Download 220.610 - Johns Hopkins Carey Business School

The Firm and the Macro-economy
2 credit hours
BU 220.610.XX (please include section number)
(Note: each section must have a separate syllabus.)
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Day/s Times (Please list available office hours at the center before/after class OR times available by
phone. By appointment is not sufficient).
Required Text and Learning Materials
N. Gregory Mankiw, Macroeconomics (8th Edition), 2012, Worth Publishers. ISBN for package containing
textbook and workbook, the latter at no additional charge, is 1464119848 9781464119842 MACROECON
8E&SG Macroeconomics & Study Guide, Eighth Edition MANKIW, N. GREGORY
The 8th edition is a new edition of the textbook and includes some material not in the 7th edition. If you
are trying to save money by buying a used copy or an older version of the textbook, note that of the
material covered in the course, the major changes include a) chapter 4 in the 8th edition is not in previous
editions; b) the numbering of all chapters between the 7th and 8th edition is therefore changed, starting
with chapter 4. For example, chapter 4 in the 7th edition is now chapter 5 in the 8th edition; c) chapter 20
on the financial crisis was not included in the 7th edition but will be covered in this course.
Please note: there is a Study Guide and Workbook (by Roger Kaufman) for this textbook that provides a
large number of questions and problems (with answers) on the topics covered in the textbook. It is
strongly recommend that you use the study guide/ workbook each week, in addition to reading the
textbook. The workbook is especially useful if you have not had any economics courses prior to this
course and/or feel that your quantitative or analytic skills are not as strong as you would like. The
workbook is a very good investment of your time if you are diligent in using it. The study guide/textbook is
free if purchased along with the textbook. Otherwise, it costs about $45.00. There is also a helpful Web
site to accompany the book at www.worthpublishers.com/mankiw. This site has activities for the more
challenging concepts, as well as self-quizzing to help you prepare for exams.
Blackboard Site
A Blackboard course site is set up for this course. Each student is expected to check the site throughout
the semester as Blackboard will be the primary venue for outside classroom communications between the
instructors and the students. Students can access the course site at https://blackboard.jhu.edu. Support
for Blackboard is available at 1-866-669-6138.
Course Evaluation
As a research and learning community, the Carey Business School is committed to continuous
improvement. The faculty strongly encourages students to provide complete and honest feedback for this
course. Please take this activity seriously because we depend on your feedback to help us improve so
you and your colleagues will benefit. Information on how to complete the evaluation will be provided
towards the end of the course.
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Disability Services
Johns Hopkins University and the Carey Business School are committed to making all academic
programs, support services, and facilities accessible. To determine eligibility for accommodations, please
contact the Carey Disability Services Office at time of admission and allow at least four weeks prior to the
beginning of the first class meeting. Students should contact Rachel Hall in the Disability Services office
by phone at 410-234-9243, by fax at 443-529-1552, or email: [email protected].
Important Academic Policies and Services
 Honor Code
 Statement of Diversity and Inclusion
 Tutoring
 Carey Writing Center
 Inclement Weather Policy
Students are strongly encouraged to consult the Johns Hopkins Carey Business School Student
Handbook and Academic Catalog and the School website http://carey.jhu.edu/syllabus_policies for
detailed information regarding the above items.
Course Description
This course explores the workings of the macroeconomy. Although the course focuses primarily on the
United States economy, the concepts and tools apply to market economies around the world. Major
topics include: the determinants of an economy’s output; the role of money in the long run and short run;
the determinants of the price level; the role of interest rates and exchange rates in the US economy and
in small, “open” economies; the causes and nature of the business cycle; the Keynesian model of the
economy and how it differs from the classical theory of the economy; and the role of fiscal and monetary
policy in stabilizing the economy and ensuring full employment. The last lecture of the course studies the
recent meltdown of the economy, stemming from the collapse of housing prices.
Course Overview
This course is one of the foundation courses for the MBA curriculum. It provides a general understanding
of the macroeconomic forces that play such a huge role in the formulation and implementation of
corporate and business strategy. Any business manager who hopes to run a successful company must
understand the forces that shape the economy in which he operates.
This course should be exciting for you: In the past few years, the economy has seen a major recession,
with household wealth dropping by tens of trillions of dollars. House prices have fallen by about 35
percent from their peak in 2006. Nearly 20 percent of homeowners owe more on their mortgages than
their homes are worth and millions have lost their homes to foreclosures. Hundreds of US banks have
failed and hundreds more have been close to insolvent because of their investments in the housing and
mortgage markets. As a result, households and small business have found it hard to get bank credit.
