14.02 | Spring 2014 | Undergraduate

Principles of Macroeconomics


Course Meeting Times

Format 1:

Lectures: 2 sessions / week 1 hour / session

Recitations: 1 session / week, 1 hour / session

Format 2:

TA Sections: 3 sessions / week, 1 hour / session

Learn more about the two formats of the course.


There are no prerequisites for this class. 

Introduction to the Course

Why do economies expand sometimes, raising employment and living standards and shrink at other times? What is a recession? What happened in 2008–09 when the world economy was hit by the worst recession since the Great Depression of the 1930s? How did a crisis initially limited to the financial market eventually hit the entire economy? And what caused the financial market crisis in the first place? How did government policy respond to the crisis and was this response effective?

More generally, can government policy make economies grow or stop them from shrinking? Why do we have inflation? Is inflation a bad thing? Is there anything we can do to reduce inflation? Why do we have unemployment? Is unemployment a bad thing? Do policies to reduce unemployment work? Why do countries borrow from abroad? How are exchange rates determined and why are they so volatile? Is exchange rate volatility a bad thing? Should we have a single currency for the entire world, as Europeans have done for some members of the European Union?

These are some of the questions that keep macroeconomists up at night. If you are curious about the answers, then this is the course for you.

The course is organized in three parts:

  • Part 1: The first seven lectures are dedicated to understanding the interactions between financial markets and the “real” economy. This is probably the hardest part of the course. But you are fresh from the Winter break, and it will be lots of fun;
  • Part 2: The following 10 lectures build up a macro model starting from the Short Run, then moving to the Medium Run and finally opening up the economy to the rest of the world;
  • Part 3: In the last seven lectures, we shall study the effectiveness of the government’s intervention through fiscal and monetary policies.

Two Alternative Formats

The course has two alternative formats. Both formats will cover the same topics, use the same textbook, and have the same required assignments, including quizzes and problem sets. As we receive more information on class enrollment, there may be changes in the number of sections and recitations.

Format 1: Lectures/Recitation

You attend one-hour lectures twice a week, given by Professor Giavazzi. You also attend one-hour recitations once a week with a TA. During the recitations—which are not optional—instructors might go over weekly problem sets and/or review materials from the lectures.

Format 2: Recitations only

You attend one-hour sections three times a week, run by a TA. As we receive more information on class enrollment, we may need to make changes in recitations or sections.


There are two main teaching tools:

  • A set of lecture notes written by Prof. Giavazzi that cover the first seven lectures.
  • Blanchard, Olivier, and David R. Johnson. Macroeconomics. 6th ed. Pearson, 2012. ISBN: 9780133061635.

From time to time, depending on the topic discussed in class, a relevant article will be posted to the course website and you will be asked to read it. You are also encouraged to read The Economist, at least a couple times a month. It provides a good coverage of economic events, and will help you relate what you learn in the course to the real world.


The course grade will be based on three quizzes and five problem sets. There is no final exam.

Three quizzes 90
Average score of four best problem sets 10

There will be no re-grades on problem sets, so if there is a minor mistake in the grade you receive, the four best out of five rules should be sufficient.

Each quiz will be worth 30% of your final grade. The grade on each of the three quizzes will be standardized by the mean and the standard deviation of the 14.02 class.

Each quiz will more or less cover the material in the lectures since the previous quiz. Each quiz will last 1.5 hours.

Course Policy

This course is one of the largest in the department, so we have to adhere to certain rules without allowing any exception.

The problem sets are due on the due date, and no late problem sets will be accepted. You need to give your problem set to your recitation instructor during your section. Problem sets will be returned to you during recitation by your TA.

You have to make every effort to show up at the exams. However, if it is not possible, you need to contact the head TA well in advance and explain your issue. There will be a strict deadline for a make-up request for each exam, and no late request will be accepted. The head TA will post information on how to request a make-up exam on the course website.

You can collaborate on the problem sets with other students, but you must produce your own write-up to hand in. However, collaboration on the exams is strictly prohibited.

Course Info

As Taught In
Spring 2014
Learning Resource Types
Problem Sets with Solutions
Exams with Solutions
Lecture Notes