Parkes' Principles of Macroeconomics Assignments Page, Spring 2011

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 Course Assignments and Tentative Outline:

                 Week 10


May 31, 2010     Chapter 35: Open Economy Macroeconomics continued
• Chapter 35: Open Economy Macroeconomics continued
  • The Role of Exchange Rates
    • Understanding Exchange Rates
    • The Equilibrium Exchange Rate
    • Shifts in Demand
    • Inflation and Real Exchange Rates
  • Purchasing Power Parity
  • Big Mac Index
  • Dollar and the Deficit
  • Exchange Rate Policies
    • Exchange Rate Intervention and Foreign Exchange Reserves
    • Exchange Rate Regime Dilemma: To Fix or Not To Fix
    • Examples of fixed rates: Bretton Woods, Euro, Yuan
  • Macroeconomic Policies and Exchange Rates
• Day 19 PPT - Apple and Jobs
• Krugman's Chapter 35 PPT

June 2, 2011     Review and Chapter 34: The Making of Modern Macroeconomics
• REVIEW
• Quizzes, Homeworks, and Notes
• What have we covered?
• Chapter 34: The Making of Modern Macroeconomics
  • Classical Macroeconomics
  • The Keynesian Revolution
  • Challenges to Keynesian Economics
  • Monetarism
  • Rational Expectations
  • Real Business Cycles
• Modern Consensus
• To Do Something or Not?
• Day 20 PPT - None Made
• Krugman's Chapter 34 PPT
• The Evolution of the Renminbi from 1957 to present

                 Week 11

FINAL EXAM, Chapters 23 - 35 on Tuesday, June 7, 2011
                              
                     

                 Week 9



May 24, 2011     Finish Chapter 32: Labor Markets and Begin Chapter 33


• Problem Set 5 due today
• Chapter 32: The Natural Rate of Unemployment
• Unemployment and the business cycle
• Okun's Law
• Labor Market "Rigidities"
  • Misperceptions
  • Sticky Wages
  • Menu Costs
• Phillips Curve - NOT COVERED THIS TERM!!
  • Phillips Curve - relationship between unemployment and the inflation rate
  • Short-run Phillips Curve
  • Long-run Phillips Curve - NAIRU


• Chapter 33: Inflation, Disinflation, and Deflation
  • Money and Inflation
    • Money and Prices Revisited
    • Classical Model of the Price Level
  • Inflation Tax
    • seigniorage
    • Cost, real inflation tax
  • Hyperinflation - One Cause: seignoirage
  • The Logic of Hyperinflation
  • Brazil
  • Yugoslavia
  • Zimbabwe
• Day 17 PPT - Hyperinflation examples: Yugoslavia (1994-5) and Zimbabwe(Today)
• Day 17 PPT - Thoughts and Questions - Hyperinflation and Fed Funds
• Krugman's Chapter 33 PPT - Second Edition

May 26, 2011     Finish Chapter 33: Inflation, Disinflation, and Deflation


• Chapter 33: Inflation, Disinflation, and Deflation
  • Effects of Inflation
  • Winners and Losers from Unexpected Inflation
  • Real versus nominal interest rate - The Fisher Effect
  • Costs of Inflation
  • Moderate Inflation and Disinflation - Definitions and Causes
    • The Great Disinflation of the 1980s
  • DEFLATION - Today's Issue
  • Effects of Unexpected Deflation
  • Effects if Expected Deflation
  • Examples: Japan, Europe today maybe?
  
  
• Chapter 35: Open Economy Macroeconomics
  • Balance of Payments
    • Current Account
    • Financial Account
• Today's Discussion of Liquidity Trap, Deflation, and the Fed's $600 Billion "QE2" increase in the Money Supply:
  • Impact of the Fed's $600 Billion Quantitative Easing - NY Times - 3 and 5 year rates already falling!! The policy is already working!
  • U.S. Treasury Department's Quarterly Refunding (of the Government - i.e. BORROWING) Statement
  • Refunding over $13 billion of maturing securities and new funding of over $58 billion
• Krugman's Chapter 35 PPT - Second Edition
• Day 18 PPT - Not Available yet.

