ECO 100A Economics for Today
Fall 2012
Dr. Robert Jantzen
Economics Department

 
 

Where and When
Course Description
Course Objectives
Text
Course Requirements
   Course Outline
Contact Information
College Policy for All Courses
Announcements


Where and When

In the Fall of 2012 this course meets at 11 a.m. on Mondays and Wednesdays in Amend 106. Classes begin on 8/29/12.
 

Course Description

This course acquaints the student with basic economic theories, concepts and tools. The course will focus on the historic origins of these tools and their application to a wide variety of current issues
and problems. The course utilizes an institutionalist approach, emphasizing the determining economic outcomes. Corequisite: college-level mathematics course. Not open to students who have taken either
ECO 201 or ECO 202. 3 credits.
 

Course Objectives

The primary objective of this course is to impart to students a working knowledge of how capitalistic economies operate. In the Microeconomics segment, students will learn how markets establish price, production, wage and employment levels, and the likely consequences of government attempts to alter market outcomes.  Students will also learn optimization strategies for profit-seeking businesses in a variety of product market environments.  In the Macroeconomics segment, students will learn how critical national economic outcomes are determined, like the unemployment rate, inflation rate, the standard of living, interest rates, the dollar exchange rate, etc. Students will also analyze the ability/inability of government to influence national economic outcomes. 
 

Text

 
Guell, Robert C.  2012.  Issues in Economics Today: 6th ed.  New York: McGraw-Hill (ISBN #978-0-07-352323-1 ).   Additional xeroxed readings and web material will be distributed to the class at appropriate times.  The textbook is available at the Iona College bookstore and from Amazon.com (print & Kindle versions).  In addition, Power Point slides for each chapter are available from the publisher at the following companion website:  Guell: Issues in Economics Web Chapters

Course Requirements and Grading

Student grades for the course will be determined as follows:

Exams (4)                                 =  90% of the course grade.
Homeworks & Class                =   10% of the course grade.
       Participation

No extra credit work is available and no makeups will be given for any of the exams or homework assignments.  The lowest exam grade, however, will be disregarded in determining the course grade.  Obviously, neither plagiarism nor cheating is acceptable behavior, and will warrant failure of the homework/exam involved.  Being late for a class counts as an absence.  Any student who misses ten or more classes may be assigned the FA (failed for absences) grade.
 

Contact Information

Instructor:          Robert Jantzen, Ph.D.
                                Professor of Economics
Office Location:        Economics Department, Spellman Hall, 2nd floor
Voice:                      (914) 637-2731
Fax:                         (914) 633-2511
Office Hours:            M & W 1:30 - 2:30 p.m., by appointment.
E-mail:          RJantzen@Iona.edu
WebPage:          www.iona.edu/faculty/rjantzen/homepage.htm

Course Outline
 
 
Week(s) Beginning:
Topic:
Reading:
8/29
  Introduction
Chapter 1
9/5 & 9/10
  Supply and Demand
Chapter 2
9/17
International Trade & Finance
Chapters 17, 18 & 19
9/24
Exam#1
9/24 
  Tobacco, Alcohol & Drugs
Chapters 21
10/1
 Pollution
Chapter 22
10/1 
 Health Insurance
 Chapters 23 & 26
10/8
Crime
Chapter 28
10/8
Discrimination
Chapter 29
10/15
Exam#2
10/22
 GDP, Unemployment, Inflation & Business Cycles
Chapter 6
10/29
 Interest Rates, Stock Prices & the Housing Bubble
Chapters 7, 13 & 40
11/5
Aggregate Demand & Supply
Chapter 8
11/5
Fiscal & Monetary Policy
Chapters 9 & 10
11/12
Exam#3
11/19 
Federal Spending, Taxes & Deficits
Chapters 11, 12, 16 & 37
11/26
 The Great Recession
Chapters 14 & 15
12/3
 Medicare & Social Security
 Chapters 24 & 36
12/10
Exam#4 
 

 
 
Specific Course Objectives:

