Macroeconomics

Course Description: 

Macroeconomics is that branch of Economics which studies how economy behaves at aggregate level.

The course intends to impart knowledge on monetary and fiscal policies and provides students with idea about the measurement and determination of gross domestic product and national income. It also gives clear concept of inflation, stagflation, unemployment, purchasing power, exchange rate policy, etc.

The course aims to enhance students’ understanding of theories of macroeconomics and develop their skill to use these theories in evaluating economic environment for making business decisions.

Course Objectives: 
  1. To know how aggregate demand and supply play role in determining the level of national income and employment.
  2. Have knowledge on factors that determine economic growth of a nation, ways to achieve highest state of economic growth and sustain it.
  3. Be able not just to determine current financial state of a nation but also prospective future.
  4. To determine where a nation is heading towards by analyzing effects of taxation, consumption, expenditure, pricing and employment.
  5. To devise essential plans to ensure a nation’s current and future financial prosperity.
  6. Be able to solve nation level economic problems like unemployment, poverty, inflation, deflation, etc. by formulating and implementing correct policies.
  7. Ensure fair distribution of national income and promote higher level of employment through better economy prioritization.
Course Syllabus: 

Introduction to Macroeconomics

  • Meaning and Scope of Macroeconomics
  • Static and Dynamic Analysis of Macroeconomics
  • Macroeconomics and Business Environment

National Income Accounting

  • Circular Flow of Income and Expenditure (Two, Three and Four Sector Economy)
  • Meaning of National Income: Various Concepts of National Income: GDP, NDP, GNP and NNP (Both in - Market Price and Factor Cost Terms), Nominal GDP, Real GDP and GDP Deflator, Potential and Actual GDP, Personal Income, Disposable Income and Saving, Per Capital Income
  • Three Approaches of Measurement of NI (Product, Income and Expenditure)
  • Measurement Difficulties of NI

Consumption, Saving and Investment

  • Meaning, Technical Attributes and Determinants of Consumption Function
  • Psychological Law of Consumption Function
  • Meaning, Technical Attributes and Determinants of Saving Function
  • Paradox of Thrift
  • Meaning and Types of Investment
  • Concept of MEC and Investment Demand Curve
  • Determinants of Induced Investment
  • Principle of Acceleration Coefficient (Tabular explanation)

Theories of National Income Determination

  • Classical Theory of Output and Employment
  • Keynesian Model of Income Determination
  • Income Determination in a Two Sector Economy, Change in Aggregate Demand and Investment Multiplier
  • Income Determination in a Three Sector Economy, Fiscal Multipliers (tax multiplier, government expenditure multiplier and balanced budget multiplier)
  • Income Determination in a Four Sector Economy, Foreign Trade Multiplier
  • IS – LM Model of Income Determination
  • Derivation of IS Curve and Product Market Equilibrium
  • Derivation of LM Curve and Money Market Equilibrium
  • Determination of Equilibrium Income
  • Shift in IS Curve and Effect on Equilibrium Income
  • Shift in LM Curve and Effect on Equilibrium Income
  • Shift in IS and LM Curves and Simultaneous Effect on Equilibrium Income
  • Monetary Policy and Effect on Equilibrium Income
  • Fiscal Policy and Effect on Equilibrium Income
  • Monetary – Fiscal Policies Mix and Effect on Equilibrium Income

Inflation, Unemployment and Business Cycles

  • Inflation: Meaning, Types (on the basis of rate and control), Theories of Inflation – Demand-pull and Cost-push, Effects (production and distribution of income and wealth)
  • Computation of Rate of Inflation (using PPI, CPI and GDP inflator only)
  • Meaning of Deflation and Stagflation
  • Unemployment: Meaning and Types, Costs of Unemployment, Inflation and Unemployment
  • Business cycles: Meaning and Characteristics, Phases of Business Cycles, Economic Stabilization Policy

Macroeconomic Policies

  • Macroeconomic Policy: Meaning and Objectives
  • Money Supply: Meaning and Sources
  • Monetary Policy: Meaning, Types, Instruments, Indicators, Targets, Goals
  • Fiscal Policy: Meaning, Methods, Instruments, Goals
  • Deficit Financing: Meaning and Significance
  • Budget: Meaning and Components