MACROECONOMICS II. Degree in International Business and Economics University of Alcalá. Academic Year 2015/2016 Year 2 Term 2

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1 MACROECONOMICS II Degree in International Business and Economics University of Alcalá Academic Year 2015/2016 Year 2 Term 2

2 COURSE GUIDE Course Name: Macroeconomics II Code: Degree Course: Subject Area: Type: Basic ECTS Credits: 6 Year and Term: Year 2- Term 2 Degree in Economics and International Business (ENI) Department: Economics Area: Foundations of Economic Analysis Cecilia Albert (Spanish) cecilia.albert@uah.es Course Conveners: Elena López (English) elena.lopez@uah.es Teaching hours: Language of Instruction: To be determined according to the availability of each group Spanish and English 1. OVERVIEW The content of the course Macroeconomics II complements the panoramic view of modern macroeconomic theory offered in the course Macroeconomics I. The main aim of the course is to familiarize the student with the microeconomic fundamentals of macroeconomics, expanding the short- and medium-term analysis addressed in that subject, as well as to examine the role of macroeconomic policies and analyze various pathologies (high unemployment, hyperinflation). The Course Content section of this guide includes a detailed description of each of the topics covered in the course. 2. SKILLS General Skills: 1. Ability to analyze and synthesize 2. Ability to gather and select information relevant to each specific area of study. Faculty of Economic Science and Business, University of Alcalá 2

3 3. Textual analysis and interpretation skills, completing exercises and problem solving. 4. A wide-ranging and comprehensive perspective on the fundamental content of macroeconomics and its corresponding research methods. 5. Skills relating to the gathering, analysis and processing of sources of information relevant to the study of macroeconomic phenomena. 6. Practical and first-hand experience of the identification and interpretation of macroeconomic problems. Specific Skills: 1. Proficiency in the use of the common concepts of modern macroeconomic analysis. 2. Capacity to understand the most important real-world macroeconomic problems and to apply the basic macroeconomic models and techniques to real-world problems and situations. 3. Ability to develop and deploy basic analytical models, both individually and as part of a team. 4. Ability to understand the relationships between the most relevant macroeconomic variables and the theoretical models used by economists. 3. COURSE CONTENT TOPICS (topics may be specified if considered necessary) PART I: INTRODUCTION Topic 1. Introduction The role of microeconomics in macroeconomics. The role of assumptions. Economic data and models. Economic fluctuations and growth: the distinction between short-, medium- and long-term. Total classes, credits or hours 2 sessions 1 topic 1 theory hour 1 practical hours Faculty of Economic Science and Business, University of Alcalá 3

4 PART II: MICROECONOMIC FUNDAMENTALS OF MACROECONOMICS Topic 2. Expectations: the basic tools Real and nominal interest. The discounted present value. Review of the IS-LM model. Topic 3. The financial markets and expectations The prices of bonds and their yield. The stock market and variations in equity prices. Topic 4. Microeconomic fundamentals of consumption and investment. Consumer theory based on life cycle and permanent income. Investment and expectations; current and projected profits. Consumer and investment volatility. Topic 5. Expectations, yields and the political economy. The financial markets and expectations. Monetary policy, expectations and yields. Deficit reduction, expectations and yields. 17 sessions 4 topics 8 theory hours 7.5 practical hours 0.5 workshop hours 1 evaluation session Faculty of Economic Science and Business, University of Alcalá 4

5 PART III: MACROECONOMIC POLICY AND PATHOLOGIES Topic 6. Monetary policy and inflation The optimal inflation rate. Development of monetary policy and aims of monetary growth and inflation. The remit of the Central Bank and monetary policy. Topic 7. Public debt and fiscal policy Public sector budgetary constraints. The deficit and public debt. Current taxes and future taxes. Ricardian equivalence. Cyclically adjusted deficit. Consequences of high public debt. Topic 8. High inflation The Budget deficit and the creation of money. Inflation and real monetary balance. Deficit, seigniorage and inflation. Cases of hyperinflation. Topic 9. Depressions and crises. Major depressions and economic crises: the Depression of the 1930s and the 2008 economic crisis. Recent developments in the international economy. 13 sessions 4 topics 6 theory hours 5.5 practical hours 0.5 workshop hours 1 evaluation session 4. LEARNING-TEACHING METHODOLOGIES: EDUCATIONAL ACTIVITIES 4.1.Distribution of credits (in hours) Number of class hours: 48 Number of independent study hours: 102 Total hours: 150 Number of class hours:48 - Attendance at large group classes (theory): Attendance at small group classes (practical): 22.5 o Tutorials: 21 o Workshops: 1.5 Examination: 3 Number of hours of independent study: 102 o Theory preparation: 50 o Practical preparation: 30 Exam preparation: 22 Faculty of Economic Science and Business, University of Alcalá 5

6 4.2. Methodological strategies, teaching materials and resources Theory classes In the theory classes, the tutor will give an overview of each topic, placing emphasis on the most relevant aspects. Through these classes the tutor will guide students in the learning of and use of the principles and instruments of economic theory. Practical classes and tutorials Classroom sessions: these will be dedicated to theory classes, exercise and the critical analysis and discussion of theoretical and practical content. The student will acquire a basic knowledge of the course. These classes will develop analytical abilities, interpretation skills and ability to complete exercises and solve problems. The practical classes will revolve around tackling exercises and problems, and sessions dedicated to the presentation and critical discussion of articles and pieces of work about current issues. This will allow students to familiarize themselves with real-world problems and to understand their relation to the theoretical models analyzed throughout the course. By solving tasks and exercises students will strengthen independent study skills, which will also be developed through the individual preparation for theory classes and assessments. The work done in the practical sessions will allow the development of teamwork skills and the students critical and analytical abilities through class interaction. The textbooks recommended in the bibliography section of this document cover the key subject material that will give students the necessary tools for studying the theoretical models, analyzing exercises and problems and the critical discussion of practical cases. It is useful to note that most of these textbooks include tables of practical cases that aid in the understanding of concepts through real examples. Materials specifically prepared by the tutor, including worksheets, readings and articles, and internet tools, will also be Faculty of Economic Science and Business, University of Alcalá 6

7 available to students. In each case, the materials suggested by the tutor will be in accordance with the degree of difficulty suggested in the recommended textbooks. Independent study: these hours will be dedicated to the students individual study and will strengthen the knowledge of the theoretical topics, completing of exercises and solving cases as well as reading articles of interest. This aims to develop transferable skills such as information gathering, interpretation of texts and problem solving. Further, students will be able to develop their work with the support of the BlackBoard virtual platform. This will give them access to new content, allow them to complete activities and assessments and facilitate communication between the students and the tutor, as well as between students themselves. The student should study the materials suggested in the theoretical classes and complete tasks set in the practical classes: problem solving, readings etc. Individual tutorials There will be two types of tutorial available to the student: virtual tutorials through the online platform (Blackboard), in which students can ask the tutor questions; and personal tutorials which the student can request from the tutor when they feel necessary and in which the tutor will guide them in their personal work. Faculty of Economic Science and Business, University of Alcalá 7

8 5. ASSESSMENT: Procedures, assessment and grading criteria Students studying this course must choose between the two following methods of assessment: 1. A system of continuous evaluation (this procedure is set out in detail in the section CONTINUOUS EVALUATION ). If the student fails to pass through this method of assessment they may sit the re-sit examination (June). 2. Assessment by final exam (May) and re-sit examination (June) In accordance with the established rules passed in the Governing Council on the 24th March 2011, which regulate assessment procedures, in order to pass the subject, all students should follow the system of continuous evaluation. Students will only be permitted to follow the system of assessment by final exam in exceptional circumstances. CONTINUOUS EVALUATION The system of continuous evaluation is based on monitoring and following the work of the student throughout the course. The system will be adapted according to the course resources and the number of students in the class and explained to the students promptly at the start of classes. In detail, the assessment will comprise the following: - Two mid-term examinations covering the theoretical and practical knowledge gained through classes and the students own independent study. These tests will evaluate the areas associated with the study of key course knowledge. - Assessment of exercises and of presentation and discussion of tasks carried out in the practical classes. These regular tests will assess skills associated with information gathering, interpretation, communication and teamwork as well as the specific knowledge of the students. The grading criteria is as follows: 1. Mid-term examinations: The grade obtained will constitute 80% of the final grade. In order to pass the course students should obtain a minimum average mark of 5/10 between the two mid-term exams. 2. Practicals continuous evaluation: The mark obtained in this second element will constitute 20% of the overall grade. 3. The final overall grade will be a combination of the average mark obtained in the mid-term assessments, and the practical grade. Faculty of Economic Science and Business, University of Alcalá 8

9 In order to pass the subject through the system of continuous evaluation it is necessary to obtain a minimum mark of 5/10. The students who do not follow the system of continuous evaluation and instead sit the final examination during the ordinary examination period in May should demonstrate that they have acquired the skills specified for this subject. To do this, students should pass an exam on the complete content of the course. In order to pass the subject through the system of continuous evaluation it is necessary to obtain a minimum mark of 5/10. RE-SIT EXAMINATION Consists of a final exam in a similar format to that of the exam sat in the ordinary examination period. Faculty of Economic Science and Business, University of Alcalá 9

10 6. BIBLIOGRAPHY Core Bibliography With an aim to facilitate the study of the concepts and models that students must handle, the subject program has been structured to closely follow the following text: Blanchard, O. and Johnson, D. Macroeconomics 6 th edition. Pearson Educación, Earlier editions of the same textbook may also be used. Additional Bibliography Mankiw, N.G. Macroeconomics, 9 th Edition. Palgrave Macmillan Dornbusch, R., Fischer, S. y Startz, S. Macroeconomía, 12th edition, McGraw-Hill Abel, A. y Bernanke, B. Macroeconomics. 8th edition. Addison Wesley, The recommended textbooks cover the key subject material that will give students the necessary tools for the study of the theoretical models, analysis of exercises and problems, and the critical discussion of practical cases. Materials prepared by the tutor, including worksheets, readings and articles will also be available to students. New communication technologies will be used to develop a virtual classroom that will serve as additional support, particularly for the practical classes and directed tutorials. Faculty of Economic Science and Business, University of Alcalá 10