SAINT MARY'S COLLEGE

Department of Business Administration and Economics

                        

 

ECON 251                                                  Professor Jerry McElroy

Macroeconomics Principles                 106 Madeleva  Phone: 284-4488

Spring 2002                                                   Home Phone: 234-2827         

<jmcelroy@saintmarys.edu>                Hours: WF 9-12 or by appointment

 

SYLLABUS

 

CONTENT:  After an introduction to the Nature of Economics (1), and scarcity (2), this course examines the elementary concepts of Demand and Supply (3).  There follows a look at the diseases of the business cycle (8), unemployment and inflation, and the measurement of overall economic activity in GDP (7).  Next we develop the Keynesian aggregate expenditure and equilibrium income model (9), and add in government and trade (10), and then the price level with Aggregate Demand and Aggregate Supply (11).

 

            Normative or policy economics begins with the role of government in the economy, fiscal policy (12), the role of money (13) and banking (14) and how the Federal Reserve conducts monetary policy (15).  Chapter (16) introduces unemployment with the Phillips Curve, (19) reviews Keynesian vs. Classical debates, (17) examines economic growth, and (18) deficits and debt.  The course concludes with a look at trade and protectionism (20), global finance (21), and the problems of poor countries (22).

 

GOALS:            1.  To develop the AD/AS model to understand how the macroeconomy  works.

 

2.  To develop a facility for understanding how various events (stock market collapse, Sept. 11th  etc.) and various economic policies impact the economy.

 

                        3.  To be able to intelligently understand economic news in the media.

 

MEANS:  These include pre-reading the text selections according to the attached assigned readings list BEFORE CLASS, discussing the material presented, doing the HOMEWORK PROBLEMS, and taking the tests.  There will be four class-period tests, plus a final exam covering the last half of the course.  Each test will count 40 points, and the final will count 60 for a 220 total.  For those students successfully completing an optional paper, the paper will be worth a possible 40 points, and the total 260.

 

GRADING SCALE:  A = 93-100, A- = 90-92, B+ = 88-89, B = 83-87,  B- = 80-82 and so on. 

 

OPTIONAL PAPER:  This is for those students who have the time and interest, i.e. it is optional.  A list of acceptable topics is attached to this syllabus.  To have a successful paper, four criteria must be met:

           

1.      The topic must be chosen from the attached list, or be a different topic that

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meets the instructor’s approval.  Two students can work on a paper together if they can justify it and get approval.

2.  Topic and short outline (one page) must  be submitted for approval on or          before March 19th.  Outline should include (a) a clear statement of the                             hypothesis you want to test, (b) a brief discussion of your method for collecting data (survey questionnaire), and (c) a listing of any library materials you plan to use, although in most cases there may be little or none of this because this is a "do-it-yourself" project and not a library research exercise.

3.      Results of the optional papers will be briefly (4-5 minutes) presented and discussed in class on 4/30.

                        4.  Final paper is due by 5 PM 5/2, and should  be limited to 5-7  pages.

 

PROCEDURES:  Each class will begin (1) with an application of theory to some real-world

news event,  (2) some review of past material, (3) and discussion of homework problems.  Class attendance and promptness are expected, and active verbal participation in discussions is encouraged and will be rewarded.

 

REQUIRED TEXT: C.R. McConnell and S.L. Brue, Macroeconomics, McGraw-Hill, 15th ed. 2001 (paperback).  See course website at: http://jmcelroy.pageout.net

 

READING ASSIGNMENTS:  Chapter numbers in ().  Chapter titles and key topics/concepts are listed for each date's pre-reading. 

 

1/15. . . . . . . . . Syllabus, (1) Nature of economics?   Scarcity and the PPF Frontier (2)

1/17-22.  . . . . . (3) Supply and Demand: Equilibrium and Disequilibrium: Applications

1/24. . . . . . . . . (8) Unemployment, Inflation and the Business Cycle

1/29-31  . . . . . .(7) Measuring GDP: Real versus Nominal, The Circular Flow Model

2/5..  . . . . . . . . TEST ONE: Chapters 1-3, 7-8

 

2/7. . . . . . . . . . (9)  Equilibrium Income: C + I = Y

2/12-14. . . . . . .(10) Equilibrium Income: Adding G & T and Net Exports (X-M)

2/19-21. . . . . . .(11) Aggregate Demand and Aggregate Supply: the Self-Correcting Economy

                                                              Also read pp. 306-311 in (16).   

2/26  . . . . . . . . .Review Class

2/28. . . . . . . . . TEST TWO: Chapters 9-11, pp. 306-311 (16)

 

3/5...  . . . . . . . .(12) Fiscal Policy  

3/7 . . . . . . . . . .(13-14) Money and Prices; Banking and Deposit Creation, Money Multiplier

                          

3/19 . . . . . . . .  (15) Monetary Policy: the Fed’s 3 Tools, Keynesian Indirect Monetary                       Mechanism, Inflation and Deflation.    Optional Paper Topics and Outlines Due.

3/21 . . . . . . . . .(16) The Phillips Curve: Unemployment and Inflation

3/26. . . . . . . . . (19) Keynesian-Classical Macro Debates

3/28. . . . . . . . . Review   

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4/2. .  . . . . . . . .TEST THREE: Chapters 12-16, 19.

