Principles of Macroeconomics

Module leader: Mr M.J. McCrostie (email: )
One term (15 units)

Aims of the module

To provide a study programme which is complementary to the module in Principles of Microeconomics and which gives an introduction to some basic technical terms and provides an overview of introductory macroeconomics. Topics considered include income determination, aggregate demand and supply, unemployment, inflation, business cycles and macroeconomic policy.

Syllabus / Study content

  1. INTRODUCTION. The nature of macroeconomics. Main objectives: growth, low inflation and unemployment, balance of payments equilibria. Business cycles.
  2. GDP, INFLATION AND GROWTH. Measures of GDP (income, expenditure, value added). Measures of inflation ( RPI , CPI ). GDP as a measure of welfare.
  3. EMPLOYMENT AND UNEMPLOYMENT. Measures of unemployment. Types of unemployment. Reasons for unemployment. Policies to counteract unemployment.
  4. AGGREGATE SUPPLY AND DEMAND. Distinguish between short and long run. The nature of equilibrium. Changes in equilibrium. Changes in output and prices. Actual and potential GDP .
  5. MULTIPLIERS. Equilibrium GDP and causes of change in GDP . The nature of such changes. Determinants of the multiplier – marginal propensity to consume. Changes in autonomous expenditure leading to expansion and contraction – business cycles.
  6. FISCAL POLICY. Government expenditure and revenue. Budget surplus or deficit. Government expenditure and tax multipliers. The balanced budget multiplier.
  7. MONETARY POLICY. How do banks affect the money supply? The role of the central bank (Bank of England) and the Monetary Policy Committee ( MPC ). Money supply and interest rates. Effect of interest rate changes on the economy. The Quantity Theory of Money (Equation of Exchange).
  8. MACROECONOMIC POLICY AND ECONOMIC GOALS. Primary goals of economic policy. Tools of economic policy, monetary and fiscal. Success of recent governments in achieving their goals.

Key texts:

  • Parkin, M., M. Powell & K. Matthews, Economics (8th ed., Harlow: Addison-Wesley, 2012). ISBN: 978-0-273-73655-4.
  • Sloman, J., A. Wride & D. Garratt, Economics (8th ed., Harlow: Pearson, 2012). ISBN: 978-0-273-76312-3.
  • Mankiw, N.G. & M.P. Taylor, Economics (2nd ed., Andover: South-Western / Cengage, 2011). ISBN: 978-1-84480-870-0.

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