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ECO403 : Macroeconomics

Course Overview

Course Synopsis

Macroeconomics describes the overall behavior of the economy. This course discusses the basic principles of macroeconomics and basic concepts of national income accounting i-e GDP, GNP, NNP, PI, DPI, GDP Deflator etc. This also highlights the concepts of money, functions of money, inflation, CPI, impact of inflation on economy and the role of government in an economy. Aggregate demand and supply analysis has also been presented in comparison with IS-LM frame work in closed and open economy. Government debt, Economics growth and unemployment issues have also been discussed in detail. In the end, this course also focuses on the consumption and investment theories which are very essential part of macroeconomics.

Course Learning Outcomes

By the end of this course, you should be able to:

  • Explain the different concepts of National Income.
  • Discuss IS-LM model of aggregate demand in closed and open economies and be able to apply it to the analysis of the impact of fiscal and monetary policies.
  • Describe the main models of classical and endogenous growth and their application to the study of economic growth in advanced and developing countries.
  • State the links between money and inflation in closed and open economies.
  • Apply life cycle /permanent income theory of household consumption.
  • Discuss the impact on the economy of public debt and deficits, the theory of rational expectations.
  • Explain why exchange rates are so volatile and be able to comprehend less advanced articles in professional journals.

Course Calendar

Introduction to Macroeconomics1Handout1
Fiscal and Monetary Policy1Handout1
Principles of Macroeconomics2Handout3
Market Economy2Handout3
Invisible Hand2Handout3
Market Failure2Handout3
Standard of Living2Handout4
Economic Models3Handout7
Shifts in Equilibrium3Handout8
Endogenous and Exogenous Variables3Handout9
Flexible and Sticky Prices3Handout9
Gross Domestic Product (GDP)4Handout10
Circular Flow of Income4Handout10
Nominal vs Real GDP4Handout11
GDP Deflator and Inflation Rate5Handout12
Computation of Nominal and Real GDP5Handout12
Stocks vs Flows5Handout13
Durable and Non Durable Goods5Handout13
Consumer Price Index6Handout15
GDP Deflator6Handout17
Okun's Law6Handout17
Market Clearing Model7Handout18
Production Function7Handout18
Distribution of National Income7Handout19
Marginal Product of Labor7Handout19
QUIZ # 01
Diminishing Marginal Return8Handout20
Components of Aggregate Demand9Handout22
The Loanable Fund Market9Handout23
Interest Rates9Handout25
The Role of Government10Handout26
Classical Theory of Inflation10Handout27
Centeral Bank10Handout28
The Quantity Theory of Money10Handout28
Components of Money Supply11Handout30
The Fisher Effect11Handout32
Inflation and Interst Rates11Handout32
Money Demand and Interest Rate12Handout33
The Money Demand Function12Handout33
Expected Inflation12Handout34
Costs of Inflation13Handout35
The Open Economy14Handout37
Classical Dichotomy14Handout37
Net Foreign Investment and Trade Balance14Handout38
Fiscal Policy at Home15Handout40
Fiscal Policy Abroad15Handout41
Exchange Rates15Handout42
Net exports function16Handout43
Determinates of Nominal Exchange Rates16Handout45
Purchasing Power Parity17Handout47
Philips Curve17Handout48
Public Policy and Job Search18Handout50
Wage Rigidity18Handout51
QUIZ # 02
Economic Growth19Handout53
Solow Growth Model19Handout53
The Steady State20Handout56
Equation of Solow Growth Model20Handout58
Golden Rule Level21Handout61
Technological Progress22Handout65
Policies to Promote Growth22Handout66
Endogenous Growth Model23Handout69
The Classical Macroeconomics Theory24Handout71
Aggregate Demand & Supply Analysis24Handout71
Demand Shocks25Handout75
Supply Shocks25Handout76
Stabilization Policy25Handout76
Keynesian Cross26Handout79
IS Curve27Handout83
LM curve27Handout85
QUIZ # 03
Policy Analysis with IS-LM Model28Handout87
IS shocks28Handout90
LM shocks28Handout90
Aggregate Demand curve29Handout91
Mundell-Fleming Model Equilibrium30Handout96
Floating Exchange Rate30Handout97
Trade Policy31Handout99
Fixed Exchange Rates31Handout99
Impact of policies31Handout101
Fixed and Flexible Exchange Rates32Handout103
Mundell-Fleming Model32Handout103
Sticky Wage Model32Handout105
The Sticky Price Model33Handout107
Philips Curve34Handout109
Sacrifice Ratio34Handout111
Expectations of Inflation34Handout112
Government Debt35Handout113
Budget Deficit35Handout114
Traditional View of Government Debt36Handout116
Ricardian View of Government Debt36Handout118
Ricardian View of Government Debt36Handout118
Keynesian Consumption Function37Handout120
Secular Stagnation37Handout121
Fishers Intertemporal Choices37Handout122
Government Budget Constraints37Handout123
QUIZ # 04
Consumers Preferences38Handout124
Interest rate effect on saving and consumption38Handout125
Life Cycle Hypothesis39Handout128
Permanent Income Hypothesis39Handout130
Random Walk Model39Handout130
Types of Investment Spending40Handout131
The Cost of Capital40Handout132
The Real Cost of Capital41Handout134
Investment Function41Handout134
Stock Market and Tobin's q42Handout137
Residential Investment42Handout138
Inventory Investment43Handout139
Accelerator Model of Inventories43Handout139
Real Interest Rate & Inventories43Handout139
Money Supply44Handout140
100% Reserve Banking System44Handout140
Fractional Reserve Banking System44Handout140
Three Instruments of Money Supply45Handout141
Demand for Money45Handout141
Portfolio Theories of Money Demand45Handout141
Transaction Theories of Money Demand45Handout142
Baumol-Tobin Model of Cash Management45Handout142
A Model of Money Supply45Handout143
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