Course Outline: Macroeconomics

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Credit:3 , Core Course
Area: Economics
Program: PGDM-B&FS
Term 2 Academic Year 2020-21
_______________________________________________________________________
Instructor(s) Name Kalpana Tokas
Room no. 302 ( Faculty Block)
Email [email protected]
Phone (Extn no.) 131
Meeting Hours TBA
______________________________________________________________________

1. COURSE DESCRIPTION

Macroeconomics is the study of an economy at aggregate level. However, this aggregate entails much
more than the sum of the parts, due to the complex interactions of various actors in the economy. This
course is the second of a two-semester course intended to provide the students of PGDM-BFS program a
broad exposure to the concepts and analytical techniques needed to understand the collective impact of
the actions of multiple economic agents working simultaneously in the economy. In its broadest sense,
Macroeconomics involves the study of three principal aggregate variables: economic output (commonly
measured as gross domestic product), price levels and national levels of unemployment. At a deeper level,
macroeconomics studies the economic behavior and policies that affect consumption and investment, the
determinants of wages and prices, fiscal and monetary policies, the stock of money in the economy,
public debt and the trade balance among others.

There is strong historical evidence of a clear relationship between the health of banking and financial
sector and the rest of the economy. The Great Recession of 2008 highlighted the potential of the banking
and financial sectors to destabilize the entire global economy. Thus, this sector has strong inter-linkages
with the growth rates as well as monetary and fiscal policies of any economy.

The interconnectedness of economic agents domestically as well as globally, assigns unprecedented

relevance to studying macroeconomic, both as a scholarly and practical discipline. Thus, this course aims
to train students to be able to assimilate relevant information and systematically analyze it to be able to
arrive at informed decisions. This course intends to acquaint the students with theoretical concepts and
supplement them with relevant evidence, in order to have a fruitful discussion regarding contemporary
macroeconomic issues and debates.

The topics this course would cover include a detailed discussion of fiscal and monetary policy and the
strengths and limitations of various policy levers such as taxes and interest rates to achieve a multiplicity
of policy outcomes. The work-horse of this course would be the IS-LM model that seamlessly links
events in the goods and money markets. The course concludes with a discussion of a country’s external
sector, which has assumed center-stage in the wake of globalization.

A lucid understanding of the role and impact of macroeconomic policies – both globally and
domestically, is critical for managers in the banking and financial services. Thus, the course has been
designed to aid future managers in developing a clear understanding of the relationship between key
macroeconomic variables, especially in the context of contemporary events.

2. COURSE OUTCOMES (COs)

After going through the course, the students would be able to:

Course Outcome 1 (CO1): Interpret key macroeconomic variables and the interplay between them.

Course Outcome 2 (CO2): Examine the role of evolving macroeconomic environment on businesses
and their decision-making.

Course Outcome 3 (CO3): Utilize macroeconomic models for policy analysis for the banking and
financial sector in the context of domestic and global economic issues.

3. MAPPING OF THE PROGRAM OUTCOMES (POs) AND COURSE OUTCOME (COs)

Course Outcomes
(COs)
Program Outcomes (POs)
CO CO CO
1 2 3

PO1: Student should be able to write well organized and grammatically correct
business reports and letters.

PO2: Student should be able to make effective oral presentations.

PO3: Student should be able to demonstrate critical thinking skills by 2 3

understanding the issues with a strong focus on banking and financial services,
evaluating alternatives on the basis of multiple perspectives and presenting a
solution including conclusions and implications

PO4: Student should be to demonstrate problem solving skills by understanding 2 3

and defining the problem related particularly to banking and financial services,
analyzing it and solving it by applying appropriate theories, tools and techniques.

PO5: Student should be able to illustrate the role of responsible leadership in

management.

PO6: Student should be able to identify social concerns and ethical issues in
management.

PO7: Students should be able to identify challenges faced by banks and financial 2 3
institutions in the global business environment.

PO8: Student should be able to take decisions in the global business environment 2 3
with special focus on banking and financial institutions.
4. PEDAGOGY
The class will be centered on the class lectures, which is typical for courses of this genre.
Students are however advised to be diligent and strongly encouraged to participate in
proceedings, both by feeling free to seek clarification and asking pertinent questions. To enable
meaningful participation, students need to regularly review the material covered in class and
supplementary readings provided by the instructor. This would benefit students’ understanding
while enriching the learning environment in the class.

