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MEBE
MEBE
MEBE
Course Handout
Program : MBA
Course Code : SLEC502
Course Title : Macroeconomics and Business Environment (MEBE) Semester: II
Faculty Name : Dr. Aruna Kumar Dash
Room No: : D-014
Consultation Hours (Day/time) : Tuesday- Friday(10Am to 5PM)
Mobile No: 9177695171 Email: akdash@ibsindia.org
Course Description:
This course enables the students to understand the basic concepts and developments in
macroeconomics to know the aggregate behavior of an economy. The students will learn the
fundamental economic ideas like measuring national output/ Income, GDP, aggregate demand
and aggregate supply, the consumption function, savings function, investment spending, the
multiplier principle and the influence of government spending on income and output. It also
provides students with a useful understanding of the product and money market and their
interaction using the IS/LM framework; the design and effects of monetary and fiscal policy;
budget deficits and government debt; and the open economy Framework. This course
introduces the economic analysis of key macroeconomic variables such as national output,
inflation, interest rates, exchange rates, unemployment, and business cycles. The course will
conclude with a discussion on globalization and the challenges in steering the economy in
turbulent global imbalances.
Course Objectives
At the end of the course, students are expected to:
• Demonstrate managerial skills and competencies required for understanding and
analyzing the macroeconomic scenarios for business decision making.
• Demonstrate business knowledge in locating and interpreting macroeconomic data; and
identify and explain important macroeconomic concepts using the stylized facts of
business cycle fluctuations, economic growth, and unemployment.
• Show their problem-solving aptitude by identifying current economic issues and
debates, then apply simple macroeconomic models to analyze and interpret policy
issues.
• Demonstrate problem-solving ability in evaluating the scope for policy to improve
macroeconomic performance.
• Analyze macroeconomic economic models to explain and interpret the behavior of key
macroeconomic variables
• Demonstrate leadership using sound macroeconomic knowledge and credible decision
making.
Learning Outcomes
1. Students will make an informed and effective selection with the application of
macroeconomic knowledge in a discipline or profession, in the contexts of local and
global business.
2. Students will define and address business problems, and propose effective evidence-
based solutions, through the application of rigorous macroeconomic analysis and
critical thinking.
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IBS Hyderabad (Academic Year – 2019-20)
3. Students will be able to utilize a simple contemporary economic model such as the
aggregate supply/aggregate demand model and describe the interrelationships among
prices, income and interest rates as they affect consumption, saving and investment.
4. Students will be able to describe the contemporary monetary and banking system and
analyze the role of money, credit, and Reserve Bank of India’s monetary policy.
5. Students will be able to analyze fiscal and monetary policy decisions to counter business
cycle swings by using macro-economic models.
6. Students will be able to outline the role of comparative advantage in exchange and the
importance of exchange rates. Describe the role of international trade and finance in
domestic economic activity.
7. Students will be aware of the global business environment and will be actively
committed to recognize and respect diversity in cultural norms, beliefs, and values, and
will apply this knowledge to interact, communicate and work effectively in diverse
environments.
Course Outline:
Ses Chapters
Case /Reading
sio –
Topic Learning Outcomes article/ Lecture /
n Referenc
Activity
No. e pages
After reading this chapter,
Introduction to Economic students should be able to
Analysis: understand:
The scope of macroeconomics
Macroeconomics Vs. in the corporate world.
1 Microeconomics, Goals & Recognize a variety of Introductory lecture pp. 2-3.
Objectives of Macroeconomics, situations where the
Tools of Macroeconomic Policy, macroeconomic ideas can be
Key concepts of macroeconomics- applied.
GDP and its importance. Explain the goals of
macroeconomic inquiry.
Irish Economy: A
Model of Success
2 Case discussion:
(MEBE0001)
(IBSCRC Case)
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IBS Hyderabad (Academic Year – 2019-20)
After reading this chapter,
Measuring National Output/ students should be able to:
Income: Define macroeconomics and
Circular flow of macroeconomic explain how economic
activity, Two sector model, Three indicators like GDP are used pp.
sector model, Four sector model, to assess the state of the Video 1: 10-12
Nominal GDP vs. Real GDP, GDP economy. Time to fix GDP? 14-15
3
deflator, GDP at market price, GDP Differentiate between and https://voxeu.org/con 23–26
at factor cost, GNP, NNP, NNP at calculate nominal and real tent/time-fix-gdp 35,
factor cost, NDP at factor cost, IIP, GDP 38-39.
Release of GDP figures and the Describe economic growth
economic outlook and reaction of Identify key institutional
the corporate sector. factors that contribute to
economic growth.
