Econ 131 Principles of Macroeconomics

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Econ 131Principles of Macroeconomics

• Byron GangnesFall 2009

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Introductions

• Me Byron Gangnes, Saunders 513,956-7285,
  gangnes_at_hawaii.edu,
• OH Tuesday, Wednesday 1000-1130 AM or by
  appointment
• TA Xiaodong Sun, Saunders 539, 956-8639,
  sun9_at_hawaii.edu
• OH Tuesday 930-1100 AM or by appointment

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Course requirements

• See Syllabus. Note
• No prerequisite
• Course book packet
• Text Robin Bade and Michael Parkin, Foundations
  of Macroeconomics, 4/e, Pearson Addison Wesley,
  2009.
• Course Administration and Online Resources
  MyEconLab (also called CourseCompass)
  (www.coursecompass.com ) Subscription included
  in bookstore bundle or can be purchased
  separately.

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Text/MyEconLab Options

• Buy the bookstore packet (more books have
  arrived) (144.15)
• Says they have used copies but bewarewill need
  MyEconLab subscription
• Buy a used text online somewhere and then buy a
  standalone MyEconLab subscription (30)
• By the electronic only version of text and
  MyEconLab (70)
• To by online
• https//register.pearsoncmg.com/reg/buy/coursebuy.
  jsp

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Registering for MyEconLab

• To register for MyEconLab/CourseCompass, go to
• http//www.coursecompass.com/
• The Course ID is
• gangnes94686
• (Optional) student subscription to Wall Street
  Journal http//subscribe.wsj.com/semester

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Course requirements

• Exams The largest part of your grade is based on
  exams.
• Exams will have multiple choice and applied
  questions (like the homework)
• You must take exams on scheduled datesand bring
  ID!

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Course requirements

• Weekly homework assignments
• You will take online in MyEconLab
• Late homework NOT accepted
• HW 1 will be assigned Thursday
• It is your responsibility to complete the HW by
  the deadline. Plan ahead in case there are
  internet problems.

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Course requirements

• In-class quizzes and activities
• About once a week
• Some may involve group work
• Must be present to win
• Class Participation
• You can earn extra credit for class
  participation. So come to class and ask/answer
  questions!

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Studying Tips

• Check the class MyEconLab web page regularly.
• MyEconLab site has online version of the complete
  textbook, a study guide, a discussion board and
  other resources.
• Study Plan feature lets you take practice tests,
  and then customizes online problem sets to what
  you need more work on.
• Optional Vango Notes provide audio summaries and
  practice quizzing
• You will need internet access, with ability to
  install plugins. MyEconLab runs on both Macs and
  PCs. Run the Install Wizard first.

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Intro to Economics

• Read Bade-Parkin Ch. 1
• Economics is the Science of Scarcity
• Wants exceed the resources available to satisfy
  them.
• Scarcity results in economic activity.
• Economics is the study of how people use their
  limited resources to try to satisfy their
  unlimited wants. (see book, p. 3, for another
  version.)
• Example attend College or not?

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The Economic Paradigm

• The Economic View of Human Behavior
• People act with rational choice
• People choose actions that most effectively use
  available resources to achieve their objective.
• Are these choices always right?
• People compare costs and benefits
• Opportunity cost is the best alternative
  foregone.
• A measure of benefit is what you are willing to
  give up to get something

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The Economic Paradigm

• People respond to incentives.
• changes in the economic environment will change
  optimal choices.
• Whats happened to UH enrollment recently? Where
  are the largest enrollment changes? Why?
• UH system at all-time high Manoa up by less
• People make decisions on the margin
• They make incremental decisions regarding
  alternatives
• Marginal cost and marginal benefit. Costs and
  benefits per one additional unit

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The Economic Paradigm

• Economics as a Social Science
• Goal discover how the economic world works
• Scientific method
• Observe and measure the economic world
• Build models
• Test models to evaluate their fit with observed
  reality
• Natural experiments
• Statistical investigations
• Economic experiments
• Economic Theory generalizations about economic
  behavior supported by evidence.

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Micro vs. Macro

• Microeconomics
• How individual people, firms make choices how
  individual markets work or fail to work as
  efficient allocators of scarce resources.
• Macroeconomics
• How a region or a whole (aggregate) economy
  operates how economic decisions of people,
  firms, governments affect aggregate performance.
• Many of the basic techniques are the same.

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Macroeconomics

• Many macro issues involve social problems that
  involve value judgments.
• We try to keep this clear by separating what is
  (positive economics) from what should
  be(normative economics).

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Macroeconomics A Preview

• Macroeconomics is the study of how the economy of
  a region or a country operates. ..the aggregate
  effectsof the choices that individuals,
  businesses and governments make.
• What makes an overall economy work?
• What are the barriers to good economic
  performance?
• What role can or should government play?
• You are living in exciting macro times(lucky
  you)

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Global Financial Crisis

• The financial system saw a major crisis in 2008
• Big banks and investment houses have been bought
  out, transformed or failed
• The availability and terms for many types of
  loans worsened ? credit crunch
• The Federal Reserve and taxpayers have funded a
  massive bailout/restructuring
• Where did this all start?
• The housing slump caused big losses on
  mortgage-related assets
• Macro questions this raises
• How vulnerable is the economy to asset price
  swings?
• How should the Fed react to such financial
  problems?
• Should we bail out financial institutions?

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Recession and Recovery

• U.S. in worst recession in MANY years
• Economic activity has been falling since late
  2007
• Global economy is also in downturn
• By some measures the deepest downturn since World
  War II
• Recently promising signs that recession is ending
• Macro questions this raises
• What causes recessions and expansions?
• How does a recession affect people?
• What role can/should government play?
• Is the fiscal stimulus plan working?

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Next time

• These are just two recent examples of
  macroeconomic issues
• Next time we'll look more systematically at the
  range of problems that occupy macroeconomists
  and policymakers
• Read Bade-Parkin Ch.2

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Mortgages in Trouble
back
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Deepest Downturn in Years

Gulf War
08-09 Financial Crisis
9/11
back
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Unemployment Surges
back
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• par.a.digm n. a philosophical and theoretical
  framework of a scientific school or discipline
  within which theories, laws, and generalizations
  and the experiments performed in support of them
  are formulated(Webster)
• Back