429, McNeil Bdg,
Tfn: 215-8987767
Fax: 215 5732057, or 215 573-4217

Econ 102, Macroeconomics, Sect 1, Fall 2005 

Professor José-Víctor Ríos-Rull

Last modified: Thu Dec 01 09:34:46 Eastern Standard Time 2005
This page contains material relevant for the course. It grows with the semester. Students should check it often.
Department of Economics
University of Pennsylvania
3718 Locust Walk
Philadelphia, PA 19104 USA
Classes are T. and Th. 10:30-11:50 in Nurs 111.
Off Hours: Wed 14:00 to 15:00.
TA Sergiy Stetsenko. sestet@sas.upenn.edu
Thursday, 3pm-5pm, McNeil 472.

Thursday is the last quiz. The material is the end of Chapter 8 (Ricardian Proposition, permanent income, life-cycle, equilibrium), Chapter 9 and the parts of previous chapters that are needed to follow it as well as all the material in the slides of Unemployment that you can find below.

The answers to the fifth quiz are below as are the statistics of the grades which are posted in Blackboard.

  • What are we doing? Brief description of previous classes and next one.
  • Examples of old quizzes
  • Course Description
  • Prerequisites
  • Requirements and Grades
  • Textbooks
  • List of Material to Cover
  • Quiz dates are September 22, October 6, October 25, November 8, November 22, and December 8.
  • Quizz materials .
  • Problem Sets. Here you will find any special problem that I ask.
  • Useful Links.

  • What are we doing each day besides reviewing the material of the previous day.

    1. We will go over any questions of the material, we will give an overview of the course as a whole and we will have the last quizz

    2. We finished the model with investment. We talked about unemployment. In particular, we looked at the equilibrium response to changes in TFP (current and future) government expenditures and the capital stock. We also looked at a formal search model where workers choose whether to take jobs or not.

    3. We continued with the model with investment. We talked about the response of people and firms to changes in various variables. We described the problem of the firm in some detail (with math). We also discussed the relation of hours worked to real wages in the short and the long run. We define and described equilibrium.

    4. We finished intertemporal choice. We talked about the Ricardian Proposition. Then we went on with with the model with investment describing using graphs how consumers determine their labor and consumption and firms their labor and investment. This part follows chapter 9 very closely.

    5. We continued with intertemporal choice. We talked about various questions, we discussed social security briefly as well as the permanent income hypothesis and the life cycle hypothesis. We had the fifth quizz
    6. We continued with intertemporal choice. We studied how the consumer chooses between consumption today and consumption tomorrow and how it responds to changes in interest rates and in endowments. We used notions of wealth and substitution effects. This latter part is in Chapter 8 of Williamson.
    7. We had an overview of the second part of the course and we discussed why should we be concerned about fluctuations; how to assess different allocations (using preferences or revealed preference) and what are the main features of our methodological approach to understanding fluctuations. We also discussed taxes and how changes in the environement affect allocations in the one period model. We finished looking at the welfare theorems. We started with intertemporal choice. This latter part is in Chapter 8 of Williamson.

    8. We continued looking at the welfare theorems. Read Chapter 5 of Williamson.

    9. We looked at equilibrium in the end of the the behavior of the firm notes. We started talking about the welfare theorems. We had the 4th quizz.

    10. We looked at wealth and substitution effects as well as at how a household behaves in a one period model. We may also start the behavior of the firm and also the the welfare theorems. Again please read ch 4 of Williamson's.

    11. We started with the second part of the course on fluctuations. We started looking at how a household behaves in a one period model. Please read ch 4 of Williamson's.

    12. We finished endogenous growth models . We talked about the successes and failures of the Solow growth model. We discussed linear techonologies, externalities and ideas and patent.

    13. We started talking about endogenous growth models and what is it that allows for the economy to grow without bounds. We had the third quiz.

    14. We discussed human capital and also talked about convergence. We gave a global view of how we are assessing the performance of the model as a tool to understand differences in output per capita.

    15. John Knowles taught the extent to which differences in human capital can be used to account for differences of output per capita across countries. His slides will be part of the third Quiz.

    16. We finished with the Solow model. Looking at the model with technical progress and assessing its performance. (read Jones, restof Chapter 2, (2.2 and 2.3).

    17. We continued with the Solow model, going until page 75 of the Slides. We constructed the equation that gives us the change in capital per capita in terms of the level of capital per capita. We did some graphical analysis and we described the steady state and its stability properties. We had the second quiz.

    18. We finished growth accounting. For this read Section 2.4 of the Jones book. We started the Solow model, going until page 72 of the Slides. We argued why we use a Cobb-Douglas production function to do the growth accounting (evidence of constant returns to scale and constancy of factor shares). We described the properties of growth accounting for the U.S. We talked about the productivity slowdown and what could be the reasons behind it. We started with the Solow model describing its assumptions, the properties of the production function that we are using, the transformation to per capita variables and the capital accumulation equation.

