Intermediate Macroeconomic Theory
MTW 4:10 – 5:50 p.m., HOAGLD 113
Department of Economics
Macroeconomics is the study of issues that affect the economy as a whole, especially
unemployment, inflation, and economic growth.
John Maynard Keynes defined economics as
the “science of thinking in terms of models, joined with the art of choosing models which are
relevant to the contemporary world.”
Economic models are simplified representations of
relationships within an economy, and are described as a set of mathematical relationships
between economic variables.
Models are useful because they allow us to focus on necessary and
important relationships while omitting unnecessary detail and complexity.
In this course, we
will be examining many models of the macroeconomy, each with its own set of simplifying
One way to categorize the models is by the time horizon over which they apply.
Models can generally be grouped into two broad categories:
The Long Run
– These models assume that wages and prices are fully flexible and, therefore,
that capital and labor are fully employed.
Over the long run, labor, capital, and technology can
The production model, Solow growth model, Romer growth model, and the quantity
theory of money are examples of long-run models.
Long-run models are best suited for
explaining the economy over a time horizon of several years or more.
The Short Run
– Most short run models of the economy (for example, the IS/MP/AD/AS
model) assume that prices and/or wages take some time to adjust to long-run equilibrium.
Because of this stickiness, capital and labor are sometimes not fully employed.
That is, not all
markets clear in the short run.
Non-market clearing models are widely viewed as being
important for explaining the economic fluctuations we observe from month-to-month or from
Prerequisites for this course include Economics 1A and 1B, and Mathematics 16A-16B or 21A-
21B, all passed with a grade of C- or better.
Course requirements include in-class exercises, four take-home problem sets, and two in-class
exams including a comprehensive final exam.
Final grades will be weighted as follows: