UNIVERSITY AT BUFFALO

DEPARTMENT OF ECONOMICS

ECO 407 Intermediate Macroeconomics Spr 2011

Course Hours and Room: Tuesday, Thursday:  6:30 – 7:50PM
Classrooom; 114 Hockstetter
Instructor: Professor James Holmes
Office: 431 Fronczak Hall
Phone: 645-2121 (do not leave message, does not work), Home: 688-2461
Office Hours: by arrangement Tuesday, Thursday, preferably between 12 –2 p.m.
my e-mail: ecoholme@Buffalo.edu. I will try to communicate with you by e-mail. You have the
responsibility/requirement to use and check your UB e-mail account daily. (The UB mail server
evidently has difficulty in sending e-mail to non-UB mail accounts, e.g. AOL, Yahoo, who knows?)
I will try to leave course materials including a copy of this syllabus on UB learns. Plus I will point
out articles that you should be interested in from the Wall Street Journal.

Attendance is required in this course. More than three (3) unexcused absences may result in an
incomplete grade for the course.

Textbook and Required Readings:

Macroeconomics, by Blanchard, Published by Prentice Hall (if you buy an older addition online
it will be much cheaper, but make sure the chapters you read correspond to those covered in the weekly
quizzes. Mc Graw-Hill has ebooks cheaper at
www.vitalsource.com <http://www.vitalsource.com>).

(Active Graphs CD-ROM to accompany text and the Study Guide to the above are recommended.)

The Wall Street Journal. (a sign-up sheet will be distributed the First class.)
To research a topic use Internet Explorer, Go to WSJ home, use your WSJ subscriber ID/password, go to
today’s paper, search, advanced search options, time range two years. If you wish to search father back
with no cost to you, you must use Factiva and your UB library ID and password.
Here's the URL for the page that links to the Factiva version of the Wall Street Journal:
<http://libweb.lib.buffalo.edu/pdp/index.asp?ID=470>

I hope to make copies of some of the lecture notes taken by former students, but unedited by me)
available. The class lecture will not follow the textbook. It is important that a student take notes upon and
understand the lectures. Suggested reading;
John M. Keynes’ The General Theory of etc. is a very readable classic.
Charles P(oor) Kindleberger, “Manias, Panics, and Crashes” is very timely and fascinating.
These are at the Undergraduate Library.

There are several very interesting Econoblogs that many people find interesting and educational. In
particular you can check out;
1. blogs, wsj.com/economics,
2. marginalrevolution.com,
3. gregmankiw.blogspot.com,
4. Economistview.TypePad.com.

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5. http://johnbtaylorsblog.blogspot.com/
6. http://blogsandwikis.bentley.edu/themoneyillusion/

Grading Policy: Subject to qualifications stated below:

Weekly Quizzes 25% (conditional upon your passing the quiz part of final)
Practice Midterm 0%
Final Exam(s)
Based upon weekly quizzes 25% (If you fail this you receive 0 credit for weekly quizzes)
Essay portion 50%
I reserve the right to give more weight to either part of the final when in my professional opinion
I think it more accurately reflects your knowledge of macroeconomics. For example, if you receive
an A on the essay portion but not such a good grade on the weekly quizzes, I will give you an A for
the course. If you fail the essay portion you may fail the course independent of your quiz grades.
Similarly, if you get 100% on the weekly quizzes but fail the final exam based upon these
quizzes (which are cut and paste) I will assume you've cheated on the weekly quizzes and give
zero weight to them. On the other hand, if you fail the weekly quizzes and do an outstanding job
on the final exam based upon them, then I will weight that more heavily than the above figures.
Basically, your grade will depend upon how much macroeconomics you can show that you know.
The weekly quizzes will be take home and available in documents at UB learns before
Tuesday. They will be due the following Thursday. in order to receive full credit they must be
handed in before the corrected quizzes are returned. You will be given the opportunity to redo any
questions you got wrong on a quiz and receive an additional 50% credit on the weekly quiz grade
for those questions you eventually get correct. Given the grading policy stated above it is not in
your interest to cheat on these quizzes. (Of course, you could not do any of them and hope to ace the
final – good luck with that plan – That is one way to get yourself educated.)

I will have several undergraduate T.A.s who you can go to see for help. Their office hours will
be posted on my office door and distributed via e-mail and in class. The weekly quizzes are due
each Thursday (starting the second week unless announced otherwise). The quiz material will be
based primarily upon the assigned material from the text, study guide, and the lectures, with a few
questions based upon the WSJ. The material covered in a quiz will be that covered and/or assigned
in the preceding week (unless announced otherwise). (For example, the first quiz handed out before
Tuesday 1/25/11 will cover the material assigned/or covered for the first week and normally would
be due in class on the next Thursday. If classes are canceled or delayed for any reason you can hand
in your quiz to any TA during their schedule office hours after the due date without penalty so long
as that is before any graded quizzes have been returned. These quizzes will be corrected by the TA's
and you will receive full credit so long as yours is submitted to a TA before the corrected quizzes
are returned to your classmates. If you hand in your quiz after this it will be corrected but you will
receive no more than half credit. If you miss a question and re-submit the correct answer your
previous quiz grade will be increased by half a point per correct answer. A portion (33%) of the
Final Exam will consist entirely of questions previously asked on these weekly quizzes (numerical
entries may be altered and typos corrected).