I.  Supply & Demand

   1. Explain the law of demand, and what a demand curve shows. Why does the curve slope downward, i.e., why are price and quantity demanded inversely related?
   2. Explain the law of supply, and what a supply curve shows.  Why does the curve slope upward, i.e., why are price and quantity supplied positively related?
   3. How are price and output levels determined in product markets, according to the supply and demand model?  What is meant by equilibrium price and quantity?  Explain how markets ensure that the amount people want to sell is in balance with the amount people want to buy, i.e., Qs=Qd.  Graphically illustrate.
   4. Why do prices and output levels change in product markets?  If prices increase or decrease, will the underlying equilibrium situation change?  Why or why not?
   5. Explain what a change in demand means, and how it is illustrated. What nonprice factors could cause demand to change?  How so?  Why don't price changes in product markets change demand?  Why do economists define a change in demand in such a special way?
   6. Explain what a change in supply means, and how it is illustrated. What nonprice factors could cause supply to change? How so?  Why don't price changes in product markets change supply?  Why do economists define a change in supply in such a special way?
   7. How will each of the following changes in demand (D) or supply(S) affect equilibrium price and quantity?  Do price and quantity rise, fall, or stay the same, or are the answers indeterminate?  Verify your answers graphically.
        a.  S increases, D constant.
        b.  D increases, S constant.
        c.  Both S and D increase.
        d. S increases, D decreases.

II.  International Trade & Finance

    1. Who are the most important trading partners of the US?  How important is international trade to the US economy?  What are the primary US exports?  What are the primary US imports? 
    2. The US Census Bureau (http://www.census.gov/foreign-trade/top/index.html#top_partners) ranks the top 10 trading partners of the US, as well as the top 10 countries with which the US has a trade surplus or a trade deficit.  Using the current month's data, compare the top 10 deficit and surplus countries with the top 10 total (exports + imports) trading partners.  Does the US have primarily surpluses or deficits with our top 10 trading partners?
    3.  Discuss absolute advantage and comparative advantage.  Why are trade patterns primarily determined by comparative advantage?
    4.  What are the economic effects of international trade?  Who gains/loses?
    5.  What forms of protection do countries use to limit imports?  Why do countries adopt protectionist measures?  What are the economic effects of such measures?  Evaluate the case for/against protection.
   6.  Using the Balance of Payments concept, discuss how the Euro/$ foreign exchange rate is determined.  What factors would lead to a change in the exchange rate?  How would such changes affect the US economy?

III.  Tobacco, Alcohol and Illegal Goods

     1.  Under ordinary circumstances, competitive markets are efficient in allocating resources to differing goods.  Explain, using the supply & demand model, why competitive markets result in an efficient balance between what businesses spend on making more products and what consumers are willing to pay for those products.
     2.  Explain the three reasons why the government tries to either limit or ban the production of certain products, like tobacco, alcohol and illegal drugs.
     3.  Explain what a negative externality is, and give an example. Explain, using the supply & demand graph, why an unregulated marketplace is less efficient than a regulated marketplace if negative externalities exist.
     4.  If consumers of an "undesirable" product don't care very much about its price, i.e., they have "inelastic demand," what will happen if the government tries to limit the production of the product by prosecuting its sellers? Will the policy reduce the number of buyers of the product and reduce profits to its sellers?  Give an example of such an "undesireable" product.

IV.  Environmental Policy

     1.  What is the optimal level of pollution, i.e., how should it be determined?
     2.  Examine the problem of pollution from the negative externality approach.  Why is pollution a negative externality?  Why do companies pollute?  Explain, using the supply & demand graph, why an unregulated marketplace is less efficient than a regulated marketplace if companies are allowed to pollute.
     3.  Examine the problem of pollution from a property rights approach.   Why do companies pollute? 
     4.  Discuss the "legal" approach and "economic" approaches that the government can use to reduce pollution to a more optimal level.  Why do economists favor "market-oriented" remedies to "non-market oriented legal" remedies?

V.  Health Insurance in the US

     1.  Health insurers can set premiums either using experience rating or community rating.  What's the difference?
     2.  Should private health insurers be forced to use community rating for individual policies?  Why?
     3.  What is adverse selection?  If insurers are forced to use community rating for individual policies, why would adverse selection gradually eliminate high coverage policies?
     4.  What is moral hazard?   Because of moral hazard, what happens to the level and efficiency of the health care industry?  Why can be done to limit the problems arising from moral hazard?

VI.  Federal Spending, Taxes & Deficits

Office of Management and Budget Historical Spending and Revenue (Tax) Numbers

http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf

1.  Looking at Table 1.1:
     A. How much is total Federal government spending (outlays) going to be in 2012?  How much will total receipts (mostly taxes) be?  How big is the government deficit?
     B. The off-budget numbers largely reflect the receipts and outlays of the Social Security program.  What do the 2012 off-budget numbers tell you?
     C. Clinton was responsible for the 1994 - 2001 budgets, G W Bush for 2002 - 2009 and Obama for 2010 - 2013.  Compare and contrast the changes in spending, receipts and the deficit that occurred during each of these presidents terms of office.  Note:  Obama is responsible for the 2013 budget because no matter who is elected this November, they'll have to live with the budget negotiated by Obama and Congress this year (which is still not settled).

