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Macroeconomics 1 (in English) @ WNE UW

University of Warsaw CODE SEMESTER ECTS

2400-PP1MA1a Summer (2nd) of academic year 2010/2011 6 credits

PREREQUISITES (informal) Microeconomics; Mathematics (high school algebra and basic concepts of calculus: first and second derivatives of functions of one and many variables) LECTURER Dr. Andrzej Kondratowicz

COURSE DELIVERY 30 hours of lectures; supplemented by 30 hours of problem solving and other exercises/discussions in Sections

ASSESSMENT

The final grade for the course will consist of the following elements:

90% = Final Exam (written, comprehensive) 10% = percentage points transferred from Sections according to the following formula: # of % points added = (# of % points obtained in the Section) /5 –10

The passing threshold for the course is 60 percent of the maximum total. Numbers will not be rounded off. As a general rule, evaluation of your work in Sections will take into consideration the results of short quizzes administered on a regular or random basis, quality and timeliness of your submitting homework assignments/presentations, as well as your active participation in class discussions. Precise rules of participation and evaluation are at the discretion of the Section’s Instructor and will be given to you in the respective Section. Same pertains to the form and content of the Midterm and Final Tests in Sections. The written Final Exam for the course will be diversified in its form. It may contain: multiple choice questions (which in turn may feature numerical problems to be solved, manipulation and assessment of graphs), numerical problems, graphical problems, short open questions. Generally accepted rules of academic honesty will be strictly applied to all elements of your class participation, including any work submitted and both exams. If in doubt about these rules, consult the Section Instructor and/or the Lecturer. In addition, when in class, students are not supposed to open their notebooks, netbooks, PDAs and the like, unless explicitly authorized by the Lecturer/Instructor. AIMS Provide students with knowledge of introductory macroeconomics. In particular: make them familiar with basic macroeconomic categories, stylized facts, transmission mechanisms and models; provide them with a good grasp of standard methods used by macroeconomists at this level, and indicate where and how to find, evaluate and use relevant data sources, including those available on the net. CONTENT

1. Subject of macro-analysis and stylized macroeconomic facts 2. Measurement of economic activity and its outcomes – circular flow of goods and services and social accounting 3. Introduction into long run macro-analysis 4. Factors of production. Macroeconomic production function. 5. Labor and labor market. Employment and unemployment. 6. Money and Banking 7. Short run macro: simple Keynesian Model. Sectoral functions. Multiplier analysis. 8. Extension: Various specifications of the consumption function. 9. Rudimentary IS-LM model (closed economy, graphical exposition)

10. Fiscal and monetary policy analyzed within the Keynesian/ISLM framework 11. From ISLM to AD-AS analysis 12. Summary: Keynesian vs. neoclassical perspective. 13. The role of government reconsidered: private vs. public choice, institutions and economic policies in SR and LR 14. Extension: current economic ‘crisis’

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LEARNING OUTCOMES

On completion of this module a student should be able to:

Define and measure main macroeconomic categories

Identify main sectors of an economy and flows between them

Measure the economic flows [national/social accounting]

Explain what an economic model is and how to build and handle one.

Understand the basics of comparative statics analysis and use simple maths for multiplier analysis

Distinguish between short and long run analyses and models

Analyze the determinants of output in the long run.

Understand the basic features of a labor market and understand the measures of un/employment

Explain basic categories in the area of money and banking, both historically and at present

Analyze the basics of short run fluctuations: understand and be able to use static/deterministic versions of the simple Keynesian [algebra and graphic exposition] and the IS-LM model [mostly graphical exposition and analysis] – both in a closed economy version)

Describe and know how to measure the effects of basic types of macroeconomic policies in the short run

Relate the ISLM analysis to the AD-AS framework

Find, retrieve and process reliable, high quality primary macroeconomic data from the internet sources TEXTBOOK The first best choice is:

McDowell, Thom, Frank, and Bernanke; Principles of Economics; McGraw-Hill.

This is a European version of an American textbook written by Frank and Bernanke alone. Ideally, you should use the full, newest version, i.e.: Principles of Economics with Bind-in Connect Access Card, Moore McDowell, Rodney Thom, Robert Frank, Ben Bernanke, 2nd Edition published in March 2009, ISBN: 9780077121693; see: http://www.mcgraw-hill.co.uk/html/0077121694.html . Nevertheless, any version is acceptable. We will only use the macro part of the book (Parts 5–7), but so far there is no separate Principles of Macroeconomics published, as far as the European version is concerned. There is one in American version. A full list of various versions/editions may be found here: http://www.mcgraw-hill.co.uk/cgi-bin/same_author.pl?author=Ben+Bernanke . A list of official Polish resellers of the book may be found at the McGraw-Hill Polish representative website: http://www.marek-lewinson.com/997/poland.php . As always, you may also try finding the best source at http://www.bookfinder.com/textbooks/ . An alternative to the above (second best):

N. Gregory Mankiw, Principles of Macroeconomics, South-Western College Pub; 5th edition (2008) [earlier editions acceptable]

Supplemented by:

Robert Hall, John Taylor, Macroeconomics: Economic Growth, Fluctuations, and Policy, W.W. Norton and Co., New York and London

– editions from 3 up acceptable [only specific fragments (mostly) of Part I, i.e. Fundamentals of Macroeconomics will be assigned; attention: 5/e has three authors: Robert E. Hall, John B. Taylor, David Papell, while starting with edition 6 (2004)

again two: Robert E. Hall & David Papell.

