Department of Business Administration

Course Title: Macroeconomics

Course Code: ECO 221
Pre-requisite Courses: Microeconomics
Credit Hours: Three (3)
Semester: Third (3)
Degree: BBA Program

Course Description: The course introduces the students to the fundamentals of Macro Economics
and how economy operates. The topics included are introduction to macroeconomics, Measuring
National Income, Cost of Living, Aggregate demand and Aggregate supply, fiscal and monetary
policy and financial institutions.

Course Objective: The main objectives of this course are to make students:

1. Understand and discuss the fundamental concepts of Macro Economics

2. Have a sound idea of the factors responsible for economic growth
3. Identify the roles carried out by different monetary institutions in the economy
4. Identify the role of government decisions in the distribution of scarce resources to
achieve maximum satisfaction
5. Understand the impact of global economies on overall functioning of the economy
6. Identify relationship between macroeconomic variables and fluctuations in the GDP

Learning Outcomes (LOs)

At the end of this course it is expected that the student should be able to:

LO Categories After completing this course a student will be able to: IU Graduate Qualities
Knowledge LOs LO1: understand and explain the basic concepts of Macro
Economics ♦ Critical thinking
LO2: identify the basic issues and problems of the
economy
LO3: understand the main reasons/causes of different
economic issues in the economy
Comprehension LOs LO4: recognize the role of consumers and producers in the
economic growth ♦ Critical thinking
LO5: underline the outcomes of the decisions of private ♦ Technical Skills
and public sectors in the economy as a whole
Application LOs LO6: apply different economic theories and models to
 understand different issues of the economy ♦ Decision making
LO7: suggest some measures to resolve issues of the
economy

Analysis Los LO8: observe changes in the economy, collect the data and ♦ Managerial skills
evaluate the data to suggest solutions to the problems of
their own economy

Teaching Methodology:
Learning will be accomplished through lectures, home assignments, quizzes, case analysis and
student participation in classroom discussion and presentations. Grading will tend to focus on
students’ overall personality rather than on one or two aspects

Code of Conduct:
Students have to follow the rules stated below to avoid a failing grade in the course:
 Understand and follow the University policy regarding attendance.
 Arrive in and leave the classroom strictly on time. Late arrival will be marked as absence. If
you leave the classroom in the middle of a session even for a short while, you will be marked
absent.
 Keep your cell phone off during the class.
 Do the assigned readings for a class before coming to the class.
 Maintain a disciplined, cordial, and respectful attitude towards the teacher and your fellow
students.
 Submit your homework on the due date before the class begins.
 Do not plagiarize from books, journals, or the internet.
 Do not cheat (make someone else do your work or present work for some other course as
work for this course).
 The teacher’s decisions about marks and grade will be final.

Course Contents

Week Topics to be covered Learning IU Graduate Methods of

Qualities
Assessment
Outcomes

1. Introduction to macroeconomics Discuss

examples
 What Macroeconomics Is About LO1 ♦ Critical thinking from
 What Macroeconomists Do LO2 Pakistan’s
 Why Macroeconomists Disagree LO3
economy

2. Measuring National Income LO4

 Circular flow of Economy
  Concept of two, three and four sector economy LO5 Assignment
 Concept of National Income and its measurement ♦ Critical thinking
 Differentiate b/w Nominal and Real GDP
 How to calculate Nominal GDP, Real GDP and GDP
♦ Technical Skills
Deflator
 Other measures of National Income

3. Measuring Cost of Living

 How to measure Consumer Price Index (CPI) ♦ Critical thinking Assignment

LO3
 Measuring Inflation Rate through CPI
Quiz
 CPI VS GDP Deflator LO5 ♦ Technical Skills
 Types of Inflation (Demand Pull & Cost Push)
 Causes of Demand Pull and Cost Push Inflation LO6 ♦ Decision making
 Different Intensities of Inflation (Anticipated,
skills
Galloping and Hyper Inflation)

4. Production Growth and Unemployment

 The Factors of Production LO4 ♦ Critical thinking

 The Production Function
 Economic Growth and Public Policy LO5 ♦ Technical Skills Assignment
 Measuring Labour Force and Unemployment Rate
 Types of unemployment: Friction, Structural & Cyclic LO7 ♦ Decision
making skills

Exchange Rate System and Monetary Policy

5. ♦ Critical thinking
 Exchange Rate Systems: Fixed, Floating & Managed
Floating Exchange Rate LO4 ♦ Technical skills
 Story of Money
 Types/kind of Money LO6 ♦ Decision
 Functions of Money making skills
 Distinguish Money from other assets (M1,M2 &M3)
 The Federal Reserve (Central Bank of US Economy)
 Functions of Federal Reserve LO7
 Monetary Policy and its tools to control money supply
in the Economy
6. Theory of Aggregate Demand and Aggregate Supply

 Short-run Economic Fluctuations ♦ Technical skills Assignment

 Three Key Facts about Economic Fluctuations LO5
&
 Short-run VS Long-run ♦ Decision
 The Basic Model of Economic Fluctuations LO7
making skills Quiz
 Aggregate Demand Curve and Aggregate Supply Curve
 Why the AD curve is downward slopping?
 Why the AD curve might shift?

