MACRO ECONOMICS 2 hours per week for 10 weeks 02


1. INTRODUCTION (1 HR) • • • • Definition & scope of macroeconomics Income and its measurement; their interpretation Circular flow of income, output, and spending NI and allied measures for India

2. INCOME DETERMINATION IN SHORT RUN: BASIC MODEL (2 HRS) • • • • Determinants of aggregate spending Equilibrium income Changes in income Concepts of inflation, unemployment, business cycle, multiplier, etc.

3. INCOME DETERMINATION IN A FOUR SECTOR MODEL (2 HRS) • • • • Introduction of govt. in income determination model Income determination in an open economy Changes in income in a four sector model Govt. and external sector in Indian economy

4. PRICE SETTING IN AD-AS FRAMEWORK (2 HRS) • • Aggregate demand, aggregate supply, and equilibrium Changes in income and price level

5. INCOME AND PRICES IN THE LONG RUN (2 HRS) • Induced changes in input prices

• • • •

Aggregate demand shocks and their consequences on income Income in short run and long run Business cycle and fiscal operations Fiscal policy in India and its implications for income determination & change

6. INSTITUTION OF MONEY IN A MODERN ECONOMY (1 HR) • • • Definition, nature, role, and function of money Money and credit Banking system: A preliminary idea of credit creation

7. MONEY IN MACROECONOMICS (2 HRS) • • • • Demand for money: General and in India Supply of money: General and in India (monetary aggregated) Monetary forces and aggregate demand Macroeconomic cycles and aggregate shocks

(Note: IS/LM model is NOT in course)

8. BALANCE OF PAYMENTS AND EXCHANGE RATES (2 HRS) • • • Balance of payments: Concept; Indian BOP Foreign exchange: Market; determination Foreign exchange markets and systems in India

9. MACROECONOMIC POLICY IN AN OPEN ECONOMY (2 HRS) • • • Meaning of an open economy and openness Macro policy in a world with perfect capital mobility Implications of an open economy; Indian case

10. MACROEONOMIC ISSUES: INFLATION (1 HR) • • • • Inflation in the macro model The Philips curve The Lucas AS function Inflation in India

11. UNEMPLOYMENT (1 HR) • Meaning, types, and characteristics of unemployment

Unemployment in India: Nature. Causes, and consequences Cyclical and structural unemployments Policies to reduce unemployment

12. INTERNATIONAL TRADE (2 HRS) • • • • Basis of trade Trade theories for the nations Trade theories at the firm level Gains from trade


Lipsey and Chrystal: Economics (11th – Indian Edition): Chs. 15-25 (OUP) Ministry of Finance: Economic Survey (Latest Edition): All Chapters (OUP)


All the case studies given in Lipsey & Chrystal are in course. The questions in examination will be application (of macroeconomics concepts) based.

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