Note 1: First, be careful not to confuse Mankiw’s Principles of Macroeconomics published by South-Western/Thomson: http://www.thomsonedu.com/economics/mankiw/index.html with his intermediate macro text entitled Macroeconomics published by Worth: http://www.worthpublishers.com/mankiw/ . You need the Principles of Macroeconomics at this moment. As in the Frank & Bernanke case, also here there is a European [2006] version by N.Gregory Mankiw and Mark P.Taylor: ISBN: 1844801330. Note 2: As far as Hall & Taylor is concerned, we will use it only for the Keynesian and ISLM models (two chapters: 6 & 7 in the 5/e) and possibly for consumption function extensions (chapter 10 in 5/e).

Other alternatives (third best):

If you don’t have access to any of any of the above, you may go for further substitutes: these would be any standard mainstream first year macroeconomics textbooks from renowned publishers, e.g.:

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Gwartney, Stroup, MacPherson, Sobel, Macroeconomics. Public and Private Choice, South-Western College Publishers [preferably the newest 12/e of 2009: ISBN-10:0324580193, ISBN-13: 9780324580198, but any post-2000 edition would do; you may also use macro parts of their Economics. Public and Private Choice version], or

Begg, Fischer, Dornbusch, Economics [preferably the newest 9/e of Feb. 2008; ISBN: 9780077117870; you will only need the macro parts of it], or

John B. Taylor and Akila Weerapana, Principles of Economics: Global Financial Crisis Edition, 6th Edition (2010) – Parts V & VI (macroeconomics); ISBN-10: 1439078203 ISBN-13: 9781439078204

If in doubt, consult the Lecturer. ADDITIONAL READING

Milton Friedman, Capitalism and Freedom, Chicago University Press, 1962, ISBN 0-226-26421-1 (2002 edition).

[This is a classic everybody should read. You may substitute a newer Free to Choose by the same author and his wife, Rose for it {in a book or a PBS TV Series version freely downloadable here: http://miltonfriedman.blogspot.com/ } – but, as Gertrude Stein once (almost) had it – classic is a classic is a classic is a classic.]

John Maynard Keynes, General Theory of Employment, Interest and Money, Macmillan 1936 (reprinted in 2007).

[Well, ubi tu Milton, ibi ego John Maynard: this is another classic everybody should read, or at least browse through it. If in a hurry, jump directly to the last (24th) chapter . Incidentally, if you don’t want to pay $38 for the book or you don’t like the idea of getting it with Paul Krugman’s Introduction (2007/e), you will have to visit a library or a Marxist website, from which you may download it for free: http://www.marxists.org/reference/subject/economics/keynes/general-theory/]. Praise Friedman - you are free to choose.]

Friedrich A. Hayek, The Road to Serfdom, Routledge 1944, ISBN: 978-0-415-25389-5 (2001paperback edition).

[This is yet another classic everybody should read. Since our subject is Macroeconomics, it is interesting to read something by an author who – as a representative of the Austrian School – posits that Macroeconomics does not exist. Having read both Keynes and Hayek, you will be ready to watch and listen with understanding to “Fear the Boom and Bust - a Hayek vs. Keynes Rap”: http://www.youtube.com/watch?v=d0nERTFo-Sk ]

John B. Taylor, Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis, 2009, Hoover Institution Press, ISBN: 978-0-8179-4971-6.

[A short, non-technical, but extremely lucid exposition and analysis of the current financial crisis.]

International Monetary Fund (IMF), World Economic Outlook (WEO). Crisis and Recovery, April 2009, free download at: http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/text.pdf (4.5 MB).

[This is an extremely rich, multi-faceted and thoroughly technical analysis of the current state of the world economy and the evolution of the current recession (crisis, if you prefer). Full of useful statistics. A good companion to John Taylor’s book. You may also want to consult earlier editions of the WEO.]

Oleh Havrylyshyn, Divergent Paths in Post-Communist Transformation. Capitalism for All or Capitalism for the Few?, Palgrave Macmillan, 2006, ISBN: 978-1-4039-9634-3, ISBN10: 1-4039-9634-2.

[This is an extremely useful and very original analysis of the (macroeconomic and other) changes we have experienced in this part of the world over the past 20 years. If I were to recommend just one book on transition, this is the one. It reads well. A PowerPoint presentation of the book (46 slides) is available for free from the Cato Institute website: http://www.powershow.com/view/48b6-ZWEwM/CATO_INSTITUTE . You may also want to download from there a related, but much shorter, 2007 text entitled “Fifteen Years of Transformation in the Post-Communist World. Rapid Reformers Outperformed Gradualists” by the same author: http://www.cato.org/pubs/dpa/DPA4.pdf ]

In addition, during the course many good quality internet sources of information and primary data will be identified and used – both European and American, and some extra handouts will be distributed. Please, consult regularly my web page at: http://www.wne.uw.edu.pl/kondratowicz which, apart from current info related to the course, lists a number of hyperlinks to those sources of data/information, as well as enables you to download the handouts.

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