Government Fiscal and Monetary Policy
Fall 1997
Prof. Gary R. Evans


[Additional copies of this course outline and other class material, including the course calendar, are available on the WWWeb at site http://www2.hmc.edu/~evans ; select CGS Course Materials]

This course explores in depth the fiscal operations and policies of the U.S. government and of the nation's central bank, the Federal Reserve System. The course is tailored to be relevant to students in management. Fiscal and monetary policies in the United States strongly influence the economy and affect the environment in which management decisions are made. Therefore the economic impact of such policies will also be given considerable attention.

The section on U.S. government fiscal operations will include a detailed, disaggregated review of the federal budget, including expenditures, tax and other revenue sources, deficits, and the means of financing for deficits. Budgetary timetables, some legislation, and budgetary procedures will also be reviewed.

In the section on the Federal Reserve System and monetary policy, we will review how the Federal Reserve sets monetary and interest rate targets, how open market operations are used to acheive their goals, how the Federal Reserve functions as a semi-political institution, and how their policies have changed over the last three decades.

In both cases the external impact of the policies upon the economy will be explored. Some of this exploration will be with theory and some with a review of history. The impact upon inflation rates, inflationary expectations, and interest rates, and in the case of the Federal Reserve, their reaction to changes in these rates will get considerable attention.

Macroeconomics and this Course

This course is designed to be taught without requiring macroeconomics as a prerequisite. Some macroeconomic theory is used in this course, but what is needed is taught as the course proceeds.

As a minor part of this course, we will use computer simulation models, which are powerful, flexible, and suitable for use by all students regardless of mathematical background. In a few words, if you are a physicist you will enjoy these models, and if you are a poet you will enjoy these models.

The focus of the class, however, is not on economic theory. Theory is used as a guideline to help understand policy and how it works in this economy. The primary orientation of this class is very nuts 'n bolts; we want to know what these policy-makers do and how they do it.

Books and Reading Material

The following books are assigned for this course:

There is no course packet for this class. All other materials will be given out during lectures.

Computer Simulation Models and Computer Files

The theoretical component of this class uses computer simulation models designed to run on Windows (any version). If you want to get an early look at the model, it can be directly downloaded from one of the web sites used by this class (there is other material at this site that you also might want to look at):


If you are unable to retrieve the model by downloading it, a disc with the model will be given out in the second meeting. These models are designed to be very easy to use and require very little knowledge of computers.

Red Ink Web Site

In addition to the class web site cited above, we will also use some material from the web site associated with the book Red Ink. That site has data and other information that is more current than the book itself. There are also some very useful links to other sites. You may want to take a look at this site at URL


Examinations and Grades

There will be two take-home projects in this class. The first, a large project, will be given out at the end of the second lecture, September 16th, and will be due at the beginning of the fifth lecture, October 7th. The take-home final will be given out at the end of the seventh and final lecture, October 21st.

To receive a grade, the final must be returned to Professor Evans according to instructions included with the exam by the following date: Monday, November 3rd.

The take-home project and the final will be equally weighted, each worth 50% of the course grade.

The Midterm Assignment: PROJECT 2001

For the midterm project you will be asked to balance the budget over a period of five years, beginning with historical data for 1996 and targeting zero deficit for FY 2001. This will be a detailed assignment requiring the use of spreadsheet software (core data templates will be provided for you) like Excel, Quattro Pro, or Lotus. You will be given necessary background material for the project and the data templates in the second week and you will have three weeks to complete the assignment. [Note: This material can also be downloaded from the class assignment web site cited at the top of the page, the material may not be available until just before the second lecture]. I will allow cooperation among students on this project and I will allow you to complete the assignment in any one of three ways: (1) working on the project entirely by yourself, (2) working on the project with other classmates as a team, where the result is submitted by the team (and graded collectively) rather than by any individual, or (3) cooperating or working with others on a team, but where each member submits an individual paper. I will discuss these arrangements more in the introductory lecture.

Reaching me

Please feel free to contact me at any time you need to ask questions or need information. I have a special number dedicated to this and you can leave voicemail or reach me directly 24 hours per day. If you want to talk to me directly or would like an appointment to talk to me in person, you can set it up via any of these numbers or addresses:




(909) 899-1010

HMC office phone:

(909) 607-2400 (not as reliable - use the number above)


(909) 899-1010


http://www2.hmc.edu/~evans (note the 2 in the address)

Good luck! We'll have a good time and learn a lot!!

Go to the COURSE CALENDAR for fall, 1997.

Go back to the course descriptions page or Prof. Evans's home page.