Addis Ababa University

College of Business and Economics

Department of Economics
Course outline
Course Instructor: Demilie B.
Program: Economics regular
Module Name: Macroeconomics
Module Category: Core
Module Code: Econ 2031
Course Description
Macroeconomics I focus mainly on short run analysis of an economy or business cycle. Hence, the main aim of this
course is to present and discuss the different views of economists (as represented by school of thought) on how an
economy behaves in the short run, how equilibrium is achieve in the short run, and the role of market forces and
government in short run economic stabilization. For this purpose, this part is divided in to three parts: Introduction,
aggregate demand and supply analysis of a closed economy, and the analysis of open economy macroeconomics.
Course objective
In this module the students are exposed to look at the aggregate analysis of an economy and the interrelationship between
various aggregate economic variables. It also incorporates the monetary and fiscal policy instruments through which
government can influence the value and dynamics of aggregate economic variables and thereby the performance of
economies. It also presents the analysis of transmission mechanism of the effect of macroeconomic policies on the
behavior of economic agents. Generally, the course enhances the knowledge of the students regarding the functioning of
the economy as a whole as well as the rest of the world thereby to develop a closer link between academic learning and
the professional practice in analyzing various economic aspects.
We Lecture Topics Of Lecture Main Reference
ek (Hour)
Chapter 1: The State of Macroeconomics – Introduction
6 hour What macroeconomics is about? N.GregoryMankiw, 2007,
Basic Concepts and Methods of Macroeconomics Macroeconomics 4th edition
Analysis William H. Branson, 2006
Macroeconomic Goals and Instruments Macroeconomic Theory and
The State of Macroeconomics: Evolution and Recent Policy
Developments
Classical macroeconomics
Keynesian macroeconomics
Neo-classical macroeconomics
Chapter 2: National Income Accounting
8 hour The concepts of GDP and GNP
Approaches of measuring national income (GDP/GNP) N.GregoryMankiw, 2007,
Other Social Accounts (GNP, NNP, NI, PI and DI) Macroeconomics 4th edition
Nominal versus Real GDP William H. Branson, 2006
The GDP Deflator and the Consumer Price Index Macroeconomic Theory and
GDP and Welfare Policy
The Business Cycle
Unemployment and Inflation
Chapter 3:Aggregate Demand in the closed Economy
14 hour Foundations of Theory of Aggregate Demand N.GregoryMankiw, 2007,
The Goods Market and the IS curve Macroeconomics 4th edition
The Money market and the LM curve William H. Branson, 2006
The Short Run Equilibrium Macroeconomic Theory and
From the IS-LM to Aggregate demand Policy
Chapter 4:Aggregate Demand in the Open Economy
 12 hour International flows of Capital Goods N.GregoryMankiw,
Saving and Investment in the Small Open Economy 2007,
Exchange rates Macroeconomics 4th
The Mundell-Fleming model edition
fiscal and monetary policies in an open economy with perfect capital William H. Branson,
mobility 2006 Macroeconomic
Fixed exchange rate Theory and Policy
Floating exchange rate
4.6 Limitations of the Mundell-Fleming model
Chapter 5: Aggregate Supply
8 hour Introduction
The Classical Approach to Aggregate Supply
The Keynesian approach to Aggregate Supply
5.3.1. The Sticky Price model
5.3.2. The Sticky Wage Model
5.3.3. The worker- misperception model
5.3.4. Imperfect information Analysis
Chapter 6: Behavioral Foundations : theories of consumption
16 6.1 the Keynesian consumption Function
6.1 the early empirical successes
6.2 secular Stagnation, Simon Kuznets and the consumption puzzle
6.3 Irvin Fischer’s Model
6.4 Modigiani’s Life cycle Hypothesis model
6.5 Friedman’s permanent income Hypothesis
6.6 Hall’s Random Walk model
Rational expectations
Adaptive expectations
Naïve expectations
Course Policy
Late coming is not allowed and no student is allowed to enter after class has started.
Duplication of assignments is strictly forbidden; it entails serious penalty.
Assignments are required to be submitted before or on the deadline.
Cheating during exam sessions results in a minimum of “F “grade while cheating in quizzes and tests is subjected to a
zero mark. All cheating cases will be reported to the department for further considerations.
Students should switch off their cell phones while they are in class and must keep their cell phones switched off during all
kinds of exam sessions.
students must attend 80% of the class for the course. Failure to attend 80% of the class will not allow the student to sit for
the final exam.
Evaluation method Weight
Test 30%
Assignment 20%
Final 50%
Missing a quiz without convincing evidences will earn the students a grade of zero marks in that specific quiz
Reference:
Text Books
N. Gregory Mankiw, 2007, Macroeconomics 4th edition Worth Publishers USA
William H. Branson, 2006 Macroeconomic Theory and Policy
Dornbusch, R. and S. Fischer: Macroeconomics
Additional readings
Eduard Shapiro, 2007. Macroeconomic Analysis 5th edition New Delhi
Olivier Blanchard, 1997.Macroeconomics Prentice Hall Inc. New jersey USA