Economics 120 Phone: FALL 2014 Office: D-413

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1 The mission of the Economics/Geography Department is to be a leader and partner in meeting the intellectual, cultural, technological, workforce and economic development needs of our diverse community. The Economics/Geography Department seeks to incorporate micro and macro economic decision-making skills into the daily lives of the students, along with promoting a spatially-influenced local, regional and global perspective of the earth using scientific principles. Instructor: Gus Montes Santa Ana College montes_gus@sac.edu Economics 120 Phone: FALL 2014 Office: D-413 MACROECONOMICS Section # COURSE DESCRIPTION: Macroeconomics is an introduction to the science of economics emphasizing how national income, unemployment, inflation, and economic growth are determined. Additional topics covered: taxation, multiplier model, money and banking, and business cycles. The effects of government policy on the economy will also be discussed. Macroeconomic analysis focuses on the "large, economy-wide aggregate, such as indicators of total economic activity. The course will also include the study of international economics and globalization. COURSE OBJECTIVE: The British economist Alfred Marshall observed that, "economics is an engine of analysis." His famous student John Maynard Keynes later said that "economics is a way of thinking." The course will have achieved its objective upon its completion if you have acquired this logical system of thought. The objective of this course is to develop and apply the basic results and techniques of economic reasoning to the American economy and globalization. Critical thinking skills that are required throughout the course include analysis, logical reasoning, comparison, evaluation, problem-solving, and prediction. Appropriate vocabulary, math and graphing skills are used as students apply economic concepts to examples from daily life and business. STUDENT LEARNING OUTCOMES Upon successful completion of this course, the student will be able to Identify and explain the fundamental economic problem of allocating scarce resources and the role of positive economics in explaining choices. Communicate using basic economic terminology, interpret relevant economic data, and follow and construct fundamental economic arguments. Apply analytical reasoning and problem solving skills to model cause-and-effect relationships and formulate predictions at the aggregate economic level. Explain the processes through which a market system allocates scarce resources at the aggregate level and analyze the efficiency of and the effects of government policies on the resulting allocation. Course Materials: Text: MACROECONOMICS, 9th Edition, by David C. Colander Required for assignments online: Registration McGraw-Hill CONNECT; Colander ECONOMICS 9 th Edition ASSIGNMENTS: The following chapters will be covered during the semester: Chapters 1-5, 9, and Library reference material, with a timetable to be announced by the instructor. I will announce in class any material that we will not cover. Material we do not cover will not be on any of your tests. ATTENDANCE POLICY: Attendance is mandatory. The school needs the money, the instructor is an egotist, and you just may learn something in classroom activity. A student may be dropped for excessive absences when the total hours of absences exceed 10% of the total, scheduled hours of the class. If you desire to stop attending class, check attendance/drop withdrawal policies in the current college catalog.

2 OFFICE HOURS: Location and times to be announced in class. The instructor reserves the right to modify this syllabus at any time by making an announcement in class. COURSE FORMAT: This course will be conducted using a lecture format, class discussions, videos, illustrations by use of overhead projections, and applications using math/graphic oriented work problems. There is always an opportunity for questions in or out of class. The lectures will stress the development of economic theory. To maximize the value of the lectures, it is recommended that the student read the assigned reading prior to the lecture. Particular attention should be given to the terms and definitions in the pre-lecture reading process. After the lecture, a more careful reading of the material should be undertaken. GRADING POLICY: Assignment of letter grades on examinations are determined by the percentage of correct responses to the total value of the items given: % = A 89-80% = B 79-70% = C 69-60% = D 59-0% = F There will be a total of four tests, including the final exam. Each test will consist of between 25 to 50 multiple-choice questions plus one or more essay, problem-solving and graphing questions. Each test will be worth 100 points, except for the final exam, which will be worth 200 points. Quizzes will be given throughout the semester. Some of the quizzes will be announced; others may be "pop" quizzes. There will be no "Make-Up" quizzes or tests unless arrangements have been made with the instructor prior to the quiz or test. If any extra credit is given, it will be less than or equal to 5% of the total points. The student will also be required to turn in homework assignments throughout the semester. In addition, an "interactive portfolio" will be required, prior to completion of this course. The portfolio will consist of selected articles, along with a brief analysis of each by the student. Creativity and originality are highly encouraged. Articles must be current! "ACADEMIC HONESTY" Students are expected to abide by ethical standards in preparing and presenting material which demonstrates their level of knowledge and which is used to determine grades. Such standards are founded on basic concepts of integrity and honesty. This policy is extended to the taking of tests or any written work that may be determined as "plagiarism." As defined by Webster, plagiarism is "to steal or pass off the work or ideas of another." Remember, whether for exams, written assignments, or group collaborations, any work turned in should be your own. ELECTRONIC DEVICES: Students are not permitted to use any electronic devices (including laptops, digital pads, cell phones, etc.) except according to a schedule of the instructor. STUDENTS WITH DISABILITIES: Your success in this course is important to me. Santa Ana College and I are committed to providing reasonable accommodations for all individuals with disabilities. If you have a disability that may have some impact on your ability to do well in this course, I encourage you to speak with me as soon as possible. Also, please contact Disabled Student Programs & Services so that we can all collaborate on your classroom accommodations in a timely manner. DSP&S is located in U-103, and their phone number is The DSP&S office requires documentation of your disability in order to receive reasonable accommodations. If you do not have documentation, they will work with you to acquire it. I look forward to supporting you to meet your learning goals. 2

