Download ECON 121 Principles of Macroeconomics

LAHORE UNIVERSITY OF MANAGEMENT SCIENCES
ECON 121: PRINCIPLES OF MACROECONOMICS
Instructor’s Name: Syed Zahid Ali
Year: 2003-2004
Office: 245
Quarter: Spring
E-Mail: [email protected]
Office Hours: Monday
Thursday
12.00 – 1.00
12.00 – 100
Course Pre-requisites: None
Course Description: The purpose of this course is to give students an introductory exposure
of macroeconomic theories, issues and understanding of goods market, input markets, money
markets, asset markets, and foreign exchange markets. After defining key variables such as
output, prices, inflation, unemployment, and exchange rate etc., we will develop various
theoretical frameworks to formalize the relationships between these variables. Such a
relationship will help track the economy in a dynamic setting. We also explore and explain
the reasons that cause recessions, inflation, and unemployment and government budget
deficit and debt. The factors that determine the interest rates and exchange rates will also be
identified.
Goals: Upon completion the course it is expected that students should be able to:
(a)
(b)
(c)
(d)
Text Book
understand the basic structure of the economy;
understand the key links between the five markets i.e., goods market, input
markets, money markets, foreign exchange markets and assets market.;
understand basic macroeconomic models as given by Classical, Keynesian, and
Modernists;
appreciate the role of monetary and fiscal policies in solving macroeconomic
problems.
2
Abel Andrew B. & Bernanke Ben S (2001) Macroeconomics, 4th Edition, Addison
Wesley (AB)
Additional Readings:
1.
Gregory N, Mankiw (1994) Macroeconomics, 2nd Edition, Worth Publishers.
2.
Hall, Rober E. & John B. Taylor (1997) Macroeconomics, 5th Edition,
W.W.Norton & Company: New York.
Class Schedules
There will be twenty 75 minutes and ten fifty minutes lectures.
1.0
Measurement and Structure of the National Economy (Week 1)
1.1
1.2
1.3
1.4
1.5
National Income Accounting: The Measurement of Production, Income, and
Expenditure
Gross Domestic Product
Saving and Wealth
Real GDP, Price Indexes, and Inflation
Interest Rates
Suggested Reading: AB Chap. 2
2.0
Productivity, Output, and Employment (Week 2)
2.1
2.2
2.3
2.4
2.5
2.6
Introduction
The Demand for Labour
The Supply of Labour
Labour Market Equilibrium
Unemployment
Okun’s Law
Suggested Reading: AB Chap. 3
3.0
Consumption, Saving, and Investment (Week 3)
3.1
3.2
3.3
3.4
Introduction
Consumption and Saving
Investment
Goods Market Equilibrium
3
Suggested Reading: AB Chap. 4
4.0
Saving and Investment in the Open Economy (Week 4)
4.1
4.2
4.3
4.4
4.5
Introduction
Balance of Payments Accounting
Goods Market Equilibrium in an Open Economy
Saving and Investment in Large Open Economies
Fiscal Policy and the Current Account
Suggested Readings: AB Chap. 5
5.0
The Asset Market, Money, and Prices (Week 5, 6)
5.1
5.2
5.3
5.4
5.5
Definition of Money
Portfolio Allocation and the Demand for Assets
The Demand for Money
Asset Market Equilibrium
Money Growth and Inflation
Suggested Readings: AB Chap. 7
6.0
The IS-LM/AD-AS Model:
(Week 6, 7, 8))
6.1
6.2
6.3
6.4
6.5
6.6
6.7
General Framework for Macroeconomic Analysis
Introduction
The FE Line: Equilibrium in the Labour Market
The IS Curve: Equilibrium in the Goods Market
The LM Curve: Asset Market Equilibrium
General Equilibrium in the Complete IS-LM Model
Price Adjustment and the Attainment of General Equilibrium
Aggregate Demand and Aggregate Supply
Suggested Readings: AB Chap. 9
7.0
Classical Business Cycle Analysis: Market-Clearing Macroeconomics (Week 8, 9)
4
7.1
7.2
7.3
7.4
7.5
Introduction
Definition of Business Cycle
Business Cycles in the Classical Model
Money in the Classical Model
Misperceptions Theory and the Non-neutrality of Money
Suggested Readings: AB Chap. 10
8.0
Keynesianism: The Macroeconomics of Wage and Price Rigidity (week 10)
8.1
8.2
8.3
8.4
Real-Wage Rigidity
Price Stickiness
Monetary and Fiscal Policy in the Keynesian Model
The Keynesian Theory of Business Cycles and Macroeconomic Stabilization
Suggested Readings: AB Chap. 11
Grading
Quizzes (3) 30%
Mid-Term 30%
Final
40%
Quizzes and Mid-Term Schedule
Quiz 1
Quiz 2
Quiz 3
Quiz 4
Mid-Term
Session 4
Session 8
Session 16
Session 20
Week 6
A non-credit Assignments will also be given from time to time. Students are also
advised to visit www.awlonline.com/abel_bernanke for useful exercises.