ECONOMICS 300
BUSINESS & MACROECONOMIC
FORECASTING
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SPRING 2012 "Practical
men, who believe themselves exempt from any intellectual influences, are
usually the slaves of some defunct economist. Madmen in authority, who hear
voices in the air, are distilling their frenzy from some academic scribbler
of a few years back.” - John Maynard Keynes |
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Office
hours - MWF 1:00-2:00 PM, TTh
10:00-11:00, or by appointment. I am always happy to talk to students
outside my scheduled hours. Feel free to drop in without an
appointment, but if you are coming from off campus, call first to make sure I
will be available. I will not be available Mondays or Tuesdays before an
exam. Office –
Forsyth 124B, Phone - (828) 227-3329. Department
of Accounting, Finance, Information Systems, & Economics – Forsyth 124,
Phone - (828) 227-3383. |
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1. Text – Arnott, Ha, Miller, Mulligan & Ullmer,
Macroeconomics & Business Forecasting, 2nd edition. |
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2. Course
Objectives "The
world consists of facts, not of things." - Ludwig Wittgenstein
Economics is a behavioral science like psychology, and one of the social
sciences. Understanding how consumer and producer behavior are influenced by
certain events (changes in interest rates, changes in prices, new government
regulations, etc.) is emphasized. While a certain amount of technical
training is standard in economics programs at most colleges, the overall
emphasis has always been on understanding behavioral implications of economic
phenomena. ECON 300 Course Objectives Chapter 14 Money and Banking
1. List and explain the three
functions of money.
2. Define the monetary base MB.
3. Define the money supply: M1,
M2, M3, and MZM.
4. State three reasons why
currency and checkable deposits are money and why they have value.
5. Explain the relationship
between the purchasing power of money and the amount of money in circulation.
6. Describe the structure of the
U.S. banking system.
7. Explain why Federal Reserve
Banks are central, quasi‑public, and bankers’ banks.
8. Describe seven functions of the
Federal Reserve System and point out which role is the most important.
9. Summarize and evaluate the
arguments for and against the Federal Reserve System remaining an independent
institution.
10. Describe the conditions that
have caused the loss of market share of banks and thrifts to pension funds,
insurance companies, mutual funds, and securities-related firms.
11. Identify three major changes
continuing to occur in the financial services industry.
12. Describe and explain the
significance of electronic payments.
13. Define and identify terms and
concepts listed at the end of the chapter. Chapter 15 Money Creation
1. Recount the story of how
fractional reserves began with goldsmiths.
2. Explain the effects of a
currency deposit in a checking account on the composition and size of the
money supply.
3. Explain the effects of a bank
loan on the composition and size of the money supply.
4. Understand and interpret the
regression theorem explaining how fiat money evolved from commodity monies.
5. Explain how the emergence of
money in a barter economy is an example of spontaneous order.
6. Compute a bank’s required and
excess reserves when you are given its balance‑sheet figures.
7. Explain why a commercial bank
is required to maintain a reserve and why it isn’t sufficient to cover
deposits.
8. Describe what happens to the
money supply when a commercial bank makes a loan or buys securities.
9. Describe what happens to the
money supply when a loan is repaid or a bank sells its securities.
10. Explain what happens to a
commercial bank’s reserves and checkable deposits after it has made a loan.
11. Describe how a check drawn on
one commercial bank and deposited in another will affect the reserves and
excess reserves in each bank after the check clears.
12. Describe what would happen to a
single bank’s reserves if it made loans that exceeded its excess reserves.
13. Explain how it is possible for
the banking system to create an amount of money that is a multiple of its
excess reserves when no single bank ever creates money greater than its
excess reserves.
14. Compute the size of the money
multiplier and the money‑creating potential of the banking system when
provided with appropriate data.
15. Explain that the money
multiplier process can also lead to multiple destruction of money.
16. Distinguish among and interpret
the simple money multiplier (deposit expansion multiplier) and the M1, M2,
M3, and MZM multipliers.
17. Define and identify the terms
and concepts at the end of the chapter (Test 1) Chapter 16 Interest Rates & Monetary Policy
1. Identify the goals of monetary
policy.
2. Identify the two types of
demand for money and the main determinant of each.
3. Describe the relationship
between GDP and the interest rate and each type of money demand.
4. Explain what is meant by
equilibrium in the money market and the equilibrium rate of interest.
5. Explain the relationship
between bond prices and the money market
6. List the principal assets and
liabilities of the Federal Reserve Banks.
7. Explain how each of the three
tools of monetary policy may be used by the Fed to expand and to contract the
money supply.