 

4/4-9. .  . . . . . . (20) International Trade/Protectionism

4/11-16. . . . . . .(21) International Monetary System: Floating and Fixed Exchange Rates and                                      the BOP, the Gold Standard

4/18. . . . . . . . . (22) The Economics of Developing Countries

4/23. . . . . . . . . Review

4/25 . . . . . . . .  TEST FOUR: Chapters 20-22

 

4/30. . . . . . . . . Student Optional Paper Presentations:  start REVIEW FOR FINAL EXAM

5/2.  . . . . . . . . .Final Drafts of Optional Papers Due 5 pm.  Finish FINAL EXAM REVIEW.

 

TOPICS FOR OPTIONAL PAPERS:  You can choose from this list or convince me of a better idea.  Keep in mind that two of you can do any of these micro-type topics together provided that you double the suggested sample size for the survey.  The 15 micro topics are followed by 15 macro topics, but you can choose either type.

 

            1.            Compare the prices of the same bundle of goods at various stores in South Bend over several weeks.              Determine where the cheapest place to shop is for various goods.  Explain the differentials.

 

            2.            Contrast the prices in South Bend with those in another city during Spring Break as in #1.

            3.            Survey the economics of any retail industry, like the small grocery store, local tavern, gas station, car wash, farmer, beautician or barber, etc.  Estimate costs, revenues, profits over several years to find impact of macroeconomy on individual behavior.

 

            4.            Likewise, analyze one of the major campus operations (bookstore, laundry, flower shop, cafeteria, snack bar, Observer, or any dorm food sales operation).  Determine cost of goods sold, pricing policies, and whether such operations are subsidized, by how much, etc.

 

            5.            Do a consumer expenditure study.  Interview 25-30 South Bend households like faculty to discover on a monthly basis what proportion of disposable income goes for           

consumption, what for saving.  Of consumption, what goes for food, rent, clothing, transportation, furniture, utilities, and other (travel,entertainment).   See if Engle's Law works, i.e. whether food and other  essentials decrease in importance as income rises.

 

            6.            What are the monthly (weekly) habits of students?             Interview 30-40 to determine how much they spend, what they buy, whether there are class differences, male/female differences, and so on.

 

7.                  Drawing a random sample of students from a given year, (35-40) determine what proportion of student body (full-time students) holds a part-time job, how many  hours per week/month, at what wage, and what type of occupational clusters.  Are

251 Syllabus—page 4

 

there differences by year, sex, ND/SMC, major, age, etc.  Because of the necessity for a large sample, say 70-80, to be more representative of the total student population, this project should be done by 2-3 students.

 

            8.            Using same type of survey analysis on non-frosh under-graduates, analyze the determinants of G.P.A. by interviewing students regarding hours of study per  class, study location, major, year, age, sex, etc. To get a sample of say, 60-70, this should be a two-person project.

 

            9.            Examine the economics of living off campus versus on campus.  What are the cost differences and are they             compensated for by nonpecuniary differentials? Survey 30 of each.

 

    10.   Study the economics of maintaining a car.  Interview 15-20 student owners or more to determine cost differences.

 

    11.   Analyze students' use of time.  What percent of the normal week day goes to eating, sleeping, study, recreation, etc.?  Does this vary for ND/SMC, junior/senior?

 

    12.   Do students perform better in 50-minute or 75-minute classes?  This has two parts:  1) Survey a group of 30             students to determine what they think and why.  2) Then compare last semester's grades in the registrar's office.  What do faculty think on the same issue?

 

    13.   What is the profile of the SMC Business major? Short interview 60 students (30 biz and liberal arts) to             determine: family income level, profession of bread-winner, political affiliation, career aspirations, whether both parents work, etc... type of high school, highest education level of parents, etc.

 

    14.   Do same as #13 to compare profiles of 30 SMC BIZ majors and 30 science, communications, or education majors.

 

    15.   Do same as #13 to compare profiles of 30 SMC BIZ majors and 30 ND female BIZ majors, or 30 ND male BIZ majors.

 

 

The following are macro-type optional paper topics.

 

            1.             Do budget deficits cause inflation?

 

            2.            Does the size of the deficit affect interest rates?

 

            3.            Do interest rates negatively affect investment, or GNP growth?

 

            4.            Is investment positively related to GNP Growth?  Do countries with the highest S or I grow fastest?

 

251 Syllabus—page 5

 

            5.            Is inflation negatively related to unemployment? Is the Phillips Curve correct?

 

6.                  What is the relationship between the stock market and GNP, or aggregate C?

 

            7.            What relation between the stock market and the exchange rate?

 

            8.            What is the relation between the stock market and interest rates?

 

            9.            How does the exchange rate affect the balance of trade?

 

          10.            How does the exchange rate affect the interest rate (or vice versa)?

 

          11.            Do high US exchange rates cause high US inflation?

 

          12.            Is Monetarism correct?  Is the Money Supply the key cause of inflation?

 

          13.            Does US growth determine the GNP growth of other countries? In Europe?  In the Third World?

 

          14.            Does high population growth correlate with low per             capita in income?  Are the fastest growing populations truly in the poorest countries?

 

          15.            Do the richest countries of the world have the best indices of health (life expectancy, caloric intake per person, etc.)?