Grade "A+" Accredited by NAAC with a CGPA of 3.46
Grade "A+" Accredited by NAAC with a CGPA of 3.46

Macroeconomics

Course ID
MC 301
Level
Undergraduate
Program
BMS
Semester
Third
Credits
6.0
Paper Type
Core Course
Method
Lecture & Tutorial

Unique Paper Code: 61011304

This course deals with the principles of Macroeconomics. The coverage includes determination of and linkages between major economic variables; level of output and prices, inflation, interest rates and exchange rates. The course is designed to study the impact of monetary and fiscal policy on the aggregate behaviour of individuals.

Learning Outcomes:

At the end of the course, students should be able to:

  • Understand the determination of key macroeconomic variables- outputs, prices and rate of interest
  • Analyse the effect of fiscal and monetary policy
  • Describe the mechanics of money supply
  • Explain the working of an open economy

Course Contents

Unit I
Unit II
Unit III
Unit IV
Unit V

Unit I (1 week)

Classical theory of income and employment: Quantity Theory of Money – Cambridge version; Classical aggregate demand curve; Classical theory of interest rate; effect of fiscal and monetary policy.

References:

Froyen, R.P. (2011). Macroeconomics-theories and policies (8th Edition). Pearson (Chapter 2 and Chapter 3)

Unit II (2 weeks)

Simple Keynesian model; components of aggregate demand; equilibrium income; changes in equilibrium, multiplier (investment, Government expenditure, lump sum tax, foreign trade); determination of equilibrium rate of interest; effect of fiscal and monetary policy; composition of output and policy mix; policy mix in action.

References:

Froyen, R.P. (2011). Macroeconomics-theories and policies (8th Edition). Pearson (Chapter 2 and Chapter 3)

Unit III (4 weeks)

Properties of ISLM curves; factors affecting the position and slope of ISLM curves; determination of equilibrium income and interest rates; effect of monetary and fiscal policy; relative effectiveness of monetary and fiscal policy; Keynesian aggregate demand curve; flexible price – fixed money wage model; flexible price-variable money wage model.

References:

Froyen, R.P. (2011). Macroeconomics-theories and policies (8th Edition). Pearson (Chapter 7)

Dornbusch and Fischer (2010). Macroeconomics (9th Edition). Tata McGraw Hill (Chapter 10)

Unit IV (3 weeks)

Money stock determination, money multiplier; instruments of monetary control; money multiplier and bank loans; Inflation: meaning, demand and supply side factors; consequences of inflation, anti-inflationary policies; natural rate theory; monetary policy- output and inflation; Phillips curve (short run and long run).

References:

Froyen, R.P. (2011). Macroeconomics-theories and policies (8th Edition). Pearson (Chapter 9)

Dornbusch and Fischer (2010). Macroeconomics (9th Edition). Tata McGraw Hill (Chapter 16)

Unit V (2 weeks)

Open Economy: Brief introduction to Balance of Payment account; market for foreign exchange and exchange rate; monetary and fiscal policy in open economy; Mundell Fleming model (perfect capital mobility and imperfect capital mobility under fixed and flexible exchange rate)

References:

Froyen, R.P. (2011). Macroeconomics-theories and policies (8th Edition). Pearson (Chapter 14)

Additional Information

Text Books


Froyen, R.P. (2011). Macroeconomics-theories and policies (8th Edition). Pearson
Dornbusch and Fischer (2010). Macroeconomics (9th Edition). Tata McGraw Hill

Additional Readings


N Gregory Mankiw (2010). Macroeconomics (7th Edition). Worth Publishers

Teaching Learning Process

Lectures, problems and numericals, team paper, presentations, case studies, discussions on current economic issues

Assessment Methods

Internal Assessment 25 marks
Written Theory Exam 75 marks

Keywords

Aggregate demand, aggregate supply, Quantity theory of money, ISLM, fiscal policy, monetary policy, Phillips curve, Mundell Fleming model

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