ECONOMICS 232
MACROECONOMICS
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SPRING 2016 "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.Ó - John Maynard Keynes |
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Office
hours - MWF 10:00-11:00 PM 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 or email first to make sure I will be available. Offices
– Forsyth 224A, phone - (828) 227-3329 Camp 110C, phone – (828)
227-3173. |
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1. Text -
Macroeconomics,
McConnell, Brue, & Flynn, 20th edition. |
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Red Zone Campaign Western
Carolina University supports its campus community members in their right to
healthy, happy, consensual relationships and is dedicated to developing a
culture of respect and nonviolence. Early in the first and second year at
college, students enter the ÒRed Zone,Ó where they are more at-risk for
unwanted sexual experiences on college campuses. And, according to NCHA 2013
data, 16.0% of WCU men and women indicated being in an emotionally,
physically, or sexually abusive relationship in the past 12 months. As a
result, the Red Zone Campaign encourages and empowers students, faculty, and
staff to develop an open dialogue on the dangers of sexual violence and to
speak up when they see violent behavior occurring. If
you notice red flags in yours or a friendÕs relationship, are experiencing
violence or have in the past, you have a number of resources available to
you: ¥
Counseling and Psychological Services (828.227.7469 or
counselingcenter.wcu.edu) ¥
REACH of Macon County services in Jackson County (828.586.8969 or
www.reachofmaconcounty.org) To
report a crime, please contact University Police at 828.227.8911 (Emergency
line). For
more information, please visit redzone.wcu.edu or contact Sarah Carter at
sacarter@wcu.edu. |
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Office of
Disability Services Accommodations for Students with Disabilities: Western
Carolina University is committed to providing equal educational opportunities
for students with documented disabilities and/or medical conditions.
Students who require reasonable accommodations must identify themselves as
having a disability and/or medical condition and provide current diagnostic
documentation to the Office of Disability Services. All information is
confidential. Please contact the Office of Disability Services at (828)
227-3886 or come by Suite 135 Killian Annex for an appointment. Student Support
Services Student Support Services provides support to students who are either
first-generation, low-income or those who have disclosed a disability with:
academic advising, mentoring, one-on-one tutorial support, and workshops
focused on career, financial aid and graduate school preparation. You may
contact SSS at (828) 227-7127 or email sssprogram@wcu.edu for more
information. SSS is located in the Killian Annex, room 138. Writing and
Learning Commons (WaLC) The Writing and
Learning Commons (WaLC), located in BELK 207,
provides free course tutoring, writing tutoring, academic skills
consultations, international
student consultations, graduate and professional exam preparation
resources, and online writing and learning resources for
all students. All tutoring sessions take place in the WaLC or in designated classrooms on campus. To schedule
tutoring appointments, visit the WaLC homepage (http://walc.wcu.edu) or call 828-227-2274.
Distance students and students taking classes at Biltmore Park are encouraged
to use Smarthinking and
the WaLCÕs online resources. Writing tutoring is
offered at the Biltmore Park campus on certain days of the week; call
828-227-2274 for availabilities. Academic
Calendar includes dates for all breaks, university closures, final exams,
etc. The academic calendar can be
found at:
http://www.wcu.edu/academics/campus-academic-resources/registrars-office/academic-calendar.asp. |
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2. Course
Objectives "The
world consists of facts, not of things." - Ludwig Wittgenstein
"Economics is the science which studies human behaviour
as a relationship between ends and scarce means which have alternative
uses." (Lionel Robbins, Essay on
the Nature and Significance of Economic Science, 1932). Note that economics is about human
behavior, not about money. It
studies how we act to realize our chosen ends given the limitations imposed
by scarce means which have alternative uses. If means don't have alternative uses,
there is no choice about which ends they should be used for. If means are not scarce, they do not
impose a limitation on our realizing our wants. Chapter 14 Money and Banking
1. List and explain the three functions of
money.
2. Define the money supply: M1 & M2.
3. Describe the structure of the U.S. banking
system.
4. Explain why Federal Reserve Banks are
central, quasi‑public, and bankersÕ banks. 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. Explain how the emergence of money in a
barter economy is an example of spontaneous order.
5. Compute a bankÕs required and excess
reserves when you are given its balance‑sheet figures.
6. Explain why a commercial bank is required
to maintain a reserve and why it isnÕt sufficient to cover deposits.
7. Describe what happens to the money supply
when a commercial bank makes a loan or buys securities.
8. Describe what happens to the money supply
when a loan is repaid or a bank sells its securities.
9. Explain what happens to a commercial bankÕs
reserves and checkable deposits after it has made a loan.
10. 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.
11. Describe what would happen to a single
bankÕs reserves if it made loans that exceeded its excess reserves.
12. 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.
13. Compute the size of the money multiplier
and the money‑creating potential of the banking system.
14. Explain that the money multiplier process
can also lead to multiple destruction
of money.