Moreover, even those households who have access to loans are cutting back on borrowing to rebuild the
net worth they lost during the downturn. As a result, the pace of recovery has been extremely slow.
The past few years have also witnessed the near-default of some European governments and banks, and
it is not yet clear that Greece will remain among the Euro countries or that the Euro will even survive. The
sorry state of European countries has implications for the US recovery.
Another unique aspect of the economy during the past few years has been the challenge of using fiscal
policy to aid in the recovery. Congress nearly caused a default in US Treasury bonds in the summer of
2011 by refusing to raise the debt ceiling, an event that was avoided by postponing to the end of 2012 a
promised deficit-cutting agreement. That deadline came and passed without a final deal on how to
reduce the US deficit (even though the “fiscal cliff” was not crossed). The irony is that at the very time the
economy could benefit from some fiscal stimulus, which would almost certainly raise the deficit, the
Congress has insisted that fiscal policy be deficit-reducing.
With no counter-recessionary fiscal policy going on, the economic recovery has depended heavily on
monetary policy. Early on in the recession, the Federal Reserve reduced the short-term interest rate to
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zero. Because the rate cannot go any lower than that, the FED has been using “unconventional”
monetary policy (increasing the monetary base and buying long-term Treasury and mortgage bonds) to
stimulate the economy, but how much stimulus these unconventional policies have provided is
questionable.
The course will give you the tools to make sense of what happened and why. But it takes diligence and
work to master the tools. This is NOT an easy course and the material cannot be learned by cramming
during the last few weeks of the term. You must keep up with the lectures and the reading. Each lecture
and chapter builds on the previous lecture and chapter of the textbook so, to understand the later
material, you must first master the earlier material. Reading the economics section of the newspaper,
particularly articles on the macroeconomy, will help you appreciate the relevance of the course material to
current events.
Student Learning Objectives for This Course
All Carey graduates are expected to demonstrate competence on four Learning Goals,
operationalized in eight Learning Objectives. These learning goals and objectives are supported
by the courses Carey offers. For a complete list of Carey learning goals and objectives, please
refer to the website http://carey.jhu.edu/LearningAtCarey/LGO/index.html.
After successful completion of this course, students should be able to:
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Explain the determination of output in the long and short run.
Describe the role of money and interest rates in determining prices and output.
Explain the causes and consequences of inflation.
Explain the theories behind the determination of exchange rates.
Describe the characteristics of business cycles, and discuss government policies to influence the
cycle.
Understand the workings of fiscal and monetary policy and the way such policies can be used to
stimulate growth or moderate the business cycle.
Discuss the most recent recession and the successes and failures of government policy to
contain the decline in output.
Attendance and Participation
Attendance is mandatory. If you expect to miss any lecture, let me know prior to or at the first
class. The material is difficult, particularly if you have never had a course in macroeconomics. Prior
experience strongly suggests that missing class precludes you from mastering the material and has a
non-negligible adverse impact on your grade.
Participation in class is strongly encouraged. Asking and answering questions is welcomed. No one
expects you to be an expert in the subject matter before you talk in class. Being able and willing to argue
your point of view – even if you are wrong – helps in mastering the material.
Homework, Quizzes, and Exams
There will be weekly homework assignments, listed in blackboard, corresponding to lectures 1 through 6.
(No assignment will be made after lecture 7). The homework will not be turned in or graded but is
intended to give you a good indication of what you are expected to know and how well you are mastering
the material. If you find that you have difficulty with the homework problems after studying the chapter
and the lecture notes, you should take that as a sign that you need to put more time into the course. The
answers to the homework problems will be provided in Blackboard, but ONLY the following week in order
that you put the effort into answering the homework problems yourself. You are free to work with other
students on the homework assignments and you are encouraged to do so.
There will be weekly quizzes at the start of the class. Questions will be multiple choice or short answers.
The frequency of the quizzes is designed to ensure that you keep up with the material. The answers to
the quizzes will be posted in Blackboard but the quizzes will not be returned. A comprehensive final
exam will be given in week 8.
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Evaluation and Grading*
Your grade has the following components:
Quizzes in weeks 2, 4, 6, and 7 (5 minutes each and covering only the material in the
immediately prior lecture): each worth 5% of total grade.
