JEFFERSON COLLEGE COURSE SYLLABUS ECO101 MACROECONOMICS 3 Credit Hours Prepared by: James Watson Revised Date: February 2007 by James Watson Arts & Science Education Dr. Mindy Selsor, Dean
ECO101 MACROECONOMICS I. CATALOGUE DESCRIPTION Prerequisite: none 3 semester hours credit Macroeconomics explains the organization and goals of the U.S. economic system and how it operates. This course is required of students who wish to transfer to a four-year school, majoring in any field of business, leading to a bachelor's degree. (F,S,Su) II. COURSE GENERAL OBJECTIVES It is the goal of this course to equip students with the necessary vocabulary, concepts and reasoning ability to think critically about the economic forces that affect the economy and society as a whole. Students should also be able to recognize how these forces (interest rates, the business cycle, etc.) affect their own lives. Upon completion of this course, the student will be able to: A. Create an awareness of society's macroeconomic problems, the theories designed to analyze these problems and the alternative policies to deal with these problems. B. Enlarge the students' ability to reason analytically and objectively concerning economics issues. C. Instill in the students an interest and appreciation for the discipline of economics. D. Integrate information read in the textbooks and heard in class discussion with information read and heard in current news media. III. COURSE OUTLINE A. Graphs 1. Direct Relationships 2. Inverse Relationships B. The Economic Problem 1. Scarcity - Production Possibilities and the Use of Models 2. Opportunity Costs 3. Economic Efficiency: Full Employment vs. Unemployment 4. Economic Growth and Economic Decline
5. The Law of Increasing Cost C. Supply and Demand 1. The Law of Demand and its determinants 2. The Law of Supply and its determinants 3. Equilibrium 4. Shifts in Demand and Supply Curves D. Economic Systems 1. Traditional Economies and the three fundamental economic questions 2. The Transition to Modern Economics: specialization and mass production 3. Market Economies and the three fundamental economic questions 4. Command Economies and the three fundamental economic questions 5. The Mixed Economy E. Accounting for National Income 1. Gross Domestic Product (GDP) 2. Adjusting for inflation and population 3. Distortions in GDP accounting 4. Limitations in GDP accounting: GDP and social welfare F. Consumption 1. The Consumption Function 2. The Savings Function 3. Determinants of Consumption 4. U.S. Savings Rate G. Investment 1. Tangible vs. Financial Investment 2. Sources of Investment 3. Determinants of Investment 4. U.S. Investment H. Government 1. The Economic Role of Government 2. Countering the Business Cycle: fiscal policy I. Net Exports 1. Reasons Nations Trade 2. The U.S. Trade Deficit
J. Economic Fluctuations 1. The Business Cycle 2. Unemployment: Types of Unemployment and Flaws in the Unemployment Statistic 3. Inflation: Types of Inflation K. A Brief Economic History of the United States 1. The transition from an agrarian economy to an industrial economy. 2. A review of the recessions, depressions, inflationary periods, and economic growth, decade by decade, from the 1920s to the present. L. Fiscal Policy 1. Countercyclical Fiscal Policy 2. The Multiplier Effect 3. Automatic Stabilizers 4. Deficit Spending and the National Debt M. Equilibrium GDP 1. The Classical School 2. The Keynesian School 3. Aggregate Supply Equals Aggregate Demand N. Taxation 1. Types of Taxes 2. Tax Fairness 3. Comparison of U.S. Taxes with Other Countries O. Money and Banking 1. The Money Supply 2. The Evolution of the Banking System 3. The Federal Reserve System P. Monetary Policy 1. Controlling Bank Reserves 2. Tools of Monetary Policy 3. Countercyclical Monetary Policy 4. A History of Monetary Policy IV. UNIT OBJECTIVES A. Graphs 1. Recognize a direct relationship as plotted on a graph between two variables (such as income and consumption). 2. Recognize an inverse relationship as plotted on a graph between two
variables (such as the rate of inflation and unemployment). B. The Economic Problem 1. Demonstrate how the production possibilities model illustrates the concept of scarcity. 2. Explain the concept of opportunity cost. 3. Indicate how the production possibilities curve demonstrates the concept of full employment and economic inefficiency. 4. Explain the concepts of economic growth and decline. 5. Explain the Law of Increasing Cost and its relationship to the production possibilities curve. C. Supply and Demand 1. List the forces (price, taste, income, etc.) that cause buyers to purchase goods and services. 2. List the forces (price, technology, cost of inputs, etc.) that cause sellers to produce goods and services. 3. Demonstrate using the supply and demand graphs (model) how equilibrium prices and quantities are determined in a market economy. D. Economic Systems 1. Describe how a traditional economy answers the three fundamental economic questions. 2. Describe how a market economy answers the three fundamental economic questions. 3. Describe how a command economy answers the three fundamental economic questions. 4. Explain why the United States economy is described as a mixed economy. E. Gross Domestic Product 1. Define the statistic Gross Domestic Product and explain how economists use it as a tool of analysis. 2. Demonstrate how to adjust GDP for inflation and population. 3. Cite the distortions in the GDP statistic. 4. Cite the limitations in the GDP statistic. F. Consumption 1. Describe the consumption function. 2. Describe the savings function. 3. List and explain the determinants of consumption. 4. Compare the U.S. savings rate with savings rates in other industrial countries. G. Business Investment 1. Compare and contrast real investment with financial investment.