7. Theory of Aggregate Demand and Aggregate Supply

 AS curve in Short-run and in Long-run ♦ Technical skills

LO5
 Why the Long-run Aggregate Supply curve is Vertical?
 Concept of Full employment, Below full employment ♦ Decision
LO7 making skills
& Above full employment
 Why the LRAS curve might shift?
 Why the SRAS curve might shift?
 Why SRAS curve is upward slopping?
 An Adverse shift in AS curve-Stagflation

8. Business Cycle / Project

 Phases of Business Cycle ♦ Critical thinking Quiz/Project

 Turning points of Business cycle : Peaks & Troughs LO2
♦ Decision
 Pro-cyclic, Acyclic and Counter-cyclic Indicators
 Leading, Lagging and Coincident variables LO6 making skills
 Keynesian Theory of Business Cycle
 Guidelines for the Final Project LO7
(Based on Current Issues in the Economy)

MID-TERM EXAMINATION

9. Open Economy LO2

 Open Economy VS Close Economy LO3 ♦ Critical thinking

 The Flow of Goods & Services: Exports, Imports & Net
Exports LO5 ♦ Technical skills
 Factors that affect Net Exports
 The Flow of Capital: Net Foreign Investment LO6 ♦ Decision
  Variables that affect Net Foreign Investment making skills
 Saving, Investment and their relationship
 Nominal VS Real Exchange Rate
 Purchasing Power parity

10. Classic Approach VS Keynesian Approach

 Classic Model LO3 ♦ Critical thinking Assignment

 Great Depression and Keynesian Criticism
 Keynesian Economics and Keynesian Short-run LO5 ♦ Technical skills
Aggregate Supply curve
 Shift in SRAS and LRAS LO7 ♦ Decision
 Consequences of changes in Aggregate Demand making skills

11. Consumption, Real GDP and the Multiplier

 The Consumption and Saving Function LO5 ♦ Technical skills Quiz

 Keynesian Theory of Consumption and Saving
 Marginal Propensity to Consume(MPC), Marginal LO8 ♦ Decision
Propensity to Save(MPS), Average Propensity to
Consume(APC) and Average Propensity to Save(APS) making skills
 Autonomous VS Induce Expenditures
 Planned Consumption and Planned Saving
 Multiplier

12. Saving, Investment and Financial System

 The Financial System LO5 ♦ Technical skills Quiz

 The Financial Institutions in US Economy
 Saving and Investment in National Income Account
LO8
 Surplus and deficit Budget ♦ Managerial
 Markets for Loanable Funds
Skills
 Government Policies that Affect Saving and
Investment

13. International Trade and Balance of Payment

 The Balance of Payment and International Capital ♦ Managerial

LO8
Movement
skills
 The Three Categories of BOP Transactions
 Role of IMF in BOP and International Capital
Movement ♦ Decision
  Determining Foreign Exchange Rate LO6 making skills

14. The Short-run Tradeoff Between Unemployment and

Inflation rate
 Unemployment and Inflation LO5 ♦ Technical skills
 Philips Curve
 Aggregate Demand, Aggregate Supply and Philips LO8
Curve ♦ Managerial
 Shifts in Philips Curve: Role of Expectations skills
 Short-run VS Long-run Philips Curve
 Breakdown of the Philips Curve in 1970s
 The Cost of Reducing Inflation

15. The Influence of Monetary and Fiscal Policy on Aggregate

Demand
Project
 Function of Central Bank LO5 ♦ Technical skills report
 The Theory of liquidity Preference LO8 &
 How the Monetary Policy Influence the AD? ♦ Managerial
 What is Fiscal Policy? skills Presentation
 How the Fiscal policy Influence the AD?
 Multiplier Effect

FINAL EXAMINATION

Rescheduling of Class:
The teachers at Iqra University are very particular about taking their classes, but in case of an
emergency, an alternate teacher may conduct the class. Students are informed through SMS in
case of rescheduling of a class.
Grading Policy:
 ‘A’ Grade: 88 and above
‘B+’ Grade: 81-87
‘B’ Grade: 74-80
‘C+’ Grade: 67-73
‘C’ Grade: 60-66
‘F’ Grade: Below 60
Recommended Reading(s):
1. Macroeconomics, Andrew B. Abel, Ben Bernanke, Dean Croushore, PrenticeHall, 8th edition
(March 14, 2013) ISBN-10: 0133407926; ISBN-13: 9780133407921

2. Macroeconomics: Theories and Policies, Richard T. Froyen, Prentice Hall, 10thedition (June
17, 2012) ISBN-10: 013283152X; ISBN-13: 978-0132831529

3. In addition the teacher may prescribe any additional reading material.

Reference Books:

1. Principles of Economics, N. Gregory Mankiw, South-Western College Pub, 6thedition

(February 10, 2011)ISBN-10: 0538453052; ISBN-13: 978-0538453059

2. Economics Today, Roger LeRoy Miller, Prentice Hall, 17th edition (March 25,2013) ISBN-
10: 013314867X; ISBN-13: 9780133148671

3. Economics By Design: Survey and Issues, Robert A. Collinge, RonaldM.Ayers, Prentice

Hall, 3rd edition (July 25, 2003) ISBN-10: 0131400584; ISBN-13: 9780131400580

4. Economics, Paul A. Samuelson, William D. Nordhaus, McGraw-Hill/Irwin; 18thedition (July

27, 2004) ISBN-10: 0072872055; ISBN-13: 978-0072872057

5. Essentials of Economics, Paul R. Gregory, Prentice Hall 6th edition (April 28,2004) ISBN-10:
0321238036; ISBN-13: 9780321238030

6. Economic Growth, David N. Weil, Prentice Hall 3rd edition (June 29, 2012) ISBN-10:
0321795733; ISBN-13: 9780321795731

7. Schaum's Outline of Principles of Economics, Dominick Salvatore, EugeneDiulio, McGraw-

Hill; 2nd edition (September 7, 2011) ISBN-10: 0071762531; ISBN-13: 978-0071762533