Econ 100B-02:
Intermediate Macroeconomics
Professor’s contact info
Professor: Doireann Fitzgerald
Office: Social Sciences I Rm. 207
Office hours: Wednesday
E-mail: dfitzger at ucsc.edu
TAs’ contact info
Solange Gouvea: sgouvea at ucsc.edu Office hours: Monday 3:25pm to 4:25 in Social Sciences I, 314
Jamus Lim: jamus at ucsc.edu Office hours: Thursday 2pm-4pm in Social Sciences I, 314, or by appointment
Mark Unruh: macro100b at yahoo.com Office hours: Tuesday 12pm-2pm in Social Sciences I, 228
MSI
MSI section locations and times will be announced as soon as they have been arranged.
Course Description
Covers major theoretical issues arising in the study of income, employment, interest rates, and the price level. Examines the role of monetary and fiscal policy in economic stabilization. Also considers these issues as they relate to the global economy. Prerequisites: 1, 2 and 11A.
Course Schedule and location
Class:
Monday, Wednesday, Friday
Section:
1. Tuesday
2. Thursday
3. Friday
Section sign-up sheets will be passed around in class. There is a maximum enrollment of 36 per section. Assignment to section is on a first come, first served basis. If you sign up for a section that is already full, you will be assigned to one that still has space.
Course requirements
Assessment will be based on problem sets (25%), a midterm (25%) and the final (50%). There will be 7 problem sets. Your grade will be based on your best 6 scores of the 7.
Problem sets are given below. They are due on Mondays, except where Monday is a holiday, in which case they are due on the following Wednesday. They must be submitted at the beginning of class. Homework submitted after class begins will be considered late, and will not be accepted. If for some reason you must miss class, you can submit your problem set by e-mail to your TA, or leave a hard copy in the TA’s box. It must be received by your TA before the relevant class starts.
Required reading
The textbook is Blanchard’s Macroeconomics, 3rd
Edition (Prentice-Hall 2002). This book should be in stock at the Bay Tree Bookstore.
Permission codes and enrollment
This class is now full. Permission codes will not be issued
to UCSC students. Students who are visiting UCSC should contact the professor.
Frequently asked questions
How much math is used in this course?
Since 11A is a prerequisite, you are expected to be comfortable with algebraic manipulation and to know some basic calculus. Being comfortable with taking derivatives will make your life a LOT easier.
Do I have to go to section?
Section is compulsory. Attendance will be taken, and will count towards your grade. In section, TAs will cover new material. They will also go through the solutions to the previous problem set, and discuss any questions you have on problem sets, readings or lectures.
Am I responsible for material covered in section?
Yes, absolutely.
Can my friends and I work together on the problem sets?
Yes. The problem sets are intended to be learning experiences, so feel free to work in groups. However you may find it useful to attempt the problems on your own before working with others. Each student must submit their own problem set solutions.
How are the problem sets graded?
The problem sets are graded on a scale of check plus, check, check minus and zero (if no problem set is handed in). Legibility is important. Typewritten problem sets are much appreciated by your TA. Where appropriate, graphs (drawn by hand) are very useful.
Can I turn a problem set in late?
No. Problem sets turned in after class begins are considered late, and will not be graded.
What if I cannot take the midterm?
There will be no make up exam. You should contact your TA in advance if you cannot make the midterm.
What is the material that will be covered on the midterm?
The midterm will cover all the material from the first half of the quarter.
What is the material that will be covered on the final?
The final will cover material from the entire quarter,
weighted towards the second half. Approximately one quarter of the credit in
the final will be for material from the first half of the quarter, with the
remaining credit for material from the second half of the quarter.
Is MSI offered for this course?
Yes. Details will be announced in class. For more information, contact Chris Lee, chilee at ucsc.edu
Syllabus
Week 1: The Long Run I.
1. Monday 5th January: Introduction and outline
of the course. Determination of national income.
2. Wednesday 7th January: Growth – the Solow model
3. Friday 9th January: Growth – the Solow model II.
Section: Extensions of the Solow model.
Week 2: The Long Run II.
4. Monday 12th January: Growth: Technology and
technology transfer.
5. Wednesday 14th January: The labor market.
6. Friday 16th January: Consumption.
Section: The concept of present discounted value. Answers to first problem set.
Week 3: The Long Run III.
Monday 19th January:
7. Wednesday 21st January: Investment.
8. Friday 23rd January: Consumption, Investment
and the stock market.
Section: The concept of rational expectations. Answers to second problem set.
Week 4: The Long Run IV.
9. Monday 26th January: Government debt.
10. Wednesday 28th January: Equilibrium in the long run. The long run interest rate.
11. Friday 30th January: The open economy in the
long run.
Section: Extra problems on long-run equilibrium. Answers to third problem set.
