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by: Elmore Funk


Elmore Funk
GPA 3.64


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This 29 page Study Guide was uploaded by Elmore Funk on Thursday September 17, 2015. The Study Guide belongs to ECO 2013 at Florida State University taught by Staff in Fall. Since its upload, it has received 28 views. For similar materials see /class/205455/eco-2013-florida-state-university in Economcs at Florida State University.




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Date Created: 09/17/15
CHAPTER I 39 What is Economics m 1 De ne economics distinguish between microeconomics and macroeconomics and explain the questions of macroeconomics 2 Describe the work of economists as social scientists 5quot Explain four core ideas that de ne way economists think about macroeconomic questions i Explain why economics is worth studying I Economics is the science ofchoice the science that explains the choices that we make and how those choices change as we cope with scarcity Society s wants exceed the resources available to satisfy them l Rich and poor alike are faced with scarcity Cobbe ECO 2013 Fall 2001 Ch 1 Page 1 of 13 This course will use this text I bade a ParKin or 1st edition I This comes in apackage with a Stud Guide a Q of exercises etc access to web resources and phone help I Practicewith Study Guide or CD or web multiple choice questionssample quizzes is the best way to prepare fortes s l Explorewhat is in the package it s costing you about 80 get your money s worth out of it I Don t bring the text to class I QQ read it preferably before and after the class that the chapter is assigned for IQQ use the CDweb and the Wquot it is best to do itwith some friends rather than alone llf you don t have an FSU email address 39 will get lots of important information about this class by email It is easy to get email forwarded from our FSU garnet account to your preferred email account I By the end of the semester there will be lots of material for the class on the web See httpmailerfs ued uljcobbelec02013htm Cobbe ECO 2013 Fall 2001 Ch 1 Page 2 of 13 l Economics uses jargon a lot I Jargon means a special vocabulary l Economicsjargon can be confusing because it often gives special meaning to ordinary every day words that have a different meaning in normal usage lJargon allows precision lJargon allows shorterstatements lJargon permits more efficient communication l lt s standard in economics so we have to know it to understand economics l You study economics in order to avoid being fooled by economists Cobbe ECO 2013 Fall 2001 Ch 1 Page 3 of 13 lJargon can be used to obfuscate or exclude lJargon can be confusing to those who are unsure of it I Unnecessary jargon hinders efficient communication ratherthan helping it IALL economics and economists usejargon to some extent I MOST of economics is common sense I Except for a very few nonintuitive ideas learning economics amounts to learning how to express what you know in the rig ht jargon ie it is like learning a new language I Definitions and Questions I Economics A Social Science I Macroeconomic ldeas I Why Economics Is Worth Studying Cobbe ECO 2013 Fall 2001 Ch 1 Page 4 of 13 AH econormc questions and probiems artse because hurhah Wants exceed the resources avatiabie to Satisfythem Scarcity The condition that ahses because the avatiabie resources are thsurrcteht to Sattsiyvvants Economics Studies the choices that thdwtduats bushesses govemmem ahd ehttre soctettes make as they cope wth scarcity l Microeconomics Microeconomics The study ofthe choices that individuals and businesses make the wa these choices interact and the in uence hat governments t quotr exert on these choices Micro sma l Macroeconomics Macr economics The study ofthe aggregate or total effects on the national economy and the global economy ofthe choices that individuals businesses and governments make Macro big l Macroeconomic Questions The three big issues that macroeconomics tries to understan are he standard ofliving The cost of ivin Economic uctuations recessions and expansions Cobbe ECO 2013 Fall 2001 Ch 1 Page 5 of 13 I l The Standard of Living Standard of living The level of consumption of goods and services that people enjoy on the average it is measured not perfectly by average income per person Goods and services The objects that people value and produce to sati fy human wants Goods are physical objects and services are things done for people For most people achieving a high standard of living 0 job means nding a 9 od Unemployment The state of being available