FINANCE 101

Macroeconomics and the Global Economic Environment

Professor Joao F. Gomes

DESCRIPTION

Finance 101 develops a unified framework suitable to analyze macroeconomic events and policy,
with an emphasis on the links between economic activity and the behavior of financial markets.

The course is designed to combine three main blocks of analysis. The first part provides an
introduction to the construction and interpretation of the main economic and financial indicators.
The bulk of the course is devoted to building a solid theoretical foundation designed to
understand the behavior of central economic and financial variables such as GDP, employment,
inflation, interest rates and stock prices. This second part of the course also includes a detailed
study of fiscal and monetary institutions and policy, focusing on the Federal Reserve and the
Federal Government. Finally, a substantial section of the course will focus on macroeconomic
analysis in an open economy. Specific topics will include the determination of international
capital flows, exchange rates and international financial crisis. In all parts of the course the
analysis will be applied to current events, highlighting their implications for financial markets,
businesses, and households.

COURSE MATERIALS AND INFORMATION

Web Sites

You can access most of the information about this course by using the webCafé room at
https://webcafe.wharton.upenn.edu. To do this you will need to have a Wharton account. If you
do not have a Wharton account you can apply online at http://accounts.wharton.upenn.edu

Lecture Notes

Copies of the lecture notes and other course materials are available in a bulkpack that can be
purchased from Wharton reprographics. Electronic copies can be downloaded from webCafé.

Textbooks

The recommended textbook for this course is Macroeconomics, 6th edition, by Abel, Bernanke
and Croushore. This is an excellent text in macroeconomics and provides a wealth of
background and complementary material. However classroom discussions and notes also focus
on more applied topics and do not always follow the book closely.
Economic News

A subscription to The Wall Street Journal is required. You can obtain one by applying online at
https://www.wallstreetjournal.com. Subscription forms will also be provided at the beginning of
the semester. You are expected to bring the paper to class regularly and to be prepared to discuss
the major economic news.

Key macroeconomic data is released regularly by the major government agencies as well as a
few private ones. Analyzing and understanding this data is one of the core elements of the
course. Major news releases will be discussed extensively during the semester and are required
reading. Links to these data releases are provided in my web site.

Occasionally selected articles from other major business newspapers may also be added to the
list of required readings.

Videos

Classes held during University recognized holidays and review sessions before exams will be
videotaped and the videos will be posted on webCafé, usually within 48 hours.

GRADES

Deliverables

The final grade for this course will be based on three exams (two midterms and one final),
homework assignments, and case studies. The weights are as follows:
• Best Two Exams 25% each
• Homework Assignments 25%
• Case Studies 25%

All exams are comprehensive. The exam format is multiple choice and “open book”-- you will
be able to bring all your notes to the exam.

Cases and assignments should be done in teams of about five students. They must be submitted
using the Assignment Submission folder in webCafé.

The final grade distribution will follow the school’s guidelines. Quality-adjusted class
participation will be taken into account for all marginal grades.

Please note: no extra work during or after the end of semester will be counted towards the final
grade.

Scheduling Conflicts and Make-ups

Because you can drop one exam grade without penalty there is no make-up for any missed exam.
Any time conflicts regarding the final exam will be resolved according to University Policy.

There are no make ups for missed assignments or cases. Late submissions will be accepted with
a penalty -- I will subtract 25% of the total points for each day after the due date.
Returning Graded Exams and Assignments

Personal grade information can be retrieved by clicking on the My Grade link in the webCafé
room. Information about grade distributions will be posted in my web site and discussed in detail
at the end of the semester.

University rules prohibit the return of graded exams and papers to individual student mail-
folders. Instead all exams and assignments will be available for collection from my TAs. Times
and locations will be announced during the semester.

Regrading of Exams

Any requests for regrading of exams must be submitted in writing within 10 days from the date
that exams are made available and must be accompanied by the Regrade Request form and
Statement of Honesty in Regrade Request form. These are posted in the FAQ section of my web
site and on webCafé. Please note that the regrade period begins on the date that the exams are
made available and not on the date that you pick up the exam.

Requests for regrading must be very specific. Asking for regrades on three or four questions
invariably means that the student is “fishing” as I have never seen that many questions graded
incorrectly. Such broad requests will be summarily rejected. You should limit you request to
those answer(s) that you believe to have clearly been misgraded.

Do not mark or make notes on your exam, and do not alter in any way the answers to the
questions. Such alterations may be construed as violations of the Code of Academic Integrity and
may be referred for disciplinary action. When you request a regrade, I retain the right to regrade
your entire exam.

OFFICE HOURS

My office is Steinberg Hall-Dietrich Hall 2324. In addition you can reach me by email
at [email protected]. Regular office hours for me and my TAs will be announced
during the semester and posted on my web site.
 TENTATIVE SCHEDULE OF ACTIVITIES

Date Topic Textbook Readings Due

Sep 3 Macroeconomics and Financial Markets Ch. 1

Sep 8 Interest Rates and Bonds

Sep 10 Stock Market Valuations

Sep 15 Money and Interest Rates Ch. 7

Sep 17 Macroeconomic Indicators Ch. 2, Ch 8, Sec 3.1 Assignment 1

Sep 22 Employment and Wages

Sep 24 Consumption, Savings, and Investment Sec. 4.1-4.2

Sep 29 Budget and Trade Deficits Sec. 4.3, Ch 5 Assignment 2

Oct 1 Case Study: Employment Report Case 1

Oct 6 Midterm Exam - 6PM -- No Class

Oct 15 General Macroeconomic Equilibrium II: IS/LM Sec 9.4-9.5

Oct 20 General Macroeconomic Equilibrium III: AS/AD Sec. 9.6

Oct 22 Business Cycles and Macroeconomic Policy Sec. 11.3-11.4 Assignment 3

Oct 27 Monetary Policy Ch. 14

Oct 29 Current Policy Topics

Nov 3 Exchange Rates Sec. 13.1-13.2

Nov 5 International Macroeconomics Assignment 4

Nov 10 Flexible Exchange Rates

Nov 12 Fixed Exchange Rates Assignment 5

Nov 17 Midterm Exam - 6PM -- No Class

Nov 24 Economic Growth Ch. 6 Case 2

Dec 1 Case Study: Country Study

Dec 3 Case Study: Country Study

TBA Final Exam