Syllabus

Course Meeting Times

Lectures: 2 sessions / week, 1.5 hours / session

Recitations: 1 session / week

Prerequisites

14.01SC Principles of Microeconomics

14.02 Principles of Macroeconomics

Objective of the Course

The primary goal of this course is to help you develop a consistent way of thinking about some key macroeconomic phenomena.

In particular, we will try to address the following type of questions:

• What drives economic growth? What explains the large differences in economic performance across different countries of different times? What is the role of policy in economic growth?
• What are the determinants of consumption and saving? How do they matter for both the long run and the short run?
• Why are people unemployed? What should the government do about unemployment?
• Why does macroeconomic activity fluctuate? How do different shocks and policies affect employment, output, investment and consumption over the business cycle?
• Should the government try to stabilize the economy against business-cycle fluctuations, and how? Is it better to restrict what the government can do even if it is fully benevolent, or should we give full discretion to the government?
• What causes financial crises? What is the role of financial markets in the macroeconomy?

We will shed light on all the above questions. However, do not expect a simple answer to any of these questions—there is no simple answer! Rather, what you should aim for is to develop a framework for studying these questions, along with some empirical guidance. We will review some of the key lessons research in macroeconomics has reached over the years—lessons that will help you understand why certain policy questions remain the topic of hot debate in both the academic and the political arena.

Requirements

Unless you had a serious medical problem (e.g., hospitalization), do not expect any exemption or any kind of leniency with regard to deadlines etc. Instead, I will only provide all of you with the following insurance:

• From the five problem sets, the one with the worst score will not be considered towards your 25% problem-sets part of the grade; only the four best problems will count.
• From the two in-class exams, the one with the highest score will count for 25%, while the one with the lowest score will count for 20%.
• Finally, I would like to encourage class participation: I will give extra points to those students who distinguish themselves in class participation.