and willing to work but unable to nd suitable wor The Cost of Living Cost of living The number of dollars it takes to buy the goods and services that achieve a given standard ofliving In ation A situation in which the cost of living is rising and the value of money is shrinking Cobbe ECO 2013 Fall 2001 Ch 1 Page 6 of 13 1 1 Emnom c uauamns Recasmnsam Ewmsmns sums cw mmquot and labs Ere De ram um Wm M mas m m he mm mm ms wm mam 4 m w aucmmgsm mswwmm mmde m Eanam ismimvmsh hem n Pasmv mm Wham Nmm mm Illnil smqu smug 1 a warm cm avvas M mm m cansslem wnh m we MN m M mm m m ms r MD M undemnd mm mmde mm Cobbe ECO 2013 Pa 2113107 1 Page 7 of 13 l l The task can be broken into three steps Observing and measur39ng Model building Testing l Observing and Measuring Items such as Quantities of resources Wages and work hours Prices and quantities of goods and services Taxes and government spending Volume ofinternational trade l Model Building Economic model A description of some aspect ofthe economic world that includes only those features ofthe world that a needed for the purpose at hand J 1 lm IA model is an abstraction a simplification that concentrates on a fewthings excluding detail that is not essential to the task at hand I Horses for courses ifthe model serves its purpose then lack of detail and realism doesn tmatter Example Cobbe ECO 2013 Fall 2001 Ch 1 Page 8 of 13 l Testing A model s predictions might correspond to or con ict with the data Economic theory A generalization hat summarizes what we understand a 0 he economic choices that people make and he economic performance of industries and nations l Unscrambling Cause and Effect The central idea that economists use to unscramble cause and effect is celeris paribus Ceteris Paribus Celeris paribus means other things being equalquot But ceteris paribus can be a problem in trying to test a model in the real world usually ceteris is not paribus Cobbe ECO 2013 Fall 2001 Ch 1 Page 9 of 13 I l Economist take three complimentary approaches Natural experiments Econometric investigations Economic experiments Natural Experiments A situation that arises in the ordinary course f economic life in which the one factor of interest changes and other things don t I Econometric Investigations Economic investigations use statistical tools Correlation The tendency for the values of two variables to ve in a predictable and related way Post hoc fallacy The error of reasoning that a rst event causes a econd event because the rst occurred before the second l Post hoc ergo propter hocquot correlation is not causation l After this therefore because of this obviously a fallacy does the sun rise because the cock crowsi l The Fallacy of Composition what is true for one may not be true for a Cobbe ECO 2013 Fall 2001 Ch 1 Page 10 of 13 l l Economic Experiments Economic experiments put real subjects in a decision making situation and vary the in uence of interest to discover how the subjects respond to one factor at a time A relatively new approach Four core ideas Rational choice Standard of living Cost of living Economic uctuations l Rational Choice Using the available resources to most effectively satisfy the wants ofthe person making the choice Also calle optimization Cost What You Must Give Up Opportunity cost The highestvalued alternative forgone Cobbe ECO 2013 Fall 2001 Ch 1 Page 11 of 13 l l Bene t Gain Measured by What You Are Willing to Give Up to get it Bene t The gain or pleasure that something brings 0n the Margin Margin choice that is made by comparing all the relevant alternatives systematically and incremen ally Marginal cost The cost of a oneunit increase in an activity Marginal benefit What you gain when you get one more unit of something make a rational choice when we take those actions for which marginal bene t exceeds or equals marginal cost We usually make choices in small steps or at the margin and choices are in uenced by incentives Marginal Bene tvs Marginal Cost Incentives are inducements to take particular Ions By looking for changes in marginal cost and marginal bene ts we can predict the way choices will change in response to changes in incentives Cobbe ECO 2013 Fall 2001 Ch 1 Page 12 of 13 l J A a g u u a mg changes from existing situations l Economics is NOT good at dealing with the equences of big changes it is ar to do a costbenefit study of a revolution l Nature non facit saltum Marshall 39 s as natural history of people s behavior l The Standard of Living and Productivity The dollar value of production can increase for three reasons Prices and wages rise People employed increases