Course title: Macroeconomics I (2000)
Course code: ECON 1008
This is an introductory course in macroeconomics for those expecting to take further courses in economics. It enables students to gain a firm foundation of core principles of the macroeconomic theory. Students acquire a clear view of the determinants in economics and develop an awareness of the factors affecting its fluctuation and long-term tendency. This course equips students with the appropriate tools and methods for macroeconomic analysis as they recognise the relevance and the application of the macroeconomic theory in a variety of contexts and current issues. Students become aware of the government interventions and the nature and effects of macroeconomic policies.
By the end of this course, students will be expected to have the following:
Knowledge and understanding
Students will understand:
- The interactions between economic agents in generating, distributing and using economic resources and the national income
- The different ways of measuring national income and other economic variables
- The concept and use of national income to measure growth and other phenomena’s in economics
- Different theories, analytical methods and approaches in macroeconomics
- The importance of the model-based approach to study macroeconomic issues
- The workings of the labour market, the source of unemployment and how it fluctuates over a business cycle
- How business investment decisions and household saving decisions are made and how the government may affect those decisions
- The main sources of long-term growth and illustrate the theories of economic growth
- The different theories of business cycles and recognise the Keynesian, monetarist theories of the business cycle
- The factors determining the level of economic activity and by using model-based arguments to illustrate the effects of aggregate supply and demand changes and their relationship with the business cycle
- The role of money, indicate its effects on the price level and economic activity
- The tools of monetary policy and their use in affecting the quantity of money
- The demand for money and describe how the Central Bank's actions on the interest rate would affects spending plans, economic activity and the price level
- Inflation and its short run/long run relationship with unemployment and interest rates
- Fiscal and monetary policies, their goals and the effects they produce on the level and growth of the economic activity
- The country's balance of payment account and identify the determinant of international borrowing and lending
- The value of exchange rate.
Students will be able to:
- Apply comparative and sensitivity analysis to gain some insights of the effects on the reference framework of changing parameters
- Understand transferable concepts useful in the decision-making process, such as equilibrium and perturbations, opportunity cost, incentive, expectations and surprises and marginal considerations
- Work with groups and co-operate with peers in problem-solving situations
- Prepare a written essay recalling information, explaining theoretical concepts and models.
Relevant practical skills
- Explore and formalise mathematically relationship between economic variables
- Gain training in setting up and solving problems using appropriate economic language, methods and criteria.
Students will be able to:
- Realise that economic principles and models are simplification of complex systems
- Provide a workable framework to study events
- Assess and evaluate the effects of economic policies
- Collect and interpret information about the current and past levels of employment, unemployment, price level, inflation and balance of payment and read tables and graphical representation of data
- Organise information and infer from the conditions and performance of an economic system.
Students will be able to:
- Present, verbally, graphically or mathematically theoretical concepts and principles, using appropriate terminology and analytical apparatus.
- Introduction: the way of thinking economics
- Central ideas: choices; incentives; tradeoffs; opportunity costs; the forces of demand; supply and equilibrium
- Instruments, tools and methodology in macroeconomics
- Macroeconomics revolution: theoretical controversies and new contributions
- National accounting: measuring the economy
- The concept of national income and its relationship to economic welfare
- The circular flow of income
- Macroeconomic concepts: use tools of economics to explain issue in today's world
- Business cycle
- Macroeconomic behaviour: classical and Keynesian macroeconomics
- Classical dichotomy: real sector and money sector
- Consumption, income and saving
- The national debt and deficit
- Keynes's income/expenditure model
- The multiplier concept in an closed and open economy
- The nature of money and its functions
- The relation between money and price, monetary policy and the role of central bank
- The equilibrium: determination of real income and the price level and employment
- The IS/LM model
- The interaction of aggregate demand and aggregate supply
- Short-run inflation and deflationary gaps
- Theories of inflation
- The Phillips curve
- Macroeconomic policies
- Supply side and demand management polices
- The global economy: the effects of international trade and financial transaction in the economy
- BOP and exchange rate.
Teaching and learning
Lectures are devoted to the introduction and explanation of concepts and analysis; to the development of relevant models of modern macroeconomics; and to the elementary identification of model-based results. Some lectures are devoted to the presentation of online sources of economic/financial data. Online handouts are available to help students to engage in active learning during the lectures, rather than focussing on taking copious notes. Students are encouraged to play an active role in learning by exploring issues and ideas, asking questions, searching for answers and interpreting observations. They are expected to do some independent work and read the recommended material before coming to class and bring to class the relevant set of hand notes available online, so as to be able to focus on the content of the topic presented during the lesson.
During reading time, students are encouraged to engage in active and effective learning through interactive tutorials available online. In order to promote active learning, students are exposed to a writing-intensive approach based on the principles of the writing across the curriculum approach (WAC). Each term they produce eight to ten short papers (one to two pages) one on each major topics of this course. The writing assignments include personal views, summary of specific authors' ideas, reflective essays, technical assignments, explanation of economic models and their predictions. Over the course of a term, the assignments become progressively more complex, leading to the production of more formal economic analysis. This approach is not primarily to make students better writers but to give them a tool to learn economics better. Group tutorials focus on reinforcing concepts presented during the lecture, examining materials more in depth and discussing ideas of articles from the Financial Times or the Economists that are relevant to the material taught in specific weeks.
Since most learning does not take place in class or reading time. Students are encouraged to read about the economy on their own, to discuss economic issues together, to interact and co-operate with other students through group work and collegial assignments. It is important to stress that participation to tutorial sessions is crucial not only for the didactic activity and participatory learning, but also because selected homework assignments, quizzes, group-work and other skill practices contribute to the final summative assessment.
Some tutorial sessions are run in the computer laboratory. These sessions stimulate interactive learning activities online as well as working on online assignments, practicing numerical and econometric skills and information management and data handling.
Assessment is through coursework, patchwork tests, class participation and an examination. Participation – 15%. Coursework – 15%. Patchwork tests – 20%. Examination – 50%.