Northeastern University Department of Economics

Syllabus
Macroeconomic Theory ECON 2315 Dadkhah Spring 2014

How to contact me
Office: 317 Lake Office hours: M, W, R: 1:30 2:30 or by appointment Phone: 617 373 2297 Fax: 617 373 3640 k.dadkhah@neu.edu

Objectives of the course

Macroeconomics is the study of the economy as a whole. It concerns such issues as employment, growth, inflation, income, income distribution, business cycles, and balance of trade. The role of government in the economy, particularly monetary and fiscal policies, is discussed. The importance of knowing macroeconomics cannot be exaggerated. Even if you pursue a career other than economics, in order to make decisions about your investment, retirement, and housing, you need an understanding of macroeconomic issues. Indeed, to be a good citizen you need to be familiar with macroeconomics. The best way to learn macroeconomics is in the context of history and with reference to particular policies followed by the government. In this course, we take such an approach; therefore, it is somewhat different from other macroeconomic courses. We start with the Great Depression and end with the present day economic conditions. The Great Depression gave birth to interventionist and welfare policies of President Roosevelt known as the New Deal. It was also the motivation for the Keynesian theory, which emphasized aggregate demand. Indeed, the study of macroeconomics began as a response to the depression. World War II changed the world: after the war, many countries around the world became welfare states and governments followed activist economic policies; a new international economic order was agreed upon in Bretton Woods, New Hampshire; and economists elaborated and expanded on Keynesian theory extending it to issues of growth and international trade.

During, the 1960s, the United States followed a Keynesian economic policy. The stagflation of the late 1960s caused the breakdown of the international economic order and created doubts as to the advisability of economic policies based on demand management. In the late 1970s a new era of relying on private sector and individual initiatives, and emphasizing aggregate supply started around the world. There was the Reagan-Thatcher revolution in the US and Britain and many countries abandoned their so called socialist framework including China and India. Countries that followed these policies prospered. The United States had two long periods of growth and prosperity, and the cases of China and India are there for everyone to see. But fluctuations and business cycles are inherent in a decentralized capitalist system. They are no different than ordinary sicknesses such as cold and flu that even the strongest individuals go through. They are a part of life. Thus, we have had the recent financial and economic crisis. In this journey through 80-year history we consider the interaction of economic events, economic theory, and economic policy to learn the body of knowledge known as macroeconomics. In addition, we will devote a portion of class time to the discussion of current events. Thus, you are expected to follow the news. In addition to Fox News, CNN and the networks, I suggest the Wall Street Journal, the New York Times, and the Economist. You need not subscribe to any of them, they are available in the library and online. I will also bring some reading material to the class.
You also have to become familiar and learn to use data sources. These include but not limited to: bea.gov; www.federalreserve.gov; www.bls.gov; data.worldbank.org/indicator

Text
The Evolution of Macroeconomic Theory and Policy, 2009

Topic

Relevant chapters from the textbook 1

The Great Depression and birth of Keynesian Theory Postwar economic order

2 3 4 5 6

Keynesian theory
Activist economic policy Open economy macroeconomics Stagflation and the breakdown of international economic order The New Classical theory Business cycles Monetary theory and policy Government budget and fiscal policy Reagan-Thatcher revolution Globalization Financial and economic crisis of 2007 2009 The aftermath of the great recession, the European crisis, and what lies ahead

7 8 9 10 11 12 13 Class notes

Grades
Grades are determined on the following basis: Class presentation and participation in discussions Short paper based on class presentation and homework Two quizzes Total 20% 20% 60% 100%