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Hey! I am Emalini, your EC 101 Course Coordinator. This course is on Blended mode this first semester and just a brief overview/introduction of the course below.   

Macroeconomics deals with the behaviour of the whole economy. This course is an introductory course in macroeconomics. It is designed primarily to familiarize students with the basic theory of income/output determination - what determines the level of national income and output in modern economies

In addition, this course expound on theories of aggregate economic activity in the national economy and its link with the rest of the world. Emphasis is placed on basic principles involved in the determination of the level of national output, the aggregate price level, money supply, interest rate, exchange rate, balance of payments, government deficit, national debt, fiscal and the monetary policies. It further provides a broad understanding of economic growth theory and its implications for the economy.

 The main goal of the course is to provide students with basic understanding of the broad macroeconomic issues concerning the economy and to enable them to understand and analyze relationships among macroeconomic variables and markets/industry/sectors within the national economy and being part of the global economic system. 

The course content has been organized in such a way that student gets a mixture of descriptive material, theoretical insights, and policy dialogues. As you can expect, the level of difficulty of the subject-matter will increase as we progress through the course - the later chapters containing more difficult materials than the earlier ones and requiring greater patience and perseverance with the course material.

 One key thing about the organization of the course material is the fact that progression of the theme of macroeconomics is like a story telling or seeing a feature film. This means that all parts of the course material are linked - you cannot pick and choose the topics (chapters/lectures), do some and skip the others. Such a pick-and-choose approach will make the course material unnecessarily difficult and class presentation immensely confusing.

Lectures notes and other learning resources will be posted in this platform. Students are expected to read the required material before coming for class. You are required to check moodle on a daily or regular basis.

I look forward to journey with you in this learning experience. Well wishes and remember, there is never a substitute for hard work.   

First we will read and grasp some economics fundamentals below before we kick start next week.

To better understand how the economy works and be able to apply economic theories and principles to your everyday life, YOU MUST THINK LIKE ECONOMISTS. To think like economists, you must read and take note of how Economists think as follows:

The Economist as a Scientist

—  Economists try to address their subject with a scientist’s objectivity. Economics is a science since it involves logical thinking to solve puzzles and evidence to support that logic. Economists approach the study of the economy in much the same way as a physicist approaches the study of matter and a biologist approaches the study of life

—  They devise theories, collect data and then analyze these data in an attempt to verify or refute their theories.

—  The essence of science however is the scientific method – the dispassionate development and testing of theories about how the world works.

The Scientific Method: Observation, Theory and More Observation

To study economic problems, economists employ a process of theoretical investigation called the ‘scientific method’ which consist of four essential steps:

1. Specify the assumptions under which the theory is to apply.  Before assumptions, observations have to be made about the relationship between variables in the economy.

Assumptions - are commonly agreed axioms which layout the framework for the theory.

Assumptions can simplify the complex world and make it easier to understand.

Eg ‘ceteris paribus’ – all other things remain equal, or held constant while we concentrate on the relation among the variables of interest

—  Behavioral assumptions – assumptions about expected behavior of economic agents eg rational self- interest

2. Identify and define the key variables that are relevant to the economic problem under consideration. A variable is  a measure eg the price of apples, quantity of apples that can take on different possible values

—  In economic model involving ‘cause and effect’ relationships: independent variables – act as the cause, dependent variables receive the effect.

Eg. Generalization: C depends on YD

3. Formulate a hypothesis, which is a theory about how key variables relate to each other; It makes predictions about the real world

Eg. If the price of meat pie rises, other things held constant, then the quantity purchased will increase.

—  Economists explain theories by building simple economic models eg D & S graph showing the market for EC 101 text book

—  Instead of models made of plastic economic models are most often composed of diagrams and equations.

—   As we use models to examine various economic issues, you will see that economist use models to explain economic theories and that these models are build with assumptions.

—   All models simplify reality to improve our understanding of it. 

4. Tests the validity of the theory/model

—  Test the hypothesis with real world data focusing our attention on key variables in question while at the same time controlling for other effects.

—  Test will lead us to either reject the theory as inconsistent with the evidence, or still use it until one comes along that predicts even better

Examples of Models: The Circular Flow Diagram, the Production Possibility Frontier

An economic model is a description of logical thinking about an economic issue. It may express its conclusion in words, graphs or mathematical symbols.

Logical thinking by itself is not sufficient to reach reliable conclusions about economics or how the economy works; logic needs support of evidence.

Economic evidence is any set of facts that helps convince economists that some positive statement about the economy is true or false.

