Summer 2008 - Michigan State University

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Intermediate Macroeconomics Summer 2008. Instructor: Dowon Kwak, ... Abel, Ben S. Bernanke, Dean Croushore, Macroeconomics, 6 th ed., Addison Wesley ...
EC 302-201, Michigan State University Intermediate Macroeconomics Summer 2008 Instructor: Dowon Kwak, Contact: [email protected] Office: Old Botany 206, Phone: 355-4671 Office Hours: M 2:30- 4:00pm, W 3:30-5:00 and by appointment Class and Discussion Session Schedule: Lecture: MWF, 12:40am-2:30pm, Ernst Bessey Hall 114. Discussion: Wed, 2:40-3:20pm, Ernst Bessey Hall 111. Course Objective: Macroeconomics is related to current economic issues such as growth, business cycles, inflation, nd unemployment. In this course, we will develop a few mathematical models that will be applied to some important economic issues such as: the effects of fiscal and monetary policy, the relationship between unemployment and inflation, the source of economic growth. Course Description: We will study the structure and performance of national economies and of the policies that governments use to try to affect economic performance. The issues that we will address include the following macroeconomic topics. - What determines a nation’s long-term economics growth? - What causes a nation’s economic activity to fluctuate? - What causes prices to rise? What causes unemployment? - Can government policies be used to improve a nation’s economic performance? th

Required Text: 1. Abel, Ben S. Bernanke, Dean Croushore, Macroeconomics, 6 ed., Addison Wesley, 2007. (“Abel”) th

Recommended Texts: Robert J. Barro, Macroeconomics, 5 ed., MIT Press, 1997. (“Barro”) Barro is available as e-book in the library (call number: HB172.5 .B36 2000). Lecture notes based on Abel will be posted on the Angel web site. Prerequisites: EC202. Grading: Problem Sets: There will be weekly problem sets of five, mostly expanding upon material covered in lectures and the texts. The problem sets will be posted on the course website (and will also be distributed in class). The most important thing you can do to succeed in this course is to thoroughly work problems until you understand the material. No late work will be accepted. Midterm: The midterm will be 2-hour in-class exam, on Wednesday, July 23. Final: The final will be in 2-hour in-class exam, on Wednesday, Aug 13. The problem sets will count towards 20%(4*10=40 points) of the Final Grade. The midterm will count towards 40%(80 points) of the Final Grade. The final will count towards 40%(80 points) of the Final Grade. Special Notes: This is a VERY fast paced course, so it is important to stay on track all the time. Class participation and attendance to discussion sessions are both strongly encouraged. Discussion sessions are reserved exclusively for solving problem sets. Solutions to the problem sets will be posted on the course web site. Both midterm and final exam will be very closely related to the questions in problem sets. Problem sets are designed to understand the midterm and final exam question better. The instructor reserves rights to make necessary changes for the course any time during the semester. The students are responsible for keeping up with changes in the course.

Course Outline Section 1: Preliminaries (2 classes) • Introduction to macroeconomics • National income accounting • What are the facts? Readings: Abel Chap.1 and 2 & Barro Chap. 1 [Problem set 1-ch1&2, due 07/09/08(wed)] Section 2: Productivity, output and Employment (1+1/2 classes) Readings: Abel Chap. 3 & Barro Chap. 6 Section 3: Consumption, Saving, and Investment (1 +1/2 classes) Readings: Able Chap. 4 & Barro Chap. 3 [Problem set 2-ch3&4, due 07/16/08(wed)] Section 4: Money and Inflation (2 classes) Readings: Abel Chap. 7 & Barro Chap. 7-8 Section 5: Growth (2 classes) • Growth Accounting • Solow growth model • Convergence Readings: Abel Chap. 6 & Barro Chap. 11 [Problem set 3(Practice midterm), due: 07/21/08(mon)] Section 6: Midterm Exam(07/23/08, wed) Section 7: Business Cycle (3 classes) • Business cycle facts • Policy response (IS-LM/AD-AS) Readings: Abel Chap. 8-9 [Problem set 4, due: 08/01/08(fri)] Section 8: Classical Business Cycle Analysis (2 classes) • Real business cycle theory • Misperception Theory Readings: Abel Chap. 10 & Barro Chap. 9 and 19 Section 9: Unemployment (1 class) • Job separation, job finding, and the natural unemployment rate • The behavior of U.S. unemployment rates Readings: Abel Chap. 12 & Barro Chap. 10 [Problem set 5, due: 08/08/08(fri)] Section 10: Government Purchases and Taxes (1 class) • Government expenditures • Types of Taxes • Income Tax • Change in the tax rate • The effect of a deficit-financed tax cut • The timing of taxes Readings: Abel Chap. 15 & Barro Chap. 12 & 14 Section 11: Monetary Policy (1 class) • Monetary Control in U.S. • The Conduct of Monetary Policy: Rules Versus Discretion Readings: Abel Chap. 14 Section 12: Review (1 class) [Problem set 6(Practice Final), not due but the solution will be provided] Section 13: Final Exam (08/13/08)