Methods for measuring National
Income:
Product Approach, Income
After reading this chapter,
Approach, Expenditure Approach,
students should be able to
Problems of measuring GDP, Real pp.
understand:
Vs Nominal Income, other 26 -30,
4 What GDP measures- and
measures of development: 35-37,
what doesn’t?
Measures of Wellbeing such as HDI, 57-61.
Why aggregate income equals
Gross National Happiness Index,
aggregate output?
etc., Economic Growth vs Economic
Development, The implication of
Economic Growth
National Income
Accounting: A Case
5 Case discussion: Study of China
(MEBE0004)
(IBSCRC Case)
After reading this chapter,
Aggregate Demand and
students should be able to
Aggregate Supply: Classical and
understand:
Keynesian Approach:
The nature of aggregate
demand and aggregate
Meaning of Aggregate Demand and
supply.
Aggregate Supply, Aggregate
The components of aggregate
Demand and Supply Curve, Factors
6 demand and their pp. 5-9,
shifts aggregate demand and
& determinants. 98-114,
supply curve.
7 Why the short-run AS curve 198
slopes upward?
Determination of price level
How aggregate demand and
through aggregate demand and
aggregate supply affect the
supply, Aggregate supply curve in
economy?
Classical view. The aggregate
Use the AD-AS model to
supply curve in the Keynesian
explain the equilibrium levels
view. Says Law of Market.
of real GDP and price level
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IBS Hyderabad (Academic Year – 2019-20)
Examine factors that shift
aggregate supply and
aggregate demand
Illustrate economic growth,
unemployment, and inflation
using the AS/AD model
Determination of Equilibrium
Income - Keynesian Approach:
Consumption function, Keynes
Psychological Law of Consumption,
Marginal Propensity to Consume,
Marginal Propensity to Save,
After reading this chapter,
Average Propensity to Consume,
students should be able to
Average Propensity to Save, PP.
understand:
Determinants of Consumption, 44-45,
Determinants of the
Factors influencing consumption, 47,
Consumption function.
Saving function, Investment 63-64,
Factors influencing
8 function, Investment demand 193,
investment, consumption,
curve, Shift in the investment 199-205
saving.
demand curve, Determinants of 326-336
The relevance of Keynesian
Investment, Types of investment- 352-360
theory.
Private Vs,. Public, Induced Vs. 364-373
Implications of spending and
Autonomous, Gross vs. Net
saving in an economy.
investment, Business fixed
investment, Residential
investment, Inventory investment,
Implications of Investment in an
Economy, how a change in interest
rate affect aggregate demand
Germany's Economic
Dilemma: To Save or
9 Case discussion: to Spend?
(FCP0006)
(IBSCRC Case)
Product Market: Ref Article 1:
Concept of Multiplier – After reading this chapter, Government spending
Assumptions of Multiplier, students should be able to multipliers in good
Importance of multiplier, Simple understand: times and in bad: pp.
multiplier, Two-sector and three- What is investment multiplier, Evidence from US 205-211
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sector model, Types of the balanced budget multiplier, historical data 403-405
multiplier, Investment multiplier, foreign trade multiplier and https://voxeu.org/arti 414, 438
foreign trade multiplier, Balanced what are the implications of cle/us-fiscal-
Budget multiplier. The multiplier them? multiplier-historical-
in the presence of tax. evidence
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IBS Hyderabad (Academic Year – 2019-20)
Money Market:
What is money? The evolution of
money and forms- Barter,
Commodity money, Paper money,
bank deposits. The functions of
money (a) Money as a medium of
exchange (b) Money as a measure
of value(c) Money as a store of
value(d) The standard of Deferred
payments. The determinants of After reading this chapter,
demand for money, The supply of students should be able to
money, The sources of money understand:
supply, Central bank and high What money is?
powered money, Measurement of Describe how money is
high powered money, Purpose of created by bank lending Video 2:
measuring money supply, The Explain the functions of Demonetization
Keynesian demand for money money, and define liquidity. https://www.youtube.
12 pp.
function (a)The transaction How does the money com/watch?v=sIYBxa
& 382-396
demand for money(b) the multiplier work? 4IB5I&index=22&list=
13 513
Precautionary demand for money Keynesian theory of demand PLzBocLh5ipFQCM5F
(c) The speculative demand for for money. 9VfzBe_fesl_wYWXA
money. The Keynesian theory of Measures of the money
interest rate, Components of the supply. Determinants of
money supply- M1, M2, M3 and M4, money supply and demand for
Measurement of money supply. money.