      Please read Sections 2.1 and 2.2 of the Jones book. Also please note that the latest version of the growth accounting slides is from October 3 2005.
    19. After reviewing briefly the growth facts, we started the part on growth accounting. For this we first discussed how taking logs we have an easier time obtaining growth rates. We also discussed the Cobb-Douglas production function and what is observable and what is not observable. We stressed the role that constant returns to scale and the constancy of factor shares play in our selection of how to do growth accounting. Read Section 2.4 of the Jones book.
    20. We talked briefly about the quiz, then we went over growth rates, unemployment and interest rates. We also went over the Growth Facts. Please take a look at Chapter 1 of Jones' book.
    21. We discussed questions and doubts, we talked about the relation between savings and investment and we had the first quiz.
    22. We talked about GDP measured from the income side and we also talked about factor shares and other relevant concepts in NIPA such as personal and disposable income. We covered price indices. We continued using the NIPA slides.
    23. We talked about GDP measured from the expenditure side and started describing the adjustments necesseary to measure it by the income side. We continued using the NIPA slides.
    24. I continued to talk about NIPA. We talked about GDP measured from the product side and from the expenditure side.
    25. Transparencies of The Introduction. I introduced the course and talked about what is macroeconomics about. I started to talk about NIPA. We talked about GDP measured from the product side.


    Info about each quiz.
    1. September 22:  First quiz and its solution. MEDIAN 39.0, MEAN 38.5, STD DEV 4.84.
    2. October 6:  Second quiz and its solution. MEDIAN 41.0, MEAN 40.0, STD DEV 6.3.
    3. October 25:   Third quiz and its solution.MEDIAN 36.0 MEAN 35.6 STD 6.10 MIN 20 MAX 45
    4. November 8. Fourth Quizz and its solution. MEDIAN 40.3, MEAN 40.7, STD 5.73, MIN 27 MAX 49.
    5. November 22. Fifth Quizz and its solution. MEDIAN 41.0 MEAN 40.7 STD 4.66 MIN 31 MAX 50/
    6. December 8: Mean , Median , Stdv: .

    Course Description

    Economics 102 is a second course in macroeconomics which focuses on understanding how a modern economy works. What makes macroeconomics specific is that we care about the working of the economy as a whole. We will be particularly interested in some of the debates about the performance of the economy and in its associated policy questions. The topics covered are long-term economic growth, short-term business cycle fluctuations, unemployment and economic policy.

    This course will be taught from an equilibrium perspective which means two things. That we use models populated by agents that optimize and that the implied allocations that result from the behavior of agents satisfy aggregate consistency conditions (essentially market clearing). Understanding the concept of equilibrium will then be the single most important theoretical tool of the course.


    The prerequisites are Econ 001, Econ 002, Econ 101 and a sequence of calculus either 104/114 or 104/115. We will cover models at an abstract and advanced level. You must have the degree of mathematical maturity associated with the concepts of sets, functions, derivatives, integrals, Taylor series, optimization, ordinary differential equations and other material covered in Math 104/114 or 104/115. There are absolutely no exceptions to this prerequisite.

    Requirements and Grades

    The requirements of the course are 6 equally valued quizzes that will be given throughout the course. The dates of the quizzes are September 22, October 6, October 25,  November 8, November 22 and December 8. There is no final exam. To compute your grade, I will drop one quizz and compute an average of the grades in the other 5. This will constitute 90% of the grade. The rest will be based on class discussions. But please take all quizzes seriously and do not plan to make up at the end, since you may have some reason to drop a later quiz.

    The quizzes include all the material that we have gone over up to what we have seen the previous day unless this homepage specifies otherwise (which will be posted the latest on the day of the previous class). Of course the quizzes are cumulative but most of its content will be about the material most recently covered. If you do not take any of the first five quizzes you have to talk to me and explain why.

    The quizzes grades will be posted in blackboard in a timely fashion.

    The grade distribution will be as is standard in Economics Department courses.

    Students should try to do the problems that the instructor describes in the lectures. Some of them will be solved in class. They help a lot for the quizzes.

    Students taking Economics 102 on a Pass/Fail basis must meet all of the requirements of the course. A pass grade is like a D or better.


    We will use parts of two books and slides that I will post in this page in the part that they belong to in the what we are doing section.

    • Stephen D. Williamson, Macroeconomics, 2nd Edition (2004).
    • Charles Jones, Introduction to Economic Growth, 2nd Edition (2002).
    Both books are available from the Penn Bookstore and, I am sure, from many other places.


    Your feedback along the course is very important. If there is something about the course you think it can be improved, please let me know. We are in this together and the higher the quality of the class, the better for all of us. So please contact me with whatever concern you have.

    Examples of Old Quizes

    Please notice that each year the course is a little bit different, emphasis is put in different places and the timing also varies.

    Problem Sets

    1. Try all the problems in the first two Chapters of Williamson.

  • Why Americans Work so much?.
  • Prescott table 1.
  • Prescott table 2.

    Useful links to get to know your government.

    José-Víctor Ríos-Rull <vr0j@econ.upenn.edu>