Universidad de Costa Rica Department of Economics

Transcription

1 Universidad de Costa Rica Department of Economics Syllabus: XE-0156 Introductory Economics 2013 I term. Course description. This course introduces the basic concepts of economics. It encourages the student to be aware of and to understand the basic issues of the economic environment, as well as discussions or debates about the functioning of the economy. Objectives of the course It aims to provide the student with the ability to: relate to the language of economics and its variables. understand the meaning and implications of economics methods and analysis. discuss and understand various economic problems. properly use specific terminology of economics. understand the operation of markets, their failures, the Government's actions in the markets and the failure of those actions. understand measurement for the economy at large and the factors affecting their evolution of the agents and their groupings. relate course concepts to the events of the economy, in particular those related to the recent economic crisis. Basic textbooks Krugman, Paul; Weills, Robin and Martha L. Olney (2011) Introduccion a la Economìa.. Editorial Reverté, Barcelona (we will use the Second Edition, which will be available at the Copias/FCE office). Robles, Edgar; Arce, Gilberto y Lizano, Eduardo (2007). Economía desde el trópico. Un curso introductorio aplicado a Costa Rica. Editorial Thomson. The literature identified in each of theses in bold is mandatory. It will be evaluated in the midterms, as directed by your teacher. Please, take notice that some material may not be discussed in class and the students must study on their own. That material and that indicated in bold below will be assessed in the final exam. RECOMMENDED BOOKS (the original are in English language) Bernanke, Ben S. y Frank, Robert H. Principios de economía. McGraw-Hill. Tercera edición, China. Mankiw Gregory N. (2009) Principios de Economía. Cengage Learning Editores, S. A. Quinta Edición. México. Samuelson Paul y Nordhaus William (2002). Economía. McGraw- Hill/Interamericana.17ª Edición. España. EVALUATION Two partial exams 25% midterms will be scheduled by the teacher for each group (likely dates are the week of May 6 th and June 17 th ) and communicated to the students at least 5 business days prior to the test. Specific activities: work, weekly quizzes and exercises. 20% The course instructor will

2 indicate to students the type of activities to be performed during the semester. Lecture Final Exam 30% The final exam for both groups pair Rodrigo Facio as regional headquarters, is a teaching and will be held on Monday July 15 at 5 pm. The bold highlighted material will be covered on the final exam, in addition to material indicated by your teacher. Total 100% THESIS 1 - Summary Define economy. Define resources and needs. Understand that decisions are based on marginal reasoning. Understand that incentives affect behavior of individuals. Understand and apply the concept of opportunity cost. Distinguish between microeconomics and macroeconomics. : Bernanke and Frank, Chapter 1 and Appendix. Krugman, Wells and Olney. Introduction and Chapter 1. Basics. Mankiw, Chapters 1 and 2. Appendix to Chapter 2. Robles, Arce and Lizano, chapter 1. Samuelson and Nordhaus, Chapter 1, Appendix 1. Recommended reading: Friedman, Milton and Friedman, Rose. (1980) Free to Choose.GrijalboChapter1. THESIS 2 - economic models: maximum production frontier and trade Manage the methods of science to explain economic phenomena. Manage observation concepts, relation and function, with their graphic representations. Understand the role of the assumptions and the use of models. understand the model curve peak production possibilities. Understand the model of comparative advantage and gains from trade. Differentiate between absolute advantage and comparative advantage. Understand the circular flow model of income. Differentiate between positive economics and normative economics. Bernanke and Frank. Chapter 2. Krugman, Wells and Olney. Chapter 2. Economic models: the production possibility frontier and trade. Appendix to Chapter 2. Graphical representations in Economics Mankiw, Chapter 3. Interdependence and the gains from trade. Robles, Arce and Lizano, Chapter 2 (p ) and Chapter 8 (p ). Samuelson and Nordhaus, chapter 15. WTO. Understanding the WTO: THESIS 3. - market forces.

