COURSE OUTLINE

MACRO ECONOMICS
COURSE SYNOPSIS: This course examines the main principles of the determination of
real income, employment and unemployment, the price level and inflation in an open mixed
economy, and the conduct of macroeconomic policy. We will examine the inner workings of the
economy and develop models which we will use to analyze a variety of monetary and fiscal
policy issues.

Course objective: The purpose of the course is to develop the economic way of
thinking and make the students ready to use logic and methods of economic analyses in their
further studies. Specifically the course aims at;

 Giving students a solid grasp of macroeconomic analysis.

 Ensuring students can apply macroeconomic analysis to the study of contemporary
and historical economic problems.
 Broadening the student’s knowledge in the field of macroeconomics.

The methods: The following methods and forms of study and control are used in the
course:

 Lectures
 Discussion
 Case study technique

TEXTBOOK: “Dornbush Fischer and R. Starz, Macroeconomics. Mc-grow Hill Book

GRADING METHOD:
End term 35%

Mid Term 25%

Class participation 10%

Quizzes, presentation 30%

Suggested Readings:
 1. ‘Blanchard, Olivier and Stanley Fischer, Lectures on Macroeconomics.
2. Dornbush R; S fisher Macroeconomics; Mc-Grow Company.
3. Andrew B. Abel , Ben S. Bernanke; Macroeconomics.

Course schedule:
Unit 1. (Session 1 and 2.) Introduction to macroeconomics

 GDP and its measurement.

 Price indices
 The components of GDP
 From GDP to GNP to National Income

UNIT 2.(session 3 and 4)

 Simple economy
 Aggregate demand in closed and open economy
 Goods market and asset market
 IS- LM curve derivation
Discussion ;( session 3 and 4) Blanchard O, J 2000 “What do we know about
Macroeconomics that Fisher and Wicksell did not? NBER working papers No 7550.

UNIT 2.(Session 5 and 6)

 Aggregate supply and Aggregate demand

 Classical model of AD-AS curves
 Sticky wages( Keynesian) model
 Equilibrium in AD-AS curves

Discussion: Greenwald B., Stiglitz J.E (1993) “New and Old Keynesians”, Journal of
economic perspectives. NBER Working paper No R (1810).

UNIT 3. Consumption and Investment Functions (sessions 7 and 8)

 Keynesian consumption function

 Real wealth effect- current consumption and past incomes.
 Multiplier effect
  Accelerator model of investment.

Discussion: “The Multiplier Effect of Investment in Training in China”,. By Xiuli Wang and
Christopher Chan, International journal of Management, June 2006, vol 23, No 2.

UNIT 4.Demand and Supply of money (session 9 & 10)

 Speculative and modern quantity theory of money

 Money multiplier model
 Open market operations

UNIT 5. Unemployment and Inflation (session 11 &12)

 Types and causes of unemployment(frictional, structural and classical unemployment)

 Policies to reduce unemployment
 Causes of inflation, effects and measures to control them.

Discussion: “The Unemployment Gender Gap during the 2007 Recession”, by Sahin, Joseph and
Habijn Bart; Current Issues in Economics and Finance Feb 2010.