3 COURSE CONTENT UNIT I Introduction: Thinking Like an Economist A. Economics and Economic Reasoning 1. Define economics and list three coordination problems that an economy must solve. 2. Develop a guide to economic reasoning that can be applied to different circumstances. 3. Utilize the appropriate economic terminology and concepts in class discussions and assignments. 4. Apply economic insights to real-world situations and differentiate the economist s perspective from the perspectives of other social science disciplines. B. Basic Graphs and Equations for Economics 1. Learn basic graphing techniques and the mathematical principles that underlie them. 2. Explain the importance of economic modeling by constructing graphs. 3. Learn to use economic equations to analyze economic problems. 4. Develop & interpret graphs with real world data. 5. Demonstrate quantitative literacy and learn to avoid common math mistakes. C. Trade, Trade-offs and The Evolving U.S. Economy in Perspective 1. Analyze and apply trade and trade-offs, and evaluate their importance to government policy. 2. Construct the Production Possibilities Model and differentiate between an individual production possibilities curve and a production possibilities curve for a society. 3. Explain and calculate the Principle of Increasing Marginal Opportunity Cost and its application to efficiency. 4. Summarize and interpret historical trends as they apply to the evolving U.S. economy. UNIT II Supply and Demand A. Supply and Demand 1. Demonstrate a technical understanding of the Law of Demand. 2. Construct a demand curve based on the appropriate economic variables. 3. Learn to explain and apply the concept of demand by differentiating between shifts in demand vs. a movement along the demand curve. 4. Analyze and distinguish between an individual demand curve and a market demand curve. 5. Demonstrate a technical understanding of the Law of Supply. 6. Construct a supply curve based on the appropriate economic variables. 7. Learn to explain and apply the concept of supply by differentiating between shifts in supply vs. a movement along the supply curve. 8. Analyze and distinguish between an individual supply curve and a market supply curve. 9. Apply the concepts of supply and demand by using them to derive a market equilibrium. 10. Explain and illustrate graphically the concept of market equilibrium. 11. Illustrate graphically supply and demand concepts and apply them to current economic events. 12. Examine government intervention in the market. 13. Graph the concept of price ceilings and learn the advantages and disadvantages of price ceilings in a free market. 14. Graph the concept of price floors and learn the advantages and disadvantages of price floors in a free market. 15. Illustrate graphically the economic effects of specific government interventions such as excise taxes to markets. 16. Explain and demonstrate with graphs quantity restrictions and third party payer markets. UNIT III Macroeconomic Issues A. Economic Growth, Business Cycles, Unemployment and Inflation 1. Explain the difference between the long-run framework and the short-run framework. 2. Summarize and apply relevant statistics about growth, business cycles, unemployment, and inflation. 3. List, explain and graph the four phases of the business cycle. 4. Explain and calculate how unemployment is measured and analyze microeconomic categories of unemployment. 5. Evaluate and utilize graphs that integrate the target rate of unemployment to the potential output of the economy. 6. Define inflation and distinguish the economic impact of a real concept from a nominal concept. 7. Explain the major costs of inflation. B. National Income Accounting 1. Explain why national income accounting is important. 2. Define GDP and calculate GDP in a simple example, avoiding double counting. 3. Evaluate why GDP can be calculated using either the income or expenditures approach. 4. Define and summarize the four expenditures of GDP. 5. Distinguish and calculate between real GDP and nominal GDP. 6. Analyze some limitations of national income accounting. 7. Describe the shortcomings of using GDP to compare standards of living among countries. C. Growth, Productivity, and The Wealth of Nations 3

