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EC102 Intro
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The Meaning
• Micro, Macro and Economics are all words that come from Greek
– Micro
– Macro
– Economics
Better Definition• Economics is divided into two parts; micro and
macro.
• Macro studies market forces beyond the control of any one person, family or company.
• Micro studies market decisions that are under a person’s, family’s or company’s control.
Example: You Are Looking For A Job
• You make Micro decisions-Your decision to accept or reject
- Since you have complete control, deciding is a microeconomic problem
• But Macro factors are key- How easy or hard is it to get a job offer?
- based on the country’s unemployment rate and the country’s current economic growth rate.
- Since no person, family or company directly controls overall unemployment or economic growth, the overall job market’s state is a macroeconomic problem.
Macro TopicsAre
News!
Macroeconomics
• In this course we will discuss some of the world’s key problems:
Who is rich? Who is poor? Why?
How many are hungry and homeless?
Are there enough resources in the world?
How much does it cost to live?
Who We Are
• Professor Jay Zagorsky
•Teaching Fellows Francois Guay, Matthew Klepacz, Enyo Rots Svetoslav Semov
• Head TF Dan Schwab
What Is Economics?
• Economics is primarily about dealing with one problem.
1st Discussion Question
What would you do with a
Billion dollars?
1st Key Idea
Society has scarce resources:– The management of society’s resources is
important because resources are scarce.– Scarcity. . . Means……………….
Economics is the study of how society manages its scarce resources
We Will Study This Semester
• Past – Understand what choices societies have made and the
ramifications of those choices.
• Present– Understand the current tradeoffs society is making.
• Future– What are the impacts of implementing various policies.– What does the future hold.
• My lectures focus on the USA. • You will each do a project on another country.
Quick Question
• Write down on a piece of paper the answer to …………………….– Don’t ask your neighbor– Don’t look it up on the Internet– Don’t put your name– Make sure you put down the units (thousands,
millions, billions, trillions)– Pass the answers to the teaching fellows
Course Book
Available for the Ipad on
Itunes.
Old version on class website for people without an Ipad.
https://itunes.apple.com/us/book/business-macroeconomics/id592573491
The Wall Street Journal• Price $29.95 for 15 weeks or Read in library for FREE
• Fill in a sheet going around.
• Sign up online (URL on class website)
• Free wsj.com only has some of the articles.
Readings for Rest of This Lecture
Zagorsky’s Chapter 1
“Introduction”
5 Key Ideas
Five key ideas in macroeconomics
1)incentives,
2)money,
3)scarcity,
4)interconnections and
5)non-zero sum games
Key Idea: Incentives• Incentives are anything that cause people to
change their actions.
• Two types of incentives; Positive and Negative.– Positive incentives: when a person, family or business
is rewarded for doing a particular action
– Negative incentives: ……………….
Examples• Examples of Incentives
– Grades– Pay– Traffic circle in India
• Right incentives improve economic conditions
• Wrong incentives can destroy a country
Reduce Gasoline Usage
Key Idea: Money Is Important
• Money is a big incentive and incentives matter.
• Expression “money is root of all evil.”
• Expression means money is such a powerful incentive, people will do many evil acts like lying, cheating, stealing and killing to obtain it.
Key Idea: Money Is ImportantPart II
• Money is magical.
• ………………
• Must have a double coincidence of wants when money does not exist.
• With money double coincidence problem eliminated.
• Reduced time to trade means more time to produce.
Key Idea: Money Is ImportantPart III
• Money is a signal of quality.
• Store is selling multiple items that look similar but have very different prices.
• Cheap Rolex watches.
Key Idea: Money Is ImportantPart IV
• Money is a measuring stick.
• How is your job?
• How are you doing in life?
Key Idea: Scarcity
• Scarcity means that at any moment in time needs and desires are greater than available resources.
• Scarcity easy to see in poor places.• Lack of food, water, health care, roads, etc.
• Scarcity also exists in rich countries.
Follow on Key Idea
• Because of scarcity to get one thing, we usually have to give up something else. This is called the “Tradeoff.”
• Understanding the tradeoffs involved are an important part of Macroeconomics.
• Key idea of tradeoff is: “There is no such thing as a free lunch!”
Examples of Tradeoffs
• Defense spending vs. domestic spending– …………………….
• Intra household decisions– Food vs. clothing– college vs. new car– fancy wedding vs. down payment for a house.
• Individual decisions– Leisure time vs. work– Studying economics vs. another course’s material
Key Idea: Interconnections
• Entire world is economically connected. • Each of our decisions affect the
economic world (slightly).– Example: cup of coffee or tea.
– Example: Mexico oil find.
Last And Maybe Biggest Idea• Macroeconomics is not a zero sum game.
