SEMESTER: III
Total Marks: 100 Paper Code: BMHCR2131
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MACROECONOMICS
Course Objective:
This course deals with the principles of Macroeconomics. The coverage includes determination of and
linkages between major economic variables; level of output and prices, inflation, interest rates and
exchange rates. The course is designed to study the impact of monetary and fiscal policy on the
aggregate behavior of individuals.
Learning Outcomes:
1. Understand the determination of key macroeconomic variables- outputs, prices and rate of
interest
2. Analyse the effect of fiscal and monetary policy
3. Describe the mechanics of money supply
4. Explain the working of an open economy
Detailed Syllabus:
Unit 1.1: Introduction to Macroeconomics (5L)
o Macroeconomic policy objectives, Macroeconomic stability and business environment, Brief
introduction to the major Schools of thought in Macroeconomics.
Unit 1.2: Measurement of macroeconomic variables (20L)
o National Income Accounts, Gross Domestic Product, National Income, Personal and Personal
disposable income; GDP deflator , Real versus Nominal GDP , CPI, National income identities
Unemployment Rate, Macroeconomic variables in the Indian Context.
Unit 2.1: Simple Keynesian model
o components of aggregate demand, equilibrium income, multiplier (Investment,
Government expenditure, lump sum tax), effect of fiscal and monetary policy, composition
of output and policy mix ;
Unit 2.2: ISLM model
o Properties of ISLM curves, factors affecting the position and slope of ISLM curves,
determination of equilibrium income and interest rates, analysis of monetary and fiscal
policies , Integrating financial markets into IS-LM model , Financial Markets and the
monetary policy dilemma,
Unit 2.3: Flexible price macroeconomic model
o Basics of AD and AS curves , Derivation of Phillips relation from AD-AS model, Analysis of
demand-pull, cost-push and expectational inflation from Phillips relation – Sacrifice Ratio ,
Anti – inflationary policies (30L)
Unit 3: Money (10L)
o Functions of money, Quantity theory of Money, Introduction to the central bank, Liquidity
preference theory of money demand, determination of money supply, Theory of high-
powered money, money multiplier, Instruments of monetary control; Money Supply and
prices
Unit 4: Open Economy (10L)
o Brief introduction to Balance of Payments account, market for foreign exchange and exchange
rate, exchange rate regimes, foreign trade multiplier, monetary and fiscal policy in open
economy, Mundell Fleming model (perfect capital mobility and imperfect capital mobility
under flexible exchange rate)
References:
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1. Froyen, R.P. (2011): Macroeconomics-theories and policies (8 ed.). Pearson:
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2. Dornbusch and Fischer (2010). Macroeconomics (9 ed.). Tata McGraw Hill
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3. N Gregory Mankiw (2010). Macroeconomics (7 ed.). Worth Publishers
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4. Olivier Blanchard, Macroeconomics (2009). (5 ed.) Pearson
5. Shyamal Roy, Macroeconomic Policy Environment (2010), (2nd ed.). Tata McGraw Hill
6. Soumyen Sikdar , Principles of Macroeconomics (2011), (2nd ed.). Oxford University Press
7. Robert J. Gordon , Macroeconomics (2011), (12th ed.). PHI Learning Pvt. Ltd.
