IS-LM Model

Posted November 10th, 2018

  • There are a lot of good explanations from Khan Academy (here). I strongly recommend to go over all the lessons.

Chapter 12 - Mankiw

Posted November 10th, 2018

  • Watch this video. 

  • Read chapter 12: Aggregate Demand II: Applying the IS-LM Model.

  • Study chapter 12 following my notes.

  • Study the practice problem (here | excel file)

  • Solution to a slightly different version of the second question in the practice (Part 1234, and 5)

Chapter 11 - Mankiw

Posted November 10th, 2018

  • Read chapter 11: Aggregate Demand I: Building the IS-LM Model.

  • Study chapter 11 following my notes.

  • Optional. Watch the video lectures for this chapter (starts here)

  • Study the practice problem (here).

Chapter 10 - Mankiw

Posted November 6th, 2018

  • Read chapter 10: Introduction to Economic Fluctuations.

  • Study chapter 10 following my notes.

  • Optional. Watch the video lectures for this chapter (starts here)


Posted November 1st, 2018

The midterm marks a natural point for us to separate the course in two (Rodrik was pre-season). Chapters 3 to 6 were about the economy in the long run (everything below this subsection). The next part of the course will be about the economy in the short-run (everything above this subsection). We do not have time to cover all the chapters of the book, so we will focus on the IS-LM model and the Model of Aggregate demand and aggregate supply (Chapters 10 to 14). The IS-LM is an old but still very popular model to explain economic fluctuations in the short-run.

The key difference between the models in the first part and the second part of the course is the behavior of prices. In the long run, we assume that prices are flexible. In the short run, we assume that prices are sticky. The behavior of prices have implications on the way the economy reacts to economic shocks and policies.

Chapter 7 - Mankiw

Posted October 31st, 2018

  • Covered by the T.A.

  • Her slides are available here.

Chapter 6 - Mankiw

Posted October 3rd, 2018

Chapter 5 - Mankiw

Posted September 28th, 2018

  1. Read chapter 5: Inflation: Its Causes, Effects, and Social Costs

  2. [Optional] Watch the video lectures on the topic (It's not an exact match with the chapter).

  3. Watch this video about the Quantity Theory of Money.

  4. Read my notes for chapter 5.

  5. Complete and bring this homework to class on October 3rd.

Chapter 4 - Mankiw

Posted September 25th, 2018

  • Read chapter 4: The monetary system. There are almost no models in this chapter, instead, a little bit of information on the monetary system. Read everything but place emphasis on section 4.3: How Central Banks Influence the Money Supply.

  • Read my notes for chapter 4.

Chapter 3 - Mankiw

Posted September 21st, 2018

  • [Optional] Math refresher. Here are a few videos explaining some math that you need to fully understand this lesson. Skip any video if you do not need the refresher, but if you are not completely sure, please watch the video and make sure you understand. If you still need a bit more help, try to find another source or just come to my office hours.

    • Linear functions. Match graph and functions (here), get the slope from the graph (here), and get the slope from the equation (here).

    • Non-linear functions. Linear vs nonlinear functions (here), slope (here), and diminishing marginal product (here).

  • [Optional] See this video about the Circular-Flow model.

  • [Optional] Watch the five video lectures for Mankiw's chapter 3 (starts here).

  • Read and study Mankiw's chapter 3. Focus on understanding the assumptions and mechanisms of the model. Do not skip equations in the body of the text, make sure you understand each and every equation (except the ones in the mathematical footnotes). Make a list of the things you do not fully understand.

  • Read and study my notes on Mankiw's chapter 3. My notes focus on the model. Review the list of things you did not fully understand and delete the ones you understand after reading my notes.

Recommended books

Posted September 18th, 2018

I hope you all learned and enjoyed reading Economic Rules: The Rights and Wrongs of the Dismal Science (Please never confuse a model for the model). For those of you who are interested, I’ve collected a list of books you might be interested in reading next. As an extra incentive, if you read any of the books from the list before December, you can get 3 bonus points.

I grouped the books in topics to help you find your next read according to your preferences.

Philosophy of Science


Financial crisis 2008

Poverty in USA

RCTs and field experiments


Behavioral Economics

Current news - Trade

Posted September 4th, 2018

It's a great time to study macroeconomics. There is a lot going on and many groups explain the same in very different ways. It's hard to know who is right and who is not. In this course you will get tools that will help you to assess the strengths and weaknesses of the arguments from any group. 

Following Rodrik's advice, let's discuss Trump's trade policies as portrayed by: