Bachelor
2023/2024
Introduction to Macroeconomics
Type:
Compulsory course (International Programme in Economics and Finance)
Area of studies:
Economics
Delivered by:
International College of Economics and Finance
When:
1 year, 3, 4 module
Mode of studies:
offline
Open to:
students of one campus
Language:
English
ECTS credits:
6
Contact hours:
92
Course Syllabus
Abstract
Introduction to Macroeconomics is a one-semester course and is taught for the first year students in Spring semester. This course gives the introduction to the macroeconomic fundamentals and to the main concepts and principles of macroeconomic theory and policy. The course deals with the analysis of aggregate product and national income as well as the price level determination; the measurement and problems of unemployment and inflation and their trade-off; the money and banking; the goods market, the financial market, the loanable funds market and the labour market equilibriums; the short-run economic fluctuations as the results of the different types of economic shocks, primarily aimed to understand the key instruments, mechanisms and consequences of the stabilization (fiscal and monetary) policies in the short run and in the medium run in the closed economy an different theories regarding these policies; the long-run economic growth and its sources. A special part is devoted to the issues of the open economy macroeconomics such as the exchange rates and the determinants of their changes; the foreign exchange market equilibrium; the balance of payments structure; the ends of the stabilization policies and of the different types of shocks in the open economy. The course is taught in English. The students are also studying for Russian degree in Economics, and knowing Russian economic terminology through reading in Russian is required.
Learning Objectives
- The purpose of the course is to give students a thorough understanding of the principles of economics that apply to an economic system as a whole and of the mechanism of macroeconomic processes and different types of macroeconomic policy.
- The specific aims of the course are: to give the knowledge of macroeconomic terminology and basic macroeconomic concepts and issues;
- to show the economic intuition of macroeconomic performance and aggregate economic activity;
- to form the economic way of thinking, that is to use the intuitive analysis of economic process and macroeconomic policy;
- to explain the main principals of macroeconomic analysis using simple algebra and graphs;
- to teach students to apply their knowledge to analyze, interpret and explain specific macroeconomic problems, stylised economic facts and real macroeconomic situations;
- to form ability in reading and understanding economic literature.
Expected Learning Outcomes
- After studying the course, a student should be able: to define the science of macroeconomics; to distinguish between macroeconomic and microeconomic problems and variables; to explain the main principles and methods of macroeconomic analysis; to give the intuition of how the whole economy performs using the circular flows model, and to describe the macroeconomic system and its key elements
- to define gross domestic product (GDP) and the three methods of its calculation, to calculate other variables of aggregate output and aggregate income; to distinguish nominal GDP from real GDP, and actual GDP from potential GDP; to calculate the key macroeconomic variables such as unemployment rate, inflation rate, output growth rate, level of economic welfare
- to explain the way of defining of equilibrium real output in the long run and in the short run, the importance of aggregate demand for determination of the short-run equilibrium in macroeconomy; to derive the short-run consumption function, the saving function and the investment function, to give the intuition of the market clearing process in the goods market in the short run, of the multiplier effect, of the “paradox of thrift” and of the output gaps, to show them on the Keynesian Cross graph
- to interpret the effect of government purchases, lump-sum taxes, transfer payments, balanced budget and proportional taxes on aggregate demand and aggregate output; to calculate government sector multipliers; to explain the role of the foreign sector and of the change in the functions of aggregate expenditures and of aggregate saving in the three sector and four sector models of the goods market; to calculate all types of the goods market multipliers in the open economy
- to list the targets, the instruments and the types of fiscal policy; to interpret the mechanism of each type of fiscal policy and to show it on the appropriate graphs; to explain the drawbacks and limitations of fiscal policy, especially the crowding-out effect and the budget deficit
- to define financial assets and their types; to define money and to list the functions and the kinds of money; to give the intuition of the money creation process and of the multiplier effect in the money market; to interpret the determinants of the money demand and of the money supply, and to give intuitive explanation of the money market equilibrium and the process of its restoration;
- to define the ultimate goals and the intermediate targets of monetary policy, to list the tools and the types of monetary policy; to give the intuition of the money transmission mechanism and to show it on the graphs; to list and to interpret the drawbacks and problems associated with the conventional monetary policy; to explain the purposes and the tools of the unconventional monetary policy
- to define labour demand and labour supply; to explain the labour market equilibrium; to define aggregate supply (AS) and to derive the long-run aggregate supply (LRAS) curve and the short-run aggregate supply (SRAS) curves from the long-run and the short-run equilibrium of the labour market, respectively; to list and interpret modern approaches to the causes for the deviations in the short run of actual output from its potential level and hence of the positive slope of the SRAS curve
- to define aggregate demand (AD), to derive the AD curve and to explain its main properties; to interpret the equilibrium in the AD-AS model and the process of its restoration; to determine the types of AD and AS shocks and to explain intuitively the mechanism and the consequences of each type of shocks in the short run, in the medium run and in the long run
- to define unemployment and the way of its measurement; to interpret sources and types of unemployment; to distinguish natural unemployment rate from the actual rate of unemployment and to use the labour force dynamics model to calculate the natural rate of unemployment; to discuss the consequences of unemployment both economic and non-economic, individual and societal, especially the Okun’s laws, and to list government policy measures to reduce unemployment
- to define inflation and its types, and to interpret the causes of inflation; to discuss and explain the costs of inflation, and to show why inflation is a deterrent for the long-run economic growth; to distinguish expected inflation from unexpected inflation and their consequences; to explain the Fisher effect
- to explain the trade-offs between inflation and unemployment; to interpret the Phillips curve relation and the history of its development; to construct the short-run and the long-run Phillips curves, and to give the intuition of how economy moves from the short run to the long run under different types of inflationary expectations; to define disinflation policy, to explain its mechanism and to interpret the sacrifice ratio under the two strategies of disinflation policy
- to define the long-run economic growth and its main goal, and to show the long-run economic growth on the graphs; to discuss the types and the sources of the long-run economic growth using the production function, and to explain how government policy can stimulate the long-run economic growth
- to define the exchange rate, to list the factors that influence the demand for national currency and the supply of national currency, and to explain the exchange market equilibrium and the causes and consequences of its changes; to discuss the balance of payments and its structure; and to explain how the balance of payments becomes balanced under the fixed and under the flexible exchange rate systems;
- to interpret the internal shocks and the external shocks and the adjustment process under the fixed and under the flexible exchange rate systems; to explain the mechanism and the ends of the fiscal and of the monetary policies in the open economy under the fixed and under the flexible exchange rate systems;
Course Contents
- The Introduction to Macroeconomics
- Measuring National Output and National Income
- The Goods Market Equilibrium
- The Financial Market Equilibrium
- The Fiscal Policy in the Closed Economy
- The Monetary Policy in the Closed Economy
- The Simultaneous Equilibrium in the Goods and the Money Markets and Aggregate Demand
- The Labour Market Equilibrium and Aggregate Supply
- Aggregate Demand and Aggregate Supply
- Unemployment
- Inflation
- The Phillips Curve
- The Long-Run Economic Growth
- The Open Economy Macroeconomics
Assessment Elements
- final International ExamThe final International Exam includes all themes.
- class activity
- home assignments
- midterm Mock ExamThe midterm Mock Exam covers the first half of the course.
Interim Assessment
- 2023/2024 4th module0.1 * class activity + 0.51 * final International Exam + 0.1 * home assignments + 0.29 * midterm Mock Exam
