Kathmandu University School of Management (KUSOM)

Course Description for Business in Aggregate Economy

2017 Summer(Tentative)

Course Title Business in Aggregate Economy

Credit 2/ 30 hours
Hours/Total
Contact
Hours
Basic Texts If available: Macroeconomics: Understanding the Global Economy by David Miles, Andrew Scott
and Francis Breedon, 3rd edition, Wiley

If the above book is not available in the market, then you should have
Macroeconomics: Understanding the Wealth of Nations by David Miles and Andrew Scott, 2nd
edition, Wiley 2005
Some  Macroeconomics by Gregory Mankiw
introductory  Macroeconomics by Abel and Bernanke
reference
books
Website  Visit www.economicsnetwork.ac.uk/teaching/Onlinefor Text and Notes in Macroeconomics
References You may find a number ofuseful links to macroeconomics resources
 Also check for IMF’s Finance & Development’s (F&D)following website having reference
to F&T in the Readings column: www.imf.org/external/pubs/ft/fandd/basics/index.htm
June’s F& T talks about problems of market economy
 Blog to appreciate economics: http://freakonomics.com/category/freakonomics-blog/

Course Every firm/business unit is a constituent of an aggregate economy, so are individual household,
Introduction policy maker, and other economic agents at home and abroad. The actions of millions of agents
jointly create an aggregate economic activity for a home economy. Impact of their cumulative
behavior on the economy and vice versa is what establishes as the subject matter of this course. In an
integrated world economy, the intensity of spill overeffects of economies across has also increased.
Understanding their impact at home and abroad is important for strategic decision making by a firm.
This course will sharpen your insights with regard to the various aspects of aggregate economic
activity of a country.

Course Upon successful completion ,you will be able to:

Objectives  Interpret what important aggregate economic activities such as GDP, its various
components, inflation, unemployment, economic growth, balance of payments, exchange
rate, government debt etc are and their relevance for businesses and economy
 Examine the media’s comments on macroeconomic events and their effects on businesses.
 Explain the interdependency across various economies, and prospects and challenges
created by global economic environment.
 Assess where government’s economic interest coincides with that of businesses and where it
may collide.
 Illustrate the beneficial effects and limitations of government’s macroeconomic policies.

Pedagogy/ Lectures will be followed by discussion of case studies (case studies to be presented/ analyzed/
Learning discussed by course participants). Every week a randomly chosen participant will summarize a given
Methods article under review, and the class may promote discussion. Textbook, case studies, newspaper
readings, journal articles and other references will constitute the basic reading materials for the
course. A number of business applications will be introduced wherever possible. Participants are
required to prepare assigned group works and are to present them in the class. Each group is also to
write a research paper - which will be presented by selected participants. Chapters 6,7,14,15,16,19
will be presented by the participants.
Course Your grade in the course will be decided on the basis of following evaluation components:
Evaluation i) Paper writing and presentation : 15%

1
 ii) Five quizzes: 40%
iii) Group presentation on chapter: 15%
iv) Exam: 30%
Class-room Please observe the following guidelines.
Etiquettes - Mobile phone calls or text messaging is not allowed in class
- No switching on laptops unless asked to work on it
- Late arrival (over 5 minutes) without prior notice may be taken as class absence
- There will be no make-up for exams, assignments or group presentation
- A deduction of 20% will be made for each late assignment per week
- Plagiarism or cheating will result in zero grade for that test or assignment

Session Coverage Readings (Chapters are based on 2nd edition of

Plan Miles et)
4 hrs Measurement of aggregate economic Chp 2
activities: national income accounts, BOP Other readings:
accounts, measuring inflation,  GDP: An economy’s all by Tim callen (F&D)
unemployment and macroeconomic  Price: the language of exchange by
indicators relevant for businesses Asmundson(F&D)
 Inflation: prices on the rise by Oner (F&D)
4 hrs Economic performance in the very long- Chps 3,4,5,6
run: long-run growth, total factor Other readings:
productivity and technological progress,  Dutch Disease: wealth managed unwisely by
growth accounting, cross country income Zadeh(F&D)
differences, endogenous growth and  Current macroeconomic situation of Nepal
convergence

3 hrs Consumption, saving, investment: Chps 12,13

theories to describe behaviors of Other readings:
household and business, IS curve

4 hrs Asset markets, money and prices: theories Chps 11,15,19, Chap 18 (3rd edition)
to describe behavior in money markets, Other readings:
LM curve, monetary policies and  money market development in Nepal by World
instruments ; exchange rate and balance Bank
of payment theories, Sovreign debt
4 hrs Labor market: unemployment and labor Chp 7
market conditions, describing labor Other readings:
market with Classical and Keynesian  Socioeconomic and labor market trends:
models, unemployment and natural rate Nepal’s case, ILO
of unemployment, labor market reform  Unemployment : the curse of joblessness by
Oner (F&D)
 Remittances: funds for folks back home by
Ratha (F&D)
4 hrs Business cycles : theories of business Chp 14
cycles and businesses' aggregate Other readings:
behavior, classical and Keynesian models  Recession when bad times prevail by Claessens
using IS/LM/AD models & Kose (F&D)

4 hrs Macroeconomic Policy: Phillip's curve Chp 16

and stabilization policies (taming Other readings:
output/unemployment/inflation  What is the output gap by Jahan & Mahmud
fluctuations), bop and macroeconomic (F&D)

2
 policy in an open economy, policy
credibility and time inconsistency
problems; limitations of macroeconomic
policy
3 hrs Government financing: governments' role
in taxation and spending, distortionary
effects of taxation and government policy
including budget deficit and public debt
 What are the structural policies by Abdel-
Kader (F&D)
 Monetary policy: stabilizing prices and output
by Mathai (F&D)
 Real exchange rate: what money can buy by
Catao (F&D)
 Purchasing power parity: weights matter by
Callen (F&D)
 Capital accounts:liberalize or not by Kose &
Prasad (F&D)
 Current account deficits: Is there a problem by
Ghosh &Ramakrishnan (F&D)
 Inflation targeting : holding the line by Jahan
(F&D)
 Macroeconomists need to learn new lesson
((F&D)
 Monetary policy (Nepal Rastra Bank website)
Chp 10, Chap
Other readings:
 Recent budget of Government of Nepal
(Ministry of Finance website)
 Fiscal policy: taking & giving away ((F&D)