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University of Vermont Department of Economics Course Outline

EC 11 Time: T/W/TH 1:00-4:45 P.M. Room: Lafayette 411 Summer 2011

Professor Catalina Vizcarra 332 Old Mill Phone Number: 6-0694 Office Hours: by appointment only

Principles of Macroeconomics

In this course we will study the fundamental principles of market economies and discuss a wide range of conceptual tools that will help us analyze macroeconomic events such as economic growth, inflation, and unemployment. By the end of the semester you should have a good understanding of the basic functioning of the overall economy and of the role that government has in influencing economic activity.

Textbook Michael Parkin. Macroeconomics. 10th Edition, Addison Wesley, 2011. Mark Rush. Study Guide (textbook companion), Addison Wesley, 2011.

Course Evaluation Your grade will be based on four in-class exams. The exams will be worth 25% of your grade each.

Tentative Course Outline

Week One I. Introduction. What is economics? Scarcity and trade-offs. Economics as a Social Science. Microeconomics and Macroeconomics ( Chapter 1. Also, review the appendix to Chapter 1: Graphs in Economics). The Economic Problem. Opportunity Cost and the Production Possibilities Frontier. The PPF and Marginal Cost. Preferences and Marginal Benefit. Production Efficiency and Allocative Efficiency. The gains from trade and economic growth (Chapter 2). II. Demand and Supply fundamentals. The laws of supply and demand. Market Equilibrium and market responses to shocks (Chapter 3). III. Measuring Economic Growth. Gross Domestic Product. Nominal and Real GDP. Limitations of Real GDP (Chapter 4). Exam 1 (covers topics discussed in sections I and II of week one)

Week Two I. Measuring Unemployment and the Price Level. The basic indicators of the state of the labor market. Unemployment and Full Employment. Types of Unemployment. The Consumer Price Index (CPI). Measuring Inflation (Chapter 5). II. Economic Growth. Long term trends in economic growth around the world. Why are some countries rich and others poor? Theories of economic growth. Economic Development. (Chapter 6). III. Finance, Saving and Investment. Financial Institutions and Financial Markets. The Market for Loanable Funds. The Origins of the 2007-2008 Financial Crisis. The Global Loanable Funds market (Chapter 7).

Exam 2 (covers topics discussed in section III of week one and sections I and II of week 2)

Week Three I. Money, the Price Level and Inflation. Whats money. How banks create money. The Federal Reserve System. The Market for Money. The Quantity Theory of Money (Chapter 8). II. The Exchange Rate and the Balance of Payments (Chapter 9). III. The Aggregate Supply/Aggregate Demand Model. Aggregate Demand, Aggregate Supply, and Macroeconomic Equilibrium. Macroeconomic Schools of Thought (Chapter 10). Exam 3 (covers sections III of week 2 and I and II of week 3)

Week Four I. Fiscal Policy. The Federal Budget. Fiscal policy and the business cycle (discretionary vs. automatic stabilizers). The supply side effects of fiscal policy. Generational effects of fiscal policies. Social Security (Chapter 13). II. Monetary Policy. Monetary Policy Objectives and Framework. The Conduct of Monetary Policy. Alternative Monetary Policy Strategies (Chapter 14). III. Review and Final Exam (covers sections III of week 3 and I and II of week 4)

Note: It is the University policy to allow students to honor their religious holidays. Students should submit in writing by the end of the second full week of classes their 3

documented religious holiday schedule for the semester so as to arrange for any necessary make up work in advance.