Course Information Undergraduate prospectus

Macroeconomics and Microeconomics in Context 1

Course summary

Course code: ECON1140
Level: 5
Credits: 30
School: Business Faculty
Department: International Bus and Economics
Course Coordinator(s): Mahkameh Ghanei

Specification

Aims

This is a core unit in microeconomics and macroeconomics for intermediate (level 5 – second year) level. It strengthens the foundations of the core principles of economic theory and analysis, it contextualises the relevance, applicability and limitations of theories providing a pluralistic view from the macroeconomic and microeconomic perspectives, and it offers abundance of current real-world examples and applications to make theoretical exposition close to experience.

Topics will be treated from a theoretical, mathematical and applied standpoint. The contextualisation will recognise that: (1) individuals are not isolated, but are embedded in collective processes, decision-making, and outcomes; (2) they have imperfect knowledge of the economy; (3) social, environmental, and political conflicts are central aspects of economics. Within the broad themes of social and environmental well-being and sustainability, attention is paid to globalization and international markets, institutions, inequality, technology, “financialisation” of the economy, the Great Recession and its aftermath. The ultimate objectives are to bridge theoretical and factual knowledge of current economic issues and to draw policy implications that can be used to evaluate policies.

Learning outcomes

1 Knowledge and understanding of economic models/theories (macro and micro) from pluralistic and international perspectives
2 Understanding of methodology and tools if economic analysis
3 How to contextualise and apply economic theories to real world factual evidence and current policy issues (such as: social; environmental; global; and sustainable)
4 Using quantitative methods and computing techniques relevant to the study of economics
5 Handling and interpretation of data relevant to the study of economics in the context of international markets
6 Identifying the interaction of economics with other social sciences and micro and macro context of business

Indicative content

The course consists of two parts: a Macroeconomics part and a Microeconomics part. Both parts will cover theory, applications and policies.
A) Theory, methodology and applications (pluralism)
MACROECONOMICS
1) Mundel-Fleming model: AD and AS curves and equilibrium and perturbations
AD curve and inter-temporal economics
• Consumption theory (testing the random Walk hypothesis)
• Capital Accumulation and firms’ decisions
• Different views of government Debt and Deficit. Potential incidence of taxation on incentives and avoidance. Testing the Ricardian Equivalence
• Open economy and international trade; the real exchange rate and interest parity condition (testing the PPP)
• Monetary Economy and international financial markets; the Tailor rule. Testing the uncovered interest parity
The AS curve
• Capital accumulation and technology;
• Labour Market and Unemployment (static, dynamic): international comparisons
• Okun’s Law, Inflation, Output and Unemployment
• The Phillips Curve and the Expectations Augmented Phillips curve: testing the PC

The general equilibrium (under fixed and flexible exchange rate) and the cyclical Behaviour of the Economy
• Stylised facts about business cycles and comparison between different theories of the business cycles: Classical, Keynesian and Lucas real theories. Measuring the international business cycle and the propagation effect.

2) Special issues in Macroeconomics: information, uncertainty and incentives (either)
• Stability and instability: Minsky’s second theorem
• Challenging the efficiency and rationality assumptions: Behavioural economics
• Imperfect Knowledge Economics
MICROECONOMICS
• Consumer theory
• Developments in the neo-classical consumer theory Money income & Real income (Marshall, Hicks and Slutsky’s theories)
• Applications, extensions and issues in consumer theory – (taxation, the labour market)
• Lancaster’s Characteristics theory – a critique of the neo-classical consumer theory
• Theory of the firms (perfect competition, monopoly, and imperfect competition)

B) Policy in context (social, global, environmental and information)
MACROECONOMICS:
Transmission mechanisms and macroeconomic stabilization policies: stabilization and sustainability
• The influence of fiscal policy on consumers, firms and the environment in an open economy
• Conventional and unconventional monetary policies and the housing market in an open economy
• Macroprudential policies and financial stability in an open economy
• Supply side policy and effects on business decisions in an open economy
• The Washington Consensus and the Augmented Washington Consensus (primer)
MICROECONOMICS:
• Industrial Organisation: price discrimination & product differentiation
• Game theory (Prisoners’ Dilemma)
• Micro prudential policies

Teaching and learning activity

The course will be delivered through a weekly lecture (two hours), tutorial and lab sessions. Lectures will provide a comprehensive conceptual framework of the all key areas of theoretical economics – both macro and micro. Tutorials will focus on the discussion of case studies, the exploration of issues, and student presentations and will involve tutor led discussions.

Scheduled contact hours include: practical classes and guest speakers taking place in lectures (24) and tutorials (24). Other non-scheduled time: guided independent study Include in preparation for scheduled sessions, follow up work, wider reading or practice, revision. Other non-scheduled time: engagement with international businesses.

Assessment

Portfolio - 50% weighting, 40% pass mark.
Learning outcomes 1, 2, 4 & 5.
Outline Details - Problem sets and Patchwork.

Exam - 50% weighting, 50% pass mark.
Learning outcomes 1, 3 & 6.
3 hour closed book exam.

Students are not required to pass all summative assessments in order to pass the course.

Formative Assessment - Number of different problem set exercises – aiming at developing different skills such as: essay writing; data analysis; exam techniques; poster presentation; and research.