Office email:chrismarme@augustana.edu
Office hours: For office hours, please see index webpage (Go to academics, departments, economics and from there, to my personal webpage.)Highly recommended supplementary texts:
Maestro: Greenspan's Fed and the American Boom by Bob Woodward, Touchstone Books, 2001.
Modern Financial Macroeconomics: Panics, Crashes, and Crises by Todd Knoop, Blackwell Publishing, 2008.
How Markets Fail: The Logic of Economic Calamities by John Cassidy, Farra, Straus and Giroux 2009
Course Objectives: (1) To significantly increase your comfort and familiarity with Macroeconomic concepts first learned in EC201, Principles of Macroeconomics. We will increase your comfort and familiarity by first reviewing basic macroeconomic principles and then extending these models. (2) To increase your awareness of how important these concepts are to financial analysis. (3) To help further develop your higher order thinking skills.
Emphasis in this course will be placed on analysis. As the term is used here, it means making connections between seemingly disparate material. Making such connections is not easy but is necessary if you are to understand why people dealing in financial markets worry so much about macroeconomic issues in general and why they worry about FED policy in particular.
You will also be expected to demonstrate knowledge of key terms, ideas and procedures as well as a clear understanding of same. Your understanding must be strong enough to apply ideas discussed in one situation to other situations. In other words if I'm going my job properly when you want to say "this is nothing like what we've done in class" it means that we need to work on your skills at applying ideas to new situations. Analysis, comparing and contrasting differing perspectives (on financial markets, monetary policy, deficits, and so on) only comes after these. All of the skills to be mastered, especially application, are extremely important. Unless you push yourself and we work at it, the "real world" won't look like anything you've done in this class or your other classes here at Augie either. With the requisite amount of effort, it will.
Course Outline
(1) Introduction and an overview of financial markets. Chapters 1-5 (part of chapter 7).
(I also highly recommend that you read chapter 6 as well)
Current rates on Treasury bonds, high grade corporate debt and munis.
(2) Predicting macroeconomic change. How the macro economy works and policy's impact on the economy. Chapters 19-25. PLEASE NOTE THAT YOU ARE EXPECTED TO READ "WEB CHAPTER" THE ISLM Model along with the assigned chapters from the text itself.
Click here for the lyrics to GDP Blues.
Click here to access a simulation for the ISLM model developed in chapter 20.
Click here for an intro to the ISLM model developed in chapter 20.
A great link that allows you to play with the Keynesian cross, ISLM and the AD AS model. (For the Keynesian cross and other models click here.)
Click here to access a simulation for the ADAS model developed in chapter 22.
Click here to access a power point describing the long run ADAS model developed in chapter 22.
Click here for another site where you can play with the ADAS model.
(3) The banking system, the Fed and the money supply. The Federal Reserve System and Monetary Policy. The fed funds futures market.
Chapters 13-16. Supplementary material.
Click here for a review of how the banking system fits into the money supply process.
Click here for a brief summary of how the tools of FED policy affect the money supply.
Click here to access a simulation showing the simple deposit multiplier process.
Course Grade and Important Dates/exam and quiz schedules
I will try to assess your command of the material covered in this course in four ways: (1) A midterm exam. This exam will be given in class April 11th, Wednesday of week 6. It will be worth 30% (300 points out of 1000 possible) of your total course grade, (2) Quizzes. Expect one every two weeks. The first will be on Friday of the second week of class, March 16th. These quizzes will be cumulative and worth 40% (400 points out of 1000 possible) of your total grade. (3) The final exam. The final is worth 30% (300 points out of 1000 possible) of your course grade Like the midterm exam and the weekly quizzes it will be cumulative. Our two hour final is scheduled for 12:00 noon, Thursday May 17th. (4) Extra credit class participation. This is worth up to 5 points extra credit toward your overall grade. The details of how I will try to measure participation are given below.
Note that each quiz and exam is cumulative. This means that each quiz incorporates material covered on
the previous quizzes or the midterm exam. This is to avoid "bulimic
learning". Because of the cumulative nature of assignments, if I see
evidence of steady and appreciable progress in your learning over the term, the weights
assigned to the midterm exam, the quizzes and the final can and will be adjusted to
reflect this. Say that your midterm exam is a
50%, your quizzes average 70%, but the final is an 85%.