Each student is required to write a three-part essay upon the actual data for the Great Depression
available in documents at UB learns, and hopefully a hard copy to be distributed the first week of class.
All handouts are available on UB Learns. (The material for the practice midterm will be distributed on
UB Learns as well.) The essay will utilize the macroeconomics theory(s) you learn in either the lectures

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and/or your reading(s) in order to explain the changes which occurred during this fascinating episode of
U.S. history. Your essay must be handed in with the final examination. In general these essays will not
be read unless you receive a grade of F or A. A set of questions based upon this essay will constitute the
remainder of the final examination. (These will be short answer, essay type question.)

A practice set of data and a set of questions will be assigned in the form of a practice midterm covering
the IS-LM theory approximately 2/3 the way through the semester. These essays and exam will be
corrected and returned. The purpose of this exercise is to give a student an idea of whether or not he or
she is “on track” in their learning in this course and, if not, where the deficiency is.

Incomplete policy
I give the grade of incomplete only if you can not complete all the course work for good reason in
accord with the university policy, please see these at
http://vpue.buffalo.edu/deangroup/docs/approved/senateresolutions.pdf. 
If you receive a grade of Incomplete, “I/F” is the only incomplete grade I give, you can make it up only
by redoing the course as an auditor either with me or any other instructor (with their permission) and
completing all the course work, tests, quizzes, etc., exactly as if you were retaking the course. DO NOT
RE-Register. The grade you earn as an auditor is the grade you will then receive.
This is my notification in writing of the work that must be completed by any and every student that
receives an incomplete in any class I teach in order to resolve the I grade. It is the only notification you
will receive.

Course Objective/Description
The somewhat unusual design of this course is intended to achieve two ambitions: First, the knowledge
of enough macroeconomics in order for it to be useful. The measure of this is whether a student can give
an intelligent, causal explanation for some major aspects of the Great Depression. Second, to teach a
student to think critically. The structure of this course is wholly designed to achieve the first goal (the
second being hopefully a byproduct).

Lectures
The lectures are organized with the primary purpose of helping a student to write his or her essay (and
are not based upon the text.) They begin by a philosophical inquiry into such basic issues as what is a
causal economic theory? What is the relationship between causality and statistics? (The questions “what
is Truth and Knowledge?” also addressed.)

These concepts are then applied to the development of a theory of consumption, investment, and
expenditure (IS theory). It will be demonstrated that the expenditure theory presented in most texts in not
a causal theory. Next, the theory of liquidity preference or money demand and money supply (LM
theory), which can illustrate the logical fallacy of composition, will be exposited. I will explain how,
based upon the LM theory, the stock market could fall 90% and no one benefit, i.e. it is not like gambling
at cards where someone loses and someone else gains. These two theories are combined to explain
Aggregate Demand, AD, theory. The demand and supply of labor and its relationship to output and prices
will then be developed; the Aggregate Supply (AS) Theory. I will try to incorporate my recent
contributions to this theory (as well as the traditional approach). The behavior of the complete macro
model (IS-LM-AS) or (AD-AS) theory will then be examined when the government changes monetary or
fiscal policy.

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 Many of the topics assigned in the text will not be covered until much later if at all in the lectures. It is
important that a student master the techniques utilized in the text early. If you had a good course in
Principles Of Economics this should be easy.

There will be little or no use of calculus and you should not worry about that prerequisite.

I strongly believe that learning is a very social activity. I have three proven ways to help you succeed in
this course by encouraging intelligent social interaction. First, Students are encouraged to study together
in groups, exchange class notes, and cooperate in (almost) every way in the learning experience of their
fellow students.
Second, I have several undergraduate T.A.s who have received A’s in this course in the past to help you this
semester. One of their most important duties is to be available to discuss problems and concepts that will help you
succeed in this course. I plan on having two or more TA's available to help you as a team or individually when you
come to discuss with them any conceptual issues and problems during their office hours, including questions you
miss on the weekly quizzes, that you have. Their office hours will be posted on my door and they will meet with
you either in my office or immediately outside of it.
Finally, I, perhaps with the aid of my TA’s, am going to try to use e-mail to answer questions student in
this course pose on the Internet using Blackboard. You must use your UB email address/account.
I will try a forth way to help you learn and become educated. According to the WSJ, 7/16/09, page
D1, there are several very interesting Econoblogs that many people find interesting and educational. In
particular you can check out; 1. blogs, wsj.com/economics, or 2. www.marginalrevolution.com, or 3.
gregmankiw.blogspot.com, or 4. Economistview.TypePad.com.

