Course Global Economics Environment

Class EMBA #71

Number of 24
hours
Lectures 8
Dates From 3/24 through 5/7
Professor Vitoria Saddi, phone number: 11 9590-0709
[email protected]

Course Outline:
The principal aim of this course is to promote economic literacy on problems of unemployment and
inflation. To accomplish this, students learn economic theory and how to apply it to understand and
evaluate media discussions of current economic problems.

It is part of student’s responsibility to read economic articles in the news and business sections of a
newspaper (NY Times, LA Times, Financial Times) and periodicals (Time, The Economist).
Illustrative key words for news article are: inflation, GDP, unemployment, budget deficit, interest
rates, consumer confidence, monetary policy, Federal Reserve, Growth, money supply, investment,
productivity, saving.

Course Outline:

3/24 (Th) – Lecture 1 – Importance of macroeconomics, concepts of opportunity costs, the

ten key concepts of economics, difference between macro and microeconomics, scarcity and
choice

Overview:
• How much does it really costs
• Trade is a win win situation
• Relevance of thinking at the margin
• Short run trade off between inflation and unemployment
• Economics and decision making
• Choice under scarcity resources
• Leading economic models

Required reading for the lecture:

• BB Ch 1, ch 2 and ch. 3.

1
Cases and Exercises:
• General overview of the course, outline of key dates, goals of the course and a few rules of
conduct
• The class should be divided in groups of 2 people. These groups will be working together to
present the news headlines and analyzing the key economic factors.
• Quiz 1.

3/31 (Th) – Lecture 2 – An Introduction to Macroeconomics

Overview:

• Agregation in macroeoconomics
• Gross domestic product
• Productivity
• Unemployment
• Inflation
• Potential GDP

Required reading: Baumol & Blinder, ch 5 (or from the 11th edition ch 21 and 22)

Cases /Exercises:
• Quiz 2.
• News headlines

4/2 (Sat) – Lecture 3 – Agregate Demand, Unemployment and Inflation

Overview:

• Determinants of net exports

• Meaning of equilibrium GDP
• The multiplier analysis
• The multiplier and agregate demand

Required reading: Baumol & Blinder chapters 8 and 9 (or from the 11th edition ch 24 and
25)

Cases/Exercises:
• Quiz 3
• News hedalines

4/7 (Th) – Lecture 4 – Demand side and supply side equilibrium

2
Overview:

Ÿ The multiplier as a general concept

Ÿ The multiplier and aggregate demand
Ÿ The aggregate supply
Ÿ Equilibrium of aggregate demand and aggregate supply
Ÿ Adjusting to a recessionary gap
Ÿ Adjusting to a inflationary gap
Ÿ Stagflation

Required reading: Baumol & Blinder Chapters 9 and 10 (or from the 11th edition ch 26)

Cases/Exercises:
• No quiz in this lecture
• News headlines

4/14 (Th) – Lecture 5 – Fiscal Policy

Overview:
• Income taxes and consumption
• The multiplier revisited
• Expansionist fiscal policy
• Contractionist fiscal policy
• Ideas behind the supply side economics

Required reading: Baumol & Blinder chapter 11 (or from the 11th ch 27)

Casos – Exercícios:
• News headlines

• Quiz 5

4/28 (Th) Lecture 6 – Monetary Policy and Banking System

Overview
• Nature of money
• Measuring the money supply
• The banking system
• Money multiplier
• The role played by key central banks
• How monetary policy affects the real economy

Required reading: – Baumol & Blinder chapters 12 and 13 (or from the 11th edition ch 28
and 31).

Cases/Exercises:

3
• Quiz # 6
• News headlines

5/5 (Th)– Lecture # 7 – Exchange rate and the macroeconomy

Overview:
• International trade, exchange rates and aggregate demand
• Macroeconomic effects of exchange rates
• Fiscal and monetary policies in a open economy
• Deficit reduction
• Twin deficits

Required reading: Baumol & Blinder chapter 19 (or from the 11th edition ch 35)

Cases/Exercises:
• Practice final (it will be counted as Quiz #7)
• News headlines

5/7 (Sat)– Lecture# 8 - Currency Crisis

Currency

Overview:
• First generation currency crisis
• Second generation currency crisis
• Third generation currency crisis
• The 1980-90s currency crisis in Latin America
• The 1997s crisis in East Asia

Cases/Exercises:
• Final exam

Grading Criteria:

The grade is distributed as following:

1. Quizzes (I take the 5 highest scores out of 7) – 35%

2. News headlines, participation and presentation – 35%.
3. Final exam: 30%

4
Required Textbook:

Macroeconomics, Principles and policy. William J. Baumol and Alan S. Blinder, Thomson,
8ª. Edition, 2003 or 11th edition.

Roubini, Nouriel and Brad Setser, 2004, New Nature of Emerging Market
Crisis. Peterson Institute for International Economics.

Suggested Readings:

McGuigan, Moyer and Harris. Economia de Empresas: Aplicações, Estratatégias e Táticas, 9ª. Edição,
2002.
Lewis, W. Cris and H. Craig Petersen, Managerial Economics, Prentice Hall, 4th edition,
1999.
Baye, Michael., . Managerial Economics and Business Stretegy, 4th edition, McGraw Hill,
2002.
Png, Ivan. Managerial Economics. Blackwell Publishers Inc., 1999.

Observations:

I strongly recommend students to visit the book website:

http://www.scribd.com/doc/23087076/William-Baumol-Alan-Blinder-Macroeconomics-Principles-and-Policy-
Eleventh-Edition

I expect that students come to class prepared, that is, that they read the required chapter
assigned in the reading list. Besides, I also expect that students read in advance to my lectures
my notes. The students should prepare the cases to be discussed during the lectures. All these
tasks are not only expected they are strongly recommended for those who want to get a good
grade in this course.

Attendance is mandatory that is students should attend at least 75% of all the lectures. Avoid
being late to the lecture. In case you arrive more than 30 minutes late I will have to give you

half of an absence. Similarly, if you leave before the end of the class, you will receive half of
an absence.

I ask you to form groups of 4 to 5 people and give me the names at the end of the first
lecture.

Blogs and articles

People are required to choose from the list below one piece to discuss in class. The discussion
will be held at the end of each class and the student does not need to turn in anything. The
student is only required to talk about the blog or piece chosen.

5
List of required blogs or articles to count as participation

Investment Banks:
JP Morgan:
http://www.jpmorgan.com/pages/jpmorgan/investbk/research/global_economic_research
Morgan Stanley:
http://www.morganstanley.com/views/gef/archive/2010.html
Scotiabank:
http://www.scotiabank.com/cda/content/0,1608,CID8339_LIDen,00.html

Newspapers:
http://www.project-syndicate.org/series_categories/1
www.nytimes.com
www.ft.com
www.wsj.com
www.economist.com

Blogs
Economist's View
The Baseline Scenario
naked capitalism
VoxEU.org: Recent Articles
Jeff Frankels Weblog