Your course average going into the final would then be (.3*50+.4*70+.3*85)=68.5 or
a D average! This, despite the steady and
substantial progress you have made over the course of the term.
To not put too fine a point on things, if there is
significant improvement over the term, it would be
profoundly stupid on my
part to stay with the original weights. Your
grade for the course should reflect the fact that you are really learning. I hope
this will give you the motivation to continue -right to the end of the term- to learn as
much as possible. The final then gives you the
opportunity to demonstrate how much you've learned.
Note at the same time that it is obviously best to try to do as well as possible on each
quiz and on the exam. I believe that all of
you -if you really work at it and if it is important enough to you to do so- can develop a
command of this subject in ten weeks. I want
to give you every chance to do so and keep the pressure on you quite frankly to try to do
this.
Please also note that I plan to give class work, assignments, and pop quizzes (done both individually and in groups) throughout the term. The scores on these will be counted as part of your exam and quiz scores
The grading scale in this class is the following
(Please see below for information on how borderline grades will be determined):A 90-100%
B 80-90%
C 70-80%
D 60-70%
F <60%
(1)
The quizzes, the midterm exam and the final will be a mixture of (1) multiple choice and other objective questions and (2) essays or detailed written responses to questions asked. A list of questions that you should review WELL BEFORE the midterm exam and the final exam will be available to help you prepare. Please do NOT wait until the night prior to either to begin reviewing these questions. All that will result is an anxiety attack before the test, a significantly poorer grade on that quiz or exam, and, most important of all, significantly less actual learning.(2) Attendance. Attendance represents minimal participation in class. Only two unexcused absences will be allowed. Each unexcused absence over the second one will result in your overall course grade being reduced by 5%. Excused or not, if you have missed class you are responsible for material that we've covered in class, even if it is not in the textbook and even though you've missed class. Quizzes missed cannot be made up unless you have a legitimate excuse.
Final word on attendance: (1) Absences hinder your learning. There is reason for holding classes! Just ask any student who has blown off class and then tries to pick up on what has been covered by just reading the text/reviewing somebody else's notes. (2) Absences also hurt the overall well-being of the class. As entertaining as I usually am, class is not a performance or a show. Your participation is an integral part of class. It helps to shape what we all learn together. I am not the "sage on the stage" but a "guide at your side". If you're not in class to be helped or guided, I can't help or guide you. (Read the following regarding class participation.) (3) There is a statistically significant negative correlation between quiz scores (in this class 40% of your grade) and attendance. I've got the numbers to prove it if you would like to see them!
(3) Attendance is not enough. I expect your undivided attention during class lectures and your active involvement in class activities. If you do not have time outside of class to chat with friends, check your cell, sleep, and work on crossword puzzles or you prefer to have your answers handed to you on a silver tray so that you can dutifully write them in your notes (ready to spit them back, undigested, on tests and quizzes) you should not bother to come to class. This sort of behavior will have the exact same impact on your overall course grade as unexcused absences. Once I know your name, any class period where you are not paying attention and where I do not see you trying will result in the same sort of penalties as missed classes will.
(4) Class participation.
I don't give lectures, I conduct classes. There is an important difference between the two. In a lecture, a student is expected to passively sit and receive the little pieces of wisdom that the professor decides to share or "profess". (NB: The word lecture itself comes from the Latin word lectus which in turn is derived from the Latin legere "to read".) You have got a text and can read on your own. I don't need me to lecture or read to you. Lectures should have gone out with the printing press. In a class or group (check the dictionary for the derivation of the word class), the student is expected to be just that, part of a group dedicated to the study of that day's topic.
To measure your contribution to our group effort or your class participation, I will give each of you a large index card on the first day of class. You will put your name on it.
If you feel that you have made a contribution to a particular day's class, make a somewhat detailed note of that contribution and turn this card in to me at the end of class. I will return the card to you at the start of the next class (unless I absent-mindedly forget). I will award points for these daily contributions based on the quality of the contribution.
At the one end of the spectrum your contribution may be something as simple as asking me to clarify what we have already covered. At the other end of the spectrum, it may be something as sophisticated as responding to a point raised by another student or bringing up something from outside class that is relevant to what we are discussing.
(5) Annotated notes. Annotated class notes are a big help.