Productivity increases ty measured nationally is Producti total production per person employed l The Cost of Living and the Quantity of Money A rising cost ofliving in ation means that more dollars are needed to buy the same xed quantity of goods and services In ation is caused by an increase in the quantity of money that is not matched by an increase in the quantity of goods and services celeris paribus Would this still be correct if we had a shi from paying workers weekly to paying them monthly Cobbe ECO 2013 Fall 2001 Ch 1 Page 13 of 13 I l lExpenditure and Productivity Fluctuations Sources of economic uctuations can be grouped as Expenditure uctuations Productivity uctuations Smoothing the Business Cycle Economic uctuations are undesirable recession brings unemployment and overly strong expansion brings in ation Macroeconomics tries to smooth he business cycle I Ef ciency how do we maximize the total value of all production ignoring whogets it and who bears the costs I Equity what are the distributional implications ie who benefits and who loses l The US tradition is to emphasize the ef ciency aspect of economic questions I However all economic decisions normally ones and an economic analysi 39s incom aspect have equity implications as well as ef ciency plete witho ut discussion of the equity s Cobbe ECO 2013 Fall 2001 Ch 1 Page 14 of 13 I How Economists Study Issues Economists attempt to discover an explanation for h 39 redict economic systems work to p Economists distinguish between Positive Statements and Normative Statements Positive statements are about how things actually are facts could show a positive statement was false if it was false Normative statements are about what ought to be involve opinion or veluejudgementsn they cannot be shown to be false l Ef ciency statements will usually be positive so alt ough we may disagree about the facts we can use them try to find truth I Equity statements can be positive but often quickly becomenormative reflectin opinions about who should benefit or bear the cost and often these views feed into political disagreements Two main bene ts from studying economics are Understanding Expanded career opportunities l Understanding Economic ideas are all around you You cannot ignore them As you progress with you study of economics you ll gain a deeper understanding of what is going on aroun you Cobbe ECO 2013 Fall 2001 Ch 1 Page 15 of 13 1 1 Exrundm Cum ownms am Mme mumsqu m minv ems w 35mm mm bushes mmvmm mum r931 eslm w Wmquot Mam nun m m m m Eanammsvradumes in mm mm m Pmkssan mm Mummy mmm camvmer mm the Col Msnmylm Et mmcs Mai mm m mm mm 5 mm mm A ukes m m mm My Wewh up war benemsand my Cobbe ECO 2013 Pa 2113107 1 Page 16 of 13 mam u 1 Mervm 2 my dignm we gems grwh ind m sechm grwh p a 3 g 2 p A Brlphremmnshps 2mmg mvummwo mums mm m between m vanabks mm m mm m 5 uHedme m5 r he mmc m mm ms qure m NW m m 3 mp mam m M m a u wp ms mm 1 WWW E ans measures quot quot mam Cobbe ECO 2013 Pa 2031 13911 Page 170f 13 1 1 mum um Gums Samar mang Amp mm W a mm mm m m H mm mm Magma gram Av vhmm mwsm myth xax sandme vaname arvanabksm Wm we in mum myth y m cross 53mm graph Av vhmm mm mm vaname mmM mm am we mm m mm m 2m 1 5mg a 5cm 1 mm l As m PM My mum nus m Cobbe ECO 2013 Pa 2031 Ch Page 18 of 13 l l qure Amman m sauermivmm m km vnce nus m quot numbermca s m m w H he 5 when 39 fx WWW I WWW x H WNW L M 5 mnmmmym s awW Ana awn5 0 h m mm m W m v vh mm 4 WWW m m M WW MN Cobbe ECO 2013 Pa 203107 1 Page 19 of 13 l l Imwmng Gums um m Ecnmmc Ammansmv between m vanabks mm mm m m 5 a w my re atmnsmv Ammansmv mm mm as smvm m qure m m ms 3 mm amu Mauansmv As m speed mm m mam mm mm qure m m m 3 mm ma mm km speed mm m we mm Page 20 of 13 Cobbe ECO 2013 Pa 203107 1 qure A13h3mws mm ma mummy km mam mm mm WWW qure m a 5mg 3 mm ma mm As sudv m mm m quotmy 01 mm waned mm Negahm mamsz w merse re almnsmv mm mmquot Cobbe ECO 2013 Pa 2031 13911 Page 21 of 13 qure m 2 ms 3 mm mums mm As m ume mm mm mm mum wan 5mg amuse mm snwm m qure A1 h5haw5 mm mums mummy km Weme mm m wawm 7va mp nus mm 3 mm m bewmes 55 sap qure A1MC5hmA5 mm mums mm mm 01 Pm m waned mm mm 3 mm m becames mew As m Cobbe ECO 2013 Pa 2113107 1 Page 22 of 13 qure A15i mw5 1 m mm gamupr as m mm mm m 2 m mm mm ilvmm a m maxvmm m 3 Yheniavesdawnwamas m m w m nus mm A15 mw5 m m mm W WW km speed mm 2 m mm mm ilvmm s m mm wS w m a m 3 Yhecums avesuvwam asme wS verm e use qure m 5a Ms W vanabks m m Wm As m W m bananas mm mum Wide m mums mm 1 75 mm m mm 5 mm Cobbe ECO 2013 Pa 2113107 1 Page 23 of 13 qure m m 5mg vanabks m m Wm muHm mm mm m mm m mm mm mm 1 3 mum va ans m mm 5 