2. List the sources of financial investment available to businesses. 3. List and explain the determinants of investment. 4. Compare the U.S. investment rate with investment rates in other industrial countries. H. Government 1. Compare and contrast the economic role of government as advocated by Adam Smith with the economic role of government as advocated by John Maynard Keynes. 2. Describe the methods used by the government using fiscal policy to counter the business cycle. I. Net Exports 1. Explain what motivates nations to trade and why we now live in a Global Economy. 2. List and explain the reasons for the persistent growing U.S. trade deficit. J. Economic Fluctuations 1. Describe the business cycle and explain the various theories as to the causes of its fluctuations. 2. Distinguish between frictional, structural and cyclical unemployment. 3. Explain some of the problems in measuring the unemployment rate. 4. Explain the relationship between unemployment and fluctuations in the business cycle. 5. Describe the history of inflation (and deflation) in the U.S. in the 20th century. 6. Demonstrate the calculation of the inflation rate using the Consumer Price Index. 7. Describe the effects of inflation on consumer behavior. 8. Distinguish between the various types of inflation (demand-pull, cost-push, disinflation, and hyperinflation.) K. A Brief Economic History of the United States 1. Describe the key ingredients of change in the evolution from an agrarian to an industrial economy. 2. List and describe the most important economic events in the decades from the 1920s to the present. L. Fiscal Policy 1. Explain how discretionary fiscal policy as carried out by Congress and the President can be used to counter the business cycle. 2. Describe the multiplier effect. 3. Explain how fiscal policy as carried out by automatic stabilizers are used to counter the business cycle. 4. Compare and contrast discretionary fiscal policy with automatic
stabilizers. 5. Distinguish between a budget deficit and the national debt. 6. Explain the advantages and disadvantages of deficit spending. 7. Compare and contrast the various philosophies concerning balancing the budget. M. Equilibrium GDP 1. Compare and contrast the Classical School of Economics with the Keynesian School Of Economics. 2. Use the Aggregate Supply-Aggregate Demand model to illustrate: large-scale unemployment, demand-pull inflation, and cost-push inflation. N. Taxation 1. Distinguish between an average tax rate and a marginal tax rate. 2. Distinguish between a direct tax and an indirect tax. 3. Describe the differences between a progressive tax, a proportional tax and a regressive tax. 4. Compare and contrast the types and levels of taxes in the U.S. with the types and levels of taxes in other industrial countries. O. Money and Banking 1. Define money and describe the various functions it performs. 2. Describe the evolution of the banking system. 3. Describe the advantages and disadvantages of a fractional reserve system. 4. List the steps the U.S. federal government took to make the banking system safer. 5. List and explain the functions of the Federal Reserve System (Fed). P. Monetary Policy 1. Demonstrate using a banks' balance sheet how the Fed can control a banks' reserves. 2. Explain how the Fed can control the money supply by controlling bank reserves in the country. 3. List and describe the tools of monetary policy. 4. Explain how monetary policy as carried out by the Fed can be used to counter the business cycle. 5. Briefly describe the history of monetary policy in the U.S. in the 20th century. V. METHOD(S) OF INSTRUCTION A. Lecture/Class Discussion
B. Class Discussion- The News and Economic Principles C. Handouts such as News Articles D. Use of Time Series Data (GDP, Unemployment, etc.) E. Videotapes VI. REQUIRED TEXTBOOK(S) (WITH PUBLICATION INFORMATION) Slavin, Steven. Economics, 8th ed., McGraw-Hill Irwin, 2008. VII. REQUIRED MATERIALS (STUDENTS) Textbook Course Lecture/Study Guide (Prepared by the Instructor) VIII. METHOD(S) OF EVALUATION (STUDENTS) A. Exams: Multiple Choice, Vocabulary B. Take-home Exam/Open-book Exams (material from articles, class discussion, news and the textbook): fill in the blank; short essay; calculations C. Quizzes: Multiple Choice; Fill-in-the-blank; Vocabulary