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Principles of Macroeconomics

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Course Type Course Code No. Of Credits
Discipline Core NSUS1EC102 4

Course Coordinator and Team:                  SES Faculty 

Email of course coordinator:                       pcbabed@aud.ac.in  

Pre-requisites:                                               No

Course Description: 

This course is designed to introduce students to the study of macro economy, the economy as a whole. It addresses the ways in which market type economies allocate their resources to produce as many goods and services as possible and how those allocation decisions affect key economic indicators like unemployment, inflation, and economic growth. This course is also intended to build critical thinking skills needed to interpret economic events such as changes in the central bank’s policy, world economic shocks, and changes in taxation and spending by the government.
 

Course Objectives:

  • Understand the role of markets as a resource allocation mechanism.
  • Understand the relationship between functioning of the market system, specific social context, and the macro economy.
  • Understand the nature of long run economic growth of India in comparison to the world.
  • Understand how various economic and legal institutions in the Indian economy have shaped and influenced its course over the short and the long term.
  • Understand how different schools of thought analyze various macroeconomic issues through simple graphical models.
  • Learn to apply these models to substantive questions concerning fiscal and monetary policy, economic growth, and business fluctuations.
  • Understand the implications of international trade and finance for the Indian macro economy. 8. Enhance critical thinking skills.

Course Outcomes: 

  • Clearly define GDP and explain the difference between GDP and GNP.
  • Clearly list and describe salient features of economic growth across the world and time.
  • Clearly list and describe institutions of economic growth.
  • Use the graphical apparatus of Solow model to show the effect of changes in immediate causes of growth.
  • Distinguish cutting edge from catch up growth
  • List the salient features of short run fluctuations in GDP in countries like India.
  • Use the graphical apparatus of business cycle models to demonstrate the role of real and nominal shocks in causing short run fluctuations in GDP.
  • Use the graphical apparatus of business cycle models to demonstrate the effect of monetary and fiscal policies on the economy in the short and long run.
  • Comment on the relative effectiveness of monetary and fiscal policy conditional on the nature of shocks affecting the economy.

Brief description of the modules: 

Unit 1: GDP and Measurement of Progress: Study of the macro economy has to start from measurement concepts and issues. This unit introduces the concepts of national income, unemployment, and other economic aggregates.

Unit 2: Growth through time and space: Why are some countries rich and others poor? One of the fundamental questions that macroeconomists deal with. Students are introduced to the ideas of comparing living standards across time and space. The nature of growth processes and salient features are assessed using a simple Solow growth model. Deep institutional factors causing disparities incomes are discussed.

Unit 3: Three macro markets: credit, labor, and money: Three major markets characterizing any macro economy, namely credit, money, and labor are introduced. Major trends and features in these markets like dual credit and labor markets in developing countries, labor force participation rates, etc. are introduced. Measurement issues are also discussed.

Unit 4: Business Fluctuations: Aggregate Demand & Supply: Students are introduced to the short run fluctuations in the GDP and the categories of shocks that cause these fluctuations. A simple apparatus of Aggregate Demand and Supply in short and long run is introduced to model short run fluctuations and demonstrate the effect of economic shocks using the model.

Unit 5: Monetary and Fiscal Policy: Students are introduced to the workings of monetary and fiscal policy. The AD-AS model is used to demonstrate the effects of these policies and assess their effectiveness in combating short run fluctuations conditions on the nature of shocks.

Assessment Plan

S.No

Assessment

Weightage

1

Class Test

30%

2

Assignment

30%

3

End Term

40%

References

  • Cowen, Tyler & Alex Tabarrok, Modern Principles: Economics, Worth Publishers, Fourth Edition, 2017 (CT)
  • The Economy: A South Asian Perspective, The CORE Economics Team. (CORE)
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