Implications of the money supply. How do changes in the money
Money Multiplier Approach, Role supply affect the economy?
of Banking systems and creation of
money, Determinants of money
supply, how the interest rate is
determined? Real Vs. Nominal
interest rates, Liquidity, how do
changes in the money supply affect
the economy? Negative Interest
rates and its implications on an
economy.
India`s
Demonetization: A
Short-Term Loss or a
14 Case Discussion:
Long-Term Gain?
(ECON061)
(IBSCRC Case)
Price Stability: After reading this chapter, Video 3: pp.
Inflation Vs. deflation, Various students should be able to Venezuela’s Inflation 39-44.
15 measures of inflation, Types of understand: to hit 1,000,000% 6,
& inflation-Low inflation, Galloping The meaning of price https://youtu.be/SCz1 119-127
16 inflation, Hyperinflation, Threshold stability/instability. x5-tgig 130-134
inflation. Demand-pull Vs. Cost- Define inflation and explain 176-185
push inflation, Stagflation, how the rate of inflation is Ref Article 2: 514-519
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IBS Hyderabad (Academic Year – 2019-20)
Expected Vs. unexpected inflation, calculated. Examples of
core inflation Vs. Headline How inflation is measured? hyperinflation from
inflation, the role of government Identify the consequences of Zimbabwe.
and RBI to control inflation, inflation http://www.nytimes.c
Economic impacts of inflation, is a Why om/2006/05/02/worl
little inflation is good for the Government/Policymakers d/africa/02zimbabwe.
economy? Price in the AD-AS and the public are more html?_r=1&oref=slogi
framework, The Phillips curve, concerned with inflation? n
Short-run Philips curve, and Long- How does the
run Philips curve. Government/Monetary
authority deal with inflation?
How an unemployment-
inflation trade-off arises?
Venezuela's
macroeconomic
crisis: An enduring
ordeal of the
17 Case Discussion:
worsening economy
with alarming
inflation, (ECC0058)
(IBSCRC Case)
Business Cycles &
Unemployment:
Features of Business Cycles:
(a) Aggregate economic activity After reading this chapter,
(b) Expansions and contractions students should be able to
(c) Co-moments (d) Recurrent but understand:
not periodic (e) Persistence. Explain the goals of
Phases of the business cycle: macroeconomic inquiry.
(a) Boom (b) Peak (c) Recession or Explain business cycles,
contraction (d) Through (e) including recessions, pp. 6, 10-
Recovery. depressions, peaks, and 18, 135,
Business cycle facts: (a) Direction troughs 143-146
(b) Timings. Theories of Business cycle. 153-170
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Business cycle theories: Impact and implication of the 494-498
Exogenous vs. internal theories, business cycle. 500-503
Demand induced cycle, Monetary How unemployment is 564-565
theories, Political theories of measured? 577, 595
business cycle, Real business cycle Unemployment and its major
theories, Supply shocks theory, types
Can we predict the business cycle? Examine the causes of
Types of unemployment unemployment, including
Okun's Law cyclical, frictional, structural,
Economic Impact of and natural unemployment.
unemployment.
Can we eradicate unemployment
completely?
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IBS Hyderabad (Academic Year – 2019-20)
Brazil's Economic
Crisis: A Tough Road
19 Case Discussion:
Ahead (ECON065)
(IBSCRC Case)
After reading this chapter,
students should be able to
understand:
Monetary Policy: How monetary policy affects
Objectives of monetary policy, macro outcomes?
Instruments of monetary policy- The constraints on monetary
open market operation, bank rate, policy.
Video 4:
cash reserve ratio, statutory How monetary policy affects
Monetary Policy and
liquidity ratio, the repo rate, the liquidity of an economy? pp.
Inflation Targeting
reverse repo rate, marginal Explain the structure, functions, 189-193
Part 1
standing facility, liquidity and responsibilities of the 253-268
20 https://www.youtube.
adjustment facility, market central bank. 405-408
com/watch?v=WGoAt
stabilization scheme. What are the monetary policy 410-411
z2cUBU&list=PLzBocL
Easing vs. tightening of monetary instruments to deal with 547
h5ipFQCM5F9VfzBe_fe
policy, Expansionary and macro-economic problems such
sl_wYWXA&index=8
contractionary monetary policy as low economic growth,
Impact of Monetary Policy. inflation, and business cycles?
Impact of demonetization on the Explain how monetary policy
Indian economy. affects GDP and interest rates.
Explain and show how
monetary policy impacts
aggregate demand
Reserve Bank of
India's Tightening
Monetary Policy: An
21 Case Discussion: Impediment to
Economic Growth?