5. COURSE EVALUATION COMPONENTS (CECs)

End Term (35%): The End term exam will be comprehensive, in that it will cover the full
syllabus and be given during the end term examination week, as announced in the student
handbook. The final will comprise both quantitative questions, which would include both
calculations and interpretation of the findings as well as short descriptive questions. Both
categories of questions would be intended to assess the student’s familiarity with the material, by
way of conceptual clarity
Mid Term (25%): The mid-term will be designed on the same lines as the final exam discussed
above, except that its coverage would be restricted to the syllabus covered until the midterm.
Both the midterm and the final would be computer-based

Quiz (30%): Three in-class quizzes will be given at regular intervals (see the Session Plan section
for a tentative schedule of quizzes) during the course. The quizzes will be in MCQ format. The
purpose of the quiz is to continually assess progress and, in the process, provide timely feedback
to students. Total marks scored in all three quizzes will be considered while calculating the final
grade of the course

Class Participation (10%): Multiple in class activities will constitute the class participation.
These include but not limited to solving a problem, explaining a concept to fellow students,
presenting data relevant for a discussion.

There will be no make-up quizzes or “extra-credit” opportunities. Make-up opportunities for

missed mid-term/end-term will be allowed only for genuine reasons (as per the rules defined in
the Student Handbook) with prior approval from Dean, Academic.

6. MAPPING BETWEEN COs, POs and CECs

Course Evaluation Components (CECs)

COs POs Class Quiz Mid Term End Term
Participation
CO1 PO3, PO4 √ √
CO2 PO3, PO4 √ √
CO3 PO7, PO8 √ √
7. RESOURCES
7.1 Textbook

Macroeconomics by N. Gregory Mankiw and Mark Taylor (MT), 4th Edition, Cengage
Learning

7.2 Reference Books

N. Gregory Mankiw, Macroeconomics, 6th Edition, Worth Publication

Shyamal Roy, Macroeconomic Policy Environment, 2nd Edition, Mc Graw Hill

Errol D’Souza, Macroeconomics, 2nd Edition, Pearson.

Rudiger Dornbusch, Stanley Fischer, and Richard Startz (DFS hereafter),

Macroeconomics, Tata McGraw Hill.

Stiglitz Joseph E., (2010), Principles of Macroeconomics, Norton.

N. Gregory Mankiw (NGM, hereafter), Principles of Macroeconomics, Cengage

Learning, 6th
edition, 2012

Additional Readings:

The Oxford Companion to Economics in India - Kaushik Basu (Edited)

India Unbound – Gurcharan Das
The Elephant Paradigm – Gurcharan Das
The End of Poverty – Jeffrey Sachs
The World is Flat – Thomas Friedman
An Intelligent Person’s Guide to Liberalization – Amit Bhaduri and Deepak Nayyar
India: After the Global Crisis-Shankar Acharya
Foreign Capital Inflows to China, India and the Caribbean - Trends Assessments and
Determinants - Arindam Banik and Pradip K Bhaumik
The Spirit of Chinese Capitalism - S. Gordon Redding
The Undercover Economist-Tim Harford
The Return of Depression Economics-Paul Krugman
Economic Survey of India (various years)
Reserve Bank of India – Annual Reports (various years), and Report on Currency and
Finance (various issues)

7.3 Online References (if any)

Students are strongly encouraged to stay acquainted with current economic and political
events by continually accessing popular newspapers such as the Business Standard,
 Economic Times, Financial Express, Business Line, besides international publications such
as the Financial Times and the ‘Economist’ magazine. This will serve the multiple purposes
of acquainting students with current events, enabling them to understand how economic
policies work in the ‘real’ world. The online resources provided below, explain global
events clearly and concisely. Regularly accessing this material would significantly
contribute to the overall learning experience.