Collaboration on the Essay (or any quiz) is strictly forbidden because it is cheating. I reserve the right
if there is any suspicion of such behavior to require a separate oral examination on the assigned quiz/
essay material. The grade for the essay (and/or quizzes) will in this event depend critically upon a
student’s answers to this oral examination.
Please feel free to drop in and see me or phone me at home or one of the T.A.s to discuss issues about
which you are confused. (my Home telephone: 688-2461). You are encouraged to get help from more
than one TA.
I plan to have a fresh pot of free coffee and an assortment of free cookies available to any student(s)
who drop by to talk with either the TA’s or me in my office.
This is not a difficult course in which to get a good grade if a student works hard and regularly (e.g. 6
hours a week out of class). It is a very difficult or impossible course to pass if you do not work regularly
and hard and attend the lectures.
I (with my wife) have recently made several very exciting contributions to this field that I look forward
to sharing with you. We have put forth a fundamentally new explanation for how depressions (and
booms) occur and how the Great Depression could reoccur, as well as how the Great Inflation, which
occurred in Germany after WWI, not only came about but radically redistributed income in a socially and
politically disruptive manner. This is the first comprehensive economic theory of this extremely important
phenomena- again one which could potentially reoccur.
It is hard to think of two more exciting and relevant economic phenomena which you could study and
hopefully understand than why and how the Great Depression in the U.S. (and the rest of the world) and
the Great Inflation in Germany occurred. Obviously, they have the potential to reoccur.

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 Eventually, I intend to incorporate this new material in a textbook based upon these lectures.

Textbook and workbook material (tentatively) assigned for the week of lectures covering:
(the chapter numbers, if you have a older edition, may not correspond to the subject matter.)
Note; the week of spring break is not a lecture week, or Thanksgiving week is a lecture week

1st week ch. 1 and 2. Tour of world (1), book (2)

2nd week ch. 3 goods market (3)
3rd week ch 4 financial market (4)
4th week ch. 5 goods and financial markets: IS_LM (5)
5th week ch. 6 labor market (6)
6th week ch. 7 AS-AD model (7)
7th week ch. 8 natural rate of unemployment and Phillips curve (8)
8 week ch.9 inflation, activity monetary growth (9)
9th week ch. 10-11 growth fax (10), savings, capital accumulation, output (11)
10th week ch. 12-13 technological progress and growth (12), technological
progress, labor (13)
11th week ch. 14-17 expectations (14), financial markets and expectations (15),
expectations, consumption and investment (16), expectations, output
in policy (17).
12 week ch. 18-21 open economy goods in financial markets (18), goods and
open economy (19) Y., r, and the exchange rate (20), exchange-rate
regimes (21).
13th week ch. 22-24 depressions and slumps (22), high inflation (23), should
policymakers be restrained (24).
14th week ch. 25-27 monetary policy (25), fiscal policy (26), epilogue: story of
macroeconomics (27)

Usually the last several weeks of quiz material are not given in class nor graded, but the quizzes are
distributed and some of the questions, like all preceding quiz questions, may be included in the quiz
portion of the final exam. If you have bought a different eddition of the text, then the chapter
numbers need not correspond to the topics, the topics are what should be included in your quizzes.

Semester Final Examinations will be combined with those scheduled for E 212 in the fall and E 205 in the
spring, so that students can have as much time (within reason) as they wish. – check the published
schedule. If you have other finals scheduled that day, I will administer the final exam at my home at a
mutually agreeable time during the final exam period. Below

Students are responsible for knowledge of and must follow the academic integrity policies, and the
policies for making up in completes of the University and Department of Economics and Faculty of Arts
and Science.
Students who suspect they may have either a visible or an invisible disability should be aware of the
excellent services offered by the university Office of Disability Services. (Personally, as will be obvious
when I first go to write on the blackboard or overhead projector, I am classified with that office for having
an expressive language disability, and I am most sympathetic to students with disabilities.)

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 I reserve the right to make changes in this syllabus and course plan, when, in my opinion, this will
better achieve the objective of this course. However, any changes in this syllabus and plan will be
announced well in advance in lecture.

Finally, I hope you enjoy being a student in this course as much as I enjoy teaching it.
Work hard and Have Fun! I do.
If you are curious about my research and/or personal life, philosophy, and adventures (including
instructions about how to camp in the wild) you can find these at my webpage link:
http://www.acsu.buffalo.edu/~ecoholme/