1. Economic Models Lecture 2
Dr. Jennifer P. Wissink
©2018 Jennifer P. Wissink, all rights reserved.
January 29, 2018

2. Announcements-MACRO Spring 2018
Cornell has posted all final exam dates!
See:
Econ 1120 Wissink’s is Monday May 14 at 2:00pm
That’s the first day of finals! So it’s early!
Be ready!
See Blackboard for announcement.
The first MEL Quiz towards your 600 magic number of MEL points has been assigned.
Make a habit of checking the MEL site regularly for what’s been assigned and when a quiz is due.
Make sure to see FAQs folder on Blackboard if you have MEL questions. Lots of answers there already.
Also make sure to read the one announcement I have posted on the MEL site itself.

3. More Pearson/MEL Info
If you are mail-ordering a book that will come with an MEL code, you can still go thru the MEL process of registering for our course. When you come to the payment screen look all around and somewhere on the screen you will find a button to check to have a 2 week trial.
Apple Mac people, DON’T USE SAFARI!!
Try Chrome or Mozilla Firefox.
Make sure to clear memory cache so you are not loading a “dead” url page.
When in doubt try to sign into our MEL course using a non-Apple machine, like a friend’s or a workstation at a lab.
Everyone, make sure your browser is set up to accept 3rd party cookies.
Make sure (after you have enrolled in our MEL course) that you Sign In to MEL using this link:
You are on the same “attempt’ of any given quiz UNTIL you hit Submit Quiz – ignore what you see on the MEL page suggesting otherwise. MEL constantly saves in the background, so you do not need to save your answers, they are already being saved.

4. i>clicker questions
What part of Cornell?
CAS
ILR
CHE
CALS or Hotel
Engineering or CAAP
What part of US?
Northeast
Midwest
West Coast
The South
Not from the US
If not from the US, what part of the world?
Canada
Europe
Asia & Down Under
South&Central America
Africa
How much do you like using math outside of math classes?
Love
Hate
Don’t love, Don’t hate
Don’t know, we’ll see
Have you already taken intro micro?
Yup.
Nope.

5. Econ 1120 Introductory Macroeconomics
So what is this course about?
(And what is it not about?)
My working title: Introduction to Applied Macroeconomic Theory
Theory: We will construct models.
Look at the world, hypothesize a model, analyze the model, use the model to make predictions and then see if the model holds up under empirical scrutiny.

6. Applied Macroeconomic Theory
Economics: The study of the allocation of scarce resources to produce commodities to satisfy infinite human wants.
Classic definition. Economics is about constrained optimization. Choice under conditions of scarcity.
Macro: The study of the determination of economic aggregates and how they relate to each other and how the government and the exogenous environment affects these aggregates.
versus micro...

7. Macro v Micro in the News
More Macro-ish:
Data on Europe’s Economy, Job Numbers and Janet Yellen’s Goodbye
More Micro-ish:
The Subway Is Next Door. Should New Yorkers Pay Extra for That?

8. Examples of Microeconomic and Macroeconomic Concerns
BRANCH OF ECONOMICS
PRODUCTION
PRICES
INCOME
EMPLOYMENT
Micro
Output in individual industries How much steel? How much office space? How many cars – big or small, how fuel efficient?
Price of individual goods and services Price of medical care. Price of gasoline. Food prices. Apartment rents.
Distribution of income and wealth Wages in the auto industry. Minimum wage. Executive Salaries. Poverty.
Wage differentials.
Employment by individual businesses and industries Steel industry jobs. Number of employees in a firm. Number of accountants.
Macro
National production/output Total output: GDP Output by sectors. Investment. Growth of output.
Aggregate price level Consumer prices. Producer prices. Rate of inflation. Interest Rates.
National income Total wages and salaries. Total corporate profits.
National savings.
Employment and unemployment in the economy Total # of jobs. Unemployment rate Productivity growth

9. Applied Macroeconomic Theory
Applied: We will apply what we learn to real world situations.

10. Why Study Economics? It’s everywhere. It’s unavoidable.
To understand how markets work.
It’s a requirement and a prerequisite for understanding lots of other material.
To help you understand how economists think and construct arguments.
To help you differentiate good from bad analysis.

11. On Modeling & Constructing Theories
Simplistic Model Construction
Ockham’s Razor
Evaluation of Models
economics is a social science
Two pitfalls to avoid
not recognizing the “fallacy of composition”
using “post hoc ergo propter hoc” logic
Positive vs. Normative analysis
What is versus
What ought to be
William of Ockham 14th century philosopher

12. A Road Map Suppose I want to get you from here to Cortland.
How about we draw a map.