What are annotated notes you ask? Set aside one note book completely for Money and Banking. Write the day's notes on the sheet on the right hand side of the notebook. After each class, go over your notes. (Research indicates that the sooner after class or readings that you review the better. In other words, preparing for the quizzes, the midterm and the final well before a Thursday afternoon or evening=smart, preparing Thursday evening or Friday morning =stupid!) On the sheet on the left hand side of your notebook write out the main formulae and the main definitions that you have worked with on that day. ALSO IT IS IMPORTANT THAT YOU DRAW THE DIAGRAMS YOURSELF ("draw the graphs, draw the graphs, draw the *@#..+-! Graphs") AND THAT YOU -ON YOUR OWN- WORK THROUGH THE NUMERICAL EXAMPLES WE DO TOGETHER IN CLASS, make a note of any questions you have, connections you see between what we've gone over and what you have talked about in other classes or you've seen in the news and so on.PLEASE NOTE THAT I OFTEN FEEL LIKE A VOICE CRYING IN THE WILDERNESS BECAUSE THIS EXCELLENT ADVICE IS SOMETIMES IGNORED. TRY IT!
(6) Key to success. Clarify your doubts right away either in class or soon after. If you are not sure about something do not pray to all that's good and holy that I will not ask you about that particular topic. You can be almost certain I will ask questions over such material.
(7) Motivation/Participation. It is my job to teach you this subject. It is YOUR job to convince yourself that what you are learning here is important and relevant. It is also YOUR job to convince yourself that what we cover in this class is interesting and worth the time you will have to invest in studying. More than just showing up and possibly answering questions when asked to, you need to think about what we're discussing in class outside of class time and to listen to questions other students raise concerning the material both in class and outside of class.
Problems with a course frequently start at the point where the student makes up his or her mind that the entire topic is not worth the close attention it demands to master it. (INUTS=I will never use this stuff. MEGO=my eyes glaze over (this stuff is soooo boring!). Also note that while it is unlikely that you will feel that we are going too slowly over the material but if so please let me know. I will happily give you other material to look at. This material will add additional depth to what we are working through together in class. Finally pretend that this class is your first job. Just as you would need to be as involved and interested in what is going on at work please try to do the same here. Keep in mind that while in class and while preparing materials for same, I am giving you my undivided attention. It is only fair that you reciprocate.
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8) Office hours: The times given on my webpage are simply times that you can be sure to find me in my office. I will help you as much as I can, provided I feel that you are interested and willing to make the effort. You are free to come in whenever you see that my office door is open (keeping in mind that right before class is probably not the best time if you want my undivided attention). If I am busy then we will schedule an alternate time. Please also feel free to email your questions to my office email.(9
) Taking ECON 345 to make-up for a deficiency in EC201: Principles of Macroeconomics? If you are taking this class to compensate for a D in Principles of Macro, it is essential that you keep me abreast of how you are doing. It is also essential that you come to class regularly and get help when needed. Keep in mind that you need a C or better here to make-up for your D in Macro. (10) Late work: A pain for you and most definitely a pain for me. If you turn stuff in to me on time you have a good chance of getting it back soon enough to benefit you. With work turned in late, there is far less of a chance that I will get the time to look at it carefully and to really help your learning. Bottom line, unless we've discussed it before hand and there is good reason for the delay, late work=0 credit on that assignment.(11) Basic truths:
Basic truth #1. Much of this material is hard. You have to put in the time and the effort to master it (Please see above). You are not to suffer silently. Keep up with the material, don't try to cram (it won't work) and, if you are having trouble, let's sit down together and review your study habits. Actively review your notes. When you don't understand something in either your notes or the text come in to see me.
Basic truth #2 You need to read the book. I had a student in one class a few terms ago who had stopped reading the book after the third week and instead relied solely on class notes. His reason for not reading the book was that it confused him. His scores however went from a 78 per cent on the first exam (a period in which he was reading the book) to a 65 on the second exam and a 52 on the third exam. Ask yourself what one should conclude from this story.
Basic Truth #3. Once you have graduated and are in the real world a year or two a lot of this material will become exceedingly relevant to you. Given the recent financial crisis and the many problems the world economy continues to face it should in fact be obvious that what we are talking about in this class is exceedingly relevant ! Any class you take should be of interest to you. The more interested and involved you are in the material the easier it is to learn what you need to learn. Also note that If you pay attention now you'll have a lot less to learn in the school of hard knocks later on.