4 1. Define growth and relate it to living standards. 2. List five sources of economic growth. 3. Explain and distinguish between diminishing marginal productivity and decreasing returns of scale. 4. Distinguish Classical Growth Theory from New-Growth Theory. UNIT IV The Macroeconomic Framework A. Aggregate Demand, Aggregate Supply, and Modern Macroeconomics 1. Discuss the historical development of modern macroeconomics. 2. Explain and graphically interpret the shape of the aggregate demand curve and analyze what factors shift the curve. 3. Explain and graphically interpret the shape of the short-run aggregate supply curve and evaluate what factors shift the curve. 4. Evaluate and derive the shape of the long-run aggregate supply curve. 5. Demonstrate graphically the effects of shifts in aggregate demand and shifts in aggregate supply on price level and output in both the short run and long run. 6. Analyze the limitations of the macro policy model. B. The Multiplier Model 1. Explain the difference between induced and autonomous expenditures. 2. Illustrate how the level of income is graphically determined in the multiplier model. 3. Utilize the multiplier equation to determine equilibrium income. 4. Explain how the multiplier process amplifies shifts in autonomous expenditures. 5. Demonstrate graphically how fiscal policy can eliminate a recessionary gap or an inflationary gap. 6. Explain the major reasons why the multiplier model might be misleading. UNIT V: Money, Inflation, Monetary Policy, and Macro Policy in Perspective (9 hours) A. Money, Banking and the Financial Sector 1. Explain why the financial sector is central to almost all macroeconomic debates. 2. Explain what money is. 3. Enumerate the three functions of money. 4. Evaluate the alternative measures of money and their primary components. 5. Explain and demonstrate how banks create money. 6. Describe and calculate both the simple and the approximate real-world money multiplier. 7. Explain how a financial panic can occur and describe the potential problems with government guarantees to prevent such panics. B. Monetary Policy and the Debate about Macro Policy 1. Summarize the structure and expanded duties of the Fed. 2. List the three tools of monetary policy and explain how they work. 3. Define the Federal funds rate and explicate how the Fed uses it as an intermediate target. 4. Explain and graph how monetary policy works in the AS/AD model. 5. Describe the major problems often encountered when conducting monetary policy. C. Inflation and Its Relationship to Unemployment and Growth 1. Analyze some of the distributional effects of inflation. 2. Explain how inflation expectations are formed. 3. Delineate the quantity theory of money and its theory of inflation. 4. Outline and explain the institutionalist theory of inflation. 5. Explain and graphically interpret long-run and short-run Phillips curves. 6. Evaluate the different views on the relationship between inflation and economic growth. D. Aggregate Demand Policy in Perspective 1. List major problems with fiscal policy and explain how these problems limit its use. 4

5 2. Describe how automatic stabilizers work. 3. Summarize the advantages and disadvantages of using monetary and fiscal policy. 4. List and analyze major alternatives to fiscal policy. 5. Explain why economists often talk about policy regimes rather than simply policy. E. Politics, Deficits, and Debt 1. Define the terms deficit, surplus and debt. 2. Distinguish between a passive deficit and a structural deficit. 3. Differentiate between real and nominal debt. 4. Explain why the debt needs to be judged relative to assets. 5. Analyze the historical record for the U.S. deficit and debt. 6. Summarize the debate about Social Security and Medicare and identify the real problems and real solutions. UNIT VI: International Policy Issues A. International Trade Policy, Comparative Advantage and Outsourcing 1. Identify and summarize selected important data of trade. 2. Explain and calculate the principle of comparative advantage. 3. Define and analyze three determinants of the terms of trade. 4. Explain and contrast why economists and laypeoples view of outsourcing differ. 5. Evaluate three policies countries use to restrict trade. 6. Summarize why economists generally oppose trade restrictions. 7. Explain how free-trade associations both help and hinder international trade. 8. Analyze why the U.S. is losing some of its comparative advantages. B. International Financial Policy 1. Describe the balance of payments and the trade balance, and relate them to the supply and demand for currencies. 2. Identify and explain four important fundamental determinants of exchange rates. 3. Explain how a country influences its exchange rate by using monetary or fiscal policy. 4. Explain how a country stabilizes or fixes an exchange rate. 5. Define purchasing power parity and real exchange rate. 6. Differentiate fixed, flexible and partially flexible exchange rates, and summarize the advantages and disadvantages of each. 7. Discuss the advantages and disadvantages of a common currency. C. Macro Policy in a Global Setting 1. Identify and discuss why there is significant debate about what U.S. international goals should be. 2. Describe the paths through which monetary policy affects the trade balance. 3. Explain the paths through which fiscal policy affects the trade balance. 4. Summarize the reasons why governments try to coordinate their monetary and fiscal policies. 5. Describe some potential problems with internationalizing a country s debt. 6. Explain how restoring U.S. competitiveness will likely affect U.S. policy in the future. 5

