L11200 Introduction to Macroeconomics 2009/10
______
School of Economics
Introduction to Macroeconomics
Module Handout –Spring 2010
______
Module CodeL11200
Credits20
Module ConvenorDr. John Gathergood
Room C34
Ext. 66447
LecturesTuesday12.00pm Maths B1
Thursday 11amMaths B1
Thursday 4pm Maths B1
TutorialsSign up on Nexus
______
1. Module Content
This module provides an introduction to modern macroeconomic analysis. Macroeconomics is concerned with some of the most pressing and fundamental questions economists can ask, such as: What determines economic growth? Why do economies exhibit expansions ('booms') and contractions ('busts') in output? What drives employment and wages, saving and investment? What causes inflation and why is it a problem? What, if anything, can governments do to improve the performance of an economy?
Microeconomics is concerned with the analysis of economic agents and markets at the individual level. Macroeconomics is concerned with the aggregate implications of microeconomic behaviour at the economy-wide level. So there is a clear connect between the actions of individual agents in the economy and the aggregate performance of the economy. This is the starting point for modern macroeconomic analysis - though macroeconomics has not always been understood or taught in these terms, and prior study of macroeconomics at A-level or equivalent is not based on this modern understanding of macroeconomics built on 'microfoundations'. Consequently prior study of economics is not necessary for taking this module and students who have studied macroeconomics previously may have to re-think how they understand the aggregate economy.The course is structured as follows:
Section 1: Introduction (2 lectures)
Introduction to the course and key economic indicators such as GDP, unemployment and inflation.
Section 2: Economic Growth (5 lectures)
This section explores what determines the output (GDP) of economies over timeand why levels of GDP and growth rates of GDP vary immensely between countries.GDP is important because it determines the incomes and prosperity of individuals.The section begins with an historical overview of global economic growth and goes on to develop a model of aggregate output which can explain most of the pattern of growth across nations over time.
Section 3: Economic Fluctuations (8 lectures)
Most economies exhibit positive long-run growth in output (in the UK we are used to GDP growth of 2-3% per annum). However, most economies also experience strong short-term fluctuations in output, employment, investment, wages and interest rates. The current UK recession is one such downturn in the economy. This section builds on the model of economic growth developed in the previous section and seeks to understand what causes short-term fluctuations, and why employment, unemployment, wages and interest rates fluctuate along with GDP.
Section 4: Money and Prices (4 lectures)
Macroeconomics is primarily concerned with how much an economy is producing (how many cars, handbags, computers), how many workers are being employed, how much investment in new capital and technology is taking place and what proportion of output is paid to workers and the owners of capital. As such, macroeconomics is not interested in money and prices alone but rather what monetary values and prices represent, the 'real economy'. However incorporating money and nominal prices into the model of economic fluctuations developed in the previous section can drastically impact the model’s predictions for the real economy. This section incorporates these phenomena, with particular focus on price inflation.
Section 5: Government Policy (4 lectures)
Governments tax economic agents and then spend tax revenues, plus manipulate interest rates in the economy. They do this in part to try to prevent booms and busts in output, control inflation and to increase overall growth of output. Which policies work, and why? For example, is it a good idea for the government to spend during a recession via a 'fiscal stimulus'? This section expands the model to include a government sector and analyses various forms of government policy. It concludes that some forms of government policy can work, sometimes.
2. Lectures and Tutorials
A range of different teaching methods are employed to develop means for students to gain an understanding of the material and that opportunities for students to show their analytical and discursive skills exist. The methods used are:
- Three hours of lectures per week
These will provide the basic information in each topic area and will form the foundation for further reading and analysis on an individual basis. Lecture notes and further materials will be provided on the WebCT virtual learning environment (see below).
- Tutorials
Tutorials are compulsory. Tutors will set at least three pieces of work to be assessed over the Semester with additional tutorial work and/or exercises where necessary. The onus is on students to provide the input in tutorials. Exercises and further materials will be provided on the web.
- Reading
While lectures will cover a great deal of material, it is essential that students read around and beyond the material presented there. This again ensures a solid basis is built up for the material covered in Years Two and Three and will normally provide a very good examination grade at the end of the module. Getting into the habit of doing background reading is vital and the earlier this can be achieved the better.
3. Reading Material
The module content will follow closely the following textbook, which students should purchase. Note that the course follows the international edition, not the U.S. edition. It is essential that students study this textbook when undertaking the course.