15. Interpret the simple money multiplier
(deposit expansion multiplier). (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 post 2007 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. Chapter 7 National Income Accounting
1. List the components of GDP in the output
(expenditures) approach and in the income approach.
2. Compute GDP using either the expenditure or
income approach when given national income data.
3. Explain the difference between gross and
net investment.
4. Explain why changes in inventories are
investments.
5. Discuss the relationship between net
investment and economic growth.
6. Compute NDP, NI, PI, and DI when given
relevant data.
7. Find real GDP by adjusting nominal GDP with
use of a price index.
8. Understand shortcomings of GDP as an index
of social welfare.
9. Explain what is meant by the underground
economy and state its approximate size in the U.S. and how that compares to
other nations. (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 Òrule of 70.Ó
5. Explain what is meant by a business cycle.
6. Describe the four phases of an idealized
business cycle.
7. Identify two types of non-cyclical
fluctuations in business activity.
8. Describe how innovation and/or random
events might cause business cycles.
9. Explain why business cycles affect capital
and consumer durable goods industries more than non-durable goods and service
industries.
10. Describe how the Bureau of Labor Statistics
(BLS) measures unemployment.
11. Evaluate strengths and limitations of BLS
unemployment statistics.
12. State causes of frictional, cyclical, and
structural unemployment.
13. Identify full employment/the natural rate
of unemployment.
14. Identify the economic costs of unemployment
and the groups that bear unusually heavy unemployment burdens.
15. Define inflation and list two types of
inflation.
16. List three groups who are hurt and two
groups who may benefit from unanticipated inflation.
17. Present three possible effects of inflation
on output and employment.
18. Compare U.S. inflation and unemployment
rates to other industrialized nations. 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)—APC, MPC, APS,
& MPS.
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 reasons investment spending is
relatively unstable.
14. Provide an intuitive explanation of the
multiplier effect.
15. Calculate the multiplier and changes in
real GDP from changes in spending given either the MPS or MPC.
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. (Test 3) Chapter 11 The Aggregate Expenditures Model
1. Identify the simplifying assumptions of the
Aggregate Expenditures (AE) model.
2. Use the consumption and investment
schedules to determine equilibrium GDP.
3. Explain why above-equilibrium or
below-equilibrium GDP will not persist.
4. Trace the changes in GDP that will occur
when there is a discrepancy between saving and planned investment, i.e., when
the AE model is out of equilibrium.
5. Use the multiplier to find changes in GDP
resulting from changes in spending.
6. Explain the impact of positive (or
negative) net exports on aggregate expenditures and the equilibrium level of
real GDP.
7. Describe how government purchases affect
equilibrium GDP.
8. Describe how personal taxes affect
equilibrium GDP.
9. Explain why an equal amount of government
purchases and taxes will have different impacts on equilibrium GDP in the AE
model.
10. Identify a recessionary expenditure gap and
explain how it relates to the U.S. recessions of 2001 and 2007-2009.
11. Identify an inflationary gap and explain
how it relates to the inflationary experience of the late 1970s. 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 curveÕs 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 curveÕs location, and explain how the curve will shift when one of
those determinants changes.
9. Find an economyÕs equilibrium price level
and real GDP using the AD-AS model.
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 aggregate supply on the equilibrium price level and real GDP.
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 three decades. (Test 4) Chapter 13 Fiscal Policy, Deficits, and Debt
1. Define and explain the role of the Council
of Economic Advisors.
2. Distinguish between discretionary and
nondiscretionary fiscal policy.
3. Distinguish 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 alleviate 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
Òstandardized budgetÓ 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 act against fiscal policy and make it
less effective.
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. (Test 5 & Final Exam) |
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This
course is a Liberal Studies course.
The learning goals of the Liberal Studies Program are for
students to: ¥ Demonstrate
the ability to locate, analyze, synthesize, and evaluate information; ¥ Demonstrate
the ability to interpret and use numerical, written, oral and visual data; ¥ Demonstrate
the ability to read with comprehension, and to write and speak clearly,
coherently, and effectively as well as to adapt modes of communication
appropriate to an audience; ¥ Demonstrate
the ability to critically analyze arguments; demonstrate the ability to
recognize behaviors and define choices that affect lifelong well-being; ¥ Demonstrate
an understanding of ¥ Past
human experiences and ability to relate them to the present: ¥ Different
contemporary cultures and their interrelationships; ¥ Issues
involving social institutions, interpersonal and group dynamics, human
development and behavior, and cultural diversity; scientific concepts and
methods as well as contemporary issues in science and technology; ¥ Cultural
heritage through its expressions of wisdom, literature and art and their
roles in the process of self and social understanding. This
course is a Perspectives course.
