Welcome to ECO 285 Principles of Macroeconomics

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1

Welcome to ECO 285

Principles of Macroeconomics


Please pick up a copy of the syllabus


Make a name card for yourself


This is your first in
-
class assignment


You will be graded on your penmanship and for correctly
following directions


Use the 8.5” x 11” cardstock provided


Fold it lengthwise.


Wait for the marker. Print your first and last names in
large letters, with your last name above the fold and your
first name below the fold as in the example shown.

2

How to Contact Me


Mr. John D. Eastwood


Office CBA Room 247


Phone: 523
-
7353


Fax: 523
-
7331


E
-
mail: John.Eastwood@nau.edu


Office Hours


Monday, Wednesday and Friday, 10:15


11:15 AM


Tuesday and Thursday, 4:00


5:00 PM


Also by appointment


3

Prerequisite


Eligible to take MAT 110 or a higher course


If you lack the prerequisite, contact me as
soon as possible!

4

Course Objectives


Topics:


Measurement of national economic variables;
the determination of output, income,
employment, and price levels through aggregate
supply and demand analysis and related
graphical techniques; business cycles, fiscal and
monetary policy and international economics. .


Successful students will learn to analyze
economic issues in an objective manner.

5

The Required Text Package


Text (required): Robin Bade and Michael
Parkin,
Foundations of Macroeconomics
,
Second Edition, Pearson Publishing
(Addison
-
Wesley), 2004. This text is
packaged with a subscription to the
course web site and a news magazine,
The Economist
.

6

Announcements & Calendar

www.cba.nau.edu/facstaff/eastwood
-
j/

7

Graded Work:


Exams are 65% of your grade


Homework, quizzes, attendance and writing
assignments are 35% of your grade


Your grade is computed as a weighted
average of your scores

8

Writing assignments


Individually prepared analysis of news
articles


About 300 words in length, double spaced,
plus a graph and a copy of the original
article


Three summaries during the semester,
graded for content, grammar and style


9

Grading Scale


90% or better earns an “A”


80% to 89% earns a “B”


70% to 79% earns a “C”


60% to 69% earns a “D”


59% or less earns an “F”


If the average on an exam falls below a C, I
may curve that exam.

10

Academic Dishonesty

1.
Plagiarism
: any attempt to pass off other’s work as your
own

2.
Cheating
: any attempt to gain an unfair, hidden advantage
over one’s fellow students

3.
Fabrication
: any attempt to present information that is not
true

4.
Fraud
: any attempt to deceive an instructor or
administrative officer of the university

5. Any attempt to facilitate academic dishonesty

Excerpt from the NAU Student Handbook, Appendix F

Questions?

12

Why Study Economics?


The purpose of studying
economics is not to acquire a
set of ready
-
made answers to
economic questions, but to
learn how to avoid being
deceived by economists.




Joan Robinson, 1903
-
1983

13

Why Not?


Within business colleges, Economics is
sometimes referred to as the “Mother
Discipline.”


Accounting, Finance, Marketing, and
Management are disciplines that apply
economic principles.


Many political issues concern Economics.

14

B.S.B.A. in Economics


extended major


Degree requirements


Economics courses


24 hours


Other major requirements

18 hours


Business Core


42 hours


Liberal Studies


35 hours


General Electives



1 hours


Total




120 hours


see page 131 of 2001
-
2003 catalog

15

B.S. in Economics

extended major


Degree requirements


Major




57 hours


Liberal Studies


35 hours


General Electives



28 hours


Total




120 hours


see page 201 of 2001
-
2003 catalog

16

Minor in Economics


Minor in Business Economics


Requires 18 credit hours


ECO 284, and ECO 285 +


Four upper
-
division economics courses


see page 133 of 2001
-
2003 catalog

17

Certificate


Certificate in Business Economics


Requires 15 credit hours


ECO 284, and ECO 285 +


Three upper
-
division economics courses


see page 131 of 2001
-
2003 catalog

18

Other Business Majors


Accounting


Computer Information Systems


Finance


Management


Marketing


B.A. in Liberal Studies


Enterprise in Society Emphasis

19

The Basics of Economics


What is Economics?