mmc the Slave a mmp S ope m mm m vame mm vaname measured an m mama hm mammmm Mme vaname measured myth mm mm M qure m m ms 3 mm 5m 1 WWW 2 1153 3 mg Wm Cobbe ECO 2013 Pa 203107 1 Page 24 of 13 qure m mu m nevauv gave 3 sppe mm 4 qure m m msme shve m cum 1 a van sppepmeewe 1 a equa sme gave Mme red hnuanvemmme me an 1 When 1x56 2 1154 3 sppe mm 4 mmpuan quothm m M VIIIDIE n v vh e pummelmwpvesmmmnm vanabks we useme up s amw 2594mmquot 5 33 p am PM m cansuned e mv me am p shun5m remmnsmvs peppeen pe em hemwemum myde wee ahce mm Cobbe ECO 2013 Pa 203107 1 Page 25 of 13 ECO20132 Fall 2001 Principles of Macroeconomics Dr Cobbe TR 2 7 315 pm Moore Auditorium MOR 101 247 Bellamy 644 7091 jcobbecossfsuedu Office Hours TRF 830 10 am MW 11 12 or by appointment email with a suggested time TA s Taro Asahina BEL 245C 644 7075 taa0345gametacnsfsuedu Sinipha Khampoui WJB 144 644 7073 ksimiphahotmailcom Gorkem Ozer BEL 245A 644 7082 ozergorkemyahoocom Text Robin Bade and Michael Parkin Foundations of Macroeconomics 1st edition Required What has been ordered is a package that comes with the text the text itself a printed study guide and access to the website econFoundations with exercises sample quizzes and various support materials and to online and phone tutorial support Note If you buy a used secondhand copy of the book it probably won t have an access number that works any more for the website however you can buy the access separately for 30 online at the website beginning in January This is the publisher s way of encouraging you to buy a new book Target Copy has a packet that contains an expanded version of the PowerPoint slides I use in class in note form 6 slidespage on one side of the page threeholepunched so you have blank pages to write notes on The packet should cost under 15 many students nd it convenient to buy it put it in a threering binder and bring it to class to make notes directly without having to copy the slides Alternatively you can download the slides in 3 or 6 slidespage form from the web see below There is no need to bring the text or studyguide to class Objectives This course is an introductory survey of economics with main focus on macroeconomics and the international economy At the end of the course you should be able to critically read and discuss an article on economics in serious media such as the Wall StreetJournal New York Times or Business Week Forbes or The Economist understand and express in normal language the jargon and reasoning of an economic statement or argument distinguish fallacious plausible and unknowable assertions about the economy Requirements and Grading Your grade will be based on three elements 1 lnclass Exams three midterms 18 20 and 22 of course grade respectively on Thursday 31 January Thursday 7 March and Thursday 11 April 2 A comprehensive nal 25 of course grade on Tuesday 23 April 300 500 p m 3 Best eight 2 minute cointoss quizzes 15 of grade Each class we will at some point during the class toss a coin to determine whether to do a 2 minute quiz so there should be about 12 of them We will do the quizzes at a random time during class to discourage people showing up near the end for the quiz only and with the seating in Moore you had better not try to leave after we do it The quiz questions will be based on closely parallel to a question from the study guide or econFoundations website on the material we are covering that day Each 2 minute quiz is scored out of 2 points 2 for a substantially right answer 1 for a wrong answer zero for absent To repeat the best eight count scaled to 15 of the total course grade Typically the final scale for the class is such that the difference between maximum and minimum points on these twominute quizzes 15 points out of a hundred is equivalent to more than a full letter grade This is deliberately designed as a an incentive for you to come to class however boring I am research shows students who attend class do better and b an incentive to actually use the study guide andor the econFoundations website Exams will be multiple choice There is no preset point score equivalent of letter grades the scale gtcurve is determined after the test on the basis of performance by the class as a whole 1 use and grades Make sure you understand how your grade will be determined 1 do not permit any form of extra credit Your grades during the semester will be accessible through a gradeengine on the course website If you are unable to be present for a scheduled midterm exam for a legitimate reason you must inform Dr Cobbe in advance and request alternative arrangements e g earlier time