The function of this module is to provide students with a firm foundation in the workings of the macroeconomy.  The module equips students with an understanding of the theory, concepts, principles and techniques of macroeconomics, building upon the material introduced in year one Macroeconomics.  Its role is to provide the intermediate step towards the advanced Macroeconomic Analysis and provides the foundation for specialist optional modules in year 3.

The Macroeconomic Theory module aims to provide students with a sound understanding of the method, content and scope of macroeconomic analysis, focusing in particular on models of the business cycle, economic growth and the components of aggregate demand.

A    Knowledge and Understanding:

• comprehend the key determinants of saving and investment, output and employment in both a closed and an open economy.
• appreciate the main differences between Classical and Keynesian theories of the business cycle.
• understand the determinants of long-term economic growth.
• be familiar with recent developments in the analysis of consumption, investment and asset demand.

B    Intellectual Skills: 

• analyse and evaluate competing theories of the business cycle.
• critically evaluate models of economic growth.
• apply and evaluate theories of the determinants of aggregate demand.

C    Discipline Specific Skills: 

• apply competing theories of the business cycle to the cyclical behaviour of key macroeconomic variables.
• illustrate and compare the potential effects of specific macroeconomic policies using different theories of the business cycle.
• apply neoclassical and endogenous growth models to the analysis of saving, investment and population growth.
• compare the operation of the open economy under different exchange rate regimes, including the effects of fiscal and monetary policy.

D    Transferable Skills: 

• demonstrate the ability to undertake both diagrammatic and mathematical analyses of macroeconomic issues.
• development analytical, communication and learning skills through class work and web-based exercises.
• develop problem-solving skills.
• interpret real world macroeconomic data.

Teaching will take place in the Autumn and Spring semesters. There will be approximately 34 hours of lectures and 10 hours of classes.  The module covers 10 topics, with each topic consisting of approximately 3 hours of lectures plus a one hour class.

Lectures are used to identify the main principles and issues that are covered under each topic, building upon and developing the material covered in year 1 Macroeconomics.  Details of specific reading material associated with each topic are presented in the course outline.

The purpose of lectures is to cover the main points and structure of the topic, introduce new material, aid in improving student learning and provide guidance to further research on the topic. 

The classes are undertaken in parallel with the lectures and are structured so as to develop student’s quantitative skills and their ability to apply the principles of macroeconomics outside the context in which they are introduced in the lectures.  Each class involves a set of review questions that either require students to consider material covered in lectures in a more mathematical way that in lectures or to apply a particular theory or model to a set of real-world events.

Indicative study hours:   200

The two class tests first require student to use material from the module to analyse a particular set of events and to solve problems, of a theoretical or practical kind, developing from the material covered in classes.  The Final examination (end of Spring semester) also has two parts.  The first part develops material covered in the classes and requires students to solve problems of a theoretical or practical kind.  The second part is essay based and requires students to demonstrate an understanding of macroeconomic theory and the ability to apply macroeconomic principles in comparative static analysis.

Productivity, Output and Employment; Consumption, Saving and Investment; Saving and Investment in the Open Economy; Business Cycles; Business Cycles in the Classical Model; The Real Business Cycle Model; New Keynesian Economics: The Macroeconomics of Wage and Price Rigidity; Business Cycles and Macroeconomic Policy; Long-Run Economic Growth; The Asset market, Money and Prices Household Decisions to Consume and Save: A More Formal Treatment; Monetary Policy and the Supply of Money Government Spending and its Financing; The Government Budget; Exchange Rates and the Open Economy.

Recommended

M Wickens (2012), Macroeconomic Theory; A Dynamic General Equilibrium Approach, (Second Edition), Princeton

Others
A Abel, B Bernanke and R McNabb (1998) Macroeconomics: European Edition, Addison Wesley

O Blanchard (2003), Macroeconomics: International Edition (Third Edition), Prentice Hall.

M Burda and C Wyplosz (2005), Macroeconomics: A European Text, Oxford University Press

R E Hall and J B Taylor (1997) Macroeconomics, Fifth Edition, Norton

K D Hoover (1989) The New Classical Macroeconomics, Blackwell

D Leslie (1993) Macroeconomics: Beyond IS/LM, McGraw Hill

B Callum (1989) Monetary Economics: Theory and Policy, Prentice Hall

P Minford and D Peel (2002), Advanced Macroeconomics, A Primer, Edward Elgar

M Parkin and R Bade (1988), Modern Macroeconomics, Phillip Allan

S M Sheffrin (1996), Rational Expectations, Second Edition, Cambridge Surveys of Economic Literature, Cambridge University Press

B Snowden, H R Vane (1997) A Macroeconomics Reader, Routledge

S D Williamson (2005), Macroeconomics, Addison-Wesley