ECO-2013

Principles of Macroeconomics

Summer B 2005

Dr. Cem Karayalcin

Office hrs: MW 1:00-2:00

Office: DM 319A

e-mail: karayalc@fiu.edu

Web page: www.fiu.edu/~karayalc

The purpose of this course is to provide an introduction to the basics of macroeconomics. It develops an analytical framework to examine the causes of business cycles, unemployment, and inflation--the main problems of macroeconomics. In doing so the course teaches the main tools to analyze these macroeconomic issues. Students should be aware of the fact that this class is mainly theoretical and thus requires the ability to use abstract concepts in their thinking.

COURSE REQUIREMENTS: There will be one midterm (on Wednesday, July 20, 2005) and one final exam (on Wednesday, August 10, 2005) with weights of 45% and 55%. There will be no make-up exams. Missed exams mean a grade of zero. Students are expected to come to class having read the relevant material.

TEXTBOOK: Macroeconomics: Principles and Tools, 4/E by Arthur O'Sullivan and Steven Sheffrin. The textbook as well as its study guide is available at the University Bookstore.

COURSE OUTLINE

I. INTRODUCTION

1. What is Economics? Chapter 1

Making decisions; Interactions and trades; standard of living; prices, money, inflation and unemployment; marginal benefit and cost; markets; opportunity cost; substitution; scarcity

2. Key Principles of Economics. Chapter 2

Observation and theory; economic models; positive vs normative economics; graphs; direct relationship; inverse relationship; linear relationship; slope; shifts.

3. Exchange and Markets. Chapter 3

Absolute and comparative advantage; production possibility frontier; gains from trade; imports and exports

II. DEMAND AND SUPPLY

1. The Market Forces of Supply and Demand. Chapter 4

Demand; quantity demanded; supply; quantity supplied; equilibrium price and quantity; substitution and income effects

III. ISSUES IN MACROECONOMICS

1. Measuring a Nation’s Income. Chapter 5

Gross Domestic Product (GDP); components of GDP; real and nominal GDP

2. Unemployment and Inflation. Chapter 6

The Consumer Price Index (CPI); measuring inflation, unemployment

IV. THE REAL ECONOMY IN THE LONG RUN

1. The Economy at Full Employment. Chapter 7

2. Why Do Economies Grow? Chapter 8

Growth around the world; productivity; growth and public policy

V. ECONOMIC FLUCTUATIONS AND FISCAL POLICY

1. Aggregate Demand and Aggregate Supply. Chapter 9

Aggregate supply; aggregate demand; macroeconomic equilibrium

2. Fiscal Policy. Chapter 10

The federal budget; fiscal policy multipliers; stabilization

3. The Income Expenditure Model. Chapter 11

The determination of national income in the short run

4. Investment and Financial Intermediation. Chapter 12

VI. MONEY, BANKING, AND MONETARY POLICY

1. Money and the Banking System. Chapter 13

The definition of money, banking system and its role

2. The Federal Reserve and Monetary Policy. Chapter 14

The Fed; money creation

VII. INFLATION, UNEMPLOYMENT, AND ECONOMIC POLICY

1. From the Short Run to the Long Run. Chapter 15

2. The Dynamics of Inflation and Unemployment. Chapter 16