• What is a zero sum game?– Poker
• What is non-zero sum game?– Yawning
• Financial markets, key part of macro, are a non-zero sum game. – Markets rise and fall. Wealth created and destroyed
4 Course Goals
• Learn Key Macro Concepts
• Learn Key Macro Data / Numbers
• Learn About Some Key Economists
• Understand Current Key Macroeconomic Events In the News– Wall Street Journal
Why Are We Learning Numbers?
• We live in the information age. – Information is easy to get and easy to pass on. Some
information being passed around is wrong.
• Some key facts all educated people should just know.– What percent class got key fact question right? _____
• Goal• Familiar looking up macroeconomic information
• Know what information means and
• Remember some key values.
Adam Smith (1723-1790)
• Adam Smith - father of economics. • Smith grew up in Scotland and his family
recognized his ability at an early age. Went to Glasgow University at 14 and finished at 17.
• Today student attendance does not matter. Then it did. Became tutor to Duke of Buccleuch.
• Spent long time in France.
Most Important Book• Wealth of Nations (1st edition 1776)
– Was the first economics book.
• In this book laid out many of the key ideas in economics:– “It is not from the benevolence of the butcher, the
brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”
• Smith’s writings show individuals constantly seeking to improve life.
• Drive by individuals ends up making all of society better off.
Administrative
Where is Course Information?
• Website is at https://learn.bu.edu– Login
– Select EC102 DD
• Under Course Information is the– Syllabus
– Class calendar is at end of syllabus
– Overview of homework
Syllabus• Contact information
Jay Zagorsky
Office School of Management Room 518K
Office hours 5:00 to 6:00 on Monday
Office hours 2:30 to 3:30 on Tuesday
Or talk to me after class in Morse.
Phone calls are not a good way to reach me.
Class email [email protected] BEST METHOD
TF contact• All TF’s have offices in Economics Department,
located at 264 Bay State Road (near Marsh Chapel)
Francois Guay, [email protected]
Matthew Klepacz, [email protected]
Enyo Rots, [email protected]
Svetoslav Semov, [email protected]
Discussion Sessions
• What is supposed to happen in discussion sessions?
• Discussion of normative questions– No wrong answers except not having an answer
• If time left over– Homework Review– Review of class lectures
Attendance• You are expected to attend all lectures and one
teaching fellow discussion session each week.– Did you sign up for a session that begins with the
letter “D”?
• Except for serious illness (you must have a dated doctors note) or major catastrophe (must be documented) there are NO INCOMPLETES and NO MAKEUP EXAMS in this course.
Slides
• The class web site has a powerpoint slide show for each lecture.
• The powerpoint slides on the class web site do not contain all of the information that will be presented in class.– Your slides are partial versions of the master slides.– Typically I put ……….. in slides where I cut out
text.
Movies
• I tape all classes and put tapes on DVD.
• One copy of each class is held at the front desk of the School of Management’s Pardee library (3rd Floor, outbound side).
• Each DVD is on 1 day reserve.– Overdue reserve fines are quite expensive.
• It takes a few days to create a DVD. You can check online to see when they are available.
Grades and Dates
• Homeworks 10% Due before every class.• Project 20% Thursday April 11th • Midterm exam 30% Tuesday March 5th (3:30
pm)• Final exam 40% Thursday May 9th (3 pm)
• All key dates are found on the web site at the end of the syllabus!
Homework
• One short online quiz for each lecture– Most quizzes 5 questions long. – Quizzes are timed– Once you click on them the timer STARTS. – Quiz due before the next lecture. – Do them by yourself, without notes/books/friends.
– I drop one homework score automatically.
Prerequisites and Preparation
• Students should know high school algebra.
• Before coming to class– Skim the chapter.
• After coming to class– Read the chapter– Do the homework problems– Talk to your TF about problematic concepts– Explain to someone else what you learned
Final Project
• Web site has more details.
• Simple summary– In class I provide you with extensive details about
the U.S. economy. – – For the final project you will work by yourself and
write a paper that shows the reader the macroeconomics of one foreign country
Some Potential Topics1 Course Introduction2 World’s Population3 Trade and Production Possibilities4 Global Outsourcing5 Supply and Demand6 Gross Domestic Product (GDP)7 Social Security8 The Cost of Living9 The Prices of Key Items: Gas, Beer and
Tuition10 Why are Some Countries Rich and
Others Poor?11 Hunger and Homelessness12 Savings and Investment13 Stocks and Bonds
14 Government Debt15 Basic Finance16 Poverty and Wealth17 Unemployment and the Labor Market18 Crime and Punishment19 Money and the Federal Reserve20 Inflation21 Taxes22 Exchange Rates23 Trade Policy and Capital Flows24 Business Cycles25 When are We in a Recession?26 Global Warming27 Course Conclusion
Conclusion
• Because society has scarce resources, we have a field of study called Macroeconomics, which investigates how society manages this problem.
• Midterm Tuesday March 5th • Final Thursday May 9th
Be There!
