Macroeconomics_Syllabus

ECO 102.3 (Credit hours 3)

Macroeconomics
BBA, Second Year, Third Semester

Course Objective
This course aims to familiarize students with the overall economic system and basic concepts of macroeconomics.

Course Content
Module 1
Nature and Scope of Macroeconomics 3 hours
Meaning and Concept of macroeconomics; Basic issues in macroeconomics: unemployment, inflation, business cycles, and economic growth; Scope and importance of macroeconomics; Distinction and interdependence between microeconomics and macroeconomics

Circular Flow of Income and Expenditure 4 hours
Circular flow with saving and investment, Circular flow in a three-sector closed economy, Adding foreign sector: Circular flow in a four-sector open economy, Importance of the circular flow

National Income: Concept and Measurement 7 hours
Meaning and definitions of National income, Various concepts of National income: Gross Domestic Product / Output / Income, Gross National Product / Output / Income, Net Domestic / National Product, GDP/GNP/NNP at market price, GDP/GNP/NNP at factor cost, Real and Nominal GDP/GNP/NNP, Methods of computing/measuring GDP/GNP/NNP: Income method, Expenditure method, Value added method, Personal income, Disposable Income, and Per Capita Income, Difficulties in the measurement of National income, Importance of National income analysis.

Classical Theory of Employment 2 hours
Classical theory of employment and output, Summary of the classical model (including Say’s law and Quantity theory of money), Keynes's criticism of classical theory

Principle of Effective Demand 2 hours
Aggregate demand price, Aggregate supply price, Determination of effective demand, Importance of effective demand, Repudiation of Say's law and Full Employment Theory

Consumption Function and Saving Function 2 hours
Meaning of consumption function, Keynes's psychological law of consumption, Meaning and significance of Marginal Propensity to Consume (MPC) and Average Propensity to Consume (APC), Determinants of the consumption function, Measures to raise the propensity to consume, Saving function

The Investment Functions 3 hours
Meaning of capital and investment, Types of investment: Induced vs. Autonomous Investment, Determinants of investment, Marginal Efficiency of Capital (MEC), Marginal Efficiency of Investment (MEI); Relation between MEC and the MEI

Income Determination in Closed and Open Economy (Goods Market Equilibrium) 3 hours
Meaning and concepts goods market, Two-sector economy: Determination of the equilibrium level of income (Goods market equilibrium) with aggregate expenditure and aggregate output, Equilibrium with saving and investment, Equilibrium level of income in three-sector and four-sector economy.

The Concept of Multiplier 2 hours
Concept of multiplier: investment multiplier, government expenditure multiplier, tax multiplier, export multiplier, and import multiplier, working principle of the multiplier in simple two sector economy, Determination of multiplier in two-, three- and four-sector economy, Leakages of multiplier, Importance of multiplier.

Theories of Interest Rate (Money Market Equilibrium) 4 hours
Concept of money market, Classical theory of interest and its criticism, Loanable funds theory of interest and its criticism, Keynes's liquidity preference theory of interest

IS and LM Function: General Equilibrium of Product and Money Markets 4 hours
The product (goods) market, Deriving the IS Curve, The money market, Deriving the LM Curve, General equilibrium of product and money market with IS and LM curves, Shift in the IS and LM functions, Changes in general equilibrium, Simultaneous shift in the IS and LM function

Macroeconomic Equilibrium 2 hours
Derivation of aggregate demand curve (AD), Derivation of aggregate supply curve (AS), Equilibrium with AD-AS, change in macroeconomic equilibrium with shift in AD and AS

Theories of Inflation 5 hours
Meaning of inflation, measures of inflation: CPI, WPI, GDP Deflator, inflationary gap, Causes of inflation: Demand-pull inflation, Cost-push inflation, Mixed demand pull cost-push inflation, Effects of Inflation, The Phillips curve: The short-run relationship between unemployment and inflation

Business Cycles 1 hour
Meaning of business cycles (economic fluctuations), Phases of a typical business cycle: Recovery; prosperity; recession, and depression, Counter cyclical measures.

Fiscal and Monetary Policies 4 hours
Objectives, tools and policy measures in developing countries

Text Book
1. Mankiw, N. Gregory, (1997). Macroeconomics (3rd ed.), New York: Worth Publishers

References
1. Donbush, Rudiger; Fisher, Stanley; and Startz, Richard (2001); Macroeconomics (8th ed.), New Delhi: Tata McGraw Hill.