ECO-221 Macroeconomics II

(10 credits) Total hours: 100 Type: Core

Course aim

This course is a continuation of Macroeconomics I that aims at exposing to a more rigorous

analysis of macroeconomics. This course will cover a wide range of topics including national
income and its determination, equilibrium aggregate demand and supply, consumption and
investment theories. The main topics covered includes: National income determination, foreign
trade, Growth and employment stabilization, and adjustment policies. The ultimate objective is for
the successful candidate to be able to undertake basic macroeconomic analysis.

Expected course outcome

On the completion of the course a student should be able to:

- Describe national income and its determinants

- Recognize aggregate demand and aggregate supply equilibrium
- Describe consumption and investment theories
- Understand the link between macroeconomic theory and policy
- Describe the interrelationships between Tanzania and other sovereign economies both
within the region and across the world
- Identify, compare, contrast, and evaluate the various schools of economic thought in light
of actual economic events and data
- Understand the key historical and chronological events that have impacted upon both
economic theory and policy development

Course contents

1. Review of national income and product accounts

2. Economic growth
- Growth accounting
- Neo classical growth model (steady state, saving rate, population growth, productivity
growth)
- Endogenous growth theory
3. Growth and employment
- Business cycles
- Theory of real business cycle
- Equilibrium in aggregate economy
- Short run and Long run equilibrium
- Recessionary gap
- Inflationary gap
- Economic policy (contraction and expansionary fiscal and monetary policy)
4. IS-LM model
- Description of IS-LM model
- Brief description of Keynesian economic model
- Construction of IS-LM model
- Deriving IS curve
- Shift in IS curve
- Deriving LM curve
- Shift in LM curve
- Equilibrium in the IS-LM model
- IS-LM Disequilibrium quadrants
- Policy analysis with IS-LM model
5. Open economy foreign trade
- Current account
- Capital account
- Foreign reserve
- Balance of payment
- National Debt
- Exchange rate
6. Stabilization and structural adjustment policies
- Logic and content of stabilization and adjustment
- Fiscal and monetary policies and instruments
- Non fiscal and non-monetary instruments
Assessment methods

 Quizzes (5%)
 Assignment (15%)
 Mid-semester test (20%)
 Final exam (60%)

Teaching methodology

Learning methods include lectures and demonstration, small group and whole class discussion,
small group presentations and other independent studies.

Reading list

Branson, W.H. (1993). Macroeconomics: Theory and Policy. Harper and Row: NY.

Mankiw, N. G. (2010). Macroeconomics.