6 SCHEDULE OF TOPICS: MACROECONOMICS 9 th Edition Part 1: Introduction: Thinking Like An Economist Chapter 1: Economics and Economic Reasoning Chapter 2: The Production Possibility Model, Trade, and Globalization Chapter 3: Economic Institutions Chapter 4: Supply and Demand Chapter 5: Using Supply and Demand Thinking Like a Modern Economist (Library reference) Part 2: Macroeconomics Chapter 24: Economic Growth, Business Cycles, Unemployment, and Inflation Chapter 25: Measuring the Aggregate Economy Chapter 34: Jobs and Unemployment Chapter 35: Inflation, Deflation (Pages ) Policy Models QUIZ: EXAM 1: QUIZ: Chapter 26: The Short-Run Keynesian Policy Model: Demand-Side Policies Chapter 26W: The Multiplier Model Chapter 27: The Classical Long-Run Policy Model: Growth and Supply-Side Policies Chapter 27W: Advances in Modern Macroeconomic Theory Chapter 28: The Structural Stagnation Policy Dilemma QUIZ: Finance, Money, and the Economy Chapter 29: The Financial Sector and the Economy Chapter 30: Monetary Policy Chapter 31: Financial Crises, Panics, and Unconventional Monetary Policy Chapter 35: Inflation, Deflation and Macro Policy (Pages ) EXAM 2: Taxes, Budgets, and Fiscal Policy QUIZ: EXAM 3: Chapter 32: Deficits and Debt Chapter 33: The Fiscal Policy Dilemma International Policy Issues Chapter 36: International Financial Policy Chapter 37: Macro Policy in a Global Setting Chapter 38: Macro Policy in Developing Countries International Economic Policy Issues Chapter 9: Comparative Advantage, Exchange Rates, and Globalization International Trade Policy (Library Reference Material) QUIZ: FINAL: 6

7 MACRO 120 FALL SAC MASTER AUGUST 2014 SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY KEY: 1 2 CW: Class Work TH: Take Home IC: In Class Week 1 CONNECT Opens Thurs: 1-5 (6am) Overview: 1-5 Overview: 1-5 CW: 1-2 CW: 1-2 PM: Overview: 1-5, CW Week 2 LABOR DAY HOLIDAY CW: 3-4 CW: 3-4 CW 4-5 PM: CW 4-5

8 MACRO 120 FALL SAC MASTER SEPTEMBER 2014 SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY Week 2 (cont.) LABOR DAY HOLIDAY CW: 3-4 CW: 3-4 CW 4-5 PM: CW Week 3 CW: 5 Review 1-5 CW: 5 Review 1-5 Review 1-5 IC: Quiz 1-5 TH: Quiz 1-5 Review 1-5 IC: Quiz 1-5 TH: Quiz 1-5 PM: (Same above) Week 4 Due TH Quiz 1-5 IC: Quiz P2: 1-5 Due TH Quiz 1-5 IC: Quiz P2: 1-5 Review & CW: 1-5 Review & CW: 1-5 Due TH Quiz 1-5 PM: Due TH Quiz 1-5 IC: Quiz P2: Week 5 CONNECT Closes 1-5, (11:00pm) CONNECT Opens 24-25, (11:00p) EXAM 1: 1-5 EXAM 1: 1-5 Overview 24-25, (pg ) CW: Overview 24-25, (pg ) CW: PM: EXAM 1: 1-5, Overview 24-25, (pg ), CW: KEY Week 6 CW: 34 & 35 (pg ) CW: Class Work TH: Take Home IC: In Class