8. Explain the relative importance
of the monetary policy tools, and why the U.S. is unique in how it can
conduct monetary policy.
9. Describe how the Fed targets
the Federal funds rate as part of its monetary policy actions.
10. Describe expansionary and
restrictive monetary policies, and explain why and how they are used.
11. Explain the Taylor rule and
describe how it relates to current Fed policy.
12. Explain the cause‑effect
chain between monetary policy and changes in equilibrium GDP.
13. Demonstrate graphically the
money market and how a change in the money supply will affect the interest
rate.
14. Show the effects of interest
rate changes on investment spending.
15. Describe the impact of changes
in investment on aggregate demand and equilibrium GDP.
16. Contrast the effects of an
expansionary monetary policy with the effects of a restrictive monetary
policy.
17. List two strengths and three
shortcomings of monetary policy.
18. Describe the arguments for and
against “inflation targeting” versus a more discretionary “artful management”
approach to monetary policy.
19. Summarize the connections
between AD-AS, the price level, real output, and stabilization (fiscal and
monetary) policy.
20. Define and identify terms and
concepts at the end of the chapter. Chapter 7 National Income
Accounting
1. State the purposes of national
income accounting.
2. List the components of GDP in
the output (expenditures) approach and in the income approach.
3. Compute GDP using either the expenditure
or income approach when given national income data.
4. Differentiate between gross and
net investment.
5. Explain why changes in
inventories are investments.
6. Discuss the relationship
between net investment and economic growth.
7. Compute NDP, NI, PI, and DI
when given relevant data.
8. Describe the system represented
by the circular flow in this chapter when given a copy of the diagram.
9. Calculate a GDP price index
using simple hypothetical data.
10. Find real GDP by adjusting
nominal GDP with use of a price index.
11. List seven shortcomings of GDP
as an index of social welfare.
12. Explain what is meant by the
underground economy and state its approximate size in the U.S. and how that
compares to other nations.
13. Define and identify terms and
concepts listed at the end of the chapter. (Test 2) Chapter 8 Introduction to Economic Growth and
Instability
1. Define two measures of economic
growth.
2. Explain why growth is a
desirable goal.
3. Identify two main sources of
growth.
4. Explain and apply the “rule of
70.”
5. Give average long-term growth
rates for U.S. and qualifications of raw data.
6. Explain what is meant by a
business cycle.
7. Describe the four phases of an
idealized business cycle.
8. Identify two types of
non-cyclical fluctuations in business activity.
9. Describe how innovation and/or
random events might cause business cycles.
10. Explain why business cycles
affect capital and consumer durable goods industries more than non-durable
goods and service industries.
11. Describe how the Bureau of
Labor Statistics (BLS) measures unemployment.
12. Evaluate strengths and
limitations of BLS unemployment statistics.
13. State causes of frictional,
cyclical, and structural unemployment.
14. Identify the full employment or
natural rate of unemployment.
15. Identify the economic costs of
unemployment and the groups that bear unusually heavy unemployment burdens.
16. Define inflation and list two
types of inflation.
17. List three groups who are hurt
and two groups who may benefit from unanticipated inflation.
18. Present three possible effects
of inflation on output and employment.
19. Compare U.S. inflation and
unemployment rates to one or more industrialized nations.
20. Define and identify terms and
concepts at the end of the chapter. Chapter 10 Basic Macroeconomic Relationships
1. Describe the income-consumption
and income-saving relationships.
2. Recognize, construct, and
explain the consumption and saving schedules.
3. Identify the determinants of
the location of the consumption and saving schedules.
4. Calculate and differentiate
between the average and marginal propensities to consume (and save).
5. Draw and interpret the
geometric representation of a consumption function and the corresponding
saving function.
6. Explain and interpret the
relationships between the algebraic representation of a consumption function
and the corresponding saving function.
7. Given the algebraic
representation of a consumption or saving function, write the algebraic
representation of the other.
8. Given the consumption or saving
schedule in tabular form, graph the consumption and saving function (the
geometric representation) and write the algebraic representations.
9. Describe the relationship
between the interest rate, expected rate of return, and investment.
10. Identify the determinants of
investment and construct an investment demand curve.
11. Draw and interpret an
investment demand curve.
12. Identify the factors that may
cause a shift in the investment demand curve.
13. Describe the reasons for the
instability in investment spending.
14. Provide an intuitive
explanation of the multiplier effect.
15. Calculate the multiplier and
changes in real GDP given information about changes in spending and the
marginal propensities.
16. Given any one of the following:
the MPC, the MPS, and the multipler, calculate and interpret the remaining
two.
