ECON 3030        
  FALL SEMSTER 2010                                      
Prerequisite: ECON 2030                               

   LINKS......                          ..                 ..............................................

HANDOUTS....                                          ..........................................

READINGS.....                                         .............................................

POWERPOINTS.                                          .............................................

IMPORTANT DATES....................................................................................



Office hours:

 Web Site:

Required Text:

Supplementary Reading
Advanced Reading:
Froyen's MacroeconomicsRichard T. Froyen

11:00 – 11:50 a.m., Monday, Wednesday, Friday

CoB (Lowder and Lowder Bldg.), Room 027 
Roger W. Garrison

Haley Center, Room 0305
9:15 – 10.45 a.m., Monday, Wednesday, Friday (and by appointment)
                                                ---but no office hours on exam day!
(334) 844-2920

Richard T. Froyen, Macroeconomics: Theories and Policies, 9th ed. (Upper Saddle River, N.J., Prentice Hall, 2009).

Roger W. Garrison, "The Austrian School," in Brian Snowdon and Howard R. Vane, Modern Macroeconomics: Its Origins, Development, and Current State. Aldershot, England: Edward Elgar, 2005, available on the course website.

Roger W. Garrison, Time and Money: The Macroeconomics of Capital Structure, London: Routledge, 2001. (Chapters 1, 3, and 4 are available on the course website.)

Purpose and Scope of the Course: Guided by the text and the materials available through the course website, the lectures will develop the analytical tools needed to deal with such issues as unemployment, inflation, business cycles, and economic growth. An effort will be made to strike a balance between acquiring technical skills and achieving economic understanding. After completing the course, students should have a solid grasp of the several competing macroeconomic frameworks and of the nature and causes of the current macroeconomic malaise. They should be able to identify the many fallacies in the following passage, which inspird by John Maynard Keynes but was actually penned (in 1934) by Albert Einstein:

Albert EinsteinOnly a fraction of the available human labor in the world is now needed for the production of the total amount of consumption goods necessary to life.  Under a complete laissez-faire economic system, this fact is bound to lead to unemployment. ... This leads to a fall in sales and profits. Businesses go bust, which further increases unemployment and diminishes confidence in industrial concerns and therewith public participation in the mediating banks; finally the banks become insolvent through the sudden withdrawal of accounts and the wheels of industry therewith come to a complete standstill....  If we could manage to prevent the purchasing power of the masses, measured in terms of goods, from sinking below a certain minimum, stoppages in the industrial cycle such as we are experiencing today [1934] would be rendered impossible. The logically simplest but most daring method of achieving this is a completely planned economy, in which consumption goods are produced and distributed by the community.
Adam SmithSynopsis and Stocktaking:
The course begins with the ideas that existed prior to the publication of John Maynard Keynes's General Theory of Employment, Interest, and Money (1936) and traces the macroeconomics that has evolved out of the Keynesian Revolution. 

     Classical economics, which dates from Adam Smith's Wealth of Nations (1776), reflects the summary judgment that markets work and that market-economies grow–implying a policy recommendation of laissez faire. It is this judgment that Keynes called into question and that lies at the root of modern debate. Is there a market mechanism that coordinates economic activities over time? More pointedly, does saving today get translated into investment for the future? The Austrian economists, particularly F. A. Hayek, focused attention on the rate of interest and showed how intertemporal coordination is (or, at least, can possibly be) achieved in a market economy. Keynes rejected the classical and Austrian views and made the summary judgment that the saving-cum-investment nexus of the market economy is failure-prone. The perceived absence of vital market mechanisms caused him to recommend policy activism as an alternative means of securing full employment. F. A. Hayek
Maynard Keynes     The simplest Keynesian model (Y = C + I + G)* ignores both interest-rate and price-level considerations; the extended models (ISLM** and AggS/AggD***) incorporate interest-rate effects (ISLM) and both interest-rate and price-level effects (AggS/AggD). All the Keynesian constructions reflect the notion that some markets (for goods, for labor, and/or for loanable funds) fail to work–or work perversely or work too sluggishly–to maintain full employment. 
     A quarter of a century after the publication of Keynes's General Theory, a trumped-up classical model was introduced into macroeconomic textbooks. This model, which no know classical economist ever endorsed, either ignores the saving-cum-investment coordination mechanism or fails to integrate that mechanism into the classical framework. But the relevance and plausibility of this model rests on the implicit assumption that the market has no problem in translating saving into investment. 
  Milton Friedman   In addition to Keynesianism, Austrianism, and Classicism, other schools of thought–Monetarism (Milton Friedman),
New Classicism (Robert Lucas), Real Business Cycle Theory (Edward Prescott) and New Keynesianism (Gregory Mankiw)–
will be considered. By the end of the term, the student should have a good understanding of the core of ideas that unite the various schools of thought as well as the major issues that separate them. 
    *In income-expenditure analysis, equilibrium is achieved when all of  the economy's  income (Y), which pays workers and others to transform inputs into output, is spent on that output. Total expenditures (E) consist of the expenditures made by consumers (C), investors (I), and the government (G). 

    **In ISLM analysis, equilibrium is achieved when Investment (I) equals Saving (S) and the Demand for Money (L) equals the Supply of Money (M).

