NOTE: These outlines are mostly based on lectures from last year. There will probably be some changes in these outlines, mostly small, by the time I give these lectures this year.

  1. Introduction (Jan 9)
    1. Mankiw's Ten Principles, with Illustrations from Econ 101
      1. How People Make Decisions
      2. How People Interact
      3. How the Economy as a Whole Works
    2. Ways that Economists Think
      1. Positive and Normative Statements
      2. How We Know What We Know
      3. Some Things that We Think We Know
  2. Measuring Production (Jan 11)
    1. Overview of the Economy
      1. Circular Flow: Income Equals Expenditure
      2. Adding Up Production
    2. Gross Domestic Product - GDP
      1. Definition
      2. Measurement
    3. Real Versus Nominal GDP
      1. Definitions
      2. GDP Deflator
    4. Data on GDP
      1. Over Time
      2. Across Countries
    5. GDP and Well-Being
  3. Measuring Prices (Jan 16)
    1. Sample Prices from Past and Present
    2. Measuring Inflation
      1. GDP Deflator
        1. Definition
        2. Interpretation
      2. Consumer Price Index
        1. Definition
        2. Problems with CPI
    3. Using the CPI
      1. Correcting Nominal Amounts
      2. Indexing for Inflation
      3. C. Adjusting Interest Rates
    4. Sample Prices Corrected
  4. Short Run Versus Long Run (Jan 18)
    1. GDP Over Time
    2. Preview of Theory
      1. Aggregate Supply and Demand
        1. Long Run Aggregate Supply - LRAS
        2. Short Run Aggregate Supply - SRAS
        3. Demand - AD
      2. The Short Story
        1. Increase in Aggregate Demand
        2. Decrease in Aggregate Demand
      3. The Full Story
    3. What We Will Do
      1. For Now: Long Run Only
      2. Short Run in Last Third of Course
    4. Size of the U.S. Economy, Compared
  5. Economic Growth (Jan 23)
    1. How Countries Differ in Size and Wealth
    2. Growth and Productivity
      1. The Production Function
      2. The Arithmetic of Growth
      3. Determinants of Growth
    3. What Makes the U.S. Rich?
    4. Differences in Growth Rates
    5. Causes of Different Growth Rates
    6. The Law of Diminishing Returns
    7. Policies to Encourage Growth
    8. How Have We Grown?
  6. Getting Savings to Investors (Jan 25)
    1. Circular Flow
      1. New Flows
      2. Implication that S=I
    2. From Savings to Investment
      1. Directly
        1. Bonds
        2. Stocks
      2. Indirectly
        1. Banks
        2. Mutual Funds
    3. Prices of Bonds
    4. Savings & Investment with Government
  7. The Market for Loanable Funds (Jan 30)
    1. What will the Growing Budget Surplus Do?
    2. Desired versus Actual Saving and Investment
    3. Demand for Loanable Funds
    4. Supply of Loanable Funds
    5. Market Equilibrium
    6. Using the Market for Analysis
      1. Tax Cut on Savings
      2. Investment Tax Credit
      3. Increased Budget Deficit
    7. Effects of the Growing Surplus
  8. Finance (Feb 1)
    1. Present Value
    2. Bond Prices
    3. Risk
      1. Risk Aversion
      2. Insurance
      3. Diversification
      4. Risk-Return Tradeoff
    4. Asset Valuation
  9. Unemployment (Feb 6)
    1. Normal versus Cyclical
    2. Definition
    3. Data
    4. Problems with Measured Unemployment
      1. Discouraged workers
      2. Underemployment
      3. Unemployment duration
    5. Reasons for Unemployment
      1. Minimum Wage
      2. Unions
      3. Efficiency Wages
      4. Job Search
    6. What Do We Have?
  10. Story of Money (Feb 13)
    1. World without Exchange
    2. Barter Economy
    3. Commodity Money
      1. Desirable Properties of Money
      2. Purposes Served by Money
    4. Paper Money (Banknotes)
    5. Fractional Reserve Banking
    6. Fiat Money
  11. Banks and the Money Supply (Feb 15)
    1. What Serves as Money? M1, M2.
    2. How Banks "Create" Money
    3. Problems with Unregulated Fractional Reserve Banking
    4. Roles of Central Bank
    5. Tools of Monetary Policy
      1. Open Market Operations
      2. Reserve Requirements
      3. The Discount Rate
    6. How Open Market Operations Work
    7. What Determines the Money Supply?
  12. Inflation (Feb 20)
    1. What Is It and What Causes It?
    2. Quantity Theory of Money
      1. Three Components
        1. Quantity Equation
        2. Monetary Neutrality
        3. Constancy of Velocity
      2. Price Level Proportional to Money Supply
      3. Implied Rate of Inflation
    3. Supply and Demand Interpretation
    4. Real versus Nominal Interest Rates
    5. Effects of Inflation
  13. International Transactions and Exchange (Feb 22)
    1. International Transactions
      1. Kinds of Transactions
        1. Trade: NX
        2. Capital Flows: NFI
      2. NFI = NX
      3. Savings and Investment
    2. Exchange Rates
      1. What Are They?
        1. Yen/Dollar vs. Dollar/Yen
        2. Appreciation, Depreciation
      2. The Real Exchange Rate