                 Week 8



May 17, 2011     Chapter 31: Monetary Policy


• Chapter 31: Monetary Theory
  • Opportunity Cost of Money - the "price" (interest rate)
  • Two Theories of Money Demand
    • Liquidity Preference Theory (Money Demand depends upon the interest rate)
      • Nominal versus Real Demand for Money
      • Shifts in the Demand for Money Curve: Price Level changes, Technology and Income Changes
    • Velocity Approach to Money Demand
      • Quantity Equation
      • Percentage Change Identity: %M + %V = %P + %Y
  • Two Models of Interest Rates? See the Box on page 758!
  • Monetary Policy and the interest rate
    • Contractionary Monetary Policy
    • Expansionary Monetary Policy
  • The Effects upon Aggregate Demand
    • Fighting a Recessionary Gap
    • Cooling an Inflationary Gap
  • Problem Set 5 Due on May 24 at the beginning of class
  • Day 15 PPT - Monetary Policy and money creation
  • Krugman's Chapter 31 PPT - Second Edition

May 19, 2011     Finish Chapter 31 and Chapter 32: Labor Markets


• Chapter 31: Monetary Theory continued
  • Problem Set 6: In class, AD/SRAS/LRAS Short and Long-run combined with the Money Market Short and Long-run, 5 pts
  • Short Run versus Long Run Effects
    • Price level effect in the long run on Money Demand, interest rates return and higher costs decrease business firms' supply
  • Money Neutrality
• Chapter 32: Labor Markets and Unemployment
  • Three Types of Unemployment
  • Job Creation and Job Destruction
  • 1. Frictional
  • 2. Structural
  • 3. Cyclical
  • The Natural Rate of Unemployment
  • Unemployment and the business cycle
  • Okun's Law
• Day 16 PPT - Monetary Review
• Krugman's Chapter 32 PPT - First Edition

                 Week 7



May 10, 2011     REVIEW THE EXAM!!! and Chapter 30: Money, Banking, and the Federal Reserve System


• REVIEW
• Chapter 30: Money, Banking, and the Fed
  • The Meaning of Money
    • What is Money?
    • The Role of Money
    • Types of Money
    • Measuring the Money Supply
  • Monetary Role of Banks
• Day 13 PPT - Answers to Selected Questions on the Midterm Exam
• Krugman's Chapter 30 PPT, 2nd Edition

May 12, 2011     Finish Chapter 30 and Begin Chapter 31: Monetary Policy


• Chapter 30: Money, Banking, and the Fed
  • Monetary Role of Banks
  • What Banks Do
  • The Problem of Bank Runs
  • The Required Reserve Ratio
  • Bank Regulation
  • Deposit Insurance
• Chapter 31: Monetary Theory
  • Opportunity Cost of Money - the "price" (interest rate)
  • A Basic Theory of Money Demand
• Quiz 13 PPT - Balance Sheet Questions
• Day 14 PPT - The Fed
• Krugman's Chapter 31 PPT, 2nd Edition

                 Week 6



May 3, 2011      Chapter 29: Fiscal Policy
• Finish Chapter 27: Aggregate Demand and Aggregate Supply and Begin Chapter 29: Fiscal Policy
  • Changes in Government Policies - Expansionary and Contractionary Fiscal Policy
  
  
• The following material is NOT on the Midterm Exam but instead on the Final Exam
• Chapter 29: Fiscal Policy
  • 1. The Basics
    • Taxes, Purchases, and Transfers
    • The Government Budget and Total Spending
    • Expansionary and Contractionary Policies
    • Lags in Fiscal Policy! - Recognition lag, Planning lag, and Action (Implementation) lag
    • 2. Fiscal Policy and the Multiplier
    • Government Spending versus Taxes and their Multiplier Effects
    • How Much Bank for the Buck?
    • Automatic Stabilizers
    • Discretionary Fiscal Policy
    • 3. The Budget Balance
      • Saving (Borrowing) by the Government
      • Cyclically Adjusted Budget Balance
      • Should the Budget be Balanced?
    • 4. Long-Run Implications of Fiscal Policy
      • Deficits, Surpluses, and Debt
      • Problems With the Rising Government Debt
      • Deficits and Debt in Practice?
  • Day 11 PPT - Government Spending and Tax Revenues, 2010
  • Krugman's Chapter 29 PPT - 2nd Edition
  
  
  
May 5, 2011     Midterm Exam: Chapters 23 - 28, inclusive!
• 12:30 to 14:00 - Schedule passed around in classes. No Classes today - Study Hard!
  

