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Principles of Economics
Teaching Assistants:
Teo Nicolais (For distance students)
On-line sections: To Be Announced
Teo.the.Econ.TA@gmail.com
On Campus TA To Be Announced
SYLLABUS
This course provides an introduction to current economic issues and to basic economic principles and
methods. The economist John Maynard Keynes wrote that "the ideas of economists and political
philosophers, both when they are right and when they are wrong, are more powerful than is commonly
understood." Economics is not primarily a set of answers, but rather a method of reasoning. By the
end of the semester, you will be able to use the analysis practiced in the course to form your own
judgments about many of the major economic problems faced by the United States and other countries.
In the first part of the semester, we will focus on microeconomics, which is the study of the interaction
of people and firms in markets. Since we live in a market economy, this study will help you to
understand how American society organizes its economic affairs. We will examine how the forces of
supply and demand operate in the markets for goods and services. Theories concerning firm behavior
will be examinedhow companies decide how much to produce, and how to produce it. Once we
have mastered some basic techniques for thinking about economic problems, we will apply those
techniques to such important social issues as pollution, poverty, income distribution, and international
trade.
During the second half of the semester, we will focus this on macroeconomics, the study of the
economy as a whole. We will study economic growth and development, business cycles, and the
impact of both monetary and fiscal policy on inflation, unemployment, interest rates, investment, the
exchange rate, and international trade.
Course Requirements
Exams
There will be two exams for the course, a midterm and a final. Both will be taken on-line.
The midterm will be held on Monday, Oct. 20, and the final will be held on Monday, Dec. 15.
Detailed instructions will be given to students well in advance of the exam dates.
Please Note:
It is your responsibility to plan your travel ahead around exam dates. In particular, the date of
the final exam is determined by the Registrar and cannot be changed for any reason. Requests
to take the final on a different day, including requests for a make-up final, involve a formal
appeal process through the Extension School Examination Committee.
Please see the section below on Grading to understand how your semester grade will be
determined if you must miss the midterm for any reason.
Problem Sets
There will be eleven problem sets assigned during the term. These will be multiple choice assignments
completed on MyEconLab. Further instructions about MyEconLab will be given before the first
problem set is assigned.
The due date on problem sets cannot be extended for any reason. However, the lowest two of the
problem set scores for the semester will be dropped from the calculation of each students semester
grade. So, if you cannot do one of the problem sets some week, that will just be one of the scores that
gets dropped.
Grading
Grading Mechanics: Assigning Letter Grades Based on a Curve
Semester grades are determined by a curve. The nature of a curve is that your grade is based on your
performance relative to all other students in the class. It does not involve an absolute standard, e.g.,
90 100 = A, 80 90 = B, etc., which you may be used to from some other courses. I believe that a
curve is ultimately the fairest way to determine grades, since it does not set some arbitrary absolute
standard, but judges students on their performance relative to their peers.
With a curve, your grade is based on your percentile rank in the class, i.e., the percentage of students in
the class who scored below you. If you are in the 60th percentile, for example, that means that 60% of
students had scores equal to or below yours, while 40% of students had scores above yours.
How We Calculate Total Semester Points
To determine your letter grade for the semester the curve is applied to your total semester points.
Your total semester points will be the higher of:
30% problem set scores
35% midterm exam
35% final exam
or
So, if you do poorly on the midterm, or are unable to take it for any reason, your final exam will
automatically be reweighted to be 70% of your semester grade, with the problem sets constituting the
remaining 30%. We will make these calculations automatically for each studentyou dont have to
opt in or opt out of one or the other weighting. We will make certain you receive the highest grade
to which you are entitled.
Your problem set average (dropping the two lowest) will be out of 100 pts. possible; your midterm will
be out of 100 pts. possible; and your final will be out of 133.33 points possible. Alternatively, we will
calculate your total semester points based on 100 pts. possible on the problem set average, and 233.33
pts. possible on the final. These two methods yield the two alternative weightings mentioned in the
first paragraph of this section. For each student, we will use whichever weighting results in a higher
semester point total for that student.
