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Semester and Year Offered: III
Course Coordinator and Team:Jyotirmoy Bhattacharya, Parag Waknis
Email of course coordinator:parag[at]aud[dot]ac[dot]in
Pre-requisites:Principles of Economics
This course, along with its sister course in the next semester, aims to cover the standard economic analysis of the behaviour of economic aggregates like GDP, employment and the price level in a market economy characterized by the use of money and credit, bringing in also the open economy context. Problems like business cycles and inflation shall be covered in these courses along with an assessment of the role government policy can play in mitigating or creating such phenomena. Various schools of thought in macroeconomics are introduced to convey and discuss the historical development of macroeconomic thinking over time.
Macroeconomics I will cover the Classical, Keynesian, and the Neo-Classical Synthesis in Macroeconomics.
As learning outcomes, at the end of the course students should be able to:
- Demonstrate with the help of a circular flow of income diagram the various monetary and real flows between different groups of agents in the economy and how that leads to the calculation of real GDP using the factor income, expenditure, and the value added approaches.
- Describe and graphically illustrate the Classical model of income and employment determination.
- Describe the Quantity Theory of Money and its variants with the help of quantity equations.
- Describe and illustrate the basic Keynesian model of income and employment determination using the Keynesian cross diagram.
- Describe the Keynesian Liquidity Preference theory of Interest Rate determination.
- Describe and illustrate the Neo-classical synthesis with the help of Hicks’ IS-LM diagram.
- Demonstrate the effect of changes in fiscal and monetary policies using the diagrammatic apparatus of the Classical, Keynesian, and Neo-Classical models.
- demonstrate how judgment about effectiveness of a particular policy depends on the theory or model used to analyse them.
Brief description of modules/ Main modules:
- Introduction: Historical and Institutional Context, Macroeconomic Aggregates, the Circular Flow of Income, Time-Periods.
- The Classical and Keynesian theories of short-run aggregate equilibrium.
- The IS-LM model and the Aggregate Demand-Aggregate Supply (AD-AS) framework.
- Inflation and Unemployment: The Phillips Curve
- The Keynes vs. Classics debate and alternative macroeconomic traditions: A Preview
Assessment Details with weights:
The main textbook followed for the course is as follows:
Froyen, R. T., Macroeconomics: Theories and Policies, 10th Edition, Pearson Education, 2012.
The following textbooksgive alternative presentations of the same material covered by Froyen’s text above.
- Blanchard, O., Macroeconomics, 7th Edition, Pearson Education, 2016.
- Snowdon, B. and Vane, H. R., Modern Macroeconomics: Its Origins, Development and Current State, Edward Elgar, 2005.
- Carlin, W. and Soskice, D., Macroeconomics and the Wage Bargain: A Modern Approach to Employment, Inflation, and the Exchange Rate, Oxford University Press, 1990.