NORTHEASTERN UNIVERSITY

University College

ECN 4116 Keshab R. Bhattarai

Economic Principles II Office Hours: Fri 4.30 - 5:30 PM

Fall 1994 342 Holmes

Friday : 5:50-8:00PM . Phone: 373-5596

Text:

C. R. McConnell and S. L. Brue, Economics : Principles, Problems and Policies 12th ed., McGraw-Hill, 1993 (Required).

W. B. Wastand and R. C. Bingham, Study Guide to Accompany McConnell and Brue: Economics, 12th ed., MacGraw-Hill, 1993 (Recommended).

Course Description:

Economic Principles I introduced you to markets for goods and services, Keynesian theory of determination of national income, output, employment and the price level. Besides it covered system of national accounting and measures of labor market of an economy.

Economic Principles II, aims at deepening understanding of the mechanism of modern capitalist economy. First this course deals with money and finance on one side and the optimization behavour of consumers and firms on the other. Secondly it will discuss the strength and weakness of various economic policies designed to combat major economic problems such as slow economic growth, a high level of unemployment and a steady rise in the price level.Finally we will focus on microeconomic issues such as utility maximization behavours of rational consumers, production function and cost structure of individual firms in order to provide a solid foundation for Economic Principles III.

During the period of this course an up-to-date information on functioning of the money markets and the Federal Reserve System and the essence of financing mechanism of public budget, such as deficit and debt, will be provided. Nature of production functions of firms in various industries and their cost structure will be discussed. Through case studies, topic of your particular interest will be pursued.

Grading Policy:

Overall grades in this course will depend on four components: solutions to problem sets, scores on mid-term and final exam, and a project paper. The questions on problem sets, mid-term and final exams will be based on class discussions. Please use the text book to follow materials presented in the class.

Problem Sets: The problem sets will account twenty percent of the grade. You will be asked to solve four problem sets in this course. Each problem set will be due in two weeks' period from the date of assignment. Any problem set handed in late will loose 20% of its original value.

Mid Term Exam : Mid-term exam will be an one hour in class test and it will be given on November 2. It will be based on materials covered till that time and account for 25 percent of the grade.

Final Exam : Final exam will be cumulative and will account for 35 percent of grade. It will be a two hours exam and will be given on December 16.

Project Paper

For individual project, you may choose any topic of your interest. It may be an analysis of demand for money and supply of money, demand for and supply of financial assets such as stocks and bonds. You may do an analysis of macroeconomic problems and provide a policy recommendation to solve such problems. If you like to present your findings in the class, in order to get a feed-back, we may allocate some time discussing over your topic. The project will be due on the just before the final exam week. This allows enough time to develop your ideas and skills on the topic. A written paper of about five pages, summarizing your works including the main points you got from the class discussions and your findings is sufficient. You could approach me to find relevant materials, once you decided on your topic. I would suggest that you follow such news megazines as the Busuness Week, the Economist, Money, and special articles on Wall Street Journal or New York Times.

Overall Policy:

While the principal aim of this course is the acquisition of knowledge in the subject area, students should be aware that University College requires that clear and effective writing be an integral part of the learning process.

Besides my office hours, you may call me at my home # (617)-236-0122 in the evening or leave a message or call me at my office # 373-5596 during day time.

Course Outline and Class Schedule

I

Money and Banking (Chapter 13)

Review of Keynesian Macroeconomics (Chapters 10, 11, 12)

II

How Banks Create Money (Chapter 14)

III

Federal Reserve Banks and Monetary Policy (Chapter 15)

IV

Alternative Views:Monetarism and Rational Expectations (Chapter 16)

V

Phillips' Curve: Trade-offs between Inflation and Unemployment and Its Criticism (Chapter 17)

VI

Public Policy: Budget Deficit and Public Debt (Chapter 18)

VII

Review Class and Midterm Exam (November 18)

VIII

Price Elasticities of Demand and Supply: Applications (Chapter 20)

IX

Optimizing Behavour of Consumers and Firms (Chapters 21, 22)

X

Costs of Production (Chapter 22)

XI

Final Exam (Dec. 16)