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BM 112: Macroeconomics
INTRODUCTION
Macroeconomics is concerned with the behavior of the economy as a
whole. Macroeconomics deals with the measurement, fluctuations, and
growth in economic aggregates like national income, employment (and
unemployment), price level, the balance of payments, and exchange
rates. It attempts to explain the past behaviour of such variables,
predicts the likely future events, and helps policy-makers to formulate
the appropriate policies to stabilize the economy and to achieve other
policy objectives. The present course aims to study the determinants,
behaviour, and policy implications of the economic aggregates.
LEARNING OBJECTIVES:
• To explain the various macroeconomic variables in terms of
concept and measurement.
• To examine the macroeconomic functions and integrate them
into alternate macroeconomic models to explain short run
fluctuations and long run growth in the economic aggregates.
• To explain the scope and limitations of various policies in
stabilizing economic fluctuations and attaining economic
growth.
Pedagogy
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The course is divided into four modules which together provide various dimensions of
the factors and forces influencing the economy at national and international levels. The
teaching methodology is aimed at active class participation. Readings given with the
topics in the course outline will provide practical aspect of application of tools of
economic analysis and the discussion on contemporary issues faced by the economy will
complement the understanding of the topics covered in the class.
Evaluation
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Class participation (10%)
The Learning Facilitator believes that the on time presence and active participation in
the class is essential to an effective learning environment. Class participation points
can be earned through preparation of the assigned readings and cases, contributing to
the learning environment of the class, raising and responding relevant question in the
class and a positive attitude. The facilitator may ask students to explain the concepts
that were discussed earlier in the class and award marks for their performance.
3. Since your work will be based on literature review – search all possible sources
for information required for meeting objectives of project work (including data)
e.g.
a. Journals, handbooks, annual reports, industry reports, books, magazines,
etc
b. Internet- websites, journal, magazine websites, company websites, news
and info websites, industry websites etc.
You may get valuable information/ literature from library and their
industry specific reports.
4. Make an index of all short-listed material – prioritize these materials on the basis
of their importance for your objectives, the quality / authority of the source (for
e.g. companies’ own report could be biased or may hide certain information
purposefully compared to third party information which is less likely to be biased.
Authority depends on who is the writer – what are his expertise, knowledge and
experience on the subject matter. It also depends on the recognition and reputation
of publisher of the information. Information from primary sources i.e. for example
information on internal issues directly from company is more likely to be accurate
than secondary or tertiary sources e.g. magazine reports)
5. Make a critical study / reading of the material priority wise – discuss the issues
and information relevant in the article in the group and make a summary / note for
which objectives it helps you or how it is relevant so that you are able to include
them in your final analysis.
6. Collect information, see if you're getting a comprehensive picture or there are
information gap which needs to be filled up – search for more information
requires for filling up this gap.
7. Analyze available information put them into logical, topical or chronological
order (which ever order is more appealing to you and/or suited to the subject
matter) in line with your project objectives.
Useful tips: You should start with broader set of objectives and/or chose more
than one topic when you start – and finally do work on those topics/ objectives on
which you have been able to get good set of published literature, information and
data.
8. Do not base your work on one or two articles or sources of information – that way
your project work becomes more or less copy or similar to the views / information
expressed in them. Sample a broader set of resources (multiple sources) for
broader and comprehensive viewpoints.
9. Your work will mostly take a shape of what is known as "Case Study" which will
have both facts and figures available in tabular or graphical formats. If you are
able to get data and figures on variables of concern (if not for all variables but at
least a very few important ones) then you can do quantitative analysis e.g.
estimation and/or forecasting, correlation or regression etc. using Excel and/or
SPSS.
10. Write the main body of your project work. This is followed by the section titled
'Conclusions' which basically presents or summarizes the findings of your
analysis/ literature survey. Put bibliography (must) in the end and any other
supplementary material (e.g. glossary, tables, etc.) in the appendix.
11. Main body of work should be preceded by section titled 'Introduction' – give a
brief preface or introductory background of your project work. Write down
objectives, methodology (should include type of analysis or research that you are
carrying out – most of the cases it would be 'Case Study' method and some would
also additionally have quantitative methods – describe the methods briefly and
also spell out the sources and method of information/data collection as well) and
limitations (if any of your work). You can also put the second part as a separate
section called 'Project Objectives and Methodology) – normally if both
introduction and this section together cannot be fitted within 2-3 pages.
12. In the end write a section titled, 'Executive Summary' – should be within 1 page
and maximum 1 and half page. This gives the summary of the whole project work
– introduction, objectives, methodology, findings and conclusions of the project
work. Findings and conclusion should take 2/3 rd of the total length of the
"Executive Summary".
13. Writing for the final project should be preferably done in the order as mentioned
in Para 10 to 12 above. But they would be finally placed in the following
sequence;
i. Title Page
ii. Assignment Cover Page
iii. Table of Contents
iv. Executive Summary – 1 Page
v. Introduction - 1-2 pages
vi. Objectives and Methodology (make section iii and iv combined if
less than 3 pages when put together) – 1-2 pages.
vii. Analysis and Interpretation – no page limit (in more organized and
structured manner NOT the copy of software generated reports)
viii. Conclusions – 1 to 1-1/2 pages
ix. References
x. Bibliography
x. Appendix - if any supplementary items needs to be put in
* Keep your writing as clear, short and crisp. Number of pages is only a suggested length
and not mandatory to follow. Make an effort to reduce the length of the writing. Write
less but mean much more. Unjustifiably lengthy work will have lesser appreciation.
