Understanding Macroeconomic Policy I

Professor: Neu
Units: 0.5
Core Course (second year)

This course will mostly focus on short-term macroeconomic fluctuations—recessions and recoveries. These are of course very much on our minds these days. Long-term economic growth is covered in other Pardee RAND classes. Our point of departure will be the Great Recession that swept the world beginning in 2008. We will explore six major topics as they relate to the Great Recession and the policy responses to it:

  1. The causes of the Great Recession, why it was so severe, and what we should learn from it. (Classes 1 and 2)
  2. How monetary authorities responded to the Great Recession and why “extraordinary” policies were necessary. (Classes 3 and 4)
  3. The fiscal responses to the recession and the consequences of this response. (Classes 5 and 6)
  4. The consequences of large government deficits and high levels of government and private debt. (Class 7)
  5. Price inflation: Why we worry (correctly) when the general price level rises and why we worry (also correctly) when it falls. (Classes 8 and 9)
  6. The purported (and controversial) macroeconomic consequences of rising inequality. (Class 10)

The course will focus mostly on macroeconomic conditions in the United States. We need concrete examples to discuss important questions in practical terms: The financial crisis that precipitated the Great Recession began in the United States. U.S. policymakers have generally led the rest of the world in responses to the crisis. Data and analyses relevant to the recession are more plentiful and accessible for the United States than for any other country. When possible, we will note parallels and differences in other countries. For these purposes, the international character of the Pardee RAND student body will be an asset.