For example, suppose you average 83/100 on your highest problem sets (dropping your lowest two)
and 93/100 on your midterm. Now, lets say there are 240 pts. possible on the final, and your score is
200/240 pts. Note that 200/240 = .833 (Meaning, you got 83.3% of the possible points on the exam).
We would then multiply .833 by 133.33, and by 233.33, to calculate your total points using the two
possible weightings on the final.
This would give you .833 133.33 = 111.11 pts. weighting the final at 30%, and .833 233.33 =
194.44 pts weighting the final at 70%.
So, for the semester, your total points would be 83 + 93 + 111.11 = 287.11 pts using the 30/30/40
weighting. Using the 30/70 weighting, your total points would be 83 + 194.44 = 277.44. So, we
would use the 30/30/40 method, since it gives you higher total points.
The Curve Used in Assigning Your Letter Grade for the Semester
To determine your semester grade, we will employ the (very generous) curve given below:
Letter Grade
A-
B+
B-
C+
C-
E/F
To return to our example above: recall that your hypothetical semester point total is 287.11/333.33,
and suppose that 43% of students had semester point totals higher than yours (i.e. above 287.11), and
therefore 57% had semester point totals less than or equal to yours (i.e. at or below 287.11). This
means that you are in the 57th percentile overall. Your semester grade, then, would be a A-.
Readings
Most of the assigned readings listed below are drawn from the textbook: Economics (5th ed.), by Glenn
Hubbard and Anthony OBrien. The majority of the reading in the text reinforces material you'll learn
in class, but some of the topics we cover may not appear in the book. Conversely, some of the
assigned reading is for background, and will not be covered explicitly in class.
The rest of the assigned reading will be drawn from recent newspaper and magazine articles. These
will all be available on the course web site.
Student Profiles
Every term, the course enrolls people from an amazing variety of backgrounds and walks of life. And,
the reasons for taking the class are almost as diverse as students backgrounds. In order to share a little
of their life stories with their classmates, students are encouraged to submit a few lines about
themselves to the course email address: econe10a@dce.harvard.edu. These will be formatted and
posted on a Student Profiles page on the course web site.
Please note that this is completely voluntary, and also that the only people who will be able to view
what you submit will be your classmates and the teaching staffnobody else. You do not have to
identify yourself with anything besides your first name if you dont want to. Just submit a few lines
about your job, background, interests, and/or why you have decided to study finance.
Even if you decide not to submit a profile, you will enjoy reading about some of your fellow students.
COURSE CALENDAR
Mon., Sept. 8
PS 1 Available on MyEconLab
_______________________________________________________________________________
Mon., Sept. 22
Elasticity
Price elasticity of demand
Income elasticity of demand
Cross-price elasticity of demand
Price elasticity of supply
Hubbard and OBrien: Chap. 6 (pp. 170 197)
Mon., Oct. 6
Basics of Trade
Welfare Analysis of Trade and Tariffs
Hubbard and OBrien: Chap. 9 (pp. 272 299)
PS 3 Must Be Completed by 11:45 PM (Eastern US Time)
PS 4 Available on MyEconLab
_______________________________________________________________________________
Mon., Oct. 13
No ClassColumbus Day
PS 5 Available on MyEconLab
_______________________________________________________________________________
Mon., Nov. 3
PS 6 Available on MyEconLab
_______________________________________________________________________________
Mon., Nov. 10
Mon., Dec. 1
Monetary Policy
Money, Banking, and the Role of the Fed
Open Market Operations
Interest Rates
Money and Inflation in the Long Run: The Quantity Theory of Money
Hubbard and OBrien: Chaps. 25 26 (pp. 829 895)
Fiscal Policy:
Introduction and Overview
Facts and Figures
The Role of Social Security
The Government Spending and Tax Multipliers
The Loanable Funds Market Revisited
Hubbard and OBrien: Chap. 27 (pp. 905 937)
Final Exam