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Economics 2: Introduction to Macroeconomics

COURSE MOTIVATION AND GOALS

Economics can be divided into microeconomics and macroeconomics. Microeconomics tries to understand how
individual markets work, and how individuals and firms behave within markets. Macroeconomics tries to
understand the operation of the economy as a whole. This means understanding the US economy itself and the
major forces operating on this economy, both domestic and international.

Motivation: This is a critically important time for studying macroeconomics, for the US and global
macroeconomies are in a profound crisis. The US and California housing markets peaked in 2006, leading in 2007
to the collapse of the subprime and securitized credit markets. This triggered a recession – a systematic downturn
in the overall economy – in the beginning of 2008, and then to an collapse, failure, or crisis of most Wall-Street-
based financial firms and megabank in September 2008. Efforts to „stabilize‟ the US Wall-Street-based financial
sector and to provide a „fiscal stimulus‟ for overall economic activity were undertaken, respectively, in October
2008 and March 2009. It is not clear whether they have worked. The US economy has shown weak overall
growth, while jobs have remained stagnant. Many questions concerning what to do about this – whether there
should be another stimulus, a tax cut, a tax increase, and so on – are being debated now. This course will provide
you with tools for understanding these debates and formulating your own point of view about economic policy.

Goals: The goals of the course are for you to understand:

 The basics about the 2007-10 US economic crisis, and the controversies it has created among economists
 The basics about what economics is, what the economy is, and how economists build different
understandings of the economy
 How to do supply-demand analysis of any market
 Why macroeconomics differs from microeconomics, what macroeconomic policy is, and why it matters.
 How to use aggregate demand-aggregate supply analysis to understand the behavior of the overall
economy
 What fiscal and monetary policies are, and why they are controversial
 Budget deficits: when are they good, when are they good, why they are controversial
 Whether macroeconomic policy-makers must choose between price inflation and unemployment
 Why the US economy and much of the world economy has been in crisis since 2007.

The key word above is “understand.” It is crucial that we go on this journey together. We will reach as many of
these goals as we can; the key is to have you understand the material, so that one idea builds on another. As you
will see below, this course is structured as a continual learning process; your involvement throughout is crucial.

This course is structured as a series of learning modules, each centered on one of these goals. These modules and
the class readings assignments are set out below.

Notice that if we achieve all our goals, we will end at the beginning. This is your first insight into economics.
Theories in economics are about the social world that humans create, not the natural world. Human societies and
people continually change, and build new institutions that either permit what was once impossible or block what
was once commonly done. Everything is in flux, including our understanding of everything or anything.

COURSE LOGISTICS

Cellphones: All cellphones are to be turned off during lecture and section. You may use a laptop PC to take notes
in class; but internet browsing or email-checking is not permitted.

Syllabus: Economics 2, Fall 2010 (Prof. Dymski) Page 1


Grading: Students are expected to keep up with the class ilearn website, read assigned material, attend all
lectures, attend and participate actively in sections, to complete homework assignments, and take all exams.
Points will be awarded as follows:
Participation/attendance in lecture 15% Homework assignments 22.5%
Participation/attendance in section 5% Midterm exam 1 15%
Midterm exam 2 17.5% Final exam 25.0%

IMPORTANT! Over two-fifths of your overall grade (42.5%) is generated from homework assignments and from
participation in lecture. This includes, for every student, 5% of his/her grade will be awarded by his/her assigned
teaching assistant. The idea is to construct the class as an interactive learning process, instead of relying on the
traditional “all-or-nothing” midterm-midterm-final approach. Notice that if you treat this class in the traditional
way, you are almost certain to fail. If you do not plan to do homework, or to attend and participate in lectures and
sections, consider taking Economics 2 from another professor.

Homework: Homework will be assigned weekly. I will use i-learn to distribute your homework assignments.
Homework assignments will be available on i-learn and can be answered on-line up to their due date (and due
time). Once the due time/due date is reached, you will no longer be able to turn in that week‟s homework. I will
drop your lowest homework grade in computing your scores for the final score. The homeworks will have
different score totals from week to week. These will be adjusted so that they total 22.5% of your total grade. Late
homework will not be accepted.

