ADVANCED MACROECONOMICS

75 Hours
Credits: 05

Course Objectives:

 To understand why short-run fluctuations occur in the macroeconomic aggregates

such as national output, consumption, investments and how to bring the economy
back to equilibrium with appropriate macro policies.
 To understand the influence of general price level and interest rate on aggregate
demand, aggregate supply is discussed.
 To learn the principles of multiplier and acceleration, inflation-unemployment
trade-off.
 To synthesize the classical and Keynesian macroeconomics within an open economy
framework.

Unit I: National Income and Accounts (15 Hours)

1. Basic issues in Macroeconomics
2. Macroeconomic models
3. Circular Flow of Income in two, three and four sector economy
4. National income - GNP, GDP; Real vs. Nominal GDP; GDP deflator
5. Social accounting
6. GVA and Green accounting

Unit II: Consumption Function (15 Hours)

1. Keynes' psychological law of consumption
2. Implications of the law
3. short-run and long run consumption function
4. Empirical evidence on consumption function
5. Income-consumption relationship
6. Absolute income hypotheses
7. Relative income hypotheses
8. Permanent income hypotheses
9. Life cycle hypotheses

Unit III: Investment Function (15 Hours)

1. Investment determinants
2. Marginal efficiency of capital
3. Rate of interest and Investment
4. Multiplier, operation of the multiplier, leakages of the multiplier
5. Accelerator
6. Super multiplier
Unit IV: Neo-classical and Keynesian Synthesis (15 Hours)
1. Theory of interest
2. Neo-classical and Keynesian views
3. The IS-LM model
4. Effectiveness of monetary and fiscal policies
5. Classical, Keynesian and Monetarist approaches to inflation
6. Structuralist theory of inflation
7. Philips curve analysis
8. Short run and long run Philips curve
9. Samuelson and Solow
10. Natural rate of unemployment hypothesis
11. Tobin's modified Philips curve
12. Types of Inflation and policies to control Inflation

Unit V: Macroeconomics in an Open Economy (15 Hours)

1. Balance of payment
2. Disequilibrium adjustment in BoP
3. Mundell-Fleming model
4. Expectations and exchange rates
5. Theory of Business Cycles
6. Theories of Schumpeter
7. Kaldor
8. Samuelson and Hicks
9. Goodwin's model
10. Control of business cycles
11. Efficacy of monetary and fiscal policies

Books for Reference:

1. Dornbusch, R. and F. Stanley (1997), Macroeconomics, McGraw Hill, Inc., New York.
2. Ackley, G. (1978), Macroeconomics: Theory and Policy, Macmillan, New York
3. Shapiro, E. (1996), Macroeconomic Analysis, Galgotia Publications, New Delhi.
4. Jha, R. (1991), Contemporary Macroeconomic Theory and Policy, Wiley Eastern Ltd.,
New Delhi.
5. Romer, D.L. (1996), Advanced Macroeconomics, McGraw Hill Company Ltd., New
York.
6. Scarfe, B.L. (1977), Cycles, Growth and Inflation, McGraw Hill, New York.
7. Heijdra, B.J. and V.P. Fredericck (2001), Foundations of Modern Macroeconomics,
Oxford University Press, New Delhi.
8. Fabio Canova (2006), Methods for Applied Macroeconomic Research, Princeton
University Press.
9. Roger E. Backhouse, Andrea Salanti(2000), Macroeconomics and the Real World
(Vol. 1& Vol. 2), Oxford University Press.
10. Dwivedi D.N. (2015). Macro Economics: Theory and Policy, McGraw Hill
publications 4th edition.