Important Topics in Macroeconomics

 Difference between Macroeconomics and Microeconomics.

 Three main goals of macroeconomics/macroeconomic policies?
 Three methods of estimating national income?
 GDP = C+I+G+(X-M)
 Concepts of national incomes?
 Factors of production and their factor payments?
 Circular flow of income, including capital markets.
 Aggregate Demand and Aggregate Supply:
o Why AD curve slopes downward?
o Why SRAS curve slopes upward?
o Equilibrium at intersection of AD and AS curves.
o Shift in AD-AS curves and change in equilibrium.
o Long run equilibrium with intersection of LRAS, SRAS and AD curves.
o Change in short-run equilibrium by shift of AD or SRAS curves.
 Return to long-run equilibrium with (usually shift in AD) or without
government intervention (usually shift in SRAS).
 What is Multiplier? What is investment multiplier? What is government expenditure
multiplier?
 Derivation of IS-LM curves.
 Liquidity trap.
 Meaning and functions of money. Money multiplier. How commercial banks create credit
(and thereby increase money supply). Role of commercial banks.
 Three reasons for demand for money --- Transaction, precautionary, and speculative.
 Business Cycles, government intervention in different phases to smooth business cycles.
Business strategies during business cycles.
 Monetary policy
o Central Bank’s instruments of monetary policy.
 Fiscal policy
o Crowding-out and crowding-in by government expenditures (fiscal deficit).
o Objectives and tools of fiscal policy.
 Types of unemployment?
 Demand-pull vs cost-push inflation?
 Effects of inflation on economy and society?
 What is Phillips curve?
 Balance of Payment and Balance of Trade?
 Reasons for adverse Balance of Payments? How to correct adverse Balance of Payments?
 How is foreign exchange rate determined by interaction of demand and supply in the foreign
exchange market.
o Fixed and flexible exchange rate systems?