2.  When the Federal government runs deficits, it has to borrow money which then increases the National Debt.  Looking at Table 7.1
    A.  How much did the Clinton, GW Bush and Obama budgets increase the National Debt (use the time periods in C above)?

    The amount you have to borrow and the amount you already owe are not important measures of indebtedness.  Rather those numbers have to be compared with how much total income you have, i.e., a rich person can borrow and owe a lot and not be in any danger of default.  Since the Federal deficit and national debt represent claims on the US of A, judgments about the indebtedness of America should compare those numbers to the national income of the USA.  The latter can be measured by the Gross Domestic Product (GDP) number.

   B.  Looking at Table 7.1, discuss how big the National Debt is as a percentage of National Income (GDP) under the Clinton, GW Bush and Obama budgets.  Looking at Table 1.2, discuss how big the budget deficit is as a percentage of GDP in those 3 administrations?  Looking at Table 1.2, discuss how much National Income (GDP) grew during the 3 administrations.

3.  A.   Looking at Table 2.1, what are the most important taxes that the federal government collects?  Discuss how they have behaved during the Clinton, GW Bush and Obama administrations.
     B.  Looking at Table 2.3, which shows the tax level for each tax as a percentage of National Income (GDP), what has happened over the 3 administrations to the burden of paying personal income, corporate income and payroll taxes?

4.  The TaxFoundation website reports reports incomes received and taxes paid by differing income classes for differing years.  Looking at Tables 5, 6 & 8 what happened to the shares of total income and total taxes paid, and the average tax rate, for the rich, the middle class and the poor between the Clinton, GW Bush & Obama administrations?

5.  A.  Table 3.1 shows how much Federal spending is occurring in differing departments over time.  Comparing the 3 administrations, why has Federal spending increased so much?
     B.  Focusing only on the 2013 spending numbers, if you wanted to reduce the budget deficit in half (say $500 billion), what areas would you cut?  What would your prospects of re-election look like if you proposed those cuts prior to November's election day?

6.  If Congress and Obama cannot agree on a budget by 12/31/12, then both have previously agreed that an "automatic" set of spending cuts and tax hikes will take place on 1/1/13.  The following website describes these automatic cuts and hikes: http://www.cfr.org/economics/fiscal-cliff/p28757 .  Will these cuts and hikes prove politically popular if enacted?  Why so?

VII.  GDP

    1.   GDP is often used as a basis for judging the health of the economy. Explain what Real GDP measures and how it is measured.  What is included/excluded? 
    2.   Web-Based Question:  The Bureau of Economic Analysis' (BEA's) website (http://www.bea.gov) provides the latest estimates for US Real GDP.  Looking at Table 1 of the latest news release (Full Version w/ Tables) discuss how Real GDP has behaved over the past 4 years.  Which components of GDP have been responsible for the changes in Real GDP?
    3.   Real GDP is the broadest measure of economic activity.  If Country A has a larger Real GDP per person number than Country B does that mean A is a better place to live than B? Why or why not?
    4.  The CIA’s World Factbook website (https://www.cia.gov/library/publications/the-world-factbook/index.html) provides detailed economic and other information for almost all countries. Click on the map for each country (look at the tables at the bottom for each country) to find the following information for the US, Japan, Germany, Mexico and Russia:  GDP per capita (PPP), shares of income for the top 10%/bottom10%,  infant mortality rate, life expectancy (male & female), and current environmental issues.  Make a table highlighting the information across the 5 countries.  Do the GDP per capita (per person) numbers give you a good picture of the relative well-being of each country’s citizens?   Why or why not?
     5.   The Organization for Economic Development (OECD) maintains a website (http://www.oecdbetterlifeindex.org/#/11111111111) where you can calculate a Better Life Index that incorporates both economic factors and noneconomic factors for differing countries.  Change the default weights to see where the USA would rank relative to other countries if: (1) only income had the highest weight & the rest were at the lowest level; (2) only the economic factors of housing, income and jobs had highest weights & the rest were at the lowest level; (3) the 3 economic factors had the lowest weight and the others were at the highest level; and (4) all factors were equally important with the same weight.  Do the income differences alone tell you about differences in standards of living across countries?

