Welcome to ECO 285 Principles of Macroeconomics n

Welcome to ECO 285 Principles of Macroeconomics n n Please pick up a copy of the syllabus Make a name card for yourself – – – This is your first in-class assignment You will be graded on your penmanship and for correctly following directions Use the 8. 5” x 11” cardstock provided Fold it lengthwise. Wait for the marker. Print your first and last names in large letters, with your last name above the fold and your first name below the fold as in the example shown. 1

How to Contact Me n n n Mr. John D. Eastwood Office CBA Room 247 Phone: 523 -7353 Fax: 523 -7331 E-mail: John. Eastwood@nau. edu Office Hours – – – Monday, Wednesday and Friday, 10: 15 – 11: 15 AM Tuesday and Thursday, 4: 00 – 5: 00 PM Also by appointment 2

Prerequisite Eligible to take MAT 110 or a higher course n If you lack the prerequisite, contact me as soon as possible! n 3

Course Objectives n Topics: – n Measurement of national economic variables; the determination of output, income, employment, and price levels through aggregate supply and demand analysis and related graphical techniques; business cycles, fiscal and monetary policy and international economics. . Successful students will learn to analyze economic issues in an objective manner. 4

The Required Text Package n Text (required): Robin Bade and Michael Parkin, Foundations of Macroeconomics, Second Edition, Pearson Publishing (Addison-Wesley), 2004. This text is packaged with a subscription to the course web site and a news magazine, The Economist. 5

Announcements & Calendar www. cba. nau. edu/facstaff/eastwood-j/ 6

Graded Work: Exams are 65% of your grade n Homework, quizzes, attendance and writing assignments are 35% of your grade n Your grade is computed as a weighted average of your scores n 7

Writing assignments Individually prepared analysis of news articles n About 300 words in length, double spaced, plus a graph and a copy of the original article n Three summaries during the semester, graded for content, grammar and style n 8

Grading Scale 90% or better earns an “A” n 80% to 89% earns a “B” n 70% to 79% earns a “C” n 60% to 69% earns a “D” n 59% or less earns an “F” n If the average on an exam falls below a C, I may curve that exam. n 9

Academic Dishonesty 1. Plagiarism: any attempt to pass off other’s work as your own 2. Cheating: any attempt to gain an unfair, hidden advantage over one’s fellow students 3. Fabrication: any attempt to present information that is not true 4. Fraud: any attempt to deceive an instructor or administrative officer of the university 5. Any attempt to facilitate academic dishonesty Excerpt from the NAU Student Handbook, Appendix F 10

Questions?

Why Study Economics? n The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists. – Joan Robinson, 1903 -1983 12

Why Not? Within business colleges, Economics is sometimes referred to as the “Mother Discipline. ” n Accounting, Finance, Marketing, and Management are disciplines that apply economic principles. n Many political issues concern Economics. n 13

B. S. B. A. in Economics extended major n Degree requirements – – – n Economics courses 24 hours Other major requirements 18 hours Business Core 42 hours Liberal Studies 35 hours General Electives 1 hours Total 120 hours see page 131 of 2001 -2003 catalog 14

B. S. in Economics extended major n Degree requirements – – n Major Liberal Studies General Electives Total 57 hours 35 hours 28 hours 120 hours see page 201 of 2001 -2003 catalog 15

Minor in Economics n Minor in Business Economics – – Requires 18 credit hours ECO 284, and ECO 285 + Four upper-division economics courses see page 133 of 2001 -2003 catalog 16

Certificate n Certificate in Business Economics – – Requires 15 credit hours ECO 284, and ECO 285 + Three upper-division economics courses see page 131 of 2001 -2003 catalog 17

Other Business Majors Accounting n Computer Information Systems n Finance n Management n Marketing n B. A. in Liberal Studies n – Enterprise in Society Emphasis 18

The Basics of Economics What is Economics? n A large subject — How do we approach it? n Heilbroner’s analogy: think of the economy as an unexplored continent. n 19

Enter the continent on foot. . . and study at close range the persons and firms whose activities (when combined) form the economy. n Microeconomics is the study of how consumers, firms, and resource owners interact in individual markets. n 20

Fly over the continent. . . and note the characteristics of the economy as a whole. n Macroeconomics is the study of the entire economy. n 21

A third approach. . . It focuses first on how the "economic continent" came to be there in the first place, and on what forces have shaped and continue to shape its landscape. n This approach is known as economic history. n 22

Primarily Macroeconomics n Economic history adds perspective on contemporary problems such as. . . – – – De-regulation, Environmental degradation, International trade, Monopoly power, and Welfare reform. 23

History of Economic Thought The study of how economic ideas and philosophies have evolved n Keynes suggested that these ideas have had a powerful influence on human history. n 24

What is Economics? n n Woody Allen: “ Economics is about money and why it is good, " Heilbroner: “Economics is the process of providing for the material well-being of society. ” However, because many goods are scarce, society must make choices. Thus Economics is often defined as the study of how scarce resources are best allocated among competing ends. 25

The Setting The human body, by itself, is not a highly efficient mechanism for survival. n Each 100 calories eaten delivers about 20 calories of mechanical energy. n That amount of work must first be applied to sustain the human. n Only what is left over can be used to build a civilization. n 26

The Problem n Scarcity Time Money Goods Food n Survival 27

The individual and society n Economic history must focus on the central problem of survival and on how humans have solved that problem. 28

The division of labor We survive because the tasks we cannot do for ourselves are done for us by an army of others. n Enhances our capacity a thousand-fold. n With this gain comes a degree of risk. n Our well-being depends on others. n 29

Economics and scarcity Is human nature or mother nature the source of most of our economic problems? n The scarcity of nature's resources. n Our desires and wants. n 30

Economics and Society What are the tasks which social organization must perform to bring human nature into harness? n A society must assure the production of enough goods for its own survival. n Society must also distribute these goods so that more production can take place. n 31

Three basic questions What to produce? n How to produce it? and n For Whom? n 32

Economizing n The production problem, in part, is one of applying technical skills to the resources at hand, avoiding waste, and using effort as efficiently as possible. 33

Mobilizing effort n Before society may concern itself about using its resources efficiently, it must first devise social institutions that will mobilize human effort for production 34

Failure to mobilize effort The Great Depression. n The poorest nations. n Thus the production problem is in part a physical and technical problem, and in part a challenge to social organization. n 35

Allocating effort Putting people to work is the first step in solving the production problem. But they must be put to work at the right tasks. n Failures emphasize that a society must not only produce goods, it must produce the right goods. n 36

Distributing output n n n to assure continued production Distributive failures need not entail a total economic collapse. Societies can exist with badly distorted distributive efforts. Problems in distribution most often reveal themselves as social and political unrest. A society must sustain and motivate its workers. 37

Three solutions n. Tradition n. Command n. Markets 38

Tradition. Workable n But static n Tradition solves the economic problem, n at the cost of economic progress. n What is Tradition’s role in the US economy? n 39

Command Also workable n Often superimposed on a traditional society n An effective tool for economic change n What is the role of command in the US economy? n Is it moral? n 40

The Market Because we live in a largely market-run society, we are apt to take for granted the puzzling nature of the market solution to the economic problem. n Quote from R. L. Heilbroner's The Economic Problem. n 41

Perplexed? n The perplexity which the market idea would rouse in the mind of someone unacquainted with it may serve to increase our own wonderment in the most sophisticated and interesting of all economic mechanisms. 42