Week 5: The Long Run V.
12. Monday 2nd February: Equilibrium and the open economy in the long run. Fourth problem set due.
13. Wednesday 4th February: Policy in the long run. Review for the midterm.
14. Friday 6th February: Midterm exam
Section: Review for the midterm
Week 6: The Short Run I.
15. Monday 9th February: Money and inflation.
16. Wednesday 11th February: Money and banking.
17. Friday 13th February: Aggregate demand – the
LM curve.
Section: Return of mid-terms and answers to the midterm
Week 7: The Short Run II.
Monday 16th February:
18. Wednesday 18th February: Aggregate demand –
the IS curve.
19. Friday 20th February: IS-LM.
Section: Extra problems on IS-LM. Answers to fifth problem set.
Week 8: The Medium Run I.
20. Monday 23rd February: Aggregate supply – the
21. Wednesday 25th February: Aggregate supply –
the Phillips curve II.
22. Friday 27th February: Aggregate supply and aggregate
demand – short-run equilibrium in the closed economy.
Section: The central banker’s problem and long-run equilibrium inflation. Answers to sixth problem set.
Week 9: The Medium Run II.
23. Monday 1st March: Medium-run equilibrium in
the open economy.
24. Wednesday 3rd March: Medium-run equilibrium
in the open economy – more on exchange rates.
25. Friday 5th March: Monetary policy.
Section: Review of medium-run equilibrium. Answers to seventh problem set.
Week 10: The Medium Run III.
26. Monday 8th March: Trade and exchange rate
policy.
27. Wednesday 10th March: Fiscal policy
28. Friday 12th March: Review of the material covered over the quarter.
Section: Review
Final exam: Monday March 15th
Problem sets: Each problem set consists of 5 problems. These problem sets are long, but doing them is a very good way to ensure that you understand the material covered in class.
Problem set 1: due Monday 12th January
Topics: Determination of national income. Growth
Chapter 2, problem 2. Chapter 3, problem 2. Chapter 10, problems 4 and 5. Chapter 11, problem 5.
Problem set 2: due Wednesday 21st January
Topics: Technology and growth. The labor market and Consumption
Chapter 12, problems 1 and 7. Chapter 6, problems 3, and 6. Chapter 16, problem 5.
Problem set 3: due Monday 26th January
Topics: Investment and the Stock market
Chapter 16, problems 1, 2, and 3. Chapter 15, problems 2 and 7.
Problem set 4: due Monday 2nd February
Topics: Government debt. Closed and open economies in the long run.
Chapter 26, problems 2 and 4. Three additional problems to be given in class and posted on the website.
Here are the three additional problems for problem set 4:
1. a. Suppose that an increase in consumer confidence raises consumers’ expectations of future income, and thus the amount they want to consume today. This might be interpreted as an upward shift in the consumption function. How does this shift affect investment and the interest rate? Please include a diagram. (ref 3.5)
1. b. Suppose that the government increases taxes and government purchases by equal amounts. What happens to the interest rate and investment in response to this balanced-budget change? Does your answer depend on the marginal propensity to consume? (ref 3.7)
2. Consider an economy described by the following equations:
Y = C + I + G
Y = 5000
G = 1000
T = 1000
C = 250 + 0.75(Y – T)
I = 1000 + 50r
2. a. In this economy, compute private saving, public saving and national saving.
2. b. Find the equilibrium interest rate
2. c. Now suppose that G rises to 1250. Compute private saving, public saving and national saving
2. d. Find the new equilibrium interest rate (ref 3.6)
3. Consider an economy described by the following equations:
Y = C + I + G + NX
Y = 5000
G = 1000
T = 1000
C = 250 + 0.75(Y – T)
I = 1000 + 50r
NX = 500 - 500ε
r = r* = 5
3. a. In this economy, solve for national saving, investment, the trade balance, and the equilibrium exchange rate
3. b. Suppose that G rises to 1250. Solve for national saving, investment, the trade balance, and the equilibrium exchange rate. Explain what you find.
3. c. Now suppose that the world interest rate rises from 5 percent to 10 percent and G is again 1000. Solve for national saving, investment, the trade balance, and the equilibrium exchange rate. Explain what you find.
Problem set 5: due Wednesday 18th February
Topics: Money, inflation and banking. The LM curve.
Chapter 2, problem 4. Chapter 4, problems 6 and 8. Chapter 23, problems 2 and 5.
Problem set 6: due Monday 23rd February
Topics: The IS curve. IS-LM.
Chapter 5, problems 1, 2, 3, 4, 5
Problem set 7: due Monday 1st March
Topics: The Phillips curve. Aggregate supply and aggregate demand.
Chapter 7, problems 2, 3 and 6. Chapter 8, problem 3. Chapter 9, problem 6.