VIII.  Unemployment & Inflation

Objectives:
    1.  How is the unemployment rate computed, i.e., who's counted? Discuss the types of unemployment and their causes.  Does the government index of unemployment provide a good "picture" of the lack of jobs in the economy?  What are the costs/benefits of unemployment?  If differing countries have the same annual unemployment rate are they likely to have the same kinds of problems?
    2.  Each month the US Department of Labor website (http://stats.bls.gov/news.release/empsit.nr0.htm) reports the current employment situation in the US.  Using the data contained in Table A, how much did the number employed and number unemployed change in the past 12 months?  Did they change by equal amounts?  Why or why not?
    3.  What does the inflation rate measure?  How is it measured?  What are the problems of measuring inflation? What are the major types/causes of inflation?  What are the costs/benefits of inflation?
    4.  Each month, the US Department of Labor website (http://stats.bls.gov/news.release/cpi.nr0.htm) reports the latest CPI figures.  What are the current figures for the official CPI-U  for the 12-month percentage change in the past year.   What does the CPI -U index measure?   What sectors are making the index increase the most?  What sectors have limited increases in the index? Also look at the 12 month percentage change in the C- CPI - U index.  Is it the same as the CPI - U change?  Why or why not?
    5.   The OECD (Organization for Economic Cooperation and Development) website  provides the latest information on the economic performance of most industrialized countries (http://stats.oecd.org/Index.aspx?QueryId=36337).  Using the website's data for 2012, rank the following six countries (US, France, Germany, Italy, Japan & the United Kingdom) from best to worst in the following categories: GDP % change,  inflation and the unemployment rate.  Which economy has performed best overall?  Worst?
     6.  Market economies are characterized by wide, repeating swings up and down in economic activity, called business cycles.  Discuss the four phases of the cycle.  How are the turning points in the cycle determined?  Why do business cycles happen?
     7.  The National Bureau of Economic Research (NBER) Business Cycle Dating Committee is the most cited source for dating cyclical turns in the US economy.  The NBER website contains the information on the recent cycle turning dates and the latest reports of the Committee.  Since 1945, how many cycles has the US economy been through?  How long was the average expansion?  contraction?  What's been happening to the length of the expansions and contractions in the past two decades?  Looking at the latest report of the Committee, when did the most recent recession begin?  When did the most recent recovery begin? 
     8.  Does the business cycle care who's President?  Check out the Businessweek graph.

IX.  Housing Bubble

    1.  Compare traditional mortgages, interest-only mortgages and negative amortization mortgages. 
    2.  Discuss the role of Fannie Mae and Freddie Mac in the mortgage market and how they "securitize" mortgages.  How did changes in Fannie Mae & Freddie Mac policies that were adopted in the late 1990s influence the type of mortgages people took out when they bought homes and the number of people able to buy homes?
    3.  Insurers, investment banks and commercial banks started to issue credit default swaps to baskets of securitized mortgages in a big way in the late 1990s.  What is a credit default swap?  How did the issuance of mortgage security credit default swaps influence the type of mortgages people took out when they bought homes and the number of people able to buy homes?
    4.  Why did the "Housing Bubble" pop?  Why were so many homeowners unable to make the payments on their homes?  Who's to blame, the mortgage borrowers, bankers, government agencies, investors, or all of the above?
     5.  Business Week recently published an article on trends in homeownership.  What has happened to the fraction of Americans who own homes?

X.  Aggregate Demand & Aggregate Supply

    1.  Briefly, using the Aggregate Demand & Aggregate Supply graphical model, show how the national economy achieves an equilibrium level of Real GDP.
    2.  What would happen to Real GDP and the US Price Level (inflation) if Aggregate Demand increased or decreased?  What factors can cause Aggregate Demand to change?
    3.  What would happen to Real GDP and the US Price Level (inflation) if Aggregate Supply increased or decreased?  What factors can cause Aggregate Supply to change?
    4.  If you have a recession: (1) what kind of demand side policy should you enact to cure the recession? and (2) what kind of supply side policy should you enact to cure the recession?
    5.   If you have an inflation: (1) what kind of demand side policy should you enact to cure the inflation? and (2) what kind of supply side policy should you enact to cure the inflation?

