201 course outline spring 16

7/25/2019 201 Course Outline Spring 16

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Spring Semester 2016

Course Econ 2021 -03

Instructor: Professor Adel A. Beshai; and Marwa, Noura, Hend.

Office: room 1015 Jameel Building

Email:[email protected]

Office hours: Mondays/Thursdays @ 12.30 noon to2.00 p.m. and by appointment.

Class location: Mary Cross Lecture Hall

Meeting times: Mondays/Thursdays @ 2.00 p.m. until 3.20 p.m.

This course is not only one of the two basic or foundation courses in Economics, but it shines of its own

light in the sense that if say an Engineering graduate or a graduate from any other discipline takes this

course only, he or she would be able to read the Economist magazine and understand fairly well what is

going on in the world. As per the tradition of AUC, each professor chooses his or her own textbook.

Notwithstanding this, based on my experience for decades, I feel that there are topics which are a

mustsome of these topics are a bit advanced, but experience has shown that if students get solid

lectures they can excel.

Course philosophy: The economics department realizes that a course such as Econ 201 is not a mere

200 level course but is a foundation stone for other courses in economics.in that spirit, the underlying

principle is to combine talents and experience of different generations to ensure a rich outcome for the

benefit of the students. The talents of an older generation are combined with those of the younger

generation, considering that no one individual has a monopoly of knowledge. The course emphasizes

exchange of ideas; class participation; scientific analysis. My three colleagues and I are committed to

this approach. The quid pro quo of this is to have on the other side (the student side) students who are

serious, hard -working, responsible, and ones who possess a searching mind. The outcome will never be

determined by the abilities of one side only- it has to be the result of the interaction of two sides. It

behooves the students, therefore, to recognize their responsibilities and to genuinely act as partners in

an interactive sense. Class participation is actively encouraged; the emphasis is on thinking and new

ideas. We started this new system of teaching 201 four and a halfyears ago. On our side and on the

students side the challenge has been met and we are all the time revising the approach; the contents.

it is an on-going activity, because dynamism is the essence of life. Let us all remember that knowledge is

the noblest of all treasures; it can never be stolen, given away, or consumed.

Course requirements: there shall be two exams and a final. Exams will be announced in advance. No

makeups. The weight of the first exam (called the five weeks exam) is 20%; the Midterm exam 35%; and

the final 30%. The remaining 15% is allocated for attendance, class participation, and assignments.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Text, Reading materials, etc: the main textbook is Economics Samuelsonand Nordhaus; 19th

Edition.

There shall be supplementary readings from books, newspapers, and a journal or two.

In the following paragraphs, I give some sort of an annotated outline:

The first few lectures cover some basic universal premises in economics: law of scarcity; factors of

production; logical fallacies such as the fallacy of composition; post hoc fallacy and their applicability in

economics; the what, how and for whom problems; positive vs. normative economics. Graphs are then

introduced; the pp curve.increasing cost; constant cost; decreasing cost; the assumptions behind this

curve and any curve we draw in economics and the significance of the assumptions. Then applications

of the pp curve; e.g. in environmental economics; rich and poor countries; capital and labour, etc.

Next; the meaning of market as distinct from market-place; and full discussion of a perfectly

competitive market and why we study it. The Invisible hand of Adam Smith and the visible hand of the

governmentthe economic role of the government in a market economy and reference to Egypt would

be well worth it and how Egypt has faltered in that in the last few decades. The process of capital

accumulation.sacrifice of present consumptionthe capital good.the time it takesthen more future

consumption as the essence of growth.

Following this, the microeconomic foundations of macroeconomics will to be discussed by analyzing

Supply and Demand each in detail and how they interactthe concept of the equilibrium price and the

significance of exante analysis i.e. e.g. in demand what one is willing to go on demanding NOT the

expost sense which refers to the past the actual or the realized, because at any price the quantity

demanded is the quantity supplied.

Then come the heart of macroeconomics: GDP; NDP; NI; PI; DI. To be explained in detail. And when to

use eache.g. if I am interested in growth I look at NDP ; If I want to have a notion of Employment (N ),I look at GDP and why; If I am interested in consumer welfare I look at PIetc. etc. for the rest. Then a

discussion of the statistical and conceptual problems in National Income Accounting: Is a carpenters

hammer an intermediate good or a final good? The sale of a Picasso painting? Services of housewives?

Etc. etc. Then analysis of inter-country comparisons of GDP

Then a look at specific macro variables: If Y = C + I in a closed economy with no G and no trade, take C:

the consumption function alone and analyze it a la Keynes, explaining the objective factors and the

subjective factors that cause it to shift; how to derive the S function from it consider that it is a mirror

image.MPC and MPS..uses of MPC.. graphs and equations must accompany the consumption

function; A linear consumption function. APC and APS.discussion of the national or long run

consumption function. Permanent Income and life cycle modesAre they really new..Can we trace

them in Keynes? Then the Investment function in detail with graphs and factors that affect

investment..Business cyclesif consumption is fairly predictable, Investment is volatile and it is the

real devil behind GDP fluctuations.

Then the tough lecture on S and I. The cleavage between saving and investment; saving and

investment are done by different people for different reasons. The Accounting equality of S and I; The


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behavioral equality of S and I. S and I are always equal. S and I are only equal in equilibrium. Are

these two statements contradictory? Explain your answer This is a major question where the

instructor has to prepare himself or herself very well to lecture on it. Integral in the explanation is the

exante analysis and the expost analysis. Income determination using S and I is the method used by

Keyness followers He had the previous method of AED on theY axis and Y on the X axis.

Then the multiplier theorem in detail, using also a graphthe formula.some assumptions..its

applicability.

Then the Money and Banking aspect of the courseMoney in detail.barterevolution of

moneyfunctions of moneyorigin of banks..functions of banks.the central bank and its functions.

Then the money marketthe L function and the M functioninterest rate determinationexplain in

detail shape of the L function and the liquidity trap.a solid lecture on the interest rate.historical and

analytical

Then the inflationary gaps and the deflationary gapsgraphsA detailed discussion of the efficacy ofmonetary policy in curing a depression.how it affects M .M should affect interest rate (r) in a certain

way..does it do sothen r should affect I in a certain way.how may it failand if so we shall never

reach Y .. M - r - I - Y. and how fiscal policy can come to the rescuetalk a lot about

Keynes and how fiscal policy can be direct in its impact.

Then Phillips curve; Stagflation and its curve; The quantity theory of money and analyze it algebraically

in the short run and the long run..Then a major lecture on the paradox of thrift.How an attempt by

all individual to save more may actually result in the whole community saving less not easy to answer.

And a diagram is required.

Time permitting a few words on growth theory; international trade and economic development

Other policies: citation style will be explained to you by my three colleagues, attendance is a must; prior

notice should be given to the professor in case of absence, not after the fact. Academic integrity is

emphasized at least as much as studying for the course itself and students must read AUCs code of

academic integrity. If there are items in that they want clarified, they must contact the professor. All the

students in this course must abide by this code.

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201 course outline spring 16

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