CENTRAL UNIVERSITY OF HIMACHAL PRADESH

[Established under the Central Universities Act 2009] PO Box: 21, Dharamshala, District Kangra - 176215 (HP) www.cuhimachal.ac.in Course Code: Course Name: Faculty: ECN 406 Basics of Macroeconomics Mr. Kamal Singh

Credits Equivalent: 2 Credits (One credit is equivalent to 10 hours of lectures / organised classroom activity / contact hours; 5 hours of laboratory work / practical / field work / Tutorial / teacher-led activity and 5 hours of other workload such as independent individual/ group work; obligatory/ optional work placement; literature survey/ library work; data collection/ field work; writing of papers/ projects/dissertation/thesis; seminars, etc.)

Course Objectives:
Familiarize students with the basic concepts of Macroeconomics Enable the students to understand the functioning of the macro economy Developing critical skills to understand the implications of macroeconomic policies

Attendance Requirements: Students are expected to attend all lectures in order to be able to fully benefit from the course. A minimum of 75% attendance is a must failing which a student may not be permitted to appear in examination. Evaluation Criteria: 1. Mid Term Examination: 25% 2. End Term Examination: 50% 3. Counselling, Activities and Tutorials (CAT): 25% i. Class Participation: 5% ii. Assignment: 5% iii. Quiz: 5% iv. Presentation : 10 % Course Content: UNIT I Hours) (2

Meaning, scope and importance of macro Economics, Schools of thought in macro economics, Concepts of gross domestic product, GNP and national income; Circular flow of income in two, three and four-sector economy; Measurement of national income; Indias national income accounts

UNIT II Hours)

(4

Says law of markets and the classical theory of employment, Keynes objection to the classical theory; Keynesian theory of income, output and employment; Aggregate demand and aggregate supply functions; The principle of effective demand; Consumption function average and marginal propensities to consume, factors influencing consumption spending, Keynes Psychological law of consumption, Post Keynesian theories of consumption: relative and permanent income hypotheses UNIT III Hours) (5

Investment: autonomous and induced investment; Marginal efficiency of capital, Theories of Investment: classical, Keynesian and accelerator theory, Multiplier: investment, budget and tax; IS and LM curves: derivation, shifts and rotations, simultaneous equilibrium in product market and money market. UNIT IV Hours) (5

Money meaning, functions and classification, Demand for money: quantity theory of money, fischer equation and cambridge equation ; Keynes approach: transaction, precautionary and speculative demand for money, Friedmans restatement of quantity theory of money, Money Supply: meaning and measures M1, M2, M3, M4; Credit creation and credit control by banks and Money multiplier. UNIT V Hours) (4

Inflation: meaning, types and effects; Demand pull and cost push theories of inflation; Trade off between inflation and unemployment Phillips curve, Macroeconomic policies: objectives and Instruments.

Prescribed Text Books:

1. Branson, W.H., Macro-Economic Theory and Policy Third Edition , East West Press , New Delh 2. Dornbusch, R. and S. Fischer (2005), Macroeconomics, 4e, McGraw-Hill Kogakusha Tokyo. 3. Blanchard, Oliver (2007), Macroeconomics, Pearson Education, New Delhi 4. Shapiro, Edward (2001), Macroeconomic Analysis Fifth Edition, Galgotia Publication, New Delhi.
Supplementary Readings:

1. Patinkin, Don (1965), Money, Interest and Prices, Harper and Row, New York. 2. Rakshit, M. (1998), Studies in Macroeconomics in Developing Countries, Oxford University Press, New Delhi 2

3. Andrew B. Abel, Ben S. Bernanke and Dean Croushore (2011), Macroeconomics, Indian Edition, Pearson 4. Gupta B. Suraj, Monetary Economics- Institutions, Theory and Policy, S.Chand & Company Ltd, New Delhi

Lecture Plan
Unit-I (Hours = 2) Meaning, Scope and Importance of Macro Economics, Schools of thought in Macro economics, Concepts of Gross Domestic Product, GNP and National Income. Circular Flow of Income in two, three and four-sector economy; Books Chapters Edward Shapiro, Chapter-1 Macroeconomic Analysis Rudiger Chapter-1 Dornbusch and Stanley Fisher, Macro Economics Chapter-2 Measurement of National Income; Indias National Income accounts Unit-II (Hours 4) Says law of markets and the classical theory of employment; Keynes objection to the classical Theory; Keynesian theory of Income, Output and Employment; Aggregate demand and aggregate supply functions; the principle of effective demand, Consumption function Average and marginal propensities to consume; Factors influencing Consumption spending, Keynesian theory, Psychological law of consumption, Edward Shapiro, Macroeconomic Analysis

Edward Shapiro, Chapter-9 Macroeconomic Analysis Edward Shapiro, Chapter-4 Macroeconomic Analysis

Edward Shapiro, Chapter-4 Macroeconomic Analysis Edward Shapiro, Macroeconomic Chapter-15 Analysis William Branson, Macroeconomic Chapter- 12 Theory and

Absolute income hypothesis, Relative income hypothesis, Permanent income hypothesis; 3

Lifecycle hypothesis Unit-III (Hours = 5) Investment: Autonomous induced investment;

Policy

and William Branson, Macroeconomic Chapter-3 Theory and policy, Chapter -4 Edward Shapiro, Macroeconomic Analysis Marginal efficiency of capital, Chapter-17, 18 Theories of Investment: Edward Shapiro, Classical, Keynesian and Macroeconomic Accelerator Theory, Analysis Chapter-5 Multiplier: Investment, budget Edward Shapiro, and tax multiplier Macroeconomic Analysis IS and LM curves: Derivation, shifts and rotations, simultaneous equilibrium in product market and money market Money Meaning, functions and classification, William Branson, Chapter- 4 & 5 Macroeconomic Theory and policy Gupta B.Suraj, Monetary Chapter-1 Economics, Institutions, Theory and Policy Chapter-14 William Branson, Macroeconomic Theory and Chapter-11 policy, Edward Shapiro, Macroeconomic Analysis

Unit IV (Hours = 5)

Demand for Money: Quantity theory of money; Fischer equation, Cambridge equation , Keynes approach: Transaction, precautionary and speculative demand for money, Friedmans restatement of quantity theory of money, Money Supply: Meaning and measures M1, M2, M3, M4, Credit creation and credit control by Banks and Money Multiplier

Chapter-15

Unit V (Hours = 4)

Inflation: Meaning, types and effects, Demand pull and cost push theories of inflation; Trade off between inflation and unemployment Phillips curve Rudiger 4

William Branson, Chapter-10 Macroeconomic Theory and policy Edward Shapiro, Macroeconomic Analysis Edward Shapiro, ChapterMacroeconomic 21,22,23 Analysis

Macroeconomic policies: Dornbusch and objectives and Instruments Stanley Fisher, Chapter-11 Macro Economics