Intermediate Macroeconomics
Spring 2022

AS-AD and Other Review Topics

TYPED NOTES: Review of AS-AD Basic

A minor, side challenge throughout the semester will be to see at what point(s) we can think in terms of an AS-AD framework for the economy.

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INTRODUCTION

• The basic island concept and the three fundamental economic challenges all societies face: (1) Who Does What?, (2) Who Gets What? and (3) How Can We Handle Aggregate Shocks?/How Do We Smooth Consumption?

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PART I: The Setup and "Who Does What?"

• Setup, constraints, production ​

  • HO 1: Hand out on setup (PDF)

• ​Production Model 1: Linear production​, and Technology and Productivity

  • HO 2: Hand out on Linear Production, Marginal Product of Labor and Related Topics (PDF)

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• Problem Set 1: Setup and Aggregate Production (Due: beginning of class, February 10th, 2022)

• ANSWER KEY: Problem Set 1 Answer Key

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• (SKIPPED Spring 2022) "Static Growth": Getting the most from what we've got.  Various means of allocating and arranging labor time. Comparative Advantage​

  • Hand out on thinking about "static growth"​

  • Hand out(s) on Comparative Advantage​

    • HO 03.0: Handwritten class lecture notes (PDF)​

    • HO 03.1: Optimal Allocation of Labor and  the Example of Comparative Advantage (PDF)​

    • HO 03.2: Comparative Advantage in 3 Steps (PDF)

    • HO 03.3 Intuition of Optimal Allocation (PDF)

    • HO 03.4 Note on Tech Growth and Labor in History (PDF)

  • AS-AD Challenge 1: Can we think in an AS-AD framework yet?

  • ​Optional reading: Hayek's "The Use of Knowledge in Society"​

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PART II: The Distribution of Income and "Who Gets What?"

• HO 04 Dist of Income Broader Thoughts (PDF)

• HO 05 Concave Fns in Economics (PDF)

• HO 06 Dist Income Conclusion (PDF)

• HO 07 Graphical Analysis of changes in A, L and K with implications for w, r, and Y (PDF)

• AS-AD Challenge 2: Can we think in an AS-AD framework yet?

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• Problem Set 2: NeoClassical Theory of Distribution (Due: beginning of class, March 3rd, 2022)

• ANSWER KEY: Problem Set 2 Answer Key and alternative answer to Prob #4

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PART III: Dyanmics Part 1 - The Fundamentals and "Smoothing Consumption"

• HO 08.01 Preferences

• HO 08.02 Utility Functions

• HO 08.02.5 Intro to Analysis Across Time

• HO 08.03 Allocation Over Time Part 1: Pure Allocation

• HO 08.03.5 Alternative Graph for Pure Allocation

• HO 08.04 Allocation Over Time Part 2: Income and Graphs

• HO 08.05 Allocation Over Time Part 3: Returns

• HO 08.05.5 Alternative Graph for Allocation Over Time with Returns

• HO 08.06 The Dynamic Effect of Interest Rates

• HO 08.07 Solving the Two Period Model

• HO 08.08 Dynamic Effects in the Solved Model

• AS-AD Challenge 2: Can we think in an AS-AD framework yet?

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• Problem Set 3: Dynamic Allocation and The Two Period Model (Due: TUESDAY, March 29, 2022)

• ANSWER KEY: Problem Set 3 Answer Key

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PART IV: Dynamics Part 2 - The Example of Capital Accumulation and the Solow Growth Model

• Breaking K from A and Concave Production

• Marginal Products of Capital and Labor

• The Neo Classical Theory of Income Distribution

• Choosing K over Time and The Solow Growth Model

• Solow Model Basics

  • Hand out/Lecture Notes : Handwritten Class Notes on the Solow Model 

  • Videos on all this material are available

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Evalutating the Solow Models in terms of GDP per Capita

• Hand out/Lecture Notes: Comparing Models​​​

• AS-AD Challenge 2: Can we think in an AS-AD framework yet?

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• Problem Set 4: Solow Growth Model (Due: 4/21/2022)

• ANSWER KEY: Problem Set 4 Answer Key

• PRACTICE PROBLEMS on Solow Growth

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PART V: Money, Government and Policy

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• TYPED NOTES Government Budget Constraints Pt. 1

• TYPED NOTES Government Budget Constraints Pt. 2

  • US Congressional Budget Office (CBO) projections for GDP, debts and deficits: https://www.cbo.gov/about/products/budget-economic-data

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Monetary Policy: An Evolutionary and Conceptual History of Money from Stones to 2021 FED Policy​

