ADDIS ABABA UNIVERSITY
COLLEGE OF BUSINESS ECONOMICS
DEPARTMENT OF ECONOMICS
Course Title: Macroeconomics Credit Hours: 3
Course Code: Econ 2031 ECTS 5
Course Description: The course tries to introduce students with the analysis of economic activity at
macro level. By introducing National Income Accounts and the workings of modern Financial
Institutions and Monetary System the course proceeds on a detailed treatment of aggregate
economic variables such as Saving, Investment, Money, Inflation, Income determination,
Unemployment and others using various economic models as tools of analysis. It also familiarizes
students with relevant macroeconomic policy issues.
Course Objectives: After completing the course, students will be able to
➢ Describe the concept of National Income Accounting.
➢ Explain the controversies in macroeconomics.
➢ Explain basic IS-LM model
➢ Use macroeconomic policy instruments
CHAPTER ONE: THE STATE OF MACROECONOMICS – INTRODUCION
1.1 What macroeconomics is about?
1.2 Basic Concepts and Methods of Macroeconomics Analysis
1.3 Macroeconomic Goals and Instruments
1.4 The State of Macroeconomics: Evolution and Recent Developments
4 hours 1.4.1. Classical macroeconomics
1.4.2. Keynesian macroeconomics
1.4.3. Neo-classical macroeconomics
CHAPTER TWO: NATIONAL INCOME ACOUNTING
2.1 The concepts of GDP and GNP
2.2 Approaches of measuring national income (GDP/GNP)
2.3 Other Social Accounts (GNP, NNP, NI, PI and DI)
2.4 Nominal versus Real GDP
10 hours 2.5 The GDP Deflator and the Consumer Price Index
2.6 GDP and Welfare
2.7 The Business Cycle
2.8 Unemployment and Inflation
CHAPTER THREE: AGGREGATE DEMAND IN THE CLOSED ECONOMY
3.1. Foundations of Theory of Aggregate Demand
3.2. The Goods Market and the IS curve
14 hours 3.3. The Money market and the LM curve
3.4. The Short Run Equilibrium
3.5 From the IS-LM to Aggregate demand
CHAPTER FOUR: AGGEGATE DEMAND IN AN OPEN ECONOMY
4.1. International flows of Capital Goods
4.2. Saving and Investment in the Small Open Economy
4.3. Exchange rates
4.4. The Mundell-Fleming model
12 hours 4.5. Fiscal and monetary policies in an open economy with perfect capital
mobility
4.5.1. Fixed exchange rate
4.5.2. Floating exchange rate
4.6. Limitations of the Mundell-Fleming model
CHAPTER FIVE: AGGREGATE SUPPLY
5.1. Introduction
5.2. The Classical Approach to Aggregate Supply
5.3. The Keynesian approach to Aggregate Supply
5.3.1. The Sticky Price model
8 hours
5.3.2. The Sticky Wage Model
5.3.3. The worker- misperception model
5.3.4. Imperfect information Analysis
CHAPTER SIX: BEHAVIOURAL FOUNDAIONS: THEORIES OF CONSUMPTON
6.1 The Keynesian consumption Function
6.2 The early empirical successes
6.3 Secular Stagnation, Simon Kuznets and the consumption puzzle
6.4 Irvin Fischer’s Model
8
6.5 Modigliani’s Life cycle Hypothesis model
hours
6.6 Friedman’s permanent income Hypothesis
6.7 Hall’s Random Walk Model
✓ Rational Expectations
✓ Adaptive Expectations
✓ Naïve expectations
CHAPTER SEVEN: THEORIES OF INVESTMENT
7.1 The concept of investment
7.2 Types of investment
• Business fixed investment
10
• Inventory investment
hours
• Residential investment
7.3 Neoclassical Model
7.4 Keynesian Explanation
7.5 Tobin’s-Q Model
7.6 Accelerator (Inventory Model)
Text Books
th
1. N. Gregory Mankiw, 2007, Macroeconomics 4 edition Worth Publishers USA
2. William H. Branson, 2006 Macroeconomic Theory and Policy
3. Dornbusch, R. and S. Fischer: Macroeconomics
REFERENCE:
4. Eduard Shapiro, 2007. Macroeconomic Analysis 5th edition New Delhi
5. Olivier Blanchard, [Link] Prentice Hall Inc. New jersey USA
6. Frederick Mishkin, 1998. The Economics of Money, Banking and Financial Markets
th
5 edition USA.
7. Colander, 2001. Macroeconomics 4th edition New York.