                   Week 5
  
  

April 26, 2011     Continue Chapter 27: Aggregate Demand and Aggregate Supply
• Chapter 27: Aggregate Demand and Aggregate Supply - continued
  • Why the Aggregate Demand Curve Shifts
  • Changes in Expectations
  • Changes in Wealth
  • Changes in the Stock of Physical Capital
  • Changes in Government Policies - Monetary and Fiscal Policy
  • Aggregate Supply Curve
    • In the Short-Run slopes upward
    • Wage contracts make wages "Sticky" causing the upward slope
    • Shifts in AS
    • Changes in Commodity Prices
    • Changes in Nominal Wages
    • Changes in Productivity
    • In the Long Run Aggregate Supply is vertical - Called Potential Output
    • From the short-run to the long-run
    • wages change affecting business costs which affect suppliers and shift short-run AS
• Day 9 PPT - No PPT
• Krugman's Chapter 28 PPT - 2nd Edition - Chapter 27 in our textbook


April 28, 2011     Chapter 27: Aggregate Demand and Aggregate Supply
• Finish Chapter 27: Aggregate Demand and Aggregate Supply
• Aggregate Supply Curve
  • In the Short-Run slopes upward
  • Wage contracts make wages "Sticky" causing the upward slope
  • Shifts in AS
  • Changes in Commodity Prices
  • Changes in Nominal Wages
  • Changes in Productivity
  • In the Long Run Aggregate Supply is vertical - Called Potential Output
  • From the short-run to the long-run
  • wages change affecting business costs which affect suppliers and shift short-run AS
  • Changes in Government Policies - Monetary and Fiscal Policy
• Day 10 PPT - No PPT
• Krugman's Chapter 28 PPT - 2nd Edition - Chapter 27 in our textbook

                 Week 4



April 19, 2011     Finish Chapter 26 and Chapter 28: Income and Expenditure
• Problem Set 4 - In class and finish at home
• Finish Chapter 26: Saving and Investment
  • The Market for Loanable Funds
    • Policy 1: Saving Incentives
    • Policy 2: Investment Incentives
    • Policy 3: Government Budget Deficits and Surpluses
  • U.S. Government Debt
  
  
  
• Chapter 28: Income and Expenditure
  • Autonomous Aggregate Spending (AAS or called Aggregate Expenditures (AE))
  • Consumer Spending
    • Consumption Function
    • Autonomous Consumption
    • MPC times income
    • Shifts in Consumption - Changes in Future Disposable Income
    • Changes in Aggregate Wealth
  • Investment Spending
  • Interest Rate and Investment Spending
  • Expectations
  • Inventories
  • The Paradox of Thrift
  • Bad Times in Buenos Aires
• Day 7 PPT - Stock Indexes
• Krugman's Chapter 27 PPT - 2nd Edition - Chapter 28 in our textbook


April 21, 2011     Chapter 27: Aggregate Demand and Aggregate Supply
• Homework Set #4 - In Class Today!
• The Aggregate Demand Curve
  • Why the Aggregate Demand Slopes Downward
  • Wealth Effect
  • Interest Rate Effect
  • Why the Aggregate Demand Curve Shifts
  • Changes in Expectations
  • Changes in Wealth
  • Changes in the Stock of Physical Capital
  • Changes in Government Policies - Monetary and Fiscal Policy
• Day 8 PPT - Aggregate Demand Shifts - Quiz 8 In Class
• Krugman's Chapter 28 PPT - 2nd Edition - Chapter 27 in our textbook



                 Week 3



April 12, 2011       Chapter 25: Long-Run Economic Growth
• Homework Set #3 - Due today! For 5 points:
  For any macroeconomy what are the 3 goals and 4 indicators.
  Beside each of three goals indicator give the rate for the U.S. AND China
  The fourth indicator is interest rates: Give the deposit and dending rates for China
  
