Macroeconomics - Principles and Policies

Post-Graduate Diploma in Management (2022-24)
Course Title: Macroeconomics - Principles and Policies

(MEPP)
Credit: 3 Classroom Hours: 30
The Faculty Cohort:

Prof. Shekhar K. Sinha
Prof. Subhajit Bhattacharyya
Prof. Manas Paul
Prof. Kasturi Das
Prof. V. J. Sebastian
Prof. Amrita Kamalini Bhattacharyya

1
Course Background and Objectives:
While the course of Microeconomics deals with decision making of, say, one firm, one
individual or one market, the course of Macroeconomics analyses collective behavior of all the
firms, all the industries, all the kinds of markets, all the individuals and their interactions with each
other, their interdependence on each other. So, the course of Macroeconomics is going to be a bit
more difficult compared to what you have studied in Microeconomics.
For a manager, it is important to understand the ‘collective behaviour’, ‘mutual
interactions’, ‘mutual interdependence’ and other such linkages of all the agents in an economy.
These agents are the producers (instead of ‘a firm’), the financial sector (instead of ‘a bank’), the
consumers (instead of ‘an individual’) etc. Also, the regulators and, more importantly, ‘The
Government’ (you are yet to be acquainted with the technicalities of their influence on a firm’s
business decision-making process). And, last, but never the least, the impact of economic policies
of other economies on a firm’s business decisions needs also to be understood. All these
collectively create the environment for doing business in a country and determine the possibility
of success or failure of a firm.
With aggressive globalization by economies around the world, growing economic inter-
connectedness and interdependence among them are increasing managerial challenges manifold.
The manager today cannot strategize merely on the basis of the firm-specific parameters, but has
to always take into consideration the economic environment the firm is placed in.
Most economies in the world today are market-driven economies. Even China, the
erstwhile bastion of communism is now a market-driven economy. However, all market driven
economies, even the most capitalist ones, have a large governmental presence, with the
government’s macroeconomic policy impinging on all economic agents.
This course of Macroeconomic Principles and Policies attempts to acquaint the students
with the analyses of the interdependence of the producers and the financial sector, as also, the roles
of the consumers, the government, the regulators, the interaction of one economy with another
(also presented as Rest of the World), etc. in ensuring economic and employment growth.
In this course, the objectives, therefore, are to:
(i) Inculcate in students an understanding of the fundamental concepts of
macroeconomics and technicalities of sectoral inter-linkages in an economy,
(ii) Develop an understanding of the implications of government policies in terms of
resulting economic performances
2
(iii) Develop in students skills to analyze and apply the understanding of macroeconomic
linkages to real-life business conditions
(iv) Develop capacity in students to analyze and understand the macroeconomic
environment that impact upon businesses and accordingly identify growth
opportunities.
Learning Outcomes :
After the completion of the course, the graduates would have:

(a) Capability to analyze and understand the macroeconomic inter-linkages and thereby
apply such conceptual knowledge to understand real-life economic conditions.
(b) Understanding of the macroeconomic environment, particularly, the government
policies faced by businesses and the impact thereupon
(c) Demonstrative aptitude for innovation to overcome constraints in the way of growth
opportunities (sub-goal 3.1)
Pedagogy:
Fundamental concepts of macroeconomic theories will be explained with the help of numerical
examples, as also with various economic data. In order to establish the relevance of these theories
and emphasize their importance, examples of macroeconomic developmental processes of selected
countries, as also certain crisis situations in the world and their respective stabilization policies
will be explained, and discussed. Latest reading material including case studies for a fruitful
discussion on global economic trends and dimensions of the global economic crisis have been
incorporated in the reading list. Cases, editorials and opinion pieces of renowned authors will be
selected from prestigious economic and business journals and newspapers for a discussion to
ensure that the acquired theoretical knowledge is eventually adapted for practice.
Consultation Outside Classroom:
A faculty teaching the course will notify his/her availability in office for consultation outside
classroom on assigned days and time in a week, each week during the Term.
3
Evaluation of Learning Outcomes:
The learning outcomes outlined above will be specifically evaluated through a four-component
evaluation scheme as follows:
(1) End Term = 40 marks
(2) AOL Evaluation = 10 marks
(3) Group Project/Class Participation = 30 marks
(4) Quizzes (Two) = 20 marks
Total = 100 marks
At least 04 components evaluation of Learning Outcomes

Sub goal
A b c 3.1
*
(i) AOL Quiz (10 marks) √

(ii) End term
Examination √ √ √
(40 marks)

(iii) Quizzes (Two) (20 marks) √ √ √

(iv) Group Project /Class
Participation (30 marks)
√ √ √

*This evaluation will be documented for AOL purposes in relation to AACSB accreditation process

Suggested Books :
Text Book: (1) Dornbusch, R and Stanley Fischer and R Startz (DSFRS), (latest available edition):
“Macroeconomics”, Tata McGraw-Hill, (Recommended for distribution among the students)
Reference Books:
(1) Dornbusch, R and Stanley Fischer (RDSF) , (2005, sixth edition) : “Macroeconomics”
Tata McGraw-Hill ,
(2) Roy, Shyamal (2012, 2nd Edition), Macroeconomic Policy Environment, Tata McGraw Hill
(RS, 2012) : All Chapters, especially, Chapter 7 , section 7.2.1 : Global Economic Trends
(Pages 288 to 315.)
4
(3) Gordon, Robert, J. (2011, 12th edition) : Macroeconomics (GR, 2011) Section 5-2 : Case-Study
: Dimensions of Global Economic Crisis (pages 122 to 127)
(4) Deodhar, Satish, Y (2012) , Day to Day Economics, IIM Ahmedabad Economics, Random
House, India
(5) Mankiw, N Gregory : “Principles of Macroeconomics” , Thomson.
(6) Baumol, W and Alan Blinder : “Macroeconomics” , Cengage Learning.
Session Plan:
(Projected. Pace of delivery and extent of coverage will depend on grasping capacity of the students)
Session Broad Topics to be Covered Readings

