ECON10003

Introductory Macroeconomics

July 2021

Introduction

Welcome to Introductory Macroeconomics. This course is an introduction to the key principles of macroeconomics. The course begins by explaining essential concepts (like GDP, unemployment and inflation) and then turns to a series of simple theoretical models designed to help think about both the determinants of macroeconomic outcomes and the role of macroeconomic policies.

It is an exciting time to study macroeconomics. There are questions actively debated in economics that have important implications for the well-being of everyone in our society. Some examples that we will see in this course include:

● What can economic policy do in response to the covid pandemic?

● Is unemployment too high?

● Is the level of public debt growing too fast? Or not fast enough?

● Why do some countries grow fast while others do not?

● Why has real wage growth slowed down?

Subject aims

The overall aim of this subject is to introduce macroeconomic theory and policy. Topics will include economic aggregates such as production and employment, the general level of prices and inflation, the exchange rate, interest rates, monetary and fiscal policies, the balance of payments and economic growth. Analysis is particularly directed to current macroeconomic problems and policy issues.

Textbook

There is no set text for the course. But if you would like to use a text to supplement the class notes, the best fit for this course is:

 Bernanke, Olekalns, Frank, Antonovics and Heffetz (BOFAH): Principles of Macroeconomics. 5th Edition. McGraw-Hill, 2019.

Prerequisites

ECON10004 Introductory Microeconomics

MAST10012 Introduction to Mathematics, for students who did not achieve a score of at least 25 in Mathematical Methods or Specialist Mathematics in VCE Units 3 & 4 or equivalent.

Assessment

Your grade for this subject will be based on:

All times and dates refer to Melbourne time.

Please note that there are some changes relative to the Handbook entry for this subject. These changes were required by the University to accommodate the impact of the covid pandemic.

Online multiple choice tests.     These are short tests administered through Canvas. You will need to log on to the Quiz page from the main menu between 9:00 August 25 and 16:00 August 26 (in week 5) to complete the first test (worth 5%) and between 9:00 October 13 and 16:00 October 14 (in week 11) to complete the second test (worth another 5%). You will have 30 minutes to complete each test.

Assignments.     These will be essay or short answer questions that may be submitted electronically in groups of three people or less. The first assignment will be due at 16:00 Wednesday September 1 (week 6). The second assignment will be due at 16:00 Wednesday October 6 (week 10). More detailed guidelines on the assignments and submission procedure will be provided with the assignments.

Final exam.     More details on the final exam will be provided on Canvas and in lectures prior to the exam period. The approved calculator for the exam is the Casio FX-82 (any suffix). The exam block is Monday November 1 to Friday November 19. The final exam is a hurdle requirement. In short:

Contact details

Email protocol.     Please note that we are only able to respond to student emails coming from a University of Melbourne email address. Please do not use personal email addresses such as Gmail, Yahoo, Hotmail or even business email addresses. Emails from non-University email addresses may be filtered by the University’s spam filter, which means that we may not receive your email. All correspondence relating to this subject will only be sent to your University email address. Note that you must first activate your University email address before you can send or receive emails at that address. You can activate your email account at this link: http://accounts.unimelb.edu.au/. While academic staff try to address queries received via email, it is often more appropriate to resolve substantive questions during lectures and tutorials and during normal consultation hours. With this in mind, we encourage students to attend all lectures and tutorials and to familiarise themselves with the consultation hours offered by the lecturers and tutors in this subject.

Lectures

There will be two lectures each week. In-person lectures will be delivered as follows:

Each lecture will also be video recorded and made available online via Canvas the same day.

