January 13, 2014

Economics 116

Introductory Macroeconomics

Spring 2014



Prof. Robert J. Shiller (Room 11a, 30 Hillhouse, Office Hours usually Monday 3-5pm)

Administrative Assistant: Bonnie Blake, 30 Hillhouse Avenue and Evans Hall

Teaching assistants: Zachary Abrahamson TF4, Letian Cynthia Chang TF4, Maximiliano Dvorkin TF4, Vitor Farinha Luz TF4, Nipun Kant TF2, Leora Kelman TF2, Yonatan Landau TF2, Pablo Olmos TF4, Disha Patel TF2, Jeffery Zhang TF4

Course Description: Macroeconomics is the study of national aggregates: employment, inflation, national product, the big picture for a whole country or for the world. In many ways macroeconomic theory is a derivative of microeconomics, summing up all the micro units of the economy. But macroeconomic theory has had its own unique dimensions, approaches to thinking, and public policy concerns.


Grading Weights: 20% problem sets, 30% midterm, 50% final (subject to judgmental adjustment)


Two books required for purchase:

Textbook: Case, Karl E., Ray Fair and Sharon Oster, Principles of Macroeconomics 11th ed., Prentice Hall, 2014. Yale Bookstore, Amazon.com $172.75, Rent $48.82-$89.50, Kindle $134.99


Additional reading: Akerlof, George A., and Robert J. Shiller, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism, Princeton University Press, 2010 ISBN 978-0-691-14592-1 Yale Bookstore, Amazon: paperback $12.51 Kindle $10.17, Audible.com $24.95, and in 21 languages that may be found on the Internet.

Lectures and Problem Sets

Lecture 1: Monday January 13, Introduction: Why Isn’t the Economy More Stable?

Chapter 5: Introduction to Macroeconomics

[A&S Introduction and Chapter One “Confidence and Its Multipliers” pp.1-18]


Lecture 2: Wednesday January 15, GDP and Related Measures of the Macroeconomy

Chapter 6: Measuring National Output and National Income


Lecture 3: Friday January 17, Other Fundamental Macroeconomic Measures and their Behavior 

Chapter 7: Unemployment, Inflation and Long-Run Growth


Lecture 4: Wednesday January 22, Guest lecturer, David Swensen, Chief Investment Officer, Yale University


Lecture 5: Monday January 27, Circular flow, general equilibrium

Chapter 8 “Aggregate Expenditure and Equilibrium Output

Problem set #1 “GDP” due


Lecture 6: Wednesday January 29, Fiscal Policy

Chapter 9: “The Government and Fiscal Policy”


Lecture 7: Monday February 3, Monetary Policy

Chapter 10: “The Money Supply aA  Dend the Federal Reserve”

A&S Chapter 7: “Why Do Central Bankers Have Power Over the Economy?

Problem set #2 “Consumption, Investment, Equilibrium” due


Lecture 8: Wednesday February 5, Inflation and Interest Rates

Chapter 11: “Money Demand and the Equilibrium Interest Rate

A&S Chapter 4 “Money Illusion”


Lecture 9: Monday February 10, Aggregate demand

Chapter 12: “The Determination of Aggregate Output, the price level and the Interest Rate

A&S Chapter 5 “Stories”

Problem set #3 “Money and Banking” due


Lecture 10: Wednesday February 12, Determination of output

Chapter 13: “Policy Effects and Cost Shocks in the AS/AD Model”

Chapter 16 “Household and Firm Behavior in the Macroeconomy: A further look (pp. 307-16)


Lecture 11: Monday February 17 “Wages, Employment”

Chapter 14: “The Labor Market in the Macroeconomy

Chapter 16 “Household and Firm Behavior in the Macroeconomy: A Further Look (pp. 299-305)

A&S Chapter 8 “Why Are there People Who Can’t Find a Job?”

Problem set #4 “Aggregate Supply and Aggregate Demand” due


Midterm Exam Wednesday February 19

Lecture 12: Monday February 24 “Financial Crises, Booms and Busts”

Chapter 15: “Financial Crises, Stabilization, and Deficits

Problem set #5 “The Labor Market” due


Lecture 13: Wednesday February 26, Growth and Historic trends

Chapter 17: Long-Run Growth


Lecture 14: Monday March 3 International macroeconomics

Chapter 19: International Trade, Comparative Advantage and Protectionism

Problem set #6 “Growth models” due


Lecture 15: Wednesday March 5: The Open Economy and the Fair Model

Chapter 20: “Open-Economy Macroeconomics: The Balance of Payments and Exchange Rates


Spring Recess, March 8-23


Lecture 16: Monday March 24 Prof. Roger Ibbotson, stock market game #1

Problem set #7 “International Macroeconomics” due


Lecture 17: Wednesday March 26, Prof. Roger Ibbotson, stock market game #2


Lecture 18: Monday March 31, Volatility in Financial Markets

A&S Chapter 11 “Why Are Financial Prices and Corporate Investments so Volatile?

Problem set #8 “The Fair Model and Questions about Ibbotson’s Games” due


Lecture 19: Wednesday April 2 Real estate markets

Chapter 16 “Measuring House Price Changes” p. 306-8

A&S Chapter 12 “Why Do Real Estate Markets Go Through Cycles?”


Lecture 20: Monday April 7, Development Economics

Chapter 21 “Economic Growth in Developing and Transitional Economics”

Problem set #9 “Real Estate Economics” due


Lecture 21: Wednesday April 9, Doctrinal Disputes in Macroeconomics

Chapter 18: Alternative Views in Macroeconomics


Lecture 22: Monday April 14, Fairness, Inequality

A&S Chapter 2 “Fairness”

A&S Chapter 13 “Why is there Special Poverty among Minorities?”

Problem set #10 “Development economics” due


Lecture 23: Wednesday April 16, Corruption, bribery, influence, Trust, Trustworthiness”

A&S Chapter 3 “Corruption and Bad Faith”


Lecture 24: Monday April 21, Macroeconomics, our Purposes, and our Society


Lecture 25: Wednesday April 23, review session