1 Introduction; Utility of Macroeconomics for Business; Some
basic concepts like GDP, inflation, rate of interest, Business
Cycle, Okun’s Law, Phillips Curve, Fiscal & Monetary Policy, DSFRS, Ch. 1
etc. RDSF, Ch. 1
2 National Income Accounting; Three Approaches of Measuring

DSFRS, Ch. 2
GDP; Numerical Examples
RDSF, Ch. 2
3 Three Identities: S = I, S = I + G + TR – TA + NX, and S = I +
DSFRS, Ch. 2
CA
RDSF, Ch. 2
4 Income and Spending: Aggregate Demand (AD) in AD – Y plane;
DSFRS, Ch.10
Multiplier; Incorporate Government; The Implication
RDSF, Ch. 3
5 Income and Spending: Effects of Changes in Taxes; Autonomous
Spending on Equilibrium Income; Budget Surplus; Balanced DSFRS, Ch.10
Budget Multiplier; Numerical Examples RDSF, Ch. 3
6 Money, Interest and Income: Goods Market Equilibrium;

DSFRS, Ch.
Deriving IS curve; Slope of IS curve; Position of IS curve;
11
Disequilibrium Position away from IS line
RDSF, Ch. 4
7 Asset Market: Wealth-Budget Constraint; Derivation of LM
curve; Slope of LM curve; Position of LM curve; Disequilibrium DSFRS, Ch.11
Positions away from LM curve
8 IS-LM Framework: Super Imposition of IS and LM curve to

derive equilibrium; Adjustments towards equilibrium; Numerical DSFRS, Ch.11
Examples
9 Monetary and Fiscal Policies; Impacts of Shift of IS and LM on

equilibrium income; Crowding-out effect; Liquidity Trap; DSFRS, Ch.12
Numerical Examples
10 Determinants of money supply (money multiplier), Monetary and DSFRS,

Fiscal Policies; Impacts of Shift of IS and LM on equilibrium Ch.17, 11
5
income; Crowding-out effect; Liquidity Trap; Numerical
Examples
11 International Linkages: Balance of Payments (BoPs); Exchange

Rate; Fixed vs. Flexible Exchange Rate policies and its DSFRS, Ch.13
Implications; Real Effective Exchange Rate
12 International Linkages: Define Net Exports (NX); Goods Market

Equilibrium after incorporating NX; Policy Dilemma in case of
Unemployment and Trade Deficit; International Capital Market;
DSFRS, Ch.13
Perfect Capital Mobility; BoP equation and graph, Beggar-Thy-
Neighbour Policy; Numerical Examples
International Adjustment and Interdependence; Adjustments

under fixed exchange rates; Exchange rate adjustments and trade
13-14 adjustments empirical issues; monetary approach to BoP;
DSFRS, Ch.23
Flexible exchange rates, money and prices; Interest rate
differentials and exchange rate expectations; Exchange rate
fluctuations and interdependence; choice of exchange rate
regimes.
Define and derive AD curve in P-Y plane;
DSFRS, Ch.5
15-16 The slope and position of the AD curve;
Impact of Fiscal Policy on AD curve;

DSFRS, Ch.5
Impact of Monetary Policy on AD curve
Equilibrium in case of Classical and Keynesian Supply Curve;

Impact of Fiscal and Monetary Policy on such equilibrium; DSFRS, Ch.6
Application of AS & AD analysis in understanding demand pull
and cost push inflation.
Inflation Unemployment and Phillips Curve; Costs of Inflation,
17-18 inflation proofing; is little inflation good for the economy?;
Unemployment – its anatomy; full employment; costs of DSFRS,
unemployment; Inflation and unemployment; stagflation , Ch.7,8,6,
expected inflation and inflation expectations augmented Phillips
Curve; Rational expectations; wage unemployment relationship;
Wage stickiness; evaluation inflation unemployment tradeoff
Financial Markets & Asset Prices; Interest Rates long run and
DSFRS, Ch.19
19 short run; Random walk of stock prices; exchange rates and
interest rates
20 WRAP UP
Group Projects:
For sections, where Group Projects are assigned as a component of internal evaluation, the
concerned faculty will present necessary details in due course.
*****

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Post-Graduate Diploma in Management (2022-24)

Course Title: Macroeconomics - Principles and Policies

Credit: 3 Classroom Hours: 30

The Faculty Cohort:

After the completion of the course, the graduates would have:

Consultation Outside Classroom:

At least 04 components evaluation of Learning Outcomes

(5) Mankiw, N Gregory : “Principles of Macroeconomics” , Thomson.

(6) Baumol, W and Alan Blinder : “Macroeconomics” , Cengage Learning.

Session Broad Topics to be Covered Readings

2 National Income Accounting; Three Approaches of Measuring

6 Money, Interest and Income: Goods Market Equilibrium;

8 IS-LM Framework: Super Imposition of IS and LM curve to

9 Monetary and Fiscal Policies; Impacts of Shift of IS and LM on

10 Determinants of money supply (money multiplier), Monetary and DSFRS,

11 International Linkages: Balance of Payments (BoPs); Exchange

12 International Linkages: Define Net Exports (NX); Goods Market

International Adjustment and Interdependence; Adjustments

Impact of Fiscal Policy on AD curve;

Equilibrium in case of Classical and Keynesian Supply Curve;

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