  
• Read Chapter 25 about Long-run economic growth
• Productivity - A key determinant of a country's standard of living
  • Productivity is defined as output per worker
  • Capital per worker
  • Technology
  • Human Capital
• Diminishing Returns
• Differences in Economic Growth Rates
  • Saving and Investment
  • Human Capital - Education
  • FDI and Infrastructure
  • R & D, property rights and political stabiility
• Rule of 70
• Convergence Hypothesis
• Malthus - what's a Protestant Minister to say?
• Day 5 PPT - Thomas Robert Malthus - a Classical Economist
• Krugman's Chapter 25 PPT


• Chapter 26: Saving and Investment
  • Basics: Financial Intermediaries, Mutual Funds and Financial Markets - READING!!
  • Important Identities: Private plus Public Saving = Investment
  • Krugman's Chapter 26 PPT
  
  
April 14, 2011     Chapter 26: Saving and Investment continued
• Finish Chapter 26: Saving and Investment
  • Basics: Financial Intermediaries, Mutual Funds and Financial Markets - READING!!
  • Important Identities: Private plus Public Saving = Investment
  • The Market for Loanable Funds
    • Policy 1: Saving Incentives
    • Policy 2: Investment Incentives
    • Policy 3: Government Budget Deficits and Surpluses
  • U.S. Government Debt
  • Day 6 PPT - Government Budget Constraint
  
  

                 Week 2


April 5, 2011     Qing Ming Jie - No Classes Today

• Day 3 NO PPT - Honor Your Ancestors Day


April 7, 2011       Chapter 32: Labor Markets (Use Chapter 24 PPT - 2nd Edition)
• Problem Set #2 - Due today!
• Homework for next class - 3 goals, indicators and values for the U.S. AND China
• Read Chapter 32 about Labor Markets and the Natural Rate of Unemployment
• 3 Types of Unemployment
  • Frictional Unemployment - seeking work, not yet found a job
  • Structural Unemployment - As may be exhibited by the minimum wage and unions.
  • Cyclical Unemployment - Due to recessions and booming economies
  • The Natural Rate of Unemployment - Frictional plus Structural
• Real wages - with and without inflation and wage raises (quiz)
• Krugman& Well's Chapter 24 PPT - Second Edition
• Day 4 PPT - Solow and Economic Growth

                  Week 1
  
  

March 29, 2011       Chapter 23: The Big Picture
• Problem Set #1 - Due next CLASS (March 31) - Graphing Price ceilings/floors
• An Introduction to the Principles of Macroeconomics
• You Know these: What are the three Goals of any Macroeconomy?
  • Grow the economy - Economic Growth
  • Price Stability - not inflation OR deflation
  • Full Employment - Everyone has a job
  Now let's find the values!
• Central Banks - the Fed, the PBC (People's Bank of China)
• Bloomberg - Currency Rates US/CNY
• An Example of Chinese Inflation - Feb. 2008
• Day 1 PPT
• Krugman's Chapter 23 PPT (Krugman & Well's Second Edition, Chapter 22 - SAME, SAME)
• Real GDP data from the BEA, 4th Quarter 2010, 3rd Revision

March 31, 2011     Chapter 24: Tracking the Economy
• Problem Set #1 - Due today!
• NIPA - National Income and Product Accounts
  • Calculate Components
  • Calculate Growth Rates - Real GDP and Gov't
  • Calculate PCE and GDP deflator growth rates
• What is a price index and how do we calculate them?  CPI, GDP deflator
• Problem Set #2 - Due next CLASS (April 7) - Price Indices (CPI, GDP deflator)
• Bureau of Labor Statistics CPI press release - February 2011 Inflation
• Day 2 PPT - CPI and Miscellaneous Topics
• NIPA PPT - A summary of equations written on the board today.
• Krugman& Well's Chapter 23 PPT - Second Edition

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email: andrew at andrewparkes.com
Last Update: May 27, 2011
By Andrew L. H. Parkes, Ph. D.