There is a welter of advice about what topics to include, which audiovisual/computing wizardry to employ, and how to use modem learning theory in Microeconomics Principles classes (William Becker and Michael Watts, 1999). What appears lacking (except for Kenneth Elzinga, 2001) is plain advice aimed particularly at newer instructors on how to present material and treat students-generally how to avoid having the course burden students and instructor. The spur is my upset when people say economics was the most boring course in college and one they never understood. My only bona fides for providing this advice is experience, over 30 sections of Micro Principles with over 12,000 students. The advice is aimed toward instructors of sections of at least 100 students, but most applies in smaller sections as well. The crucial assumptions here are that students: (i) do not intend to take more economics; (ii) know very little about what economics is really about; and (iii) are very concerned about maintaining/raising their grade point averages. These assumptions regrettably characterize the majority of students in Micro Principles classes and should condition how we teach. They imply that the burden of teaching, including the sheer physical energy and attention required to demonstrate the relevance of economics and maintain students' interest, is greater than in other courses. They necessitate introducing only those techniques that will be used in class in analyzing real-world issues: Teach ideas, not techniques.' The purpose is to enable students to see economic principles in action in real life, not to prepare budding economics majors. I. In-Class Issues

FEDERAL RESERVE BANK OF CLEVELANDWorking papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views stated herein are those of the authors and are not necessarily those of the Federal Reserve Bank of Cleveland or of the Board of Governors of the Federal Reserve System. Working papers are now available electronically through the Cleveland Fed’s site on the World Wide

During the 1980's, theories were developed to explain the striking correlation between real exchange rates and foreign direct investment (FDI). However, this relationship broke down for Japanese FDI in the 1990's, as the real exchange rate appreciated while FDI plummeted. We propose the relative access to credit hypothesis and show that unequal access to credit by Japanese firms contributes to the explanation of declining Japanese FDI. Using bank-level and firm-level data sets, we find that financial difficulties at banks were economically and statistically important in reducing the number of FDI projects by Japanese firms into the United States.

Testing Mixed-Strategy Equilibria When Players Are Heterogeneous: The Case of Penalty Kicks in Soccer by P.-A. Chiappori, S. Levitt and T. Groseclose. Published in volume 92, issue 4, pages 1138-1151 of American Economic Review, September 2002

Economic models of incentives in employment relationships are based on a specific theory of motivation: employees are “rational cheaters,” who anticipate the consequences of their actions and shirk when the marginal benefits exceed costs. We investigate the “rational cheater model” by observing how experimentally induced variation in monitoring of telephone call center employees influences opportunism. A significant fraction of employees behave as the “rational cheater model” predicts. A substantial proportion of employees, however, do not respond to manipulations in the monitoring rate. This heterogeneity is related to variation in employee assessments of their general treatment by the employer.