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Semester Iv: Econ 223 - Elements of Macroeconomics Ii

This document outlines the modules and topics covered in Semester IV of ECON 223 - Elements of Macroeconomics II. The five modules cover: 1) Microeconomic foundations of consumption and investment theories; 2) Goods and money markets in a closed economy and determining equilibrium income; 3) Deriving aggregate demand and supply curves and sources of unemployment; 4) Inflation, the Phillips curve, and the natural rate of unemployment; 5) The Mundell-Fleming model of determining output in an open economy under different exchange rate regimes. Readings are recommended from macroeconomics textbooks by Froyen, Mankiw, Dornbusch et al., and an economic growth textbook by Jones.

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46 views1 page

Semester Iv: Econ 223 - Elements of Macroeconomics Ii

This document outlines the modules and topics covered in Semester IV of ECON 223 - Elements of Macroeconomics II. The five modules cover: 1) Microeconomic foundations of consumption and investment theories; 2) Goods and money markets in a closed economy and determining equilibrium income; 3) Deriving aggregate demand and supply curves and sources of unemployment; 4) Inflation, the Phillips curve, and the natural rate of unemployment; 5) The Mundell-Fleming model of determining output in an open economy under different exchange rate regimes. Readings are recommended from macroeconomics textbooks by Froyen, Mankiw, Dornbusch et al., and an economic growth textbook by Jones.

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Bathu
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SEMESTER IV

ECON 223 ELEMENTS OF MACROECONOMICS II


Module 1: Microeconomic Foundations
Consumption absolute income hypothesis, relative income hypothesis, life cycle hypothesis,
permanent income hypothesis investment (business fixed investment, residential investment
and inventory investment) neo-classical theory of investment accelerator theory of
investment the Tobins q theory.
Module 2: The Closed Economy in the Short Run
The goods market and derivation of IS curve real influences and Shift in IS schedule the
money market and derivation of LM curve the shift in LM curve determination of
equilibrium income and interest rates the relative efficacy of fiscal and monetary policy.
Module 3: The Aggregate Demand and Supply
The derivation of aggregate demand and supply curves the Keynesian aggregate demand
with vertical aggregate supply curve sources of wage rigidity and unemployment the
flexible price with fixed money wage model labour supply and money wage the shift in
aggregate supply Keynes vs. Classics.
Module 4: Output, Inflation and Unemployment
Inflation: concepts and consequences- The Phillips curve the natural rate of unemployment
factors affecting natural rate of unemployment the adaptive expectation and long-run
Phillips curve the concept of rational expectations policy ineffectiveness debate.
Module 5: Open Economy Models
The Mundell-Fleming model determining equilibrium output in a small open economy the
monetary and fiscal policy under flexible and fixed exchange rates regimes the MundellFlemming model with changing price level.
Readings:
1. R T Froyen (2008), Macroeconomics, Theory and policies, Prentice Hall
2. N. Gregory Mankiw (2002) Macroeconomics, 5th or later edition, Worth Publishers.
3. Rudiger Dornbusch, Stanley Fischer and Richard Startz,(2007) Macroeconomics, 7th or
later edition, McGraw Hill.
4. Jones, Charles I. (1998), Introduction to Economic Growth, W.W. Norton & Company,
Chapters 1, 2, 8.

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