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Macroeconomics 1

Academic Year
Instruction in English
ECTS credits
Course type:
Compulsory course
2 year, 3, 4 module


Course Syllabus


Macroeconomics-1 is a one-semester course delivered for the second-year ICEF students in the Spring semester. It is taught in English and finally examined by the University of London international programme. The course focuses on the core macroeconomic models that describe closed and open economy issues both in the short- and the long-run. In particular, it provides the basic toolkit for the analysis of business cycles, such as the IS-LM-BP and AD-AS models, and develops students’ ability to apply it to the real world where central banks set interest rates to target inflation. It also equips students with the Solow model that helps justify and evaluate public policies aimed at promoting long-term economic growth. PREREQUISITES: This is an introductory course and requires virtually no specific knowledge of the subject beyond the APT level. Working knowledge of mathematics (i.e. elementary calculus) is a must. Due to specific structure of the final University of London exam, Microeconomics-1 course is a corequisite.
Learning Objectives

Learning Objectives

  • develop the model-based way of ‘aggregate thinking’ and make students ready to apply relevant macroeconomic tools in their further studies and professional career
  • introduce students to the main factors of aggregate demand fluctuations in a mixed open economy as well as determinants of long-run aggregate supply dynamics
  • explain the concepts of equilibrium output, unemployment and inflation using both general language and analytical tools
  • develop students ability to critically evaluate and justify implications of macroeconomic policies
  • enable students to participate in debates on macroeconomic and political matters and present their group work results
Expected Learning Outcomes

Expected Learning Outcomes

  • ILO 1: define the main macroeconomic concepts and describe the models and methods used in the macroeconomic analysis of the long-run dynamics
  • ILO 2: formulate real world phenomena at the aggregate level in the language of macroeconomic modelling using graphic analysis and simple algebra
  • ILO 3: apply proper analytical models to solve standard macroeconomic problems at the intermediate level
  • ILO 4: assess potential and limitations of the basic macroeconomic models and extend them to evaluate and justify positive macroeconomic policy propositions
  • ILO 5: illustrate relevance of basic macroeconomic models both in written and oral communications through applying good group working practices
Course Contents

Course Contents

  • National accounts and output determination
    The problem of aggregation, the circular flow of income, leakages and injections, national income accounting, value added and the NNP=Y identity, real and nominal gross domestic product (GDP). Actual and potential output, consumption, investment, government expenditure. Taxation and disposable income. Keynesian Cross diagram: income determination, equilibrium, the multiplier, the paradox of thrift. The government budget and taxation, balanced budget multipliers. Automatic stabilisers (the financing of government), the role of discretionary fiscal and redistribution policy
  • The IS-LM model
    The role of money, real balances, the liquidity preference approach and the demand for money (liquid assets), commercial banks and the supply of money (banks and the various multipliers). Interest rates and monetary transmission. Central banks and monetary control, goals, targets and instruments of monetary control. Equilibrium in the money market and the transmission mechanism Goods market equilibrium and the IS curve, equilibrium in the money market and LM curve, the IS-LM model, monetary and fiscal policies in a closed economy
  • The AD-AS model
    Keynesian and classical assumptions regarding wages and prices, aggregate supply in the long-run and the short-run, the effects of exogenous demand and supply shocks. Inflation targeting, the Taylor rule, the quantity theory of money, the Phillips curve in the long-run and the short-run, stagflation and the role of expectations, costs of inflation. Types of unemployment, voluntary and involuntary unemployment, causes of unemployment, private and social costs, hysteresis
  • The IS-LM-BP model
    Imports and exports. The foreign currency market, exchange rate regimes, the balance of payments, capital mobility, the rate of interest and the price of foreign currency. The multiplier in an open economy. The effects of fiscal and monetary policies under fixed and floating exchange rates with and without capital mobility
  • Economic growth
    Supply-side economics, growth in potential output, capital accumulation. The Solow model with exogenous technological progress, balanced growth path and steady state. Romer's model of endogenous growth. Absolute and conditional convergence, increasing returns, policies to promote growth
Assessment Elements

Assessment Elements

  • non-blocking Classroom activities
    Quizzes on lectures (0.1) and group work activities (0.1) in classes
  • non-blocking Home Assignments
    The best ten grades for home assignments are finally counted
  • non-blocking Mid-term test
    Closed-book proctored test (offline or online)
  • non-blocking Team project
    Individualised team grades
  • non-blocking Final exam (UoL or HSE)
    External exam organised by the Universtity of London. UoL Assessment criteria are available at https://london.ac.uk/sites/default/files/regulations/progregs-emfss-20-21.pdf
Interim Assessment

Interim Assessment

  • Interim assessment (4 module)
    0.2 * Classroom activities + 0.4 * Final exam (UoL or HSE) + 0.1 * Home Assignments + 0.2 * Mid-term test + 0.1 * Team project


Recommended Core Bibliography

  • Economics, Begg, D., 2011
  • Economics, Begg, D., 2014

Recommended Additional Bibliography

  • Ben S. Bernanke, & Frederic S. Mishkin. (1997). Inflation Targeting: A New Framework for Monetary Policy? Journal of Economic Perspectives, (2), 97. https://doi.org/10.1257/jep.11.2.97
  • Blanchard, O., Amighini, A., & Giavazzi, F. (2013). Macroeconomics: A European Perspective (Vol. 2nd ed). Harlow: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1418008
  • David H. Romer. (2000). Keynesian Macroeconomics without the LM Curve. Journal of Economic Perspectives, (2), 149. https://doi.org/10.1257/jep.14.2.149
  • Jones, A. (2005). Culture and context: critical thinking and student learning in introductory macroeconomics. Studies in Higher Education, 30(3), 339–354. https://doi.org/10.1080/03075070500095788
  • Krugman, P. R., Obstfeld, M., & Melitz, M. J. (2015). International Economics: Theory and Policy, Global Edition (Vol. Tenth edition, global edition). Boston: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=nlebk&AN=1419045
  • Mankiw, N. G. (1990). A Quick Refresher Course in Macroeconomics. Journal of Economic Literature, (4), 1645. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.aea.jeclit.v28y1990i4p1645.60
  • Mankiw, N. G. (DE-588)120973626, (DE-576)164048383. (2000). Macroeconomics / N. Gregory Mankiw. New York, NY: Worth. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edswao&AN=edswao.07890529X