      3. Purchasing Power Parity
  14. Mankiw's Open-Economy Model (Mar 6)
    1. Net Foreign Investment (NFI)
      1. Determinants of NFI
      2. The NFI Curve
      3. Two Roles for NFI in Open Economy Model
    2. Net Exports (NX)
      1. Determinants of NX
      2. The NX Curve
    3. The Model
      1. How Markets Fit Together
      2. Use of the Model
    4. Things to Remember
    5. Examples
      1. Increased Desire to Save
      2. Michigan's Spring Break (Not Really)
      3. New Domestic Technology
      4. Rise in Foreign Interest Rate
  15. The Budget and Trade Deficits (Mar 8)
    1. Two Chronic Problems for the U.S.
      1. The Government Budget Deficit
      2. The Trade Deficit
    2. Interpretation of the Deficits
      1. What do they mean?
      2. Are they good or bad?
    3. How Are They Related?
      1. Through their definitions
      2. Through Mankiw's Open-Economy Model
    4. Where Are We Now, and Why?
      1. Budget Surplus
      2. Growing Trade Deficit
    5. More on the Trade Deficit
  16. Review: The Big Picture (Mar 13)
    1. Circular Flows
    2. Main Parts of the Long-Run Model
      1. Determination of Output
      2. Determination of Investment
      3. Role of Money
    3. What Matters for Growth?
      1. Direct Effects
      2. Indirect Effects
    4. Examples
      1. Saving?
      2. Tax Policies?
      3. Money?
  17. Aggregate Supply (Mar 20)
    1. Short-Run Fluctuations Observed
    2. Preview of the Short-Run Model
    3. The Long-Run Aggregate Supply Curve (LRAS)
    4. The Short-Run Aggregate Supply Curve (SRAS)
    5. Reasons SRAS Slopes Up
      1. Misperceptions of Prices
      2. Sticky Wages
      3. Sticky Prices
    6. Equation of SRAS
    7. What Shifts SRAS?
      1. Determinants of LRAS
      2. Expected Prices
      3. Costs
  18. Short-Run Aggregate Demand (Mar 22)
    1. Preview of Aggregate Demand
    2. The Interest Rate in the Short Run
    3. Aggregate Demand Curve
      1. Reasons It Slopes Down
        1. Wealth Effect (on Consumption)
        2. Interest-Rate Effect (on Investment)
        3. Exchange-Rate Effect (on Net Exports)
      2. What Shifts AD?
  19. Causes of Economic Fluctuations (Mar 27)
    1. Recall Ups and Downs of GDP
    2. Shifts of Aggregate Demand
      1. Causes
      2. Analysis of Downward Shift
        1. Short Run
        2. Long Run
    3. Shifts of Aggregate Supply
      1. Causes
      2. Analysis of Upward Shift
    4. Shifts the Other Direction
      1. Increased Spending
      2. Increased Productivity
    5. The Economy Over Time
  20. Monetary Policy (Mar 29)
    1. What We Know Already
    2. What Is Different in Short Run?
      1. Prices Slow to Adjust
      2. Interest Rate Clears Money Market
    3. Model of Money Supply (MS) and Money Demand (MD)
      1. Curves
      2. Equilibrium
      3. What Determines Interest Rates in Short Run?
    4. Monetary Policy
      1. How Does It Work?
      2. How Is It Used?
  21. Fiscal Policy (Apr 3)
    1. Kinds of Fiscal Policy
      1. Government Purchases
      2. Net Taxes
    2. Effects of Government Purchases
      1. How They Work
      2. Why D Y D AD D G
    3. Effects of Net Taxes
      1. How They Work
      2. Temporary Versus Permanent
    4. Uses of Monetary and Fiscal Policy
      1. Pros and Cons of Stabilization
      2. Automatic Stabilizers
  22. The Phillips Curve (Apr 5)
    1. Lessons from AD/AS Model
      1. Unemployment Depends on Output
      2. Output in Short and Long Runs
    2. Can Policy Maintain Unemployment below the Natural Rate?
      1. Yes, Temporarily
      2. No, if Policies Constant
      3. Yes, if Money Stock Grows
      4. No, if People Catch On
    3. The Phillips Curve
      1. Includes Expectations
      2. Implications
    4. Algebra of Natural Rate Hypothesis
  23. Moving (Along?) the Phillips Curve (Apr 10)
    1. The Complete Phillips Curve
      1. The Role of Expectations
      2. The Long-Run Phillips Curve
      3. Algebra of Natural Rate Hypothesis
      4. How It All Works
    2. Historical Episodes
      1. Discovery of Macro Policy
      2. First Inflation Fight
      3. Oil Shocks
      4. Second Inflation Fight
      5. Accepting the Inevitable?
  24. Stabilization Policy (Apr 12)
    1. Lessons from 1960-1985
      1. Can't Keep U<UN
      2. U<UN Causes Accelerating Inflation
      3. Reducing Inflation Costs Jobs and Output
    2. What Business Cycles Look Like
    3. Experience Since 1984
    4. Where Are We Now, and Why?
      1. One-time Drop in Costs?
      2. Reduced Expectations of Inflation?
      3. Lower Natural Rate of Unemployment?
    5. Recession of 2001 and Beyond
  25. Other Issues (Apr 17)
    1. Steering the Macro Economy
      1. Analogy to Driving a Car
      2. Difficulties
        1. Lags
        2. Don't Know the Future
        3. Don't Know the Recent Past
      3. Don't Know the Natural Rate of Unemployment
    2. Review