for a test greater weight on the other two quizzes if possible emergencies on the day of the test CALL 644 7091 N0 makeups 0r alternatives permitted after the event if you miss the test without my permission beforehand Because only the best 8 count no makeups on twominute quizzes If an excused absence prevents you from taking a scheduled midterm and you cannot do it early the weight on that 1 midterm will be given to the other two midterms equally You cannot have a makeup after the test has been given Unexcused absences translate into zeroes If you are taking both ECO 2013 and 2023 this semester both should have their nal at the same time check your 2023 syllabus If so you need to either take both nals in the same time slot one after the other or one on Tuesday and the other at the scheduled makeup time on Friday of exam week 26 April at 530 pm Consult Dr Cobbe after Spring Break you will need a written permission slip to take the makeup General Housekeeping Notes 1 make heavy use of email if you dont have an FSU garnet email address already get one at once If you prefer to use a nonFSU email address there is an easy way to forward your FSU email to the other address fill out the form at htggsregisteracns fsueduCARSforwardhtml You must have an FSU email address and then forward because the course mailing lists are generated from registration data and only include FSU email addresses 1 check my email frequently and in general you should get a reply within 24 hours usually much quicker The course email list has address ECO201302garnetacns fsuedu email sent to that address goes to everyone registered for the class and me If you want to send email to me only not to everybody in the class use the address jcobbecoss fsuedu The material in this class is mostly cumulative i e it builds on what has gone before We move quite fast there are 20 chapters in the main textbook and we will cover all of them although not all the material in all chapters email will tell you what you can pay less attention to it is important not to get behind at the beginning and to keep up throughout With a twiceaweek only class there are only 25 class meetings other than exams you cannot afford to miss much material The text package gives you lots of alternatives for practice and learning make use of them If you work this stuff it will help you on quizzes and exams More generally if you are having trouble with the course ASK FOR HELP B contact one of the TA s go to the help room see below or see Dr Cobbe in office hours If you have already taken ECO 2023 the first three weeks chapters 1 7 4 are going to be mostly if not wholly review 7 material you have seen before Do not be lulled into a false sense that the whole course will be easy most people find ECO 2013 more difficult than ECO 2023 There will be a regular weekly help session in room BEL 0004 on Wednesdays 515 7 630 p m You are not required to attend and you get no extra credit for doing so but if you have questions or problems this is an opportunity to come ask for further explanation and hear what other people are having trouble with Review sessions will be scheduled before the midterms assuming a room can be obtained details will be provided by email and in class The Department of Economics has a help room for all its lower division courses The room is 146 W113 and will be open 11 am to 4 p m and 630 pm to 730 pm Monday through Thursday and 11 am to 3 pm Friday depending on usage opening times might be adjusted later in the semester The room will be staffed by economics graduate student TA s and will have materials for all the 2000level courses in the Department and some PCs for the websiteCD material You will be emailed with the times that my TA s will be working in the help room but if you have a courserelated economics question rather than a question about your grade you can go there anytime it is open 7 all the graduate students staffing the room should be able to answer your questions The location is 146 W113 146 William Johnston Building But it is hard to find There is a brick arched walkway by some dumpsters about half way from Landis Green to Ivy Way between the side of W113 and the side back of Reynolds Hall There are double doors with windows into WJB in that walkway 146 is just inside first door on the right Each class is 75 minutes 200 to 315 that is the price you pay for only meeting twice a week 1 will try to break the 75 minutes up by having you do things during it butl will normally try to use the full 75 minutes This is not the nicest room please do me and your fellow students the courtesy