through the library website.
Articles for Philips Curve, the Keynesian-Monetarist Debate, and the UnemploymentInflation Trade-Off
1.
2.
3.
4.
Kalecki, M. 1943. “Political Aspects of Full Employment.” In The Legacy of Michael Kalecki. Ereserve.
Mishkin, F . 2000. “What Should Central Banks Do?” Federal Reserve Bank of St. Louis Review.
http://research.stlouisfed.org/publications/review/00/11/0011fm.pdf. E-reserve.
Yom, Sean and Basel Saleh. 2004. “Palestinian Suicide Bombers.” ECAAR Newsletter, Winter
2004. http://www.ecaar.org/Newsletter/Nov04/saleh.htm
Darity, W. and A. Goldsmith. 1996. “Social Psychology, Unemployment and
Macroeconomics.” Journal of Economic Perspectives 10(1): 121-40.
http://ideas.repec.org/a/aea/jecper/v10y1996i1p121-40.html
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