The primary goals of the Perspectives courses are: ¥ To
promote love of learning and to cultivate an active interest in the Liberal
Studies; ¥ To build
on the Core's foundation through practice and refinement of areas of academic
emphasis; ¥ To
provide students with a broadened world view and knowledge base; ¥ To
provide experiences in the arts, humanities, and social sciences from which
connections between disciplines can be revealed; ¥ To
provide an introduction to the challenges of living in a global society; ¥ To create
opportunities for reflection on values, and for discussing differences in
values in a critical yet tolerant manner; ¥ To afford
opportunities to make career or disciplinary choices. In
addition, each Perspectives course will be expected to include emphasis on
one or more of the following: ¥ Critical
analysis of arguments ¥ Oral
communication ¥ Service
learning ¥ Moral
reflection ¥ Cultural
diversity ¥ Any other
creative but defensible area of intellectual development that a discipline
wants to focus on, and that the program chooses to adopt.
This course partly satisfies the P1 Social Science Perspective Requirement
of the WCU Liberal Studies Program. Courses in Social Sciences provide
systematic study of observational and analytic methods and findings of those
disciplines that focus on the interpersonal functioning and institutional
creations of human beings. Courses
in this category may focus on the scientific study of the mental and
behavioral characteristics of individuals or groups or may focus on the
description and explanation of political, economic, or legal institutions. Included will be inquiry into basic social
scientific concepts such as mind, behavior, class, society, culture, freedom,
government, property, equality, and rights.
As a component of the foundations of business knowledge, economics
contributes an understanding of how and why individuals, as consumers and as
managers of private and public sector organizations, make choices about the
allocation of scarce resources. Economics examines how competition in markets
leads to efficient production of goods and services, and the consequences of
government intervention in private markets. Students gain an understanding of
effective decision-making by managers of firms and other organizations.
Your education in economics thus prepares you for employment in a wide
variety of jobs, or serves as an excellent foundation from which to pursue
law school or other advanced degree work. Employment for economics majors
ranges from very technically-oriented work, including business analysis and
forecasting, with private firms, foundations or trade associations, to
policy-oriented work with public sector agencies or private firms. Economists work as loan officers at
banks, budget analysts and market research analysts in firms, insurance
actuaries, policy analysts for government agencies and industry groups, and
in many other specialties where technical knowledge about consumer behavior,
firm behavior, and policy implications is called for.
Virtually every large corporation in America, and numerous
medium-sized firms, employs economists to help make appropriate pricing
decisions for its products, to help evaluate the impact of government
regulations, and to forecast future demand and supply conditions within the
industry. Trade organizations representing
all firms in an industry hire economists for the same reasons. Public sector agencies at the federal,
state and local levels hire economists to monitor performance of the economy,
to assess the desirability and impact of regulations, and to contribute to
ongoing discussions of policy formation. Nonprofit groups such as hospitals,
community foundations, charitable organizations and schools employ economists
as well. |
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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 of McConnell. 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. |
4. 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:
1. Responsible
adults display responsible behavior, and
2. Difficult
concepts will be explained and administrative announcements will be made in
class. |
"Be
content with fruit, with flowers, with weeds, with thorns even, but gather them
in the one garden you may call your own."
- Edmond Rostand, Cyrano de
Bergerac
b. Grades: Out of a total of
1600 possible points:
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Test 1 |
100 points |
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Test 2 |
200 points |
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Test 3 |
300 points |
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Test 4 |
400 points |
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Test
5/Final Exam |
500 points |
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E-Writing
Assignment |
100 points |
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Total: |
1600
points |
you will receive the following letter grade:
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Letter
Grade |
Minimum
Required Percentage |
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A+ |
93% |
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A |
90% |
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A- |
87% |
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B+ |
83% |
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B |
80% |
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B- |
77% |
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C+ |
73% |
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C |
70% |
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C- |
67% |
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D+ |
63% |
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D |
60% |
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D- |
57% |
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F |
0 |
"Champions
keep playing until they get it right." - Billie Jean King
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c. Exams: 1. No make ups. 2. Cheating will
result in an automatic grade of F for the course. 4. There will be
five cumulative exams. Exam 5
will be administered during the last week of class and may be taken in place
of the final. A final exam will be given during the scheduled final exam
period. You may take either or both. If you take both, only the highest score
will count. If you do better on test 2 than test 1, your test 2 grade will
count for both tests 1 and 2. 5. If you do better on test 3 than test 1
or test 2, your test 3 grade will replace each of the earlier test grades it
is higher than, etc. 6. Tests 1 - 4 each
consist of 32 questions each, but are graded on a basis of 30 questions. The extra two are for extra credit. 7. Test 5 consists
of 35 questions. Because there is
no quiz after this test, there are five extra credit questions. 8. The final exam
consists of 70 questions. Ten are
extra credit. 9. Always bring a
calculator on test days. You will
not be permitted to take any exams without a calculator. |
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d. Withdrawal from the course: 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. 2. Ws will not be given after the appropriate deadline
except for documented medical or legal reasons. See the WCU Undergraduate
Catalog. 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. Please don't let this happen to you. |
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5. 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.) presented
in a mature, professional manner.
You may include information on past and 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 29, but
you are welcome to complete it earlier. |
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6.
Course calendar: Read
assigned chapters before the day they will be discussed in class. |