Learning Outcomes for Economics 332 Instructor: Thomas Dalton Term: Fall Overview of Expected Learning Outcomes:

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1 Learning Outcomes for Economics 332 Instructor: Thomas Dalton Term: Fall 2012 Overview of Expected Learning Outcomes: The purpose of Economics 332 is to examine Classical, Keynesian, and modern alternative theories of aggregate economic behavior and to analyze the fiscal and monetary policy options available to manage economic activity. Emphasis is placed on examining the application of macroeconomic policy in the current economic environment. Economics 332 provides opportunities for students to gain knowledge and experience in mainly three areas of emphasis in the Department of Economics. The three department learning outcomes covered in Economics 332 are: 1. Critical Thinking 2. Business Knowledge 3. Social Responsibility Specific learning outcomes for the course are examined within the broad department guidelines. These topics are: 1. Understand the Classical view of aggregate economic activity: a. Say s Law b. Quantity Theory of Money c. Classical investment and interest rate theory d. Classical Production Theory and Aggregate Supply 2. Understand the Keynesian view of aggregate economic activity: a. The role of uncertainty in molding aggregate demand b. Consumption theory c. Investment theory d. Monetary theory e. IS- LM analysis (including policy options) f. Keynesian Aggregate Demand g. Keynesian Aggregate Supply 3. Understand alternative theories of aggregate economic activity a. Monetarism b. New Classical Theory, Real Business Cycle Theory, New Keynesianism c. Austrian critiques

2 Evaluation Process: Each of these outcomes is assessed through four examinations. Specific questions for each outcome and student performance are listed below. Student performance is evaluated by comparing test scores, by question, against the following standard: a score of 85% to 100% correct is Excellent; a score of 73% to 84% is Good and a score of 60% to 72% is Fair. Scores below 60% are rated Poor. The calculated mean and standard deviation for each question is used to estimate the percentage of students satisfying these criteria. Data: Department Outcomes are evaluated as follows: Department Outcome 1: Question 3 on the first exam, questions 2 and 3 on the second exam and questions 1 and 2 on the final exam. 11% Excellent, 15% Good, 50% Fair and 24% Poor. Department Outcome 2: All questions for all four exams. 10% Excellent, 13% Good, 42% Fair and 36% Poor. Department Outcome 3: Question 1 on the first exam and question 3 on the final exam. 11% Excellent, 17% Good, 55% Fair and 18% Poor. Department Outcome 4: Question 2 on the first exam, question 1 on the second exam and questions 1 and 3 on the final exam. 11% Excellent, 14% Good, 45% Fair and 30% Poor. Course Outcomes are evaluated as follows: Course Outcome 1a Question 1 on the first midterm exam 12% Excellent, 17% Good, 56% Fair and 14% Poor. Course Outcomes 1b and 1c Question 2 on the first midterm exam 10% Excellent, 11% Good, 38% Fair and 41% Poor. Course Outcome 1d Question 3 on the first midterm exam 7% Excellent, 9% Good, 30% Fair and 54% Poor. Course Outcome 2a Question 1 on the second midterm exam 8% Excellent, 10% Good, 34% Fair and 47% Poor. Course Outcomes 2b, 2c and 2e Question 2 on the second midterm exam Course Outcomes 2d and 2e Question 3 on the second midterm exam

