Principles of Macroeconomics

This course is designed to provide an introduction to the theory and practice of contemporary macroeconomics. The course begins with a discussion of several basic tools and concepts that play an inportant role in macroeconomic analysis. In this portion of the class, students examine the business cycle and the costs associated with unemployment and inflation. A relatively simple model of aggregate demand and supply is introduced to explain the stages of the business cycle.

This introductory portion of the course is followed by a more detailed discussion of the determinants of aggregate demand and supply. In this portion of the class, students examine the determinants of the levels of consumer spending, investment spending, government spending, and the level of net exports. The determination of the money supply and the role of the banking system is also covered in this section of the course.

This more complete model of aggregate demand and supply is then used to explain the classical, Keynesian, monetarist, new Keynesian, and new classical models of macroeconomic equilibria. Adaptive and rational expectation models of expectation formation are examined and compared. The effectiveness of monetary and fiscal policy under each of these models is also analyzed.

The class concludes with a discussion of international trade and finance. Students examine the determination of exchange rates and the arguments concerning trade barriers. The relationship between the government deficit and the trade deficit is examined as part of this discussion.

Prerequisite: Eco 101