Description
This is an intermediate unit in macroeconomic theory and policy applications. Topics include short-run economic fluctuations, long-run economic growth, unemployment, inflation, and fiscal and monetary policies.Macroeconomics is a branch of economics that studies the workings of an economy as a whole. This unit introduces students to the most important concepts and theories of macroeconomics. In this unit, students will acquire the knowledge of the causes and effects of business-cycle fluctuations, and how policymakers can reduce business-cycle volatility by using fiscal and/or monetary policies. It is expected that students will learn the mechanisms and limitations involved in conducting fiscal and monetary policies. It is also important for students to explain the policy goals of maintaining full employment and low inflation as well as keeping internal and external balances, and how these policy goals can be achieved. Economic growth is an important topic in macroeconomics and students in this unit are expected to understand the determinants of long-run economic growth. Upon successful completion of this unit, students should be well- prepared to continue studying macroeconomics at the third-year level.
The study of macroeconomics can be divided into three different time frames: The short, medium and long runs. In the short run, we are concerned with business-cycle fluctuations, which may be caused by changes in consumption, investment or imports and exports. Inflation and unemployment are the medium-run topics because wage and price levels do not change instantaneously, but only with long time lags. In the long run, economic growth is the most important topic that preoccupies the attention of many macroeconomists.
This unit first focuses on short-run business-cycle fluctuations, then medium-run inflation and unemployment, and finally long-run economic growth. We will also discuss topics in open economy such as nominal and real exchange rate and policies under open economy. Throughout this Unit, a number of economic models will be used as analytical tools that involve extensive algebraic manipulations.