Lecture schedule

BOFAH reading

1. Introduction and course overview     Chapter 1

Fundamental concepts

2. Aggregate economic activity     Chapter 2

3. Inflation and interest rates     Chapter 3

4. Employment and unemployment     Chapter 5

Short-run macroeconomics

5. Short-run fluctuations overview     Chapter 6

6. Keynesian model of the economy, part one     Chapter 7

7. Keynesian model of the economy, part two     Chapter 7

8. Fiscal policy     Chapter 8

9. Monetary policy, part one     Chapter 9

10. Monetary policy, part two     Chapter 10

11. Aggregate demand and supply, part one     Chapter 11

12. Aggregate demand and supply, part two     Chapter 12

Long-run macroeconomics

13. Savings and capital formation     Chapter 4

14. Long run growth overview     Chapters 13 & 14

15. Solow-Swan model, part one     Chapter 15

16. Solow-Swan model, part two     Chapter 15

International economics

17. International trade, part one     Chapter 16

18. International trade, part two     Chapter 16

19. Exchange rates, part one     Chapter 17

20. Exchange rates, part two     Chapter 17

21. Balance of payments, part one     Chapter 18

22. Balance of payments, part two     Chapter 18

Course summary and final exam review

23. Final exam review, part one

24. Final exam review, part two

Lecture slides

Lecture slides will be posted to Canvas under the Modules tab before each class.

Tutorials

Tutorials begin in the second week of semester, on Monday August 2.

Students are expected to attend a one-hour tutorial each week. Both in-person and online tutorials will be available. Students should enrol in a tutorial using the Student Portal.

Tutorial participation.     Each tutorial will consist of a pre-tutorial quiz and further in-tutorial prob-lems. For each tutorial there will be an online pre-tutorial quiz, administered through Canvas, to help you prepare for that week’s tutorial. All together, these pre-tutorial quizzes are worth 5% of your marks for the subject. They are not long or difficult, they are simply to help reinforce what you have learned in the lectures. The in-tutorial problems are to be discussed with your tutor either (in-person or online) and another 5% of your marks will be awarded on the basis of your in-class tutorial participation. Together, the pre-tutorial quizzes and in-tutorial participation are worth 10% of your marks for the subject.

Solutions to the pre-tutorial quizzes will be available by clicking on your mark which is hyperlinked to show correct/incorrect answers. A brief answer key to the in-tutorial problems will be posted in the relevant module every Friday.

Getting help

There are lots of ways to get help if and when you need it.

Lecturer consultation.     Both Chris and Nahid have regular office hours online and in-person, see contact details above.

Tutor consultation.     Shortly after tutorials begin each tutor will have a regular (fortnightly) consulta-tion hour in addition to their regular tutorial. Your tutor will notify you of their regular consultation time and they will also be posted to Canvas.

Online questions.     Online questions will also be answered through an online discussion board avail-able via Canvas. Tutors will attempt to answer your question within 24 hours (weekdays only).

Review sessions.     There will be an optional review session every two weeks, starting from Week 4, run by Nahid Khan. In these sessions discussion will be based on students’ questions that may arise from tutorial tasks, past exam questions and questions asked to the discussion board. The review sessions will be held during Weeks 4, 6, 8, 10 and 12. In these weeks, the sessions will run on Thursdays from 14:15 to 15:15. Exact venue or online details will be provided by announcement closer to the date.

Private tutoring services

The Faculty has become increasingly concerned about the existence of private tutoring services that heavily target University of Melbourne students enrolled in FBE subjects.

Students are urged to show caution and exercise their judgement if they are considering using any of these services, and to please take note of the following:

● Any claim by any of these businesses that they have a ‘special’ or ‘collaborative’ or ‘partnership’ style relationship with the University or Faculty is false and misleading.

● Any claim by a private tutoring service that they are in possession of, or can supply you with, forthcoming University exam or assignment questions or ‘insider’ or ‘exclusive’ information is also false and misleading.

● The University has no relationship whatsoever with any of these services and takes these claims very seriously as they threaten to damage the University’s reputation and undermine its inde-pendence.

It is also not appropriate for students to provide course materials (including University curricula, reading materials, exam and assignment questions and answers) to operators of these businesses for the purposes of allowing them to conduct commercial tutoring activities. Doing so may amount to misconduct and will be taken seriously. Those materials contain intellectual property owned or controlled by the University.

We encourage you to bring to the attention of Faculty staff any behaviour or activity that is not aligned with University expectations or policy as outlined above.