Many scientists gather evidence through controlled experiments. Sometimes scientists gather evidence by simply observing nature. Physicists learn about stars and galaxies by observing them and measuring their emissions of radiation; medical researchers learn about diseases by observing differences in the incidence in different societies and applying statistical analysis to draw inferences about those observations.

Statistical Analysis is the use of mathematical probability theory to draw inferences in situations of uncertainty.

Economists gather most of their evidence from observation followed by statistical analysis. An economist might examine inflation and interest rates in ten countries over the last 40 years to gather evidence about connections between inflation and interest rates. This evidence could help economists decide which of several economic models most effectively portrays the true relationships.

Assumptions and Conclusions

Every economic model requires assumptions about how people behave. Assumptions can make understanding how the economy works easier. Eg understanding the fundamental concepts of scarcity, choice and opportunity costs, we assume in the    PPF model that there is only one economy producing only two goods. Of course the real world consists of dozens of economies each of which produces thousands of different types of goods. By making assumptions, we can focus our thinking on the important variables,  we are simplifying the complex world and make it easier to understand how the economy works.   The model works from these assumptions to draw logical conclusions. These conclusions often take the form of “If………then……” statements that say what will happen if someone does something. These conclusions are the predictions of the model (sometimes called a hypothesis)

High school biology teachers teach basic anatomy using plastic replicas of the human body. These models have the major body organs which allow the teachers to show their students how the important parts of the body fit together. This model does not include all the body muscles and capillaries’, however studying the model is useful for learning how the human body works. Likewise, economists also use model to learn about how the economy works and to examine various economic issues, they may not be made of plastic but most often composed of diagrams and equations – it does not include every feature of the economy. The use of models simplifies reality to improve our understanding of it.

Macroeconomics- the Study of the behavior of the whole (aggregate) economies or economic systems instead of the behavior of individuals, individual firms, or markets (which is the domain of Microeconomics).

 Positive Statements – are statements of fact, of what is or what should be if something else were to happen. Positive statements are either true or false. It involves facts, not value judgments. It states what is, not what should be eg technological change has raised salaries of college graduates and kept wages of less educated workers low, Governments subsidies on higher education raises enrolment rates in higher education institutions.

Normative statements – express value judgments; they state what should be. Normative statements cannot be true or false eg Government should raise subsidies on higher education.

 Economists use the term market for the activity of people buying and selling goods.  Any arrangement that enables buyers and sellers to get information and to do business with each other.  Eg real estate market refers to the activities of people trying to buy and sell houses. The market process refers to the coordination of people’s economic activities.   The market process coordinates people’s economic actions by providing them with incentives to do things that benefit others. A market process is an example of a self organizing system. Markets have evolved to facilitate trade. Enterprising individuals and firms each pursuing their own interest have profited from making markets – standing ready to buy and sell items in which they specialize.

Markets can work only when property rights exist and when we use money as a means of payment and getting paid.

People can trade only things that they own. Property rights are the social arrangement that governs the ownership, use and disposal of resources, goods and services. Ownership means the right to make decisions about a scarce resource (whether to use it or to sell it). Owners have property rights in all kinds of resources and goods – real property, financial property, and intellectual property.

Economics has many facets, but it is unified by several central ideas which are the Ten Principles of Economics introduced here. Please have a read and try and grasp. 

. Principle 1: People Face Trade-offs:

—  No such thing as a free lunch – To get one thing that we like, we usually have to give up another thing that we like. Making decisions requires trading off one goal against another.

—  For eg. Consider a student who must decide to allocate her most valuable resource-her time

—  Or consider parents deciding how to spend their family income.

—  Or consider when people are grouped in societies making up economies. An economy faces different kinds of trade- offs.

Principle 2: The Cost of Something Is What You Give Up to Get It:     

—  Because people face trade-offs, making decisions requires comparing costs and benefits of alternative course of action.

—   This ‘cost-benefit analysis’ is based on the principle that an action should be taken if and only if, its benefit exceeds its costs.

—  Consider the decision to go to college: The main benefits: intellectual enrichment, lifetime of better job opportunities.

—  The costs: Opportunity Costs – the value of the next best alternative to taking a particular action

—  The largest cost of going to college – opportunity cost of your time. For most students, their next best alternative action to coming to university is holding down a job. So the earnings given up to attend university are the largest cost of their education.

Principle 3: Rational People Think at the Margin:

—  Economists normally assume that people are rational. Rational people systematically and purposefully do the best they can to achieve their objectives, given the available opportunities.