    ***In AggS/AggD analysis, equilibrium is achieved when Aggregate Supply equals Aggregate Demand, where AggS and AggD are each  conceived as a relationship between income (Y) and the price level (P). The logical integrety of this construction is threatened by tha fact that the two P-Y relationships (underlying AggD and AggS) are based on different–and conflicting–assumptions about the way a market economy functions. 

Class Attendance: Students are required to attend all class meetings and to arrive before the lecture begins. (Late-arriving students create a distraction for other students and for the instructor.) The students will sign an attendance roster each day. Documentation of excused absences must be presented within one week of the absence A harsh penalty will be imposed on any student who signs the attendance roster for another student: The signer and possibly the signee will forfeit all attendance points.

Class Participation: Student participation is encouraged and welcomed. Questions for the purpose of clarification will benefit most all the students; critical questions and comments tend to make the course more interesting. 

Organization, Readings, and Exam Schedule: The reading material is divided into three lecture series as shown in the table below. The table includes reading assignments from Richard T. Froyen's Macroeconomics: Theories and Policies, 9th edition, as well as readings available through this site. The scheduling of the textbook chapters may be modified as the course progresses. Also, additional readings may be assigned as appropriate.  

General Topic
Reading from
  Richard T. Froyen's Macroeconomics
Other Readings 
(on the course website)
Exam Dates
Introduction to Macroeconomics
Classical Macroeconomics
Simple Keynesian Analytics
Chapters 1 & 2
Chapters 3 & 4
Chapter 5 minus Section 5.7

"Textbook Classicism"

 Wednesday, September 29

The IS Curve
The LM Curve
The ISLM Analytical Framework
The Policy Implications of ISLM
The Monetarist Counter-Revolution
Chapter 6, pp. 119-123
Chapter 6, pp. 97-118
Chapter 6, pp. 123-131
Chapter 7, pp. 136-155
Chapter 9

Wednesday, October 27
Austrian Macroeconomics
The Roaring '20s and the Great Depression
Booms and Busts in Modern Times

"The Austrian School"

Wednesday, December 8
12:00 - 2:30 p.m.

The subject matter covered in class will parallel the assigned reading, but in some instances the lectures will go beyond the text. Thus, the text and the lectures should be viewed as complements and not as substitutes. The analytics of macroeconomic phenomena will be the primary focus of the lectures. The Handouts, Readings, PowerPoint files, and Links available through this web site should be helpful. The Handouts summerize some of the key concepts discussed in class and give the students a preview of test material. The Readings reinforce and elaborate upon the ideas presented in the text. The PowerPoint files are the ones shown in class and are made available here for reinforcement and review. The  Links are intended to anchor class material to some of the institutions, policy actions, and macroeconomic data being discussed. 

Examinations: There will be two one-hour exams (scheduled for September 29 and October 27) and a comprehensive final exam as scheduled by the university (December 8, 12:00 - 2:30 p.m.). The exams will be constructed in a multiple-choice format but some questions will require a graphical and/or algebraic solution.  The wearing of caps, hats, bonnets, sombreros, motorcycle helmets, ski masks or other headgear is not allowed during the exam.

Grading System: One-fourth of your course grade is based on attendance. Each student begins the course with 100 attendance points. Then, beginning on Monday, August 23, he or she will lose three points for each unexcused absence. Late-arriving students can be counted as absent at the discretion of the professor. The three exams will count 100 points each, which means that the total possible points in the course (exams plus attendance) is 400. Hence, if a student has four unexcused absences (for an attendance score of 88) and has exam scores of 76, 85, and 79, his or her course average would be (88 + 76 + 85 + 79)/4 = 83. Letter grades for the course will be determined by applying a 10-point scale to the course average. That is, 90 and above is an A; 80 to 90 is a B; etc.

Make-ups: Students will not be permitted to take the exams early or late. Should it become necessary for a student to miss an exam, he or she should notify the instructor in advance of the exam date. Students with excused absences will be required to take a make-up exam as arranged by the professor.

Supplemental Materials:


Readings: PowerPoint Files Important Dates:
Milestone Dates
for ECON 2030
The Unemployment Rate
as announced by the BLS
The Consumer Price Index
as announced by the BLS

August 18: 1st Day of Class

September 6: Labor Day
September 29: 1st Exam
  October 7:  Mid Semester
October 27: 2nd Exam
November 22-26: Thanksgiving Break
December 3: Last Day of Class
December 8:  Final Exam

August 6 for the July Rate
September 3 for the August Rate
October 8 for the September Rate
November 5 for the October Rate
Decemberl 3 for the November Rate

August 13 for July CPI
September 17 for the August CPI

October 15 for the September CPI
November 17 for the October CPI
December 15 for the November CPI

Advanced Reading

Roger W. Garrison, Time and Money: The Macroeconomics of Capital Structure, London: Routledge, 2001 
   Chapter 0. Preface (.html file)
   Chapter 1. The Macroeconomics of Capital Structure (.html file)
   Chapter 3. Capital-Based Macroeconomics (.pdf file)
   Chapter 4. Sustainable and Unsustainable Growth (.pdf file)