Quiz in week 3 (20 minutes and covering material from weeks 1 and 2) 15%
Quiz in week 5 (20 minutes and covering material from weeks 3 and 4) 15%
Comprehensive Final Exam, week 8 (1.5-2 hrs)
50%
TOTAL
100%
You may miss NO MORE than one quiz.. No makeups will be given for a missed quiz. If you are
absent and therefore miss the quiz, the weight assigned to that quiz will be added to your final exam
score. For example, if you miss the quiz in week 4, the weight on your final exam will be 55% rather
than 50%. You cannot miss the final exam and there is no makeup for the final exam; it must be
taken at the time scheduled. .
Important notes about grading policy:
The grade for good performance in a course will be a B+/B. The grade of A- will only be awarded for
excellent performance. The grade of A will be reserved for those who demonstrate extraordinarily
excellent performance. *The grades of D+, D, and D- are not awarded at the graduate level. Grade
appeals will ONLY be considered in the case of a documented clerical error.
Please note: The course grade is based solely on your performance in this course. For example, the
reimbursement policy of your employer has absolutely no bearing on the grade you receive.
Reading the material prior to class
It is essential that you read all the material assigned for each lecture PRIOR to that lecture. Obviously,
you are not expected to understand all the material in the textbook prior to the lecture; however, if you do
not make a good faith effort to read the textbook prior to the lecture, you will likely find that you cannot
keep up with everything covered in the lecture. The lecture will not cover every point made in the
textbook but will cover the most important points. However, unless noted otherwise, you should read the
entire chapter.
Tentative Topics and Class Schedule
Textbook readings may be supplemented by selected articles from other publications and Internet
resources. The following is a tentative plan, and the instructor reserves the right to alter course content or
adjust the pace to accommodate class progress throughout the term. The scheduling of the quizzes may
also be modified. Changes to this schedule will be posted in Blackboard and announced in class.
Pre-course readings: Chapters 1 and 2 of Mankiw should be read prior to the first lecture. If you cannot
read these chapters for the first class, it is important that you do so for the second class. Anyone who
has had a course in macro or micro (or other science or social science disciplines) will already understand
what is meant by a “model” and endogenous and exogenous variables and thus can read and digest
chapter 1 very quickly. Chapter 2 will also be familiar to most students in this program, although some of
the details may not be. Parts of chapter 2 will be reviewed in the first lecture but the time devoted to that
review will be limited. You are not responsible for the following sections of chapter 2 and thus may omit
reading them: “Chain-Weighted Measure of Real GDP;” “Other Measures of Income;” and “Seasonal
Adjustment.”
BU.220.610.xx - The Firm and the Macro-economy - Instructor’s Name - Page 5 of 5
Week
1
2
3
4
5
6
7
8
Assignment/
assessment
Topics/Themes of lecture
How the economy works in the long run: what
determines the amount of output and the distribution
Homework
of income between wages and profits. What is the
on chapter 3
role of the interest rate.
given out
Also, brief review of parts of chapter 2 (GDP, CPI,
unemployment rate)
Quiz on
How the amount of money is determined by the
chapter 3; central bank and the banks/public. The link between
homework money and prices/inflation in the long run – the
on chapters “quantity theory of money”; costs of inflation;
4 and 5
nominal and real interest rates.
given out
Quiz on
chapters 3,
The Open Economy; the real and nominal exchange
4 and 5;
rates.
homework
on chapter 6
given out
Chapter 7: why the unemployment rate is not zero
Quiz on
even when the economy is booming
chapter 6;
Chapter 10: the business cycle; long-run and shorthomework
run aggregate supply curves; the aggregate demand
on chapters
curve; shocks to supply and demand; stabilization
7 and 10
policy
given out
Quiz on
chapters 6,
7, and 10;
homework
on chapter
11 given out
Quiz on
chapter 11;
homework
on chapter
12 given out
Quiz on
chapter 12
Review and
Final Exam
Aggregate Demand: the Keynesian IS-LM model
describing the determination of the level of output in
the short run
More on the Keynesian model; fiscal and monetary
policy.
The Financial Crisis of the past few years
Chapters in Textbook to be
covered in lecture
Chapter 3
Chapter 4 and chapter 5
(excluding appendix to
chapter 5)
Chapter 6 (excluding
appendix to chapter 6)
Chapters 7 and 10
Chapter 11
Chapter 12
Chapter 20
In addition to the instructor’s review, students should
bring any lingering questions to class that they want
answered prior to the final exam. Exam will take
between 1 ½ to 2 hours.
Copyright Statement
Unless explicitly allowed by the instructor, course materials, class discussions, and examinations are
created for and expected to be used by class participants only. The recording and rebroadcasting of such
material, by any means, is forbidden. Violations are subject to sanctions under the Honor Code.