Group Presentation
(a). EXPECTATION FROM PRESENTATION
Content/analysis
• addressing the topic/ identifying the issues involved/ staying relevant
• applying key business concepts and theories
• comprehensiveness: i.e. addressing the main aspects of the project
• use of evidence/support: justifying your argument
• showing research effort beyond the reading provided
Delivery/style
• organization: clear structure for presentation, keeping to time
• use of visual aids: make sure they are clear, easy to read and cover the main points
• style: clear, well-projected voice, interest and enthusiasm, maintaining eye contact
with audience, good use of time
• creativity: presenting ideas in a novel or innovative way
Management of class discussion
• responding effectively to questions
• stimulating audience involvement and maintaining control of discussion
• being an active and attentive audience member for other presentations
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Supplementary Books:
1. Principles of Macroeconomics, 4th Edition, by N. Gregory Mankiw, Thompson South
Western
2. Macroeconomics by Rudiger Dornbusch, Stanley Fischer and Richard Startz, ata
McGraw hill
Session Plan
Session 1 Topic 01: Course Introduction and
Overview
Contents
The introductory session will provide the perspective of studying
macroeconomics. It will cover the decision issues, economics methodology,
subject matter of macroeconomics, major macroeconomic variables, and
macroeconomic problems/issues.
Text
Chapter 1(G. S. Gupta), Chapter 1 & 2 (Mankiw)
Contents
Income concepts, Fundamental income identities, Circular flow of income,
Measurement of GDP, Income and economic welfare.
Text
Chapter 2 (G. S. Gupta), Chapter 10(Mankiw)
Reading
Gross Domestic Product/Net Domestic Product -
http://www.indiastat.com/economy/8/nationalincome/175/grossdomesticpro
ductgdpnetdomesticproductndp/449275/stats.aspx
Sessions 5, 6, 7 Topic 03: Consumption
Function
Contents
Significance, determinants of consumption, Absolute income hypothesis, life
cycle theory, permanent income hypothesis, relationship between
consumption and saving functions.
Text
Chapter 5 (G. S. Gupta), Chapter 13(Dornbusch, Fischer & Startz)
Reading
Consumption Function, by James Tobin, Reprinted from International
Encyclopedia of Social Sciences, The Macmillan Company & The Free
Press, 1968
Contents
Significance, motivations for investments, investment and capital,
investment theories, investment function, public/autonomous investment.
Text
Chapter 6 (G. S. Gupta), Chapter 14(Dornbusch, Fischer & Startz)
Reading
Government Investment and Fiscal Stimulus in the Short and Long runs
byEric m. Leeper, todd b. Walker, and shu-chun s. Yang,
Working Paper 15153 http://www.nber.org/papers/w15153
Text
Chapter 7 (G. S. Gupta), Chapter 12(Dornbusch, Fischer & Startz), Chapter
9, 18 (Mankiw).
Reading
Global Savings and Global Investment: The Transmission of Identified
Fiscal Shocks by James Feyrer, Jay C. Shambaugh, Working Paper 15113
http://www.nber.org/papers/w15113
Sessions 14, 15, 16 Topic 06: Money Demand and
Supply Functions
Contents
Money demand function, money supply and banking, sources of broad
money supply in India, money multiplier, regulation of money supply.
Text
Chapter 8 (G. S. Gupta), Chapter 15, 16(Dornbusch, Fischer & Startz),
Chapter 9, 18 (Mankiw).
Contents
Meaning & Components, Business Cycle Facts, Cyclical Behavior of
Economic Variables, Business Cycle Theories.
Text
Chapter 10 (G. S. Gupta).
Reading
What Caused the Recession of 2008? Hints from Labor Productivity by
Casey Mulligan, Working Paper 14729http://www.nber.org/papers/w14729
Contents
The assumptions of Classical Economics, the model of aggregate demand
and aggregate supply, aggregate demand and supply curves, the effects of
shift in aggregate demand and supply.
Text
Chapter 20 (Mankiw).
Reading
New-keynesian economics: An AS-AD view by Pierpaolo Benigno, Working
paper 14824, http://www.nber.org/papers/w14824
Contents
The theory of Liquidity Preferences, interest rates in long run and short run,
change in government purchases, the multiplier effect, crowding-out effect.
Text
Chapter 21 (Mankiw), Chapter 11,(Dornbusch, Fischer & Startz).
Reading
Rethinking the Role of Fiscal Policy by Martin S. Feldstein,
Working Paper 14684, http://www.nber.org/papers/w14684
Monetary-fiscal policy interactions and fiscal stimulus by Troy Davig & Eric
M. Leeper, Working paper 15133, http://www.nber.org/papers/w15133.
Is Monetary Policy Effective During Financial Crises? By Frederic S.
Mishkin, Working Paper 14678, http://www.nber.org/papers/w14678
Contents
The Phillips Curve, shifts in Phillips Curve – role of expectations, and
supply shocks, cost of reducing inflation, disinflation.
Text
Chapter 22 (Mankiw).
Contents
Determinants of income and growth, Harrod-Domar Model, Solow Model,
Limits to Economic Growth.
Text
Chapter 16 (G. S. Gupta).
Reading
Credit Constraints, Cyclical Fiscal Policy and Industry Growth by Philippe
Aghion, David Hemous & Enisse Kharroubi, Working paper 15119
http://www.nber.org/papers/w15119