(MOP0023IRC)
(IBSCRC Case)
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IBS Hyderabad (Academic Year – 2019-20)
Policy, and stabilization, types of Explain fiscal policies,
deficits, Public debt, Crowding-out including automatic,
effect. expansionary, and
contractionary fiscal policies.
Differentiate between deficit
and debt.
Who bears the burden of the
national debt?
Explain how economic growth
or decline can influence a
budget surplus or budget
deficit
Ireland: Turnaround
by Tax Policy
24 Case Discussion:
(MEBE0024)
(IBSCRC Case)
IS-LM Framework:
After reading this chapter,
Product and Money Market
students should be able to
Equilibrium, Hicks-Hansen Model:
understand:
IS-LM analysis. The slope of the IS
What is the goods market? pp.
25 curve, Shift in the IS curve, Shift of
What is the money market? 224-249
the LM curve. Monetary Policy and
How does equilibrium reach
its impacts on the LM curve. Fiscal
through the money market
Policy and its impact on the IS
and goods market?
curve.
Global Financial
Crisis and Its Impact
on Real and
26 Case Discussion: Financial Sectors in
India
(MEBE0038)
(IBSCRC Case)
After reading this chapter,
students should be able to
understand:
Why nations go for
Open-Economy Framework: international trade?
International Vs. Domestic trade, Explain the absolute
The advantages of international advantage and comparative
trade. Theories of International advantage pp.
27
Trade, Theory of Absolute and How trade flows are affected 290-291
Comparative advantage, by Fiscal Policy?
Protection and WTO, What are the theories of
Issues related to the tariff. international trade?
Explain the origin and role of
the World Trade Organization
(WTO)
How trade barriers affect
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IBS Hyderabad (Academic Year – 2019-20)
prices, output, and income?
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IBS Hyderabad (Academic Year – 2019-20)
Expectations from Students
a. Students must report to the respective sessions well before the announced time. Latecomers will not
be permitted to join the class after the scheduled time. If late, the attendance for that session will be
marked as absent.
b. Read the Case Study/material well prior to the class discussion. He/she is also expected to read the
chapter indicated in the course plan as the faculty directs.
c. In the class discussion, the student is expected to participate actively and contribute to individual
and group learning. Evaluation is based on active participation.
Evaluation Timelines
Keeping in line with continuous evaluation at IBS the following evaluation schedule has been drawn.
Students are expected to go through the dates/sessions mentioned and prepare accordingly.
2. Web game:
Chair the Fed: A monetary policy game
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IBS Hyderabad (Academic Year – 2019-20)
https://www.frbsf.org/education/teacher-resources/chair-federal-reserve-economy-simulation-
game/
3. Web resources:
1. Real-world economics
https://www.aeaweb.org/resources/teachers/economics-concepts-examples-in-research
2. Introduction to macroeconomics
http://www.econweb.com/macro/outline.htm
9. Fiscal policy is no free lunch: Lessons from the Swedish fiscal framework for fiscal targeting
https://voxeu.org/content/fiscal-policy-no-free-lunch-lessons-swedish-fiscal-framework-
fiscal-targeting
10. What can Europe learn from Sweden? Four lessons for fiscal discipline
https://voxeu.org/article/what-can-europe-learn-sweden-four-lessons-fiscal-discipline
14. The Great Depression, golden age, and global financial crisis
https://core-econ.org/the-economy/book/text/17.html
4. Data Sources:
https://www.aeaweb.org/resources/data
https://fred.stlouisfed.org/
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IBS Hyderabad (Academic Year – 2019-20)
Dr. Aruna Kumar Dash is an Associate Professor at IBS Business School, Hyderabad.
Prior to joining Business School, he has worked as a Senior Manager in Centrum
Broking Private Limited, Mumbai. He has worked as an Analysts in Credit Suisse
Business Analytics India Private Limited, Mumbai. Before joining Credit –Suisse, he
also worked as Associate (Research & Analytics) in Epitome Global Services,
Mumbai. In industry, his role was to develop quantitative, statistical and econometric
models for multiple asset classes which are critical for bank’s investment
recommendations and advisory services. He has been teaching economics for last 9
years and his teaching interests include Macroeconomics, Managerial economics,
International Business Management, International Economics and Public policy. His
research areas include International trade, Macroeconomic modeling, Tourism
research, Thematic research and Applied econometrics. He has presented papers in
both national and international conferences and has more than 20 publications which
are published by international reputed publisher. One of his books entitled as
“Exchange Rate Changes on Prices and Volume of Trade Flows in India” is
forthcoming shortly by Lambert Academic Publishing, Germany.
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