Econ 387: Intermediate Macroeconomic Theory II


Office Hours: 11.30-12.30 Wednesday, WMC 2684 (or by appointment).

TA: Sophie Wang. Office Hours: 11.30-1.20 Monday, WMC 2692. Email:

Textbook: Macroeconomic Theory and Policy, by D. Andolfatto. Free download available here.

Prerequisites: The course assumes that the student has a working knowledge of basic macroeconomic theory (Econ 305); i.e., Chapters 1-6 in Andolfatto or Chapters 1-8 in Williamson. If you did not take Econ 305 (or its equivalent) using either of these textbooks, then you may have to devote some extra time to catch up on this material. I will spend the first couple of weeks reviewing this core material. As for math requirements, the main tools will be graphs and high-school algebra. Some elementary calculus may be employed as well. While technical skills are important, I will place more emphasis on the ability to grasp economic intuition. You will also be graded on your ability to communicate intuitive ideas in plain written English (sentences that are free of spelling mistakes, are grammatically correct, and use a minimal amount of economic jargon).

Grading: Midterm 1 (15%); Midterm 2 (35%); Final Exam (50%). Note: you have the option of replacing one of the midterm exams with a term paper (due on the last day of classes) in the event that you cannot write a midterm (e.g., illness, etc.) . The topic of the termed paper is to be cleared with me.

Comment Form: Feel free to fill out and hand in comments using this form.

Midterm 1: Thursday, Feb. 9; Midterm 2: Thursday, Mar. 9.

Midterm 1. Answer Key.

Midterm 2. Answer Key.


  1. Basic Neoclassical Theory I. A basic "static" model that highlights the forces determining the allocation of time across competing activities within a period. Readings: Chapters 1-3. An extension to heterogeneous agents: here.
  2. Basic Neoclassical Theory II. A basic "dynamic" model that highlights the forces determining the allocation of resources across time periods. Readings: Chapters 4-6. Extra reading: Economist magazine on the Ricardian Equivalence Theorem [page 1] [page 2].
  3. Money, Interest, and Prices, Chapter 8.
  4. New-Keynesian Theory, Chapter 9.
  5. The Demand for Fiat Money, Chapter 10.
  6. International Monetary Systems, Chapter 11.

Tutorial Assignments

Questions and Answers

  1. In our last Econ 387 lecture, we discussed the Neoclassical and Conventional Approach; we touched on the subject of central banks and the wisdom of their governors for knowing more than the average citizen.
    In earlier economic courses, we were told that increasing the money supply is not enough to bring an economy out of a liquidity trap. One can argue that Japan was mired in such an environment during the 90s. But in a famous speech, Mr. Ben Bernanke, the soon to be chair of the Federal Reserves, claimed that dropping money by "helicopters" will get countries out of a liquidity trap.
    How does that work? And where can I get a copy of his speech? I want to read it for myself.
    Thank you.