A large subject


How do we approach it?


Heilbroner’s analogy: think of the economy
as an unexplored continent.

20


Enter the continent on foot...


and study at close range the persons and
firms whose activities (when combined)
form the economy.


Microeconomics

is the study of how
consumers, firms, and resource owners
interact in individual markets.

21

Fly over the continent...


and note the characteristics of the economy
as a whole.


Macroeconomics

is the study of the entire
economy.

22

A third approach...


It focuses first on how the "economic
continent" came to be there in the first
place, and on what forces have shaped and
continue to shape its landscape.


This approach is known as
economic
history
.

23

Primarily Macroeconomics


Economic history adds perspective on
contemporary problems such as ...


De
-
regulation,


Environmental degradation,


International trade,


Monopoly power, and


Welfare reform.

24

History of Economic Thought


The study of how economic ideas and
philosophies have evolved


Keynes suggested that these ideas have had
a powerful influence on human history.

25

What is Economics?


Woody Allen:“ Economics is about money and
why it is good,"


Heilbroner: “Economics is the process of
providing for the material well
-
being of society.”


However, because many goods are scarce, society
must make choices.


Thus Economics is often defined as the study of
how scarce resources are best allocated among
competing ends.

26

The Setting


The human body, by itself, is not a highly
efficient mechanism for survival.


Each 100 calories eaten delivers about 20
calories of mechanical energy.


That amount of work must first be applied
to sustain the human.


Only what is left over can be used to build a
civilization.

27

The Problem


Scarcity



Time



Money



Goods



Food


Survival

28


The individual and society


Economic history must focus on the central
problem of survival and on how humans
have solved that problem.

29


The division of labor


We survive because the tasks we cannot do
for ourselves are done for us by an army of
others.


Enhances our capacity a thousand
-
fold.


With this gain comes a degree of risk.


Our well
-
being depends on others.

30


Economics and scarcity


Is human nature or mother nature the source
of most of our economic problems?


The scarcity of nature's resources.


Our desires and wants.

31


Economics and Society


What are the tasks which social
organization must perform to bring human
nature into harness?


A society must assure the production of
enough goods for its own survival.


Society must also distribute these goods so
that more production can take place.

32

Three basic questions


What

to produce?


How

to produce it? and


For Whom?

33

Economizing


The production problem, in part, is one of
applying technical skills to the resources at
hand, avoiding waste, and using effort as
efficiently as possible.

34

Mobilizing effort


Before society may concern itself about
using its resources efficiently, it must first
devise social institutions that will mobilize
human effort for production

35

Failure to mobilize effort


The Great Depression.


The poorest nations.


Thus the production problem is in part a
physical and technical problem, and in part
a challenge to social organization.

36


Allocating effort


Putting people to work is the first step in
solving the production problem. But they
must be put to work at the right tasks.


Failures emphasize that a society must not
only produce goods, it must produce the
right goods.

37

Distributing output


to assure continued production


Distributive failures need not entail a total
economic collapse.


Societies can exist with badly distorted
distributive efforts.


Problems in distribution most often reveal
themselves as social and political unrest.


A society must sustain and motivate its workers.

38

Three solutions


Tradition


Command


Markets

39


Tradition
.


Workable


But static


Tradition solves the economic problem,


at the cost of economic progress.


What is Tradition’s role in the US
economy?

40


Command


Also workable


Often superimposed on a traditional society


An effective tool for economic change


What is the role of command in the US
economy?


Is it moral?

41


The Market


Because we live in a largely market
-
run
society, we are apt to take for granted the
puzzling nature of the market solution to the
economic problem.


Quote from R. L. Heilbroner's
The
Economic Problem
.

42

Perplexed?


The perplexity which the market idea would
rouse in the mind of someone unacquainted
with it may serve to increase our own
wonderment in the most sophisticated and
interesting of all economic mechanisms.