—  Rational people will apply the cost-benefit principle most of the time probably in an intuitive or approximate way, rather than through explicit and precise calculations.

—  Economists use marginal change to describe a small incremental adjustment to an existing plan of action. Margin means ‘edge’, so marginal changes are adjustment around the edges of what you are doing.

—  Rational people often make decisions by comparing marginal benefits and marginal costs.

Principle 4: People Respond to Incentives:

—  An incentive is something that induces a person to act, such as the prospect of a punishment and reward.

—  Because rational people make decisions by comparing costs and benefits, they respond to incentives.

—  Incentives play a central role in the study of economics: eg The behaviour of prices on the behavior of consumers and producers is crucial for how a market economy allocates scarce resources

Principle 5: Trade Can Make Everyone Better Off:

—  Trade between countries can make each country better off. Trade allows countries to specialize in what they do best and to enjoy a greater variety of goods and services at lower costs.

Principle 6: Markets Are Usually a Good Way to organize Economic Activity:

—  In a market economy, economic activity is determined and organized by the price mechanism and self interest – collective decisions of millions of firms and households interacting in the market place.

—   Despite the failures of market economies, they still have been proven as remarkably successful in organizing economic activity to promote overall economic well being.

Principle 7: Government Can Sometimes Improve Economic Outcomes:

 Market failures require government participation/intervention in market economies.

—  Market needs institutions to enforce property rights so individuals can own and control scarce resources. We need government provided police and courts to enforce our property rights.

—  Government intervenes to promote efficiency and to promote equality. 

Principle 8: A Country’s Standard of Living Depends on its Ability to Produce Goods and Services:
The differences in living standards around the world are staggering

—  This large variation in average income is reflected in various measures of quality of life.

—  Changes in living standards (change in average incomes) over time are also large. Eg US incomes have historically grown by 2% per year (after cost of living adjustment. At this rate, it doubles every 35 years.

—  What explains these large differences in living standards among countries and over time?

—  Almost all variations in living standards is attributable to differences in countries’ productivity.

—  Productivity determines living standards (average per capita income), the growth rate of a nation’s productivity (Productivity growth) determines the growth rate of its average income.  

Principle 9: Prices Rise When the Government Prints Too Much Money:

—  High inflation imposes various costs on society; keeping inflation at a low level is a goal of macroeconomic policy.

—  What causes inflation? In most cases, persistent inflation is a result of growth in the quantity of money.

Principle 10: Society Faces a Short-Run Trade-off between Inflation and Unemployment:

—  In the long run, increasing the quantity of money leads to higher price levels, however unemployment remains stable (classical theory). In the short run, the story is more complex and controversial.

—  In the short run, there is a trade- off between inflation and unemployment. Some economists still question these ideas, most accept. This simply means that over a period of a year or two, many economic policies push inflation and unemployment in opposite directions.

—  This short-run trade off plays a key role in the analysis of the business cycle – the irregular and largely unpredictable fluctuations in economic activity.

—  Policy makers can exploit the short-run trade-off between inflation and unemployment using various fiscal (change in G, change in TA) and monetary policy instrument (change in money supply or interest rate) to influence the overall demand for goods and services which in turn influences the combination of inflation and unemployment that the economy experiences in the short-run.

This is a Moodle shell template.

This is a Moodle shell template.

This is a Moodle shell template.

This is a Moodle shell template.

This is a Moodle shell template.

This is a Moodle shell template.

This is a Moodle shell template.

Welcome to the first of three ED300 Modules that you will do to successfully complete the course. In this, your first Module, you will complete a three week placement in a school. Quite possibly for many of you this will be your first time back in a school and classroom since you were a student yourself. The Module is designed as an introductory experience where you are to observe and reflect on what you see going on around you in both the classroom and the wider school and its community. You are not required to do any teaching, although you may if required assist your Associate Teachers in the lessons they teach. In this case you shall be interacting with the students and generally helping out in the classroom. The specific mandatory requirements of this Module are mapped out below. They form 10% of your overall result in this course and are added to the assessment weighting of the other two Modules you will complete over the span of your degree.

Please take some time to familiarise yourself with the contents of this Moodle page and the requirements of the Module.

Please pay particular attention to the assessment overview and how each of the tasks help you work toward important course outcomes. At a later stage you will combine all completed assessment tasks (from Modules 1, 2 and 3) into an e-portfolio based on the 8 ED300 course outcomes. You will find all eight course outcomes listed in the downloadable course outline below. Please familiarise yourself with them as they guide us all in the direction in which we need to be heading in this important capstone ED300 Practicum course.