Learning outcomes

Subject objectives.     On successful completion of this subject students should be able to:

● Explain the importance of the circular flow of income to macroeconomics

● Interpret the meaning and measurement of macroeconomic aggregates such as GDP

● Explain and use the Keynesian model of national income determination

● Describe the roles of money and the financial system in the macroeconomy

● Critically analyse macroeconomic policies appropriate to achieving macroeconomic objectives

● Explain and apply the aggregate demand/aggregate supply model

● Explain the key features of the neoclassical model of growth

● Analyse the factors influencing the balance of payments and the exchange rate.

Generic skills     In this subject you will have the opportunity to develop important generic skills. These skills are grouped below by level of development:

● High level of development: written communication; collaborative learning; critical thinking; synthesis of data and other information; application of theory to practice.

● Moderate level of development: oral communication; problem solving; team work; interpretation and analysis; evaluation of data and other information; accessing data and other information from a range of sources; receptiveness to alternative ideas.

● Some level of development: statistical reasoning.

Awareness issues     At a broader level, this subject will increase your awareness of issues such as:

● Macroeconomic arguments and theories and how they can be used to understand the current state of the economy both in Australia and internationally

● The nature of competing macroeconomic theories

● How macroeconomics enables the assessment of government policies

● The disparity in living standards across countries

● The effects of globalisation on economic welfare.

Plagiarism and collusion

Presenting material from other sources without full acknowledgement (referred to as plagiarism) is heavily penalised. Penalties for plagiarism can include a mark of zero for the piece of assessment or a fail grade for the subject.

Plagiarism is the presentation by a student of an assignment identified as his or her own work even though it has been copied in whole or in part from another students work, or from any other source (e.g., published books, web based materials or periodicals), without due acknowledgement in the text.

Collusion is the presentation by a student of an assignment as his or her own work when it is, in fact, the result (in whole or in part) of unauthorised collaboration with another person or persons. Both the student presenting the assignment and the student(s) willingly supplying unauthorised material are considered participants in the act of academic misconduct.

See http://academicintegrity.unimelb.edu.au/ for more information.

Assignment submission

Please note that you are required to keep a copy of your assignment after it has been submitted as you must be able to produce a copy of your assignment at the request of teaching staff at any time after the submission due date.

There will be no assignment extensions

Students with a genuine and acceptable reason for not completing an assignment or other assessment task, such as illness, can apply for special consideration (see below).

Penalties for late submission and exceeding word limits

In order to ensure equality for all students, assignments and examinations (where relevant) must be submitted by specified deadlines. Late submissions will attract the following marking penalties:

Assignments.     10% penalty per day of the total maximum mark for the piece of assessment.

Assignments that exceed word limits may also attract a marking penalty in line with University policy. Students with a genuine and acceptable reason for not completing an assignment (or other assessment task), such as illness, can apply for special consideration (see below).

Exams.     Late submissions will attract a 10% penalty (of the total maximum mark for the exam) if submitted after the scheduled completion time (for instance, an exam scheduled at 3:00pm with 180 minutes writing time + 30 minutes reading time will have a completion time of 6:30pm). Submissions 30 minutes after the completion time will not be marked.

Students who were prevented from submitting due to technical difficulties will need to apply for technical consideration with supporting documentation.

Special consideration

Students who have been significantly affected by illness or other serious circumstances during the semester may be eligible to apply for Special Consideration.

The following website contains detailed information relating to who can apply for Special Consider-ation and the process for making an application: http://students.unimelb.edu.au/admin/special.

Students who are granted special consideration will have the relevant marks transferred (reweighted) to the final exam.

Referencing

All sources used for a written piece of assessment must be referenced. This is to acknowledge that your material is not based entirely on your own ideas, but is based, in part, on the ideas, information, and evidence of others. This is desirable as you are attending University in order to learn from others. You will be required to use the APA system or Harvard System of referencing. The library has prepared a website to help students correctly reference:

http://www.lib.unimelb.edu.au/recite/citations/harvard/generalNotes.html

It is important that all material you present for assessment is referenced correctly. Material that has not been referenced correctly may be considered to be plagiarised, and as such may be penalised. We will also look for evidence that material included in the bibliography has been used in the assignment. Including references that have not been used may also result in your assignment being penalised.