Course Details
Subject {L-T-P / C} : HS5431 : Theory of Money, Output and Employment { 3-0-0 / 3}
Subject Nature : Theory
Coordinator : Dr. Narayan Sethi
Syllabus
Modules:
1. National Income Accounting
i) Meaning and Significance of Macro Economics, Difference between Micro and Macro Economics/Analysis.
ii) National Income- Accounting: Concepts-GDP,GNP, NDP, NNP, Income at market price, and income at factor cost, Income at Constant Price, Capital Income
iii) Methods of Measurement of National Income and problem associated with measurement of national income.
iv) Circular flow of income and expenditure, two, three and four sectors model
v) National Income as indicator of national welfare
2. Classical Theory
i) Classical Ideas on determination of output and employment in the short run: Say’s law of Markets classical dichotomy, quantity theory of money Self-regulation of markets and full employment and classical theory of rate of interest.
3. Keynesian Theory
i) Keynes’ critique of classical theories attack on self-regulation of markets classical dichotomy and full-employment equilibrium. Keynes theory of Effective Demand consumption function, multiplier Keynes theory of rate of interest- liquidity preference theory of investment- marginal efficiency of capital. Keynes theory of prices and wages, Pigou effect and its critique.
4. Consumption Behaviour
i) Fundamental Psychological law of consumption and its implication.
ii) Determination of consumption function.
iii) Theories of aggregate consumption- life cycle hypothesis, Absolute, relative and permanent income hypothesis.
5. Demand for Money and Supply of Money
i) Definition of money Motives for holding money Keynesian and Friedman formulations of demand for money transaction and portfolio balance approaches wealth effect on demand for money
ii) Determinants of money supply money multiplier model instruments of monetary policy transmission mechanism of monetary policy.
6. Theories of Inflation
i) Excess demand theories-keynsian, Inflationary Gap Cost Push inflation-Phillips Curve
Course Objectives
- Macroeconomics is concerned with issues, objectives and policies that affect the whole economy. All economic analysis that refers to aggregates is macro. The UK unemployment rate, the UK inflation rate, the rate of economic growth in the UK these are all UK aggregates and therefore macro issues.
Course Outcomes
The four major objectives are: Full employment, Price stability, sustainable rate of economic growth and Keeping the balance of payments in equilibrium. In this Learn-It, we will look at the way in which these objectives are measured. In the next, we shall look at why these objectives are important, their relative importance and how successful recent governments have been in achieving these goals. Finally we will look at the difficulties that governments have in trying to achieve all the objectives at once.
Essential Reading
- W.H. Branson,, Macroeconomic Theory and Policy, Harper and Row Publisher, New York
- N.G. Mankiw, Macroeconomics, Worth Publishers, Sixth Edition
Supplementary Reading
- David Romer,, Advanced Macro Economics, Third Edition, McGraw- Hills
- J.M Keynes,, The General Theory of Employment, Interest and Money, Macmillan Press ltd.