17. Given any two of the following:
the multiplier, the change in aggregate expenditures, and the change in
equilibrium GDP, calculate and interpret the remaining one.
18. Discuss why the actual
multiplier may differ from the theoretical examples.
19. Define and identify terms and
concepts at the end of the chapter. (Test 3) Chapter 11 The Aggregate Expenditures Model
1. Identify the simplifying
assumptions of the Aggregate Expenditures (AE) model.
2. Explain the relationship
between the investment demand curve and the investment schedule.
3. Use the consumption and
investment schedules to determine the equilibrium level of GDP.
4. Explain verbally and
graphically the equilibrium level of GDP.
5. Explain why above-equilibrium
or below-equilibrium GDP levels will not persist.
6. Explain the basics of the
classical view that the economy would generally provide full employment
levels of output.
7. Trace the changes in GDP that
will occur when there is a discrepancy between saving and planned investment.
8. Use the multiplier to find
changes in GDP resulting from changes in spending.
9. Define the net export schedule.
10. Explain the impact of positive
(or negative) net exports on aggregate expenditures and the equilibrium level
of real GDP.
11. Explain the effect of increases
(or decreases) in exports on real GDP.
12. Explain the effect of increases
(or decreases) in imports on real GDP.
13. Describe how government
purchases affect equilibrium GDP.
14. Describe how personal taxes
affect equilibrium GDP.
15. Explain why an equal amount of
government purchases and taxes will have a differential impact on GDP.
16. Identify a recessionary
expenditure gap and explain how it relates to the U.S. recession of 2001, and
perhaps also to the recession of 2008.
17. Explain how the U.S. managed
full-employment output in 2005 while experiencing large negative net exports.
18. Identify an inflationary gap
and explain how it relates to the inflationary experience of the late 1970s.
19. List five limitations of the
aggregate expenditures model.
20. Explain how the aggregate
expenditures model emerged as a critique of classical economics and in
response to the Great Depression.
21. Define and identify terms and
concepts listed at the end of the chapter. Chapter 12 Aggregate Demand and Aggregate Supply
1. Define aggregate demand and
aggregate supply.
2. Give three reasons why the aggregate
demand curve slopes downward.
3. Explain how the international
trade effect and interest rate effect can be considered substitution effects,
even though there is no substitute for GDP.
4. State the determinants of the
aggregate demand curve’s location, and explain how the curve will shift when
one of these determinants changes.
5. Distinguish between an initial
shift in aggregate demand and the full shift after multiplier effects have
been incorporated.
6. Explain the shape of the
long-run aggregate supply curve.
7. Explain the shape of the
short-run aggregate supply curve.
8. Indicate the determinants of
the aggregate supply curve’s location, and explain how the curve will shift
when one of those determinants changes.
9. Find an economy’s equilibrium
price level and real domestic output using AD-AS.
10. Explain how the multiplier
effect is weakened when there is demand-pull inflation.
11. Demonstrate and explain how a
decrease in aggregate demand can cause a recession without a drop in the
price level.
12. Demonstrate and explain the
effects of shifts in aggregates supply on the equilibrium price level and
real domestic output of an economy.
13. Explain how an economy can
maintain full employment and stable prices under conditions of rising
aggregate demand.
14. Explain how the impact of oil
price fluctuations has changed for the U.S. economy over the past two
decades.
15. Define and identify terms and
concepts at the end of the chapter and in the appendix. (Test 4) Chapter 13 Fiscal Policy, Deficits, and Debt
1. Define and explain the role of
the CEA.
2. Distinguish between
discretionary and nondiscretionary fiscal policy.
3. Differentiate between
expansionary and contractionary fiscal policy.
4. Recognize the conditions for
recommending an expansionary or contractionary fiscal policy.
5. Explain expansionary fiscal
policy and its effects on the economy and Federal budget.
6. Explain contractionary fiscal
policy and its effects on the economy and Federal budget.
7. Give two examples of how built‑in
stabilizers help eliminate (or just minimize) recession or inflation.
8. Explain the differential
impacts of progressive, proportional, and regressive taxes in terms of
stabilization policy.
9. Explain the significance of the
“standardized budget” concept.
10. Describe recent U.S. fiscal
policy actions and the motivation behind them.
11. List three timing problems
encountered with fiscal policy.
12. State political problems that
limit effective fiscal policy.
13. Identify actions by households,
and by state and local governments that can frustrate fiscal policy.
14. Differentiate between
government deficits and the public debt.
15. State the relative size of the
debt as a percentage of U.S. GDP and describe how that has changed in recent
years.
