Econ 502: Macroeconomic Theory

Course Module Objectives

From Keynes' General Theory (1936) through the mid-nineteen seventies, macroeconomic models primarily consisted of highly aggregated relationships for consumption, investment, and other key economic activities using some version of the IS-LM framework. Over the past twenty-five years, however, macroeconomic theorists have developed a variety of different macroeconomic models that are based more explicitly on microfoundations. These models include: (1) new classical macro models based on rational expectations and a Walrasian conception of continual market clearing; (2) post-Walrasian macro models based on bounded rationality, asymmetric information, and possible market disequilibrium; and (3) agent-based computational economic models in which macroeconomic regularities are viewed as evolving (by chance, necessity, and design) from the interactions over time of autonomous microeconomic agents with learning capabilities.

This course module will focus on macroeconomic coordination issues for decentralized market economies. After an introductory discussion of these issues, we will critically investigate the distinct ways in which these issues are addressed by each of the three modeling approaches outlined above. Each approach will be examined for logical coherence, empirical relevance, and practical policy implications.

Course Module Organization

• Outline of Topics:
  1. Macroeconomic Coordination Issues: Introduction
  2. Walrasian Equilibrium: Benchmark of Coordination Success?
  3. Post-Walrasian Macroeconomics
  4. A Constructive Approach to Macroeconomic Coordination
  5. Comparative Illustration: The Efficiency Wage Debate

• Prerequisites: Intermediate micro and macro, intermediate calculus, and basic matrix algebra

• Total Econ 502 Credits: 4 credits

• Grading: Your grade for this course module will count as one third of your overall Econ 502 course grade. Your course module grade will be based on: (a) assigned exercises (pro-rated to 30% of your course module grade); and (b) a final exam (pro-rated to 70% of your course module grade). The final exam will be held at the regularly scheduled time for the Econ 502 final exam. Class attendance and contributions to class discussion will count for extra credit in case of a borderline grade. As the course proceeds, you will be able to check your accumulated exercise and exam points online at the Accumulated Exercise and Exam Points Site (pdf). The last four digits of your student identification number will be used in place of your name at this site.

• Required and Recommended Readings: Please refer to the Syllabus for this Econ 502 Course Module for a detailed annotated listing of required and recommended readings.

• Special Note on Class Discussion:

  Since all basic lecture notes for this Econ 502 course module will be available in advance, class discussion will be stressed in place of traditional lectures. Students will be expected to study assigned readings prior to attending the class in which they are to be discussed. Key discussion questions will be identified in advance for each class meeting, and students should come to class prepared to participate in a discussion of these questions.

• Special Note on Exercise Grading:

  As indicated at the top of each assigned exercise sheet, these exercises must be received by me by the beginning of class on each due date in order to be counted as part of a student's cumulative course points. Late assignments will not be accepted for formal grading -- no exceptions. The reason for this policy is that exercise answers will be discussed in class on each due date; the passing out of an exercise answer key and/or the beginning of the discussion of the answers (whichever comes first) will be the effective dividing line between on-time and late assignments. The bag of collected exercises will be sealed at this time.

  If you must miss class on a due date, you can still ensure your exercise is in on time by one of the following means: (a) have someone else carry the exercise to class for handing in; hand in (or have someone else hand in) the exercise directly to the TA or to the instructor prior to the start of class on the due date (e.g., during office hours); or (c) put (or have someone else put) the exercise under the Heady 375 office door of the instructor no later than fifteen minutes prior to the start of class on the due date. Please note that putting exercises in the department mail box of the instructor or TA, or emailing answers to the instructor or TA, are not among these listed options because there is no set time that mailboxes and/or email will be checked.
  The intent of this policy is to help ensure that student grading is fair and accurate. Your cooperation is appreciated.

  Special Note on the Final Exam:

  The final exam for this Econ 502 course module will be a two hour exam held in the regular class meeting room on the officially scheduled final exam day for Econ 502, as announced in the University Bulletin. For Fall 2003, the date/time of this final exam is Thursday, December 18, 9:45-11:45am.

  The exam will be a closed-book comprehensive exam covering all assigned materials for the course module. Test booklets will be provided at each exam, so students do not need to bring paper or blue books to the exams. Each exam will consist of a selection of problems designed to test ability to analyze and discuss macroeconomic coordination issues using basic tools and concepts covered in assigned class materials. These exam problems will make use of class lecture materials, in-class discussion questions, required readings, and assigned exercises.

  Absence from the final exam will result in a grade of zero unless the instructor agrees there are verified extenuating circumstances such as a major medical emergency. In the latter case, the course module grade will be determined on the basis of other work completed; no make-up final exam for this course module will be scheduled.

Disability Statement

If you have a disability and require accommodations for this course, please contact the instructor early in the semester so that your learning needs can be appropriately met. You will need to provide documentation of your disability to the Disability Resources (DR) office, located on the main floor of the Student Services Building, Room 1076, 515-294-6624.

Copyright © 2003 Leigh Tesfatsion. All Rights Reserved.