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ECON222b: Intermediate Macroeconomics I


Department: Economics NCF Level: FHEQ/QCF/NQF5//RQF5
Study Level: Part II (yr 2) Credit Points: 15.0
Start Date: 12-01-2015 End Date: 20-03-2015
Available for Online Enrolment?: Y Enrolment Restriction: Only available to students majoring in delivering department
Module Convenor: Dr WJ Tayler

Syllabus Rules and Pre-requisites

  • Prior to ECON222b, the student must have successfully completed:
  • The following modules may not be taken:

Curriculum Design: Outline Syllabus

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    COURSE OUTLINE/LECTURE SCHEDULE

    Weeks 11-12: The economy in the long run: the classical model of the macro-economy

    (i) Classical macroeconomics: full employment equilibrium, the assumptions of the classical model. The component parts of the classical model

    the production function

    the labour market

    the QTM

    the loanable funds hypothesis and Say's Law

    (ii) The interaction between the component parts of the classical model - the real economy v the money economy (the classical dichotomy).

    Reading:

    MT, chs. 3, 5, 7.

    Hillier, Chapter 1.

    Blanchard, Ch. 2.

    Weeks 13-14: The macro-economy in the short run. Flexible wages and prices, and the Aggregate demand/Aggregate Supply

    (i) Time horizons: aggregate supply in the short run v the long run

    (ii) Fixed prices v flexible prices

    (iii) Consumption, investment and aggregate effective demand: the Keynesian product market.

    (iv) The demand for money: the transactions, precautionary and speculative motives.

    (v) The link between the money market and the goods market: the ISLM model (rate of interest v real income).

    (vi) Deriving the aggregate demand function (price level v real income).

    (vii) ISLM + aggregate demand function + aggregate supply function.

    (vii) Real wage resistance: the Keynesian labour supply function.

    (viii) Flexible money wages: is full employment inevitable?

    (ix) The aggregate demand and aggregate supply functions.

    (x) The liquidity trap and interest inelastic investment.

    Reading

    MT, chs 10, 11, 12.

    Hillier, chs 2, 3, and 4.

    Blanchard, ch. 3-7.

    Weeks 15-16: The budget constraint and the effectiveness of macro-policy

    (i) Weaknesses of the simple ISLM model: the problem of lags.

    (ii) Interdependence between fiscal and monetary policy instruments: the critical role of the budget constraint.

    (iii) Financing budget deficits: tax-financing, bond-financing and money financed deficits.

    (iv) The balanced budget multiplier: closed and open economy models.

    (v) Wealth effects of fiscal and monetary policy.

    (vi) Optimisation over time: a micro perspective on real macroeconomic aggregates

    (a) Consumption spending and the inter-temporal budget constraint.

    (b) Optimising consumption functions, the PIH and LCH

    (vii) Government budget constraints and Ricardian Equivalence.

    Reading:

    MT, Chapters 15, 16, and 17.

    Hillier Chapter 5.

    Blanchard, Ch. 26.

    Buiter, W H, 'Crowding-out and the effectiveness of fiscal policy', Journal of Public Economics, 7, 1977.

    Blinder, A S and Solow, R M, 'Does Fiscal Policy Matter?' Journal of Public Economics. 3, 1973.

    Dalamagas, 'Government deficits, crowding out, and inflation: some international evidence', Public Finance, 1987 (1).

    Weeks 17-18: Monetary policy with special reference to the UK

    (i) The objectives of monetary policy: stable prices, steady growth

    (ii) An overview of monetary policy options

    (iii) Controlling monetary conditions via the money supply (the high-powered money multiplier, controlling high-powered money)

    (iv) Controlling monetary conditions via the interest rate (the 'repo' in the UK): the transmission mechanism: how does the interest rate affect the economy?

    (v) UK monetary policy: how does the Monetary Policy Committee operate?

