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MEAP-EMBA-20
MBA(Exe.) 2020-21: Term-II

Course Name - Macro Economic Analysis and Policy (MEAP)
Credits3
Faculty NameBiswa Swarup Misra
ProgramEMBA
Academic Year and Term2020-21, Term - II

1. Course Description
Coverage of this course would include discussion of macroeconomic fundamentals, various macroeconomic policies (Monetary and fiscal), policy options under alternate macroeconomic scenario, Inflation-Unemployment tradeoff, open economy macroeconomics and exchange rate policies. The discussion will be centering round the Indian context so that participants can relate what is covered in the class room to what is happening around them in the real life situations and appreciate the subject of discussion.
2. Objective:
Having dealt with the principles guiding decision making of the individual economic agents in your Microeconomics for Managers course, we would shift our focus to discuss the macro economic factors, which influence business outlook in this course. Every Business operates with an outlook. The exposure to the working of the macro economy helps one to shape the future outlook of business.

Macroeconomic concepts involve abstractions as one deal with economic aggregates such as GDP, Inflation, and Exchange rate etc. Though abstract, we may be very much conversant with some of the macroeconomic concepts in our day-to-day life or can relate to them very easily. For instance, consider the case of the inflation, a macroeconomic aggregate. Inflation is measured by the rise in the price index. We do not observe the price index (an abstraction), though we can observe the prices of individual items such as price of a candle, watch etc. which contribute to the price index. Nonetheless, many people (especially the salaried class) can easily relate to the price index!

We would be primarily interested in three macroeconomic parameters i.e. growth, employment and inflation as well factors driving internal and external stability of a country. The discussions in the class would be oriented to appreciate the factors governing the above three parameters.

Further details about the Course can be seen from the Session Plan.

3. Student Learning Outcomes
1. Learn how to measure performance of an economy through key macroeconomic indicators. Understand the meaning and importance of major macroeconomics aggregates like GDP, unemployment, inflation, interest rate, exchange rate and how the different macroeconomic indicators are linked to each other and their implications for business.

2. Learn how the National Income Accounting is linked to the Balance of Payments so as to appreciate how a country’s transactions with the rest of the world can impact economic activity within the country.

3. Learn why business activity fluctuates in the short term and understand the implications of the changing macroeconomic environment for business through the study of business cycles. Understand the implications of different instruments of monetary policy on the cost of business.

4. Understand the implications of monetary and fiscal policy for major macroeconomic aggregates like GDP, Inflation, interest rate, exchange rate etc. through three mainstream models viz, AD-AS, IS-LM and Mundell Felmming Model. This will help the students to understand how different domestic and global events impact the macroeconomy and appreciate the debates and discussions surrounding the macroeconomic issues in the media.

4. Session Plan
Session-1What Macroeconomics is all about
Why we should be studying macroeconomics
Distinction between Micro and Macro economics
Important Macroeconomic Variables: Growth, Inflation, Unemployment
Distinction between Stock and Flow, Output and Wealth
Kinds of Macroeconomic Policy:
Sessions 2-6Measuring the Value of Economic Activity
Concepts of GDP, GNP, NDP, NNP
Nominal vs. real GDP
GDP at basic price, market price and factor cost
Interrelations amongst different concepts of GDP
GDP as a measure of economic welfare
Reading
Principles of Economics - Mankiw (7th edition) Chapter- 23
Macroeconomics-Oliver Blanchard (4th edition)
Session-7Inflation:
Meaning and Measurement
Inflation Measurement in India- GDP Deflator, WPI, CPI-IW,CPI-AL, CPI-UNME, CPI-Rl
Biases in measurement of Inflation
Costs of inflation
Reading
Principles of Economics - Mankiw (7th edition) Chapter-24&35
Session-8Unemployment : Frictional, Structural and Cyclical Natural rate of unemployment
Unemployment Measurement in India - Usual Status, CDS, CWS
Principles of Economics - Mankiw (4th edition) Chapter- 23
Macroeconomics - Mankiw (6th edition)
Macroeconomics- Dornbusch, Fisher and Statrtz (9th edition)
Session-9Long run determinants of Growth
Concept of Natural Rate of Output
Catch up effect and Convergence of Income across nations
Session-10-11Concept of Equilibrium Income and Multiplier
Schools of Macroeconomic Thought –Mercantilism, Classical, Marxian, Neoclassical and Keynesian
Fiscal Policy and Its Limitations
Session 12-14Stylised facts about Short run economic fluctuations
Predicting business cycles with leading Indictor Analysis.
Framework of Aggregate Demand and Aggregate supply to study business cycles.
Aggregate Supply
Models of aggregate supply
Sticky wage, Sticky Price and the Imperfect-Information models
Aggregate supply Curve- Shart run vs. Long run
Hard Landing vs. Soft Landing
Demand pull vs Cost push Inflation
Session-15Unemployment-Inflation Relationship
Phillips Curve
From Aggregate supply to Philips curve
Movement along the shift curve vs. Shifts in the Philips curve: The role of Expectations
Expectations Augmented Phillips Curve
Session-16Money-Functions
Components of monetary aggregates
Banks and Money Supply-Deposit Multiplier
Central bank and reserve money
Money Multiplier
Reading
Principles of Economics - Mankiw (4th edition) Chapter-29
Session-17-18Alternate characterization of goods market equilibrium: Saving-Investment equality vs. Equilibrium
Derivation of the IS Curve
Money Market
The theory of liquidity Preference
Derivation of the LM Curve
Equilibrium in the short rum and impact of monetary and fiscal policy on short run equilibrium.
IS-LM model to aggregate demand curve
Reading
Macroeconomics - Mankiw (6th edition)
Macroeconomics - Dornbusch, Fisher and Statrtz (9th edition)
Session-19Balance of Payments and Exchange rate
Current vs. Capital Account
Balance in the Balance of Payments
Exchange rates;
Fixed vs. Flexible
Dirty Floating or Managed Exchange rate regime
Purchasing power parity theory of exchange rate
Movement in Exchange rate and impact on Balance of Payment – Marshall Lerner Condition
J-Curve effect
Reading
Principles of Economics - Mankiw (4th edition) Chapter-31
Macroeconomics - Mankiw (6th edition)
Macroeconomics- Dornbusch, Fisher and Statrtz (9th edition)
Session 20IS-LM model in the open economy:
Effectiveness of monetary vs fiscal policy under different exchange rate regimes
The Mundell- Fleming model - Impossible Trinity
Reading
Macroeconomics- Dornbusch, Fisher and Statrtz (9th edition)
Macroeconomics –Mankiw (6th edition)
4. Evaluation Criteria

5. Readings and References
Text Book (Readings from these Books are Mandatory):
1. Principles of Economics: Mankiw (Seventh Edition), 2015. Thomson (South-Western)
2. Macroeconomics: Mankiw (Ninth Edition), 2015. Worth Publishers
Further Readings:
Latest edition of the following Books
1. Macroeconomics - Abel and Bernanke
2. Macroeconomics: Dornbusch, Fischer, and Startz. Tata McGraw-Hill
3. Macroeconomics: Principles and policy: Baumol and Blinder, South-Western Publishing.
4. Macroeconomics: Olivier Blanchard, Pearson Education
Created By: Alora Kar on 10/27/2020 at 10:57 AM
Category: MBA(Exe.)2020-21 T-II Doctype: Document

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