Financial Times (www.ft.com);

The Economist (www.economist.com);
Business Standard (www.business-standard.com);
Wall Street Journal (http://online.wsj.com);
Ted Talk (http://www.ted.com/talks); and
Various Blog by Economists like Greg Mankiw, Daron Acemoglu
(http://gregmankiw.blogspot.in/, http://whynationsfail.com/).
CNN Finance; The Financial Times; The Economist; Reuters; Reserve Bank of
India(http://www.rbi.org.in/home.aspx); Ministry of Finance ( GoI)( http://finmin.nic.in/);
Hindu Business Line (http://www.thehindubusinessline.com/);
Economic Times (http://economictimes.indiatimes.com/);
Business Standard (http://www.business-standard.com/);
South Asian Financial Times (extremely useful) (http://www.ft.com/markets/asiapacific),
Asian Wall Street journal (http://online.wsj.com/public/asia);

8. SESSION PLAN
Session No. Topics Readings/Cases
-----------------------
1  Course Roadmap
 Expectations, Policies and Assessment
plans
 What is Macroeconomics?

2-3 Measuring Macroeconomic Variables

 The Circular Flow Diagram Compulsory Reading:

 Gross Domestic Product (GDP) Ch. 1- 2 (M&T)
 Consumption
 Investment: Capital Formation and Additional Readings:
Inventories Is GDP a satisfactory measure of growth?-
 Government Expenditure: Taxes OECD Observer
and Transfer Payments
 Net Exports
 Nominal and Real GDP
 Gross National Product (GNP)
 Net Domestic Product (NDP)
 Net National Product (NNP)
  Price indicators – CPI, WPI, GDP
Deflator

4 Savings & Investment Compulsory Reading:

Ch. 5 (M&T) & Lecture notes
 Private and Public Saving
 Loanable Funds Market
EY – Economy Watch (Monitoring India’s
 Gap between Saving and Investment
macro-fiscal performance)
 Incremental Capital Output Ratio:
ICOR
Quiz 1

5-6 Keynesian System of Closed Economy Compulsory Reading:

Ch. 12 and 13 (M&T)
 Keynesian Cross
 Fiscal Policy Multipliers – Simple Additional Readings:
multiplier, Government Spending Demand stimulation, supply constraints and
multiplier, Tax multiplier recession risks

7 The Goods Market

 IS Curve & the Goods Market

Equilibrium (Derivation and Compulsory Reading:
Interpretation) Ch. 12 and 13 (M&T)
 The IS Curve and Fiscal Policy effects
Additional Readings:
What could be wrong with a Fiscal Deficit

Quiz 2

8-10 The Monetary System

 What is money? (Types & functions) Compulsory Reading:

 Demand for Money Chapter 8 and 9 (M&T)
 Banks & Money Supply (100 per cent Additional Readings:
and fractional reserve banking) Monetary Transmission in India: Why is it
 Money Multiplier important and why hasn’t it worked well?
 Monetary Transmission Mechanism
 Inflation and types of inflation Hyperinflation in Zimbabwe, German
Hyperinflation after the First World War
 LM Curve & Money Market
Equilibrium (Derivation and
 To print more money or not to
Interpretation)
 The LM Curve and Monetary Policy
effects

MID TERM EXAM

11-12 IS-LM Framework Compulsory Reading:

 Instruments of Fiscal & Monetary Ch. 13 (M&T) & Lecture notes

Policy
 Expansionary and Contractionary Additional Readings:
Policies Can Monetary Policy Affect Economic
 Interaction between fiscal and Growth?
monetary policy in the IS-LM Model

13-15 Balance of Payments

Compulsory Reading:
 Current & Capital Account Ch. 10 and 11 (M&T)
 The exchange rate (Nominal and real)
Additional Readings:
 Fixed versus floating exchange rates Asian Financial Crisis of 1997

Equilibrium Output in an Open Economy India’s impossible Trinity Problem

 Mundell-Fleming model The Chinese currency controversy

Quiz 3

END TERM EXAM

9. ACADEMIC INTEGRITY & CLASS RULES

a) Plagiarism is the use of or presentation of ideas, works that are not one’s own and which are not
common knowledge, without granting credit to the originator. Plagiarism is unacceptable in IMI
and will invite penalty. Type and extent of penalty will be at the discretion of the concerned
faculty.

b) Cheating means using written, verbal or electronic sources of aid during an examination/ quiz/
assignment or providing such assistance to other students (except in cases where it is expressly
permitted by the faculty). It also includes providing false data or references/list of sources which
either do not exist or have not been used, having another individual write your paper or
assignment or purchasing a paper for one’s own submission. Cheating is strictly prohibited at IMI
and will invite penalty as per policies of the Institute.