9 MACRO 120 FALL SAC MASTER OCTOBER 2014 SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY Week 6 (cont.) CW: 34 & 35 (pg ) CW: 34 & 35 (pg ) IC Quiz: 24, 25, 34, 35 (pg ) IC Quiz: 24, 25, 34, 35 (pg ) PM: CW: 34 & 35 (pg ) IC Quiz: 24, 25, 34, 35 (pg CONNECT Closes 24-25, (11 pm) CONNECT Opens 26-28, 26W (11 pm) Week 7 Overview & CW: 26, 27, 28, 26W Overview & CW: 26, 27, 28, 26W CW: 26, 27, 28, 26W CW: 26, 27, 28, 26W PM: Overview & CW: 26-28, 26W Week 8 IC Quiz: 26-28, 26W- 27W TH Quiz: 26-28, 26W IC Quiz: 26-28, 26W- 27W TH Quiz: 26-28, 26W Return TH Quiz: 26-28, 26W Return TH Quiz: 26-28, 26W PM: Review for Quiz IC Quiz: 26-28, 26W TH Quiz: 26-28, 26W Week 9 CONNECT Closes 26-28, 26W (11 pm) EXAM 2: 26-28, 26W EXAM 2: 26-28, 26W Overview: 29, 30, 31, 35 Overview: 29, 30, 31, 35 PM: EXAM 2: 26, 27, 28, 26W, Overview: 29-31, 35 CONNECT Opens 29, 30, 31, 35 (p ) (6:00 am) KEY: Week 10 CW: 29, 30, 31, 35 ) CW: 29, 30, 31, 35 Review: 29, 30, 31, 35 Review: 29-31, 35 PM: CW & Review: 29-31, 35 CW: Class Work TH: Take Home IC: In Class

10 MACRO 120 FALL SAC MASTER NOVEMBER 2014 SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY KEY: 1 CW: Class Work TH: Take Home IC: In Class LRM: Library Reference Material Week 11 Review: 29, 30, 31, 35 Review: 29, 30, 31, 35 IC Quiz: 29-31, 35, TH Quiz: 29-31, 35 IC Quiz: 29, 30, 31, 35 TH Quiz: 29-31, 35 Due TH Quiz: 29, 30, 31, 35 & Review PM: Review & IC Quiz: 29, 30, 31, 35, TH: Quiz 29-31, Week 12 CONNECT Closes 29-31, 35 (11 pm) Due TH Quiz 29-31, 35 Review 29-31, 35 VETERANS DAY HOLIDAY EXAM 3: 29-31, 35 EXAM 3: 29-31, 35 (p ) PM: Due TH Quiz 29-31, 35 Review & EXAM 3: 29-31, 35 CONNECT Opens 9, 10-LRM, (6:00 am) Week 13 Last day to drop with a W Overview & CW: 9, 10-LRM, Overview & CW: 9, 10-LRM, CW: 9, 10-LRM, 32-33, CW: 9, 10-LRM, 32-33, PM: Overview & CW 9, 10- LRM, Pre-Final IC & TH Quizzes: 9, 10-LRM, Week 14 CW: 9, 10-LRM, 32, 33, 36, 37 CW: 9, 10-LRM, 32, 33, 36, 37 Pre-Final IC & TH Quizzes: 9, 10-LRM, CW: 9, 10-LRM, 32, 33, 36, 37 Pre-Final IC & TH Quizzes: 9, 10-LRM, THANKSGIVING HOLIDAY Week 15 Due TH Quiz & Due TH Quiz & Due: TH Quiz & Review: 9, 10-LRM, PM: Pre-Final IC & TH Quizzes: 9, 10-LRM, 32-33, and Review

11 MACRO 120 FALL SAC MASTER DECEMBER 2014 SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY Week 15 (cont.) Due TH Quiz & Due TH Quiz & Due: TH Quiz & 32-33, PM: Pre-Final IC & TH Quizzes: 9, 10-LRM, and Review Week 16 CONNECT Closes 9, 10-LRM, (11 pm) FINALS FINALS FINALS FINALS KEY: CW: Class Work TH: Take Home IC: In Class