of not leaving early or arriving late that is disruptive for others The classes are anchored around lecture material keyed to the PowerPoint slides but we should be coming out of the slides and doing other things a lot of the time If we are spending too much time on the slides and you are getting bored or sent to sleep let me know Economics is about I 39 39 but also about r 39 The A A that come with this text package are quite good and can be very helpful for understanding and absorbing the material ifyou use them The course will also use the web to post material of various kinds The home page for the course is httpmailerfsueduNjcobbe 13502htm39 1 also leave up on the web material from earlier semesters which you can browse if you want start from httpmailerfsueduNjcobbeec02013htm A longer version of the PowerPoint slides thatl use in class will be posted to the web in 3 and 6 slideperpage note format you can download if you wish I believe there is also a version of the PowerPoint slides on the eFoundations website but they are not quite the same and I prefer mine Do not imagine that if you have the text and the slides you have the whole course and don t need to come to class because the slides are available to you 1 will tend to go through them fast and 1 mean to do lots of things that are NOT in the slides Class time can maybe help you begin to understand the material reading the book and the slidesnotes will help too yes it really does but the only way to fully get it is to be able to do it B which is where the eFoundations website and Study Guide can really help you Many people find it both less unpleasant and more productive to work software or other exercises with one or two others rather than alone I encourage you to do that try to find a couple of other people in the class with whom you can form a little study group and meet regularly to do the exercises and talk about the material B for most people that works better than just studying alone The schedule below is somewhat tentative because this is a brand new book B it may turn out that we go a bit faster or slower in places and we may not have time to cover everything on this initial outline I will email the class where we are in the book and what the coverage is for the midterm exams on a regular basis The Department of Economics strongly endorses the Academic Honor Code and any instance of academic dishonesty detected will lead to severe academic penalties at least an un droppable zero for any graded item in question If you have any doubts as to what is or is not academic dishonesty consult the Student Handbook or ask ADA Statement If you have a disability requiring academic accommodations 1 Inform Dr Cobbe as soon as possible preferably during the first week of class bringing a letter from the SDRC confirming your need for academic accommodations 2 Discuss the accommodations you need with Dr Cobbe39 it is your responsibility to ensure that he has adequate notice to arrange such accommodations Tentative Schedule 1 T 8 J Introduction Chapter 1 2 R 10 J Chapter 1 continued39 Also the appendix to chapter 1 on graphs cartoons will be discussed brie y in class but if you are not comfortable with the idea of making graphs from data or with graphs in general study it on your own some Probably start on chapter 2 3 T 15 J Chapter 2 maybe start on chapter 3 4 R 17 J Chapter 3 continued 5 T 22 J Chapter 3 continued start Chapter 4 6 R 24 J Chapter 4 continued 7 T 29 J Chapter 4 review 8 R 31 January rst midterm chapters 1 through 4 9 T 5 F Chapter 5 10 R 7 F Chapter 5 continued chapter 6 ll T 12 F Chapter 6 continued chapter 7 12 R 14 F Chapter 7 continued start chapter 8 13 T 19 F Chapter 8 14 R21 F Chapter 9 15 T 26F Chapter 10 16 R28 F Chapter ll 17 T 5 M Chapter l2 18 R 7 M Second Midterm Chapters 5 through 12 March 11 to 15 is Spring Break classes do not meet 19 T 19M Chapter 13 20 R 21 M Chapter 14 N T 26 M Chapter 14 continued start Chapter 15 N N R 28 M Chapter 15 continued start Chapter 16 N L T 2 A Chapter 16 continued start Chapter 17 N 4 R 4 A Chapter 17 continued start Chapter 18 N Lquot T 9 A Chapter 18 review N O R 11 A Third Midterm Chapters 13 through 18 27 T 16A Chapter 19 28 R 18 A Chapter 20 review Comprehensive Final Tuesday 23 April 10 300 500 pm Feel free to make suggestions or complaints by email or otherwise whenever you think of any Teaching ECO 2013 in Moore is an experiment this year feec 7ack on whether it is better the same or worse than classes in Fisher or Bellamy 102 would be particularly useful


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