Barro, R. J. (2008) 'Macroeconomics: A Modern Approach (International Edition)', Thomson South Western. ISBN-10 0-324-54567-3
A supplementary textbook which will be referred to throughout the course is:
Miles, D. and Scott, A. (2005) 'Macroeconomics: Understanding the Wealth of Nations', Wiley. ISBN-10 0-470-86892-9
It should be emphasised that students should not attempt to study this module whilst drawing on macroeconomics textbooks used on A-level (or equivalent) courses, or other macroeconomics textbooks. In addition a number of texts exist to help you develop your writing skills including (recommended more generally for Year One economics students):
Barrass, R. (1995) Students Must Write, Routledge.
Cottrell, S. (2005) Critical Thinking Skills , Palgrave Study Guides.
Greetham, B. (2001) How to Write Better Essays , Palgrave Study Guides.
Neugeboren, R. (2005) The Student's Guide to Writing Economics , Routledge.
Phelan, P. and Reynolds, P. (1996) Argument and Evidence: Critical analysis for the social sciences, Routledge.
4. Module Assessment
There are two compulsory elements to the assessment for the module:
Mid-Term Exam on Sections 1 and 2
As with L11100, there is a mid-term examination. The mid-term exam will take the form of a 45 minute on-line assessment to be held in March (30% of the assessment for the module). The Mid-term exam will cover topics 1 and 2, excluding the first lecture.It willinclude the material covered in lectures plus the reading material suggested for the course.
Within the WebCT ‘assessments’ section there are approximately 200 multiple choice questions relating to topics 1 and 2 which available for practice prior to the March on-line assessment. The practice questions are taken from the same set of questions which will appear in the on-line assessment, so can be taken as indicative of difficulty of the questions which will arise in the assessment.
Final Exam on Sections 3, 4 and 5
The final exam will take the form of a 90 minute unseen written examination to be held in May (70% of the assessment for the module). The exam will consist of two questions. Candidates must answer both questions. Two sample exam papers are available via WebCT.
Please note: this module has been substantially revised for the 2009/10 session, so you are strongly advised not to consult past exam papers and examination feedbackrelating to this module in previous years.
5. Plagiarism
Students are reminded that plagiarism is a very serious academic offence and that they should refer back to their booklet Undergraduate Student Handbook for confirmation of what it is and the penalties for committing it. Students are further reminded that they have signed a declaration acknowledging that they understand the nature of the offence and the attendant penalties. Those students taking this module from outside the School should consult with Dr. Morgan who will provide a copy of the relevant pages from the School's Undergraduate Student Handbook and a declaration form which they must sign.
Week Commencing / Lectures and Content / Barro Chapters / Tutorials25 January
1 February
8 February
15 February
22 February
1 March
8 March
15 March
22 March
29 March
3 May / Section 1: Introduction
1. Introduction
2. National Income Accounting
Section 2: Economic Growth
3. Key Facts About Economic Growth
4. The Solow Growth Model
5. Working With the Model
6. Conditional Convergence and Growth
7. Long-Run Growth
Section 3: Economic Fluctuations
8. Markets, Prices, Supply and Demand I
9. Markets, Prices Supply and Demand II
10. Consumption, Saving and Investment I
11. Consumption, Saving and Investment II
12. The Equilibrium Business Cycle Model
13. Expanding the Model with Labour Supply
14. Capital Utilization and the Business Cycle
15. Unemployment and the Business Cycle
Section 4: Money and Prices
16. Money and the Price Level I
17. Money and the Price Level II
18. Inflation and Money Growth
Mid-Term Online Assessment – 9 March
19. Inflation in the Business Cycle Model
Section 5: Government Policy
20. Government Expenditure
21. Taxation
22. Public Debt I
23. Public Debt I
24. Summary
25. Conclusion / Ch. 1
Ch. 2
Ch. 3
Ch. 3
Ch. 4
Ch. 4
Ch. 5
Ch. 6
Ch. 6
Ch. 7
Ch. 7
Ch. 8
Ch. 8
Ch. 9
Ch. 9
Ch. 10
Ch. 10
Ch. 11
Ch. 11
Ch. 12
Ch. 13
Ch. 14
Ch. 14 / 1. Section 1: Introduction & Economic GrowthI
2. Section 2: Economic Growth II
3. Section 3: Economic Fluctuations I
4. Revision for Mid-Term Assessment
5. Section 3: Economic Fluctuations II
6. Section 4:
Money and Prices
7. Section 5:
Government Policy
1