Course outline

1. Course Title

Macroeconomic Theory and Policy

Core Course for BM and HRM
2. Course Instructor
Arundhati Sarkar Bose
3. Objective
To understand
How the economy functions at the macro level
Macroeconomic linkages of the economy
Macroeconomic policies in theory and practice
4. Learning Goals:
The participants should be inspired to strive for excellence through an involved
continuous learning and sharing of learning with peers. This learning should
enable the participants to take well-informed decisions in simulated situations.
Learning
goals
Quest for
Excellence
Global
Mindset
Functional
Knowledge

Dimensions
Standard of
performance
Identifying
global
opportunity
Identifying
conceptual
framework

Continuous
learning
Global local
interplay
Application of
conceptual
framework

Measures of AOL:

Quest for Excellence

Global Mind-set

Functional Knowledge

Std. of
performance

Continuous
learning

Identifying Global local interplay

global
opportunity

Identifying
conceptual
framework

Application
of conceptual
framework

Periodic
quizzes

Periodic
quizzes

Problems and / caselets given in endterm exam

Overall grade in the course

5. Topics
1. Introduction :
Macroeconomic issues
Aggregation problem
Circular flow of income involving households, firms, governments and
financial institutions.
2. Measuring income and inflation
Introduction to national income accounting
3 approaches to measuring aggregate income
Measuring inflation: GDP deflator, CPI and WPI.
3. Income determination and multiplier
Macroeconomic equilibrium
Multiplier under different parametric conditions.
Paradox of thrift
Balanced Budget multiplier
Deficit financing of the budget
Limitations in the operation of multiplier.
4. General equilibrium of the macro economy: (closed economy)
Money , bonds and money market equilibrium and LM
Goods market equilibrium and IS
General equilibrium and introduction to fiscal and monetary policy
Interest sensitivity of money demand and policy effectiveness
Liquidity trap and Japans stagnation
Fiscal and monetary policy and their implication on stock prices
Rational expectation and policy effectiveness
Price flexibility and policy effectiveness
Credit creation and instruments of monetary policy
5. The open economy
Balance of payments and exchange rates
Exchange rate determination: the product market approach and asset market
approach
Exchange rate regimes
BOP crisis
Fiscal and monetary policy under fixed and flexible exchange rates: The
Mundell Fleming approach
Trillema of macroeconomic policy objectives

6. Macroeconomic policy experiences around the world: A pathology

Stagflation in US in 1970s and policy responses
Debt crises in Latin America First generation model of currency crisis
Currency crises in Europe in 1992 Second generation model of currency
crises
South East Asian Crisis in 1997 Third generation model of currency crisis
Global recessionary trends in late 2000s - debates over origin and policy
prescriptions.
7. A critique to macroeconomic policy choices in India:
Policy choices before 1991
Policy choices after 1991
6. References
1. Macroeconomics by Oliver Blancard
2. International Economics by Paul R. Krugman, Maurice Obstfeld
3. Selected Articles
7. Pedagogy
The course will be largely lecture based and will follow methods of analysis that are
conventional in economics. Case studies will supplement analytical understanding as and
when required.
8. Evaluation
3 Quizzes 20 marks each
1 end term examination - 40 marks
9. Grading Pattern
Those who score 30% or below will receive F, D or D+
The first 30% of students will receive A or A+
A spread over at least 5 grades will be followed.
10. Instructors availability for guidance
The instructor will be available on campus during the term to provide guidance. Students
can meet he instructor in office, contact on e-mail and telephone.
Phone 9771469737