COURSE TITLE: MACRO ECONOMICS

COURSE DURATION: 2 hours per week for 10 weeks

COURSE CREDITS: 02

INDICATIVE LIST OF TOPICS

1. INTRODUCTION (1 HR)

• Definition & scope of macroeconomics

• Income and its measurement; their interpretation
• Circular flow of income, output, and spending
• NI and allied measures for India

2. INCOME DETERMINATION IN SHORT RUN: BASIC MODEL (2 HRS)

• Determinants of aggregate spending

• Equilibrium income
• Changes in income
• Concepts of inflation, unemployment, business cycle, multiplier, etc.

3. INCOME DETERMINATION IN A FOUR SECTOR MODEL (2 HRS)

• Introduction of govt. in income determination model

• Income determination in an open economy
• Changes in income in a four sector model
• Govt. and external sector in Indian economy

4. PRICE SETTING IN AD-AS FRAMEWORK (2 HRS)

• Aggregate demand, aggregate supply, and equilibrium

• Changes in income and price level

5. INCOME AND PRICES IN THE LONG RUN (2 HRS)

• Induced changes in input prices

 • Aggregate demand shocks and their consequences on income
• Income in short run and long run
• Business cycle and fiscal operations
• Fiscal policy in India and its implications for income determination & change

6. INSTITUTION OF MONEY IN A MODERN ECONOMY (1 HR)

• Definition, nature, role, and function of money

• Money and credit
• Banking system: A preliminary idea of credit creation

7. MONEY IN MACROECONOMICS (2 HRS)

• Demand for money: General and in India

• Supply of money: General and in India (monetary aggregated)
• Monetary forces and aggregate demand
• Macroeconomic cycles and aggregate shocks

(Note: IS/LM model is NOT in course)

8. BALANCE OF PAYMENTS AND EXCHANGE RATES (2 HRS)

• Balance of payments: Concept; Indian BOP

• Foreign exchange: Market; determination
• Foreign exchange markets and systems in India

9. MACROECONOMIC POLICY IN AN OPEN ECONOMY (2 HRS)

• Meaning of an open economy and openness

• Macro policy in a world with perfect capital mobility
• Implications of an open economy; Indian case

10. MACROEONOMIC ISSUES: INFLATION (1 HR)

• Inflation in the macro model

• The Philips curve
• The Lucas AS function
• Inflation in India

11. UNEMPLOYMENT (1 HR)

• Meaning, types, and characteristics of unemployment

 • Unemployment in India: Nature. Causes, and consequences
• Cyclical and structural unemployments
• Policies to reduce unemployment

12. INTERNATIONAL TRADE (2 HRS)

• Basis of trade
• Trade theories for the nations
• Trade theories at the firm level
• Gains from trade

BASIC TEXT

• Lipsey and Chrystal: Economics (11th – Indian Edition): Chs. 15-25 (OUP)
• Ministry of Finance: Economic Survey (Latest Edition): All Chapters (OUP)

V. IMPORTANT NOTES:

• All the case studies given in Lipsey & Chrystal are in course.
• The questions in examination will be application (of macroeconomics concepts) based.