MANAGEMENT DEVELOPMENT INSTITUTE

Mehrauli Road, Sukhrali, Gurgaon 12201

POST GRADUATE PROGRAMME IN MANAGEMENT Batch 2012-14 Economic Environment and Policy I Course Facilitator: Dr. Sunil Ashra
Office: Room No. B-16, Faculty Block, Ext. 5178 Dr. Subhalakshmi Sircar, Office: Room No E-20, Faculty Block, Ext. 5296

Introduction
Economic phenomena like inflation, unemployment, growth rates of GDP, interest rates, stock markets or exchange rates dominate everyday news. We hear and read so much about these phenomena because they affect our well being either directly or indirectly. It is perhaps mostly for these reasons that the study of macroeconomics, the study of these economy wide phenomena, is so exciting. Macroeconomics can also be very useful. The economic well being of all consumers, poor or rich, is affected by movements in interest rates, exchange rates, the rate of inflation and other macroeconomic variables..Businesses can gain or lose large sums of money when their environment changes, regardless of how well they are managed. Macroeconomics is relevant to voters who wonder what their governments are upto, but also can help governments avoid severe economic crises that have afflicted modern industrial economies in the past century.

Course Objective:
This course on macroeconomics is designed to provide a broad overview of the macroeconomic environment in terms of key concepts like output determination, unemployment, inflation etc. The course will help students to become familiar with the working of a modern industrial economy and to study in detail how to measure the economic activity and understand behavioural relationships pertaining to commodity, money and labour markets. The course would also have elaborate discussion on the nature and functions of different markets as well as role of macroeconomic policies.

Deliverables: Competencies to be developed:

The course attempts to equip the aspiring managers with a basic understanding of different macroeconomic principles and theories and to apply these principles to analyse the current economic problems with focus on policies. This course provides skill and knowledge which are highly relevant for managers and consultants.

Methodology:
The course is conducted largely as a discussion based course concerning the theory and analysis of macroeconomics, applied problems and case studies. Although certain aspects of each prescribed chapter will be considered in detailed classroom presentations and discussions, the chapter content should be regarded as requisite background preparation for other analyses and discussions that extend beyond the textbook's contents. Full preparation is needed before each class.

Evaluation:
Component
Quizzes Project assignment Case study Mid term exam End term exam

Weight (%)
20% 10% 10% 30% 30%

Quizzes: Will be objective type and can be taken any time without prior notice. There will be no make-up quiz.

Attendance:
Attendance is compulsory. Absence does not relieve an individual from the requirements of the course. For detailed rules contact the administrative office.

Essential Textbook:
N. Gregory Mankiw, Macroeconomics, Worth publishers

Session Plan:
Part 1:

Course Introduction, sessions-3 Understand the working of an economy, its functions and key players, measurement of the total economic activity, the concept of GDP (Gross Domestic Product), Rules of measuring GDP, Different methods of measuring GDP ,Nominal GDP versus Real GDP, Gross National Product (GNP), Cost of living index, Purchasing power parity (PPP), Human development index and quality of living Readings: Mankiw, Chapters 1 and 2 and 3 Part 2: Economy in the short-run, sessions- 4

Aggregate demand and its components, different types of multipliers, Role of multiplier, Goods market and IS curve, Government expenditure and revenue, Budget in the Indian context, Concept of money and its functions, Financial markets, Money market and the LM curve, Demand and supply of money, Money market equilibrium, Interest rates, Interaction of goods and money market, Role of Fiscal and Monetary policies, need for stabilization policies Readings: Mankiw, Chapters 9, 10, 11, 14, 16, 17 and 18 Part 3: Open economy, sessions-3 Balance of Payments, Capital flows, Effectiveness of macroeconomic policies in an open economy, Aggregate demand in a small open economy with perfect capital mobility, Exchange rate regime Readings: Mankiw, Chapters 5 and 12 Part 4: Economy in the long-run, sessions-3 Concept of full employment equilibrium. The role of labour market, aggregate demand and aggregate supply, Unemployment. Readings: Mankiw, Chapters 6 and 9 and 13 Part 5: Five Broad issues of macroeconomics, sessions-3 Economic growth, Growth and accumulation, Neo Classical growth theory Endogenous growth Theory Money and Inflation, Problems of inflation, Inflation and unemployment trade-off, Philips curve Readings: Mankiw, Chapters 4, 7, 8 13

Other References:
1. Krugman, Paul & Robin Wells: Macroeconomics, Worth Publishers 2. Bhaduri Amit, Macroeconomics: The Dynamics Of Commodity Production, Macmillan India Limited ,1990 3. Samuelson Paul and William D Nordhaus, Economics, McGraw Hill, New York, Latest edition 4. Macroeconomic Policy Environment: An analytical guide for managers, Shyamal Roy, Tata McGraw-Hill Publishing Company Ltd, 2007. 5. Different publications of Government of India and Reserve Bank of India 6. Other References and Case Study material would be prescribed in the class

Recommended Materials: 1. The Economist 2. Business Week 3. Business World 4. The Wall Street Journal 5. Harvard Business Review