Participation and attendance in lecture: As indicated above, a large number of points are reserved for these two
items. Every class will make use of “Clickers.” Two separate grades will be awarded for every class: (1)
participation – did you click, and if so did you get the right answer; (2) attendance. Every class, one or more of
the “clicker” exercises will be used to determine attendance. This will be randomized.

Participation and attendance in TA sessions: Every teaching assistant (TA) will determine autonomously how
to structure his/her sessions, and how to assign points for your participation in those sessions. This class has eight
(8) TAs. Because there are so many TAs and so many students, no student will be allowed to „switch‟ from one
TA to another. Work with the TA you have been assigned.

Fairness in grading: Statistical methods will be used to insure fairness in grading. Students who feel they have
received an unfair grade on an exam or assignment can write up an appeal and send it to the course instructor.

Midterms and final: All students must arrive on time for midterm and final exams. Only students with excused
absences approved in advance by the instructor will be excused from participating in exams during the assigned
times. Excused absences will be considered for the following reasons: medical emergencies; non-elective medical
procedures; family medical or life-death emergencies. Vacations or trips with family or friends will not be
considered as valid excuses. absences , who inform their teaching assistant and/or the instructor prior to a
midterm or final exam, will be excused from participating in exams with other students.

Required materials:
 Text: Introduction to Macroeconomics, William Baumol and Alan Blinder, 11th edition. A custom loose-leaf
edition (2011/UC Riverside) of this required text may be purchased at the bookstore. If you use another
edition or version of this text, you will be responsible to check whether chapters and text are the same. A
workbook for the textbook is also available, but not mandatory.
 Articles: During the course of the quarter, I will be uploading articles from the Financial Times, Wall Street
Journal, New York Times, and other sources onto the “class materials” page in i-learn.
 Clicker: All students are required to have a “clicker” (also known as a Personal Response System; see
http://www.cnc.ucr.edu/clickers/). These will be used in class frequently, beginning next week.

Syllabus: Economics 2, Fall 2010 (Prof. Dymski) Page 2


COURSE SCHEDULE

Class 1: September 23
Overview and introduction
Module 0: The 2007-10 crisis of the US economy, and the controversies this crisis has created among
economists. Readings: Chapter 20

Classes 2-3: September 28, 30


Module 1: The basics about what economics is, what the economy is, and how economists build different
understandings of the economy; the controversies that the 2007-10 crisis has created for economists‟
understanding of the economy. Readings: Chapters 1-3.

Classes 4-5: October 5, 7


Module 2: how to do supply-demand analysis of any market. Readings: Chapter 4.

Classes 6-7: October 12, 14


Module 3: why macroeconomics differs from microeconomics, what macroeconomic policy is, and why it
matters. Readings: Chapter 5-7.

Classes 8, 10-11: October 19, 26, 28


Module 4: using aggregate demand-aggregate supply analysis to understand to understand the behavior of the
overall economy. Readings: Chapters 8-10.

Midterm 1: October 21

Classes 12-14: November 2, 4, 9


Module 5: what fiscal and monetary policies are, and why they are controversial. Readings: Chapters 11-14.

Class 15: November 16


Module 6: budget deficits: when are they good, when are they good, why they are controversial. Reading:
Chapter 15.

Midterm 2: November 18

Class 16: November 30


Module 7: whether macroeconomic policy-makers must choose between price inflation and unemployment.
Reading: Chapter 16.

Class 17: December 2


Module 8: why the US economy and much of the world economy has been in crisis since 2007, and why this
has renewed controversy among economists about how the macroeconomy works. Reading: Chapter 20.

Final Exam: Monday, December 6, 7-10 PM

Syllabus: Economics 2, Fall 2010 (Prof. Dymski) Page 3