XI.  Fiscal Policy

     1.  What is fiscal policy?  What is the appropriate demand-side fiscal policy to cure a recession?  an inflation?
     2.  What are the automatic stabilizers?  How do they work as demand-side fiscal policies to reduce business cycle swings?
     3.  What is the appropriate supply-side fiscal policy to cure a recession?  an inflation?
     4.  What are the advantages and disadvantages of using fiscal policy to stabilize the economy?
     5.  What is the "Fiscal Cliff?"  What are the provisions of the Budget Contral Act of 2011 and why was it passed (click here for an overall summary and here for a review of the 2013 year effects)?
    6.  The Congressional Budget Office (CBO) has just issued a report on what will happen to the US economy if the "Fiscal Cliff" occurs.  Review the likely effects on the US economy and whether Obama & Congress should allow it to occur.
    7.  The National Commission on Fiscal Responsibility and Reform (commonly called the Simpson-Bowles Commission) in December 2010 made some recommendations on how to reduce the Federal Budget Deficit over the next eight years.  What kinds of spending and tax changes did they recommend?  Should Obama and Congress seriously consider their plan?
    8.  Currently many Republicans favor tax reform that generates more tax revenue over tax rate increases.  Specifically they would like to limit the deductions that individuals and companies can take.  Looking at Businessweek's list of deductions, and how much taxes would increase if they were eliminated, would a Republican approach limiting deductions be a practical way to generate more tax revenues?  Which deductions would have to be eliminated or reduced?

XII.  Monetary Policy

     1.  What is the Federal Reserve?  What are its functions?
     2.  What are the three "ordinary" tools that the Federal Reserve uses to change economic activity?  How do they influence interest rates and the economy?  What should the FED do during recessions?  during inflations?
     3.  What are the advantages and disadvantages of using monetary policy to stabilize the economy?
     3.  What additional actions did the Federal Reserve take to stabilize the economy when the 2008 Financial Crisis began.

XIII.  The Great Recession (2007-9)

    1.  Investopedia reviews the causes and immediate effects of the Financial Crisis in 2008 in the following web chapters:
         A.  Causes
         B.  Immediate Effects

     What caused the Financial Crisis in 2008?  What role did the housing market play in creating the crisis?  What happened during the crisis in financial markets?

    2.  The following links describe how the various actions taken by government agencies in response to the crisis:
          A. US Treasury Report April 2012
          B. NY Federal Reserve Report
          C. Investopedia

     How did various federal government agencies respond to the crisis, i.e., what were the key steps taken to stabilize the economy?  Were the steps necessary and were they effective?
 
 
 
 
 
 
 
 
 

 


 
 
 
 

College Policy for all courses and students: (full explanations of policy may be found in the College Catalog)

Cheating and Plagiarism:  Cheating and plagiarism subvert both the purpose of the College and the experience students derive from being at Iona. They are offenses which harm the offender and the students who do not cheat. The Iona community, therefore, pledges itself to do all in its power to prevent cheating and plagiarism, and to impose impartial sanctions upon those who harm themselves, their fellow students, and the entire community by academic dishonesty. Sanction and Appeals: At the beginning of each semester, professors shall state their policy with regard to intellectual dishonesty on the syllabi and course requirement forms they distribute. This policy shall include the penalty to be imposed when cheating or plagiarism is discovered; penalties may include failure for a given assignment or failure in the course. Students who are given a failing grade as a result of cheating, plagiarism or academic dishonesty are not permitted to withdraw from the class. Faculty members will report all incidents of cheating and plagiarism to the dean. After the first offense the student will be required to complete an instructional program on intellectual dishonesty. After the second offense, the student will no longer qualify for a degree with honors, and the student may be suspended from the college. In any allegation of intellectual dishonesty, every effort will be made to ensure justice; in all cases, educational assistance rather than adversarial proceedings will be sought. If, in conformity with this policy, a sanction is imposed, students may appeal first, to the professor who discovered the offence; second to the department chair; and third to the academic dean of the division involved. The decision of the academic dean is final. A student has the right to appeal the academic dean's decision to the provost if, and only if, the sanction involves a suspension from class or dismissal from the College. In such appeals, the decision of the provost is final.

Attendance:  All students are required to attend all classes.  Iona has an attendance policy for which all students are accountable.  While class absence may be explained it is never excused.  Professors may weigh class absence in the class grade as they see fit.  Failure to attend class may result in a failure of the class for attendance(FA), when the student has missed 20% or more of the total class meetings.  The FA grade weighs as an F would in the final official transcript.

Course and Teacher Evaluation(CTE):  Iona College now uses an on-line CTE system.  This system is administered by an outside company and all of the data is collected confidentially.  No student name or information will be linked to any feedback received by the instructor.  The information collected will be compiled in aggregate form by the agency and distributed back to the Iona administration and faculty, with select information made available to students who complete the CTE.  Your feedback in this process is an essential part of improving our course offerings and instructional effectiveness.  We want and value your point of view.*
NOTE* You will receive several emails at your Iona email account about how and when the CTE will be administered with instructions how to proceed.


 
 


Economics Department || Iona College