16. Describe the annual interest
charges on the debt, who holds the debt, and the impact of inflation on the
debt.
17. Explain why the debt can also
be considered public credit.
18. Identify and discuss two widely
held myths about the public debt.
19. Explain the real or potential
effect of the debt on income distribution, economic incentives, fiscal policy,
and private investment
20. Explain and recognize
graphically how crowding out is a concern caused by a large public debt.
21. Explain the purpose and
structure of the Leading Economic Indicators.
22. Define and identify terms and
concepts at the end of the chapter. (Test 5 & Final Exam) |
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3.
Suggested Study Strategy Spend no less than
fifteen-twenty minutes each weeknight reviewing, recopying, and reorganizing
your notes, in addition to reading the assigned chapters. This adds up to about
5-8 hours of study time each month. Be
committed to spending enough time each day to cover the material you need to,
and to fully reviewing your notes and identifying areas requiring further work
and things you need to ask me about. Spread out this way, your
study time will be much more productive than an equivalent amount of cramming
before tests. In addition to taking lecture notes in class, read,
outline, and make notes on each text chapter. Take the chapter quizzes
posted on the course website to test your understanding and identify problem
areas which need further work. Some students find it helpful to attempt
these quizzes before reading the chapter or before covering the material in
class. Take all the applicable chapter
quizzes to prepare for exams. The more time you have spent on the
course, the easier it will be to spend additional time studying, and the more
productive additional study time will be for you. Start this strategy
the first day of class, because the sooner you start, the easier it will be
to continue. |
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4.
Tutoring The Catamount Academic Tutoring Center, Hunter Library ground floor, room 30,
227-2274 - The Catamount Academic Tutoring (CAT) Center’s services are
designed to provide a solid foundation for college success. Students in 100
and 200-level classes who participate in tutoring sessions have an
opportunity to improve their knowledge of course content, to cultivate an
understanding of their learning preferences, and to develop study strategies that
can be transferred to upper-level courses. Online Learning Resources <http://www.wcu.edu/9442.asp>
are available to all students and include strategies for time management,
note taking, studying, and test preparation. CAT Center tutors are successful
students who are recommended by the faculty and trained in effective tutoring
practice via an Internationally Certified Tutor Training Program. Tutoring
sessions are available by appointment and on a drop-in basis. Visit
the CAT Center website <catcenter.wcu.edu> for scheduling information.
Students are expected to arrive for their tutoring sessions prepared with
class notes, readings, assignments, and any questions they have about the
material. |
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5. Course
Policies & Organization "Eighty
percent of success is just showing up." - Woody Allen |
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a. Absence
policy: Class
attendance is essential. Attendance is important because: |
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"Be content with fruit, with flowers,
with weeds, with thorns even, but gather them in the one garden you may call
your own." |
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b. Grades: Out of a total of 1600
possible points:
you will
receive the following letter grade:
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"Champions keep playing until they get
it right." - Billie Jean King |
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c.
Examination Policies:
1. No make ups.
8. Test 5 consists of 35 questions. |
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d.
Withdrawal Policy:
1. Students considering withdrawal prior to the withdrawal deadline should
make an appointment to discuss withdrawal with the instructor. This is to
give me the opportunity to advise you of your options and standing in the
class. I do not attempt to stop students from withdrawing.
3. Every semester a number of students receive Fs because they stop attending
class and taking exams, but do not formally withdraw through the registrar.
Don't let this happen to you. |
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6.
Writing Assignment: Your
graded writing assignment is to create a resume-like homepage on the
professional networking website LinkedIn (http://www.linkedin.com). Register for a free, non-premium
account. At a minimum, list Western
Carolina University as your school, from the year you enrolled, to the future
year you expect to graduate. Any other
information is optional, but everything you include in your personal profile
must be (a.) honest and factually correct, and (b.) must be presented in a
mature, professional manner. You may
wish to include information on past and/or current employment,
extra-curricular activities, etc. If
you post a picture, it must present a professional appearance. When you are done and ready for your
profile to be graded, invite me to add you as a contact. My email address is mulligan@wcu.edu. This assignment is due on Friday, January 27, but you are
welcome to complete it earlier. |
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7. Accommodations for Students
with Disabilities: Western Carolina University is committed to providing equal
educational opportunities for students with documented disabilities.
Students who require disability services or reasonable accommodations must
identify themselves as having a disability and provide current diagnostic
documentation to Disability Services. All information is
confidential. Please contact Disability Services for more information
at (828) 227-2716, lalexis@wcu.edu
or 144 Killian Annex. |
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8.
Course calendar: Read
assigned chapters before
the day they will be discussed in class. |