Gerald R. Ford School of Public Policy

SPP 556

Winter 2004, Alan Deardorff
Revised 3/18/04

Prerequisite Requirements Exams Grades
Texts Wall Street Journal Communication Schedule


This course deals with the behavior of the major economy-wide (or "aggregate") economic variables, such as the level and growth rate of GDP, unemployment, the price level and rate of inflation, the rate of interest, the exchange rate, the trade deficit and the government budget deficit. The purpose of the course is to provide an analytical framework that will enable students to make sense of these economic aggregates. It is important to know not just what they mean and how they are measured, but also how they relate to each other and how they are determined in a market-oriented economy like that of the United States. This in turn will bring us to important issues of economic policy, and the extent to which such policies can and should be used to influence these variables, especially in the context of the interdependent world economy.

Prerequisite: There is no formal prerequisite for this course. However, all students from The Ford School will have had SPP 555 or 559, Microeconomics, or equivalent before taking this course, and other students would be well advised to have some background in microeconomics before attempting it.





How We Will Use the Wall Street Journal:


Office Hours: The GSI for the course is Priya Naik. She will hold regular office hours as follows:

Office: Oakland Annex, Rm 260
Hours:Tuesdays 4:30-6:30 PM

My office and office hours this term are as follows:

Office:458 Lorch: Phone: 764-6817
Hours:General:Tuesdays, 10:00-11:00 AM
General:Thursdays, 3:00-4:00 PM
SPP 556:Tuesdays, 11:00-12:00 AM

I will be glad to talk with you during these times without an appointment, or at other times with an appointment. Also, feel free to stop by unannounced whenever my door is ajar. If I'm busy, I'll say so; if not, I'll be glad to talk to you.

E-mail Priya Naik and I will be available by e-mail, and we will be glad to answer questions there. Our e-mail addresses are listed below:
Professor:Alan Deardorff
GSI:Priya Naik
The Web Wherever possible, course materials will be posted at the following site:
You should look there for extra copies of anything that has been handed out, such as homework assignments and answers. There will also be a place on that site reporting questions that students have asked me by e-mail and the answers that I gave them.




Readings and Assignments
Jan 13 Introduction Mankiw 1

Jan 15 Data of Macroeconomics Mankiw 2
Boskin on the CPI, online
Homework #1 assigned: "Data of Macroeconomics"
Jan 20 Introduction to Fluctuations Mankiw 9, pp. 238-250
Jan 22 Stabilization Policies Mankiw 9, pp. 250-255
Hymans on the U.S. economic outlook, online
Bernstein on the U.S. economic outlook, online
Homework #1 Due
Jan 27 National Income in the Long Run Mankiw 3
Jan 29 Money and Inflation Mankiw 4
Homework #2 assigned: "Fluctuations and National Income"
Feb 3 The Open Economy Mankiw 5
Feb 5 Unemployment Mankiw 6
Bureau of Labor Statistics on the definition of unemployment, online
Baumol and Wolff on the Natural Rate, online
Blank on Unemployment and Inequality, online
Homework #2 Due
Feb 10 Economic Growth I Mankiw 7
Homework #3 assigned: "Open Economy, Unemployment, and Growth" (not to be handed in)
Feb 12 Economic Growth II Mankiw 8
Romer on the sources of growth, online
Feb 17 Review
Feb 19 ***Midterm Exam No. 1*** Covers through Mankiw 9
Winter Break, Feb 23-27
Mar 2 The IS Curve Mankiw 10, pp. 257-271
Mar 4 The LM Curve Mankiw 10, pp. 271-277
Mar 9 The IS-LM Model Mankiw 11, pp. 281-291
Mar 11 Using the IS-LM Model Mankiw 11, 291-303
Homework #4 assigned: "The IS-LM Model"
Mar 16 The Mundell-Fleming Model, Floating Exchange Rates Mankiw 12, 312-321
Mar 18 The Mundell-Fleming Model, Pegged Exchange Rates Mankiw 12, 321-327
Homework #4 Due (Mar 20, actually)
Homework #5 assigned: "Macro Policy Analysis"
Mar 23 Aggregate Supply Mankiw 13, 347-358
Mar 25 The Phillips Curve Mankiw 13, 358-371
Mar 30 Review Homework #5 Due
Apr 1 ***Midterm Exam No. 2*** Covers through Mankiw 13, with emphasis on 9-13
Apr 6 Policies: Active versus Passive Mankiw 14, pp. 380-389
Greenspan on uncertainty, online
Apr 8 Policies: Rules versus Discretion Mankiw 14, pp. 389-399
Apr 13 Deficits and Debt Mankiw 15, pp. 405-415
Homework #6 assigned: "Use of Macro Policy"
Apr 15 Deficits and Debt, Other views Mankiw 15, pp. 455-427
Makin (AEI) on deficits, online
Gale and Orszag (Brookings) on deficits, online
Apr 20 Other Issues Mankiw Epilogue
Homework #6 Due
Apr 26:

Thursday. Apr 26, 4:00-6:00 PM, FINAL EXAM

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