Economics 231: Principles of Macroeconomics

Last chance for extra credit

2010-05-07T15:54:49Z

Here is your final extra credit question based on today's news.

The Bureau of Labor Statistics released their April employment report. Answer these questions based on the report. (1 point each for 3 possible extra credit points)

1. What happened to the unemployment rate in April, and how many net new jobs were created in April?

2. The answer to #1 may seem confusing to people who do not understand the definition of unemployment you learned in class. Why?

3. What was the labor force participation rate in April, and how did that compare to what it was in March?

Top ten list of things to know for the final

2010-05-07T15:52:10Z

econ231_4.ppt

As always, this is not an exhaustive list. However, if you really know and understand the concepts mentioned here, you should do a lot better than if you don't.

Homework, Due May 4

2010-04-22T08:47:12Z

hw231_6.pdf

Some things to study for exam 3

2010-04-14T16:29:38Z

Not really in the form of a top 10 list this time, but here are some thoughts on the things you should definitely know for the third exam.

Employment and unemployment
Know the types of unemployment (frictional, structural, cyclical).
Know how to calculate labor market statistics (in class exercise).
Understand the differences between US and European labor markets that cause differences in unemployment rates.

Inflation
Basic definition (page 218): Inflation is the percentage increase in the price level (deflation is a decrease). Though individual prices may be rising and falling, inflation refers to the average.
Difference between price indexes (CPI, PPI, GDP deflator)
Hyperinflation: Extremely high inflation. No precise definition but you know it when you see it.
Notable hyperinflations: Germany 1919-1923 (assisted Hitler's rise to power), Hungary 1945-1946 (highest monthly inflation on record), Zimbabwe 2001-2008 (most recent example and almost broke Hungary's record)
Quantity theory: MV=PY (know what it each variable represents)
Quantity theory is also written %change in M + %change in V = %change in P + %change in Y
"Inflation is always and everywhere a monetary phenomenon" and "In the long run, money is neutral": Know what is meant by these statements.
What is the relationship between inflation and real and nominal interest rates?
What are the costs of inflation? Why is it hard to stop?

Business cycle model and transmission mechanisms
Understand the graph of the model (see pages 255-258 for examples)
Solow growth curve is like a supply curve, it describes productive capacity.
Aggregate demand curve is determined by spending and the money supply.
Know the difference between Real Business Cycle theory and New Keynesian Theory
Real business cycle theory does not have the short run aggregate supply curve; New Keynesian theory does.
New Keynesian theory relies on sticky wages or sticky prices to generate a short run aggregate supply curve that is upward sloping.
Review pages 255-258 closely to see how output and inflation respond to different shocks (i.e. changes in AD or shifts in the Solow growth curve).
Intertemporal substitution, irreversible investment, and time bunching are examples of transmission mechanisms that can affect the business cycle.

Homework 5: Due Tuesday, April 13, 2010

2010-04-06T07:52:21Z

hw231_5.pdf

Extra credit opportunity

2010-03-25T14:23:12Z

Here is an extra credit opportunity.

Find a news article on the current employment situation in the U.S. and write a critical analysis/summary of the article.

The length of your summary should be about 1 page typed double-spaced (2 pages if hand written). In your summary, you need to identify the main point of the article (i.e. the thesis) and then analyze the content in light of the textbook's presentation of the labor market.

Things to consider:

Does the article address cyclical or structural unemployment (or both)?
Does the article address policies designed to tackle the problem (e.g. extending the time limit on unemployment insurance)?
Does the article address issues related to skills or training?

There are many other questions that you could consider. Do not limit yourself to these. Base your specific approach on the article you choose. Every one will be a little different.

This will be worth 5 points and is due April 6.

Labor market definitions

2010-03-25T14:22:19Z

econ231_3.ppt

Homework 4: Due April 1

2010-03-25T12:54:35Z

hw231_4.pdf

Top ten list for 2nd exam

2010-03-09T08:06:23Z

econ231_2.ppt

Homework 3: Due March 3

2010-03-03T17:12:06Z

hw231_3.pdf

Some links

2010-02-23T22:23:22Z

Here is a link to the gapminder.org site I showed in class.

Here's a video that I will show in class on Thursday.

Yes they can! from Gapminder Foundation on Vimeo.

Here is the video I showed today:

And if you're wondering what this video has to do with economic growth, think about this for a minute. The point of the video is to highlight the way that the world is changing. That change is the result of economic growth. A country beginning its path to modern growth today will go through all the changes that the U.S. went through in the last hundred years--but they'll do it in a couple of decades. That is the story I want you to take away from this.

And how will you adapt to this new world? Leaders in this new world will be those who can harness social networks and invent new technologies. The more you understand economics, the more you will understand this changing world. The economic way of thinking gives you tools that you can use that will work just as well in the next 50 years as they did in the last 50--tools to understand why things are the way they are, and tools to help change the world for the better.

Do economists care about Facebook? Do we care about making copyright law reflect changing technologies? You bet we do. The world is changing. It's a consequence of economic growth. Few subjects could boast such a direct connection to the world's most interesting questions.

Helpful links

2010-02-21T21:47:53Z

Bureau of Economic Analysis (GDP press releases and data)

Bureau of Labor Statistics (Employment, unemployment, productivity, and price data)

Homework 2: Due February 23

2010-02-16T05:15:23Z

hw231_2.pdf

No office hours Monday, February 8

2010-02-08T00:08:22Z

I am out of town with a student group. I will answer any e-mails you may have with questions about the exam when I return in the evening (around 9:30).

Additional suggestions as you study for the first exam

2010-02-07T23:22:46Z

It is more important to be able to apply the big ideas (chapter 1) than to be able to list them. In other words, you should be able to look at a situation and see why the incentives matter, what the trade-offs are, and what the opportunity cost of an action is. If you can do this (and the problems at the end of each chapter are good for testing yourself), then you should do well. There are several questions where you will need to think about the incentives--even if that is not what is asked for directly. Don't make the questions too hard! Remember ceteris paribus (all other things being equal) and don't bring in all kinds of other assumptions.

Pay special attention to the things that shift demand and supply.

Demand shifters:

Income
Population (# of buyers)
Price of substitutes and complements (know which is which!)
Expectations
Tastes (preferences)

The good's own price does not affect demand. The good's own price affects the quantity demanded.

Supply shifters:

Technological innovation
Taxes and subsidies
Expectations
Entry and exit of producers (# of producers)
Changes in opportunity cost (see homework problem on corn and soybeans)

The good's own price does not affect supply. The good's own price affects the quantity supplied.

Know what happens to price and quantity when supply or demand shift. (See figure 3.8 page 43 and be able to apply it.)