    Reading:

    The New Monetary Policy Framework, HM Treasury, 1999. Available on the Treasury's website: www.hm-treasury.gov.uk/

    Monetary Policy in the UK, Bank of England. Available at www.bankofengland.co.uk/

    The Transmission Mechanism of Monetary Policy, Bank of England website.

    MT, Ch. 4, 20.

    Blanchard, Ch. 4, 14

    Weeks 19-20: The Open Economy. Theories of exchange rate determination

    (i) The determination of exchange rates: purchasing-power parity, monetary model, uncovered interest parity.

    (ii) Over-shooting of exchange rates to monetary shocks in the short run.

    (iii) Optimal currency areas.

    Reading:

    MT, chs 6, 13.

    Blanchard, Ch. 18-21.

Curriculum Design: Pre-requisites/Co-requisites/Exclusions

  • Econ 100 or Econ 224 and 225 and Econ 103 or Math 100 or Maths at GCE A-level or equivalent.

Curriculum Design: Single, Combined or Consortial Schemes to which the Module Contributes

  • Economics and joint degrees with Economics.  Available as a minor to students who meet the required pre-requisites.

  • 60% Exam
  • 40% Coursework

Assessment: Details of Assessment

  • COURSEWORK ASSESMENT

    The coursework assessment for this course comprises a test that will take place in week 20.

Educational Aims: Subject Specific: Knowledge, Understanding and Skills

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    Objectives of Course

     

    This course is designed to extend the knowledge of the principles of macroeconomics which students acquired in their first year. Although the main focus of the course is on macroeconomic theory, this is taught within the context of current events in the international macroeconomic environment. Considerable emphasis is placed on the use of analytical tools for gaining a better understanding of the workings of the macro-economy and the ways in which policy makers respond to macroeconomic problems. Students are encouraged to use their knowledge of macroeconomic theory to gain a better understanding of current macroeconomic events and issues. Note that some of the topics covered in the course require basic knowledge of calculus and algebra.

     

Educational Aims: General: Knowledge, Understanding and Skills

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    This course is designed to extend the knowledge of the principles of macroeconomics which students acquired in their first year. Although the main focus of the course is on macroeconomic theory, this is taught within the context of current events in the international macroeconomic environment. Considerable emphasis is placed on the use of analytical tools for gaining a better understanding of the workings of the macro-economy and the ways in which policy makers respond to macroeconomic problems. Students are encouraged to use their knowledge of macroeconomic theory to gain a better understanding of current macroeconomic events and issues. Note that some of the topics covered in the course require basic knowledge of calculus and algebra.

     

Learning Outcomes: Subject Specific: Knowledge, Understanding and Skills

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    Learning outcomes

    By the end of this course, students should have a knowledge and understanding of:

     

    • Analytical methods, both theory and model based
    • The relevance of different theoretical approaches      to public policy and business problems
    • The international economic environment in the UK and the impact of external factors on      macro economic performance and policy with particular reference to the UK economy

     

    By the end of this course, students should be able to:

     

    • Engage in abstract thinking by extracting the      essential features of complex systems to facilitate problem solving and      decision-making
    • Engage in deductive and inductive reasoning to      enhance problem solving and decision-making skills
    • Apply theoretical, historical and quantitative      methods to the analyses of public policy problems
    • Plan and manage their time effectively in      relation to deadlines whilst displaying individual initiative and      enterprise
    • Communicate and present complex arguments in oral      and written form with clarity and succinctness
    • Understand the nature of incentives and      opportunity costs in decision-making
    • Think in marginal terms about the trade-offs      involved in public policy and business decision-making

     

Learning Outcomes: General: Knowledge, Understanding and Skills

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    On successful completion of this module students will be able to...

     

    •  Engage in deductive and inductive reasoning to enhance problem solving and decision-making skills
    • Apply theoretical, historical and quantitative methods to the analyses of public policy problems
    • Plan and manage their time effectively in relation to deadlines whilst displaying individual initiative and enterprise

    Understand the nature of incentives and opportunity costs in decision-making

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