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2013-14
TERM: II
TITLE OF THE COURSE: MACROECONOMICS
CREDITS: 4
Telephone Number
COURSE DESCRIPTION
The course covers macroeconomic theory and its applications particularly in the Indian context.
The main theoretical framework for the course will be IS-LM and Aggregate Demand - Aggregate
Supply. We begin the course with understanding national income accounts. We then set up with
simple models of national income determination and relax the assumptions to set up more
complex models. These models are necessary to understand and analyze the effects of fiscal and
monetary policy on the economy. The course will help participants to develop analytical skills to
understand the monetary policy announcements of the central banks and broad fiscal policies of
the government and their impact on the economy.
In the context of globalization of economies , we will discuss the linkages of national economy with
global economy and explore interdependencies among countries. We have allocated 6 out of the
total 20 sessions for international linkages of national economy.
COURSE OBJECTIVES
The course aims at helping participants understand the complex macroeconomic environment,
which confronts business. The participants will be able to understand the rationale behind the
economic policy announcements and anticipate policy changes. The course will equip participants
with analytical tools to decipher the effects of economic policy announcements, particularly
Monetary and Fiscal policy, on crucial macroeconomic factors such as interest rate, income,
inflation etc.
PEDAGOGY/TEACHING METHOD:
The prdagogy will be predominantly lectures and classroom discussions. Applications of
macroeconomic theory and case studies are discussed to reinforce understanding of concepts.
EVALUATION
Weightage
Quizzes
Mid Term
End Term
Class Participation
20%
35%
35%
10%
Total
100%
SCHEDULE OF SESSIONS
Module IOverview of Macroeconomics
Module Objective
To discuss dynamics of price- output determination for an economy in different time horizons and
to understand basic concepts in national income accounting
Module
Module Objective
To discuss the behaviour of goods market and money market and to understand the impact of
monetary and fiscal policy in a closed as well as in an open economy in the shrort run
Module
Module Objective
To discuss the relationship beween inflation and unemployment and to understand the impact of
monetary and fiscal policy in an open economy in the long run.
Objective : To derive the aggregate demand curve and to show how shifts in aggregate demand
can change output in the short run and prices in the long run
Readings : Chap. 10, pp.241-242 , Chap. 5 pp. 97- 115 in Macroeconomics by R.Dornbush et.al.
Tenth Edition , 2008
Sessions 16 & 17 : Aggregate Supply :Wages , Prices and Unemployment
Objective : To discuss the relationship between inflation and unemployment in the short run and in
the long run and to derive aggregate supply curve
Readings: Chap. 6 pp. 118- 141 in Macroeconomics by R.Dornbush et.al. Tenth Edition , 2008.
Case "Curve Ball", The Economist, September 28, 2006.
Sessions 18 & 19 : International Adjustments and Interdependence : Adjustments under Fixed
Exchange Rate System
Objective : To understand the role of prices, devaluation and trade balance in an open economy
with fixed exchange rate system
Readings : Chap. 20 507 - 527 in Macroeconomics by R.Dornbush et.al. Tenth Edition , 2008
Case Study : "Mexico's External Balance" pp. 516-517 in Macroeconomics by R.Dornbush et.al.
Tenth Edition , 2008
Session 20 : International Adjustments and Interdependence : Adjustments under Flexible
Exchange Rates; Inflation Differentials, Interest Differentials and Exchange Rate; Exchange Rate
Fluctuations and Interdependencies
Objective : To discuss the impact of monetary and fiscal policies in an open economy with flexible
exchange rates in the long run
Readings : Chap. 20 pp. 527- 542 in Macroeconomics by R.Dornbush et.al. Tenth Edition , 2008.
Case Study : "Unsustainable Deficits and the Dollar Bubble" pp. 540-541 in Macroeconomics by
R.Dornbush et.al. Tenth Edition , 2008.
Module
IV
Module Objective
Module
Module Objective
Additional Reading
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