• READINGS

  1. READING 1: The Island of Yap (Chap 1 in Milton Friedman's Money Mischief)

  2. READING 2: The Mystery of Money (First pages of Chap 2 in Friedman's Money Mischief)

  3. BBC Article on YAP today (2018)

  4. Wikipedia's YAP page

• Handwritten NOTES

  1. NOTES 1: The Birth of Money (2021v) Part 1: From Commodities to Digital​

  2. NOTES 2: The Birth of Money (2021v) Part 2: The Great Depression

  3. NOTES 3: The Birth of Money (2021v) Part 3: The Great Recession and Beyond

• TYPED NOTES

  • ​The Birth of Money to other Topics

  • Money and Prices in the Short Run vs Long Run

  • Economic Evolution and Money

  • The (Traditional) Monetary System

• AMPLE RESERVES: The Fed's "Ample-Reserves" Approach to Implementing Monetary Policy

• How Policy Framework Changed: How Does the Fed Influence Interest Rates Using Its New Tools? (August 2020)

• Interest Rate Policy​​

• TBD...​

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• Problem Set 5: Monetary Theory  (Due: May 5th)

• ANSWER KEY: Problem Set 5 Answer Key

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QU Course Number: EC 212

Days: Tuesdays and Thursdays

Time:  2:00 - 3:15 PM

Location:  TH 328

Office Hours: TBD and As Needed

Syllabus and Other Material

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EC 212 Spring 2022 Syllabus: download

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OPTIONAL textbook for the course:

• Mankiw, Macroeconomics, 11th Edition by MacMillan Press

  • Standard macro textbook. Very good and well written.​

• Garin-Lester-Sims, Intermediate Macroeconomics by Julio Garin, Robert Lester and Eric Sims.

  • A truly modern macro textbook that is really more of an "advanced undergraduate" macro book than an "intermediate" book.

  • The authors' site is here in case they update.

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Additional Reading

The Economics of TIME

• EconTalk interview with Daniel Hamermesh

  • Practice Problems:  Econ of Time and Interview

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Gary Becker's 1965 Classic (Optional and Advanced/Technical)

• "A Theory of the Allocation of Time," by Gary Becker, The Economic Journal. September 1965.

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Modern FED Policy Framework

• NY FED, "How the Federal Reserve’s Monetary Policy Implementation Framework Has Evolved", NY FED's Liberty Street Blog, Jan 10, 2022

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Birth of Money​

• Jevons, William. Money and the Mechanism of Exchange. D. Appleton and Company, 1875.

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Early Trade Structures

• Avner Greif, Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders, The Journal of Economic History, Vol. 49, No. 4 (Dec., 1989), pp. 857-882​

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Friedrich Hayek's 1945 Classic (Optional)

• "The Use of Knowledge in Society" by F.A. Hayek, The American Economic Review, Vol. 35, Issue 4, Sep, 1945: 519 - 530.​

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Additional Material for the More Analysis-Oriented Student

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• Simulate Solow Models in R (optional for those interested in data science and grad school):

  • Simulation-only link (recommended for first time)

  • Data, Estimation and Simulation link (requires a little econometric knowledge and more R familiarity)

  • Solow-specific R script

• Simulate Solow Models in Python (optional for those interested in data science and grad school):

  • Brad DeLong's 2020 Version (more sophisticated)

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VIDEOS and HOMEWORK

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HOMEWORK

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• Problem Set 1: Setup and Aggregate Production (Due: beginning of class, February 10th, 2022)

• Problem Set 2: 

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VIDEOS

​I recommend you watch them in order and SKIP "Evaluating Growth" videos at first. After you finish all the Solow Model stuff, you can return to them. I just organized them with each section so you can easily go back and check the videos when you look at the Evaluation Stuff.​

• Solow Model Video 1: Review

• Solow Model Video 2: Review Golden Rule and max-Consumption Steady State​

• Solow Model Video 3: Review change in Depreciation Rate (delta)

• Solow Model Video 4: Review change in Technology (A)

• Solow Model Video 5: Review Increase in the Savings Rate

• Evaluating Growth Video 1: Basic Solow Model​

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Solow Model with Population Growth

• Solow Model with Pop Video 1: Basics

• Solow Model with Pop Video 2: Basics Pt 2

• Evaluating Growth Video 2: Solow with Population Growth

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Solow Model with Technological Progress

• Solow Model with Tech Video 1: Overview Pt. 1 

• Solow Model with Tech Video 2: Overview Pt. 2

• Solow Model with Tech Video 3: Exogenous A-Growth

• Evaluating Growth 3 Video: Solow with Exogenous Tech

• Solow Model with Tech 4 Video: Labor-Augmenting Growth

• Evaluating Growth Video 4: Solow with Labor Augmenting Tech

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Evalutating the Solow Models in terms of GDP per Capita

Lecture Notes: Comparing Models​

Evaluation Videos all in One Place (best if you download the "Comparing Models" Notes and go through these with those notes and AFTER we did it in class.)

• Evaluating Growth Video 1: Basic Solow Model​

• Evaluating Growth Video 2: Solow with Population Growth 

• Evaluating Growth 3 Video: Solow with Exogenous Tech

• Evaluating Growth Video 4: Solow with Labor Augmenting Tech​​

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