3 Explain what a model of perfect competition. Identify what determines the demand for a good in a perfectly competitive market.. Explain the income and substitution effects. Identify what determines the supply of a good in a perfectly competitive market. Explain the concept of market equilibrium and how supply and demand determine the price and quantity of the good sold. Understand the role of prices in allocating scarce resources in a market economy. Define, calculate, interpret and apply the concept of elasticity of demand and supply. Identify the factors that determine it. Frank and Bernanke, Chapters 3 and 4. Krugman, Wells and Olney. Chapters 3. Supply and Demand and Chapter 5. The elasticity. Mankiw, Chapters 4 and 5. Robles, Arce and Lizano. Chapters 2, 3 and 4. Samuelson and Nordhaus, Chapter 3 and 4. THESIS 4. markets, the efficiency and the role of the Government. Define and understand the concepts of consumer surplus and producer surplus. Define and understand the concept of economic efficiency. Understand the relationship between efficiency and the allocation of resources in an economy model of perfect competition. Analyze the consequences of price controls in competitive markets. Analyze the role of international trade. Analyze the impact and consequences of a tax efficient perfectly competitive markets. Understand the various market failures in reality: uncompetitive structures, externalities, public goods and public action to address these market failures. Understand state failures. Understand the market and state discussion in microeconomics. Bernanke and Frank, Chapter 5 (p ), Chapter 6 (p ), 7 and Chapter 8 (p and ) and Chapter 9. Krugman, Wells and Olney. Chapter 4. The Market Strikes / Chapter 6. Consumer surplus and producer / Chapter 7. Efficiency, Equity inefficiency and / Chapter 8. International trade / Chapter 9. Externalities / Chapter 10. Public goods and common resources. Mankiw, Chapters 6, 7, 8, 9, 10 and 11. Robles, Arce and Lizano, Chapters 6, 7 and 9. Samuelson and Nordhaus, Chapters 2C, 15, 16 and 17. of topics that will not be discussed in class and required reading (corresponds to what is stated in italics in the scope of the thesis) Robles, Arce and Lizano, Chapters 6, 7 and 8. THESIS 5. - Concepts and Measurement of macroeconomics.

4 Define basic concepts: Microeconomics and Macroeconomics; economic aggregates; macroeconomic policies; cycle; employment and unemployment. or aggregate production; inflation and deflation; Define the concept of GDP, the three ways of measuring it, and components. Distinguish the concept of nominal GDP and real GDP. Understand the concept of implicit GDP deflator. Interpret the meaning of GDP and its limitations. Explain the concept of aggregate price level and its approximation by the consumer price index (CPI). Understand the CPI and its limitations.. How a nominal variable is transformed to constant buying power and the difference between nominal and real changes. Explain the concept of balance of payments and its main components: the current account and the financial account. Place where Costa Rican macroeconomic data relates to measuring GDP, CPI and the Balance of Payments. Define employment, unemployment, frictional unemployment, structural unemployment, natural rate of unemployment. Relate unemployment and the economic cycle Be able to place the data used to measure unemployment in Costa Rica. Understand the concepts of poverty and inequality and how they are measured in Costa Rica. Bernanke and Frank, chapters 17, 18 and 19. Krugman, Wells and Olney. Chapter 11. Macroeconomics: an overview. Chapter 12. Evaluate the macroeconomy. Chapter 19. Labor market, unemployment and inflation. p Chapter 21. The open economy macroeconomics, p Mankiw, Chapters 23, 24 and 23 (p ). Robles, Arce and Lizano, Chapter 1 (p. 7-13), Chapter 5, Chapter 8 (p ) and Chapter 13. Samuelson and Nordhaus, Chapters 21 and 29-A. of topics that will not be discussed in class but are required reading GDP per capita, according to the World Bank: Methodology for calculating the Consumer Price Index in Costa Rica National Statistics Institute (INEC). Main characteristics of the consumer price index. Base on July 2006 purchasing schedules. Evolution of the in Costa Rica Balance of payments of Costa Rica. Central Bank of Costa Rica. Economic indicators, external sector, balance of payments.. Thesis 6. - growth Understand the concept of economic growth and the current debate on economic development. Understand the sources of economic growth.

