Module Code and Title:      ECO202 Macroeconomics

Programme:                                      Bachelor of Commerce

Credit Value:                                     12

Module Tutors:                                 Karma Lhaden, Dr. Swati Chakraborty, Kabita Chhetri

Module Coordinator:                        Dr. Swati Chakraborty

General Objective: This provides an introduction to macroeconomics. The module gives students a thorough understanding of the principles of economics that apply to an economic system as a whole. It places particular emphasis on the study of national income and price determination, and also develops students’ familiarity with economic performance measures, the financial sector, stabilization policies, and economic growth.

Learning Outcomes -On completion of the module, students should be able to:

1. Explain the basic concepts of economics and relate the basic economic theory and principles to current macroeconomic issues and evaluate related public policy
2. Anticipate and describe the potential impacts of fiscal and monetary policy changes on businesses/economy
3. Interpret charts, graphs, and tables and use the information to make informed judgments
4. Use economic models to analyse a situation in terms of economics
5. Apply effective, creative and innovative solutions, both independently and cooperatively, to economic problems/issues
6. Communicate knowledge and understanding of economic issues using written, verbal and visual expressions
7. Evaluate the broader social consequences of economic decisions making
8. Analyse impact of macroeconomic indicators in business situations of moderately complex nature

Teaching and Learning Approach:

Assessment Approach:

A. Application-based assignments: Portion of Final Marks-20%

Each student will complete 2 assignments (10% each) of 5 problems or topics each using economic concepts on business problems concerning the national income and money market.

3%       using the correct procedure and calculations

3%       applying economic concepts to answer questions

4%       drawing the correct conclusions

B. Case study and presentation: Portion of Final Marks-15%

Groups of 4 will complete a case study of 2000 words, based on current financial topics in the news. Each group will then deliver a presentation of 10 minutes, followed by a 5 min Q & A session. All group members must be involved in the presentation and the Q&A session.

3%       defining the economic problem presented by real situations

5%       reaching reasonable conclusions using economic analysis

2%       group presentation: cohesiveness and organization

5%       individually assessed process score (contribution to the group output and responses in Q&A)

C. Panel Discussion: Portion of Final Marks-10%

Students in group will be given topics and a panel discussion will be held. The tutor will work as a moderator of the discussion. Assessment of the individual participants will be based on their valid contribution to the discussion.

D. Midterm Examination: Portion of Final Marks-20%

Students will take a written exam of 2-hour duration covering topics up to the mid-point of the semester.

E. Semester-end Examination: Portion of Final Marks-35%

The module will have a semester-end exam for 2 hours covering the entire syllabus. The question will be divided into two parts – Part A (carrying 40% of the exam weightage) will be mostly of short answer including objective questions. Part-B (carrying almost 60% of the exam weightage) will be mostly of essay type or an extended response to the given question. This part of the question requires students to apply, analyse, and evaluate or construct knowledge and skills. Cases will also be used to test the levels of knowledge.

Pre-requisites:ECO101 Microeconomics

Subject Matter:

1. Introduction to Macroeconomics
   • Macroeconomics and its scope
   • How macroeconomics is different from microeconomics
   • Overview of the national economy

2. National Income
   • Circular flow in a four-sector open economy
   • Concepts of national income
   • Methods of measuring national income (with simple numerical examples)
   • Limitations in measuring national income
   • Importance of national income analysis

3. The IS-LM Model
   • The goods market and the IS Curve
   • The money market and the LM Curve
   • Equilibrium in the goods and money markets
   • Effects of change in the monetary and fiscal policies

4. Monetary and Fiscal Policy
   • Monetary policy
   • Fiscal policy and crowding out
   • The composition of output and the policy mix
   • The policy mix in action

5. Anatomy of Inflation and Unemployment
   • Overview of labour market
   • Unemployment: cause, effects and costs of unemployment
   • Full employment
   • Natural rate of unemployment
   • Equilibrium in the labour market
   • Inflation: Cause, effects and cost of high inflation
   • Is little inflation good for the economy
   • Phillips curve

6. Aggregate Supply and Demand
   • The aggregate supply curve
   • The aggregate demand curve
   • Equilibrium in all three markets: Goods, financial and labour
   • Dynamic effects of fiscal and monetary policy change

7. The Central Bank, Money and Credit
   • The money stock determination – the money multiplier
   • The instruments of monetary control
   • The money multiplier and bank loans
   • Control of the money stock and control of the interest rate
   • Money stock and interest rate targets
   • Money, credit and interest rates
   • The income velocity of money and the quantity theory

8. Economic Growth and Factors Impacting Growth
   • How to measure the standard of living, introduction to the growth model
   • Role of capital accumulation in growth
   • Interactions between output and capital accumulation and the effects of the saving rate
   • Role of technological progress andcapital accumulation in growth
   • GNH compatibility and conflict with economic growth in Bhutan

Reading Lists:

1. Essential Readings
   • Blanchard, O.,& Johnson, D.R. (2013). Macroeconomics (6th ed.). Boston: Pearson.
   • Dornbusch, R., Fischer, S.,& Startz, R. (2011). Macroeconomics (11th ed.). Delhi: McGraw-Hill Europe.
   • Jhingan, M.L. (2010). Macroeconomic theory (12th ed.). Delhi: Vrinda Publication (P) Ltd.
   • Mankiw, N.G. (2010). Macroeconomics(7th ed.). Worth Publishers.
   • Royal Monetary Authority Act of Bhutan (2010)
2. Additional Readings
   • Gross National Happiness Commission. (2013).Eleventh Five Year Plan (2013-2018).
   • Royal Monetary Authority. Annual Reports and other publications.
   • National Statistical Bureau. Reports and data.

Date: July, 2017