3 Course Outcomes 2b, and 2e Question 1 on the third midterm exam Outcome 2b: 24% Excellent, 17% Good, 52% Fair and 7% Poor. Outcome 2c: 30% Excellent, 23% Good, 43% Fair and 0% Poor. Outcome 2d: 31% Excellent, 21% Good, 48% Fair and 0% Poor. Outcome 2e: 26% Excellent, 18% Good, 55% Fair and 1% Poor. Course Outcome 2f Question 2 on the third midterm exam 7% Excellent, 17% Good, 35% Fair and 41% Poor. Course Outcome 2g Question 3 on the third midterm exam 11% Excellent, 24% Good, 28% Fair and 37% Poor. Course Outcome 3a Question 1 on the final exam Course Outcomes 3a and 3b Question 2 on the final exam Course Outcomes 3a and 3c Question 3 on the final exam Outcome 3a: 12% Excellent, 15% Good, 31% Fair and 42% Poor. Outcome 3b: 14% Excellent, 14% Good, 53% Fair and 29% Poor. Outcome 3c: 9% Excellent, 16% Good, 53% Fair and 22% Poor. Exam Questions from the Fall Semester 2012 Exam1 Question 1 Thomas Mun was a Mercantilist. a. How did his view of what role the government should have in the economy differ from J.B. Say, a classical economist? b. What did Say argue was the source of market instability? c. How did classical economists expect markets to deal with variations in aggregate economic activity if government did not act to counteract poor economic performance? Exam 1 Question 2 Markets regulated economic activity in the classical model of the economy. a. In the classical view, what controlled the ability to buy in the aggregate economy? What was Irving Fisher s contribution regarding the ability to buy? b. What controlled the willingness to buy aggregate output? Explain the relationship between the willingness to purchase consumption and the willingness to invest in plant and equipment. c. What conclusion did classical economists draw concerning the use of government spending to stimulate economic activity (explain under both the assumption that additional spending is paid for by increasing taxes and that it is funded by borrowing from the public)? Exam 1 Question 3 Explain how the classical assumption of flexible money wages leads to the conclusion that full employment is maintained even when recessions occur. Summarize the effects

4 of price changes on the demand and the supply of labor and aggregate supply in your answer. Exam 2 Question 1 The lasting legacy of J. M. Keynes is his emphasis on the importance of uncertainty in economic decision making. In 1983 Ronald Heiner wrote Uncertainty exists because agents cannot decipher all of the complexity of the decision problems they face, which literally prevents them from selecting most preferred alternatives. Consequently, the flexibility of behavior to react to information is constrained to smaller behavioral repertoires that can be reliably administered. Daniel Kahneman and Amos Tversky showed that these smaller behavioral repertoires (habits, rules of thumb, routines) are biased. Explain how Keynes anticipated both Heiner s views and the research by Kahneman and Tversky and the consequence of his theories for a) investment demand, b) consumption demand and c) money demand. Exam 2 Question 2 a) Define the IS curve. b) Why does the IS curve have a negative slope? c) Explain why the IS curve is flatter from the classical perspective than it is from the Keynesian view. d) What causes the IS curve to shift? Exam 2 Question 3 a) Define the LM curve. b) Why does the LM curve have a positive slope? c) Explain why the LM curve is steeper from the classical perspective than it is from the Keynesian view. Exam 3 Question 1 Monetary policy is more effective when the interest rate sensitivity of investment is large. Explain why. a) Refer to the IS- LM analysis in your answer. b) Also, refer to changes that take place in the bond and capital markets when the money supply grows. Exam 3 Question 2 Explain, from the Keynesian perspective, why the aggregate demand schedule is negatively slope. Your answer should both describe a) what happens in the IS- LM analysis (how does the equilibrium change when prices change) and b) what happens in markets when prices change. Exam 3 Question 3 Compare the aggregate supply schedule from the classical perspective with the aggregate supply schedule from the Keynesian view when money wages are flexible but do not change proportionally with price changes. a) Compare the informational and

5 behavioral assumptions that underlie their difference in opinion. b) Explain how these different behaviors affect the slope of aggregate supply. Final Exam Question 1 Milton Friedman made major contributions to (a) monetary theory, (b) consumption theory and (c) employment/production theory. Explain how Friedman challenged Keynesian analysis on each of these. Final Exam Question 2 What are the major differences between the macroeconomic theories of New Classical and Monetarist economists? What is the significance of these differences? Final Exam Question 3 Both Hayek and Keynes thought that uncertainty was the cause of endogenous business cycles. How did their explanations differ?