5 Understand the reasons why growth rates may differ between countries.. (This argument can not be discussed in class and the material required is indicated in bold) Bernanke and Frank, Chapters 20 and 21. Krugman, Wells and Olney. Chapter 13. The long term growth. Leon, Jorge (2012) Economic History of Costa Rica in the twentieth century. Volume II: The rural economy. Institute for Research in Economics (ICSI) and Historical Research Center of Central America (CIHAC) Mankiw, Chapters 20, 25 and 28. Samuelson and Nordhaus, Chapters 19, 27, 28, and 31-B. Robles, Arce and Lizano, Chapter 12.. Sen, Amartya. Theories of development in the early twenty-first century. Thesis 7- the financial system. Understand the matching between saving and investment in a closed economy and an open economy. Understand the functions of the financial system. Understand the role of the interest rate Distinguish between the nominal interest rate and the real interest rate. Understand the operation of the main financial instruments: loans, bonds, stocks and bank deposits Understand the operation of financial markets intermediaries: banks, investment funds, pension funds and bags Understand how the market for loanable funds in a small open economy or closed to international capital flows. Relate the market for loanable funds to the deficit of public finances and balance of payments Understand the structure of the Costa Rican financial system and its regulation. Bernanke and Frank, chapters 22 and 24. Krugman, Wells and Olney. Chapter 14. Saving, investment and the financial system. Mankiw, Chapters 26 and 27. Robles, Arce and Lizano, Chapter 11. Samuelson and Nordhaus, Chapters 25-C and 30-B. of topics that will not be discussed in class and required reading: SUGEVAL. Virtual Classroom courses. (all courses) Two simple explanations of the financial crisis of 2008: On the risk premium: tml THESIS 8. -The demand and aggregate supply.

6 Explain economic fluctuations Distinguish between long term and short term economic analysis. Identify the main features of the short-term fluctuations. Explain the model of aggregate supply and demand, both in the short and long term. Use the aggregate supply and demand model to analyze short-term and long term fluctuations. Understand the basics of fiscal policy and its consequences in the short and long term. Bernanke and Frank, Chapter 28.. Krugman, Wells and Olney. Chapter 15. The aggregate supply and demand, p and Chapter 16. Fiscal policy, p and p Mankiw, Chapters 33 and 34. Samuelson and Nordhaus, Chapters 20, 23 and 31-A. THESIS 9 - money, inflation and the central bank Define what is money, understand the roles it plays in the economy and the different definitions of money. Explain the concept of money supply and the roles the central bank and the commercial banks play to establish that aggregate. Understand the ways to measure the money supply. Understand the concept of monetary base and money supply multiplier Understand the concept of monetary policy and its instruments.. Relate monetary policy to aggregate demand. Explain what is inflation and to identify its causes. Identify and analyze the costs introduced by inflation for the different agents in the economy. Explain modern macroeconomics. Bernanke and Frank, chapters 23, 27 and 29. Krugman, Wells and Olney. Chapter 17. The money, the interbank system and central banks / Chapter 18. Monetary policy. Chapter 20. The creation of the modern economy. Mankiw, Chapters 29, 30, 35 and 36. Robles, Arce and Lizano, Chapter 10 (p ). Samuelson and Nordhaus, Chapters 25 A and B, 32 and 34. Thesis 10 - The macroeconomics of the open economy. Explain the concept of balance of payments and its main components: the current account and the financial account. (Review thesis V) Apply the model of supply and demand to explain the functioning of the foreign exchange market and the determination of the nominal exchange rate. Explain the different operating regimes: Flotation clean or dirty

7 or exchange rate determined by the authority. or bands. Differentiate between the concepts of nominal exchange rate and real. Explain the theory of purchasing power parity and its limitations. Explain the concept and determinants of international capital flows. Explain the operation of the loanable funds market in a small open economy to international capital flows. Bernanke and Frank, Chapter 30. Krugman, Wells and Olney. Chapter 21. The open economy macroeconomics. (Except for the section called a model of private capital flows, p ) Mankiw, Chapter 31. Robles, Arce and Lizano, Chapter 8 (p ) and Chapter 10 (p ). Samuelson and Nordhaus, Chapters 29. I shall be available Tuesday and Wednesday at office 5 in the Department of Economics at 5 pm. It is best to get an appointment by writing to: jrvargas@fce.ucr.ac.cr