Indian Institute of Management

Lucknow

POST GRADUATE PROGRAMME (PGP)

BE01102: MACROECONOMIC ENVIRONMENT
TERM II: 2015-16
COURSE OUTLINE

Instructor and Contact Information

NAME:

PROF D TRIPATI RAO

PROF K G SAHADEVAN

PROF. SANGEETA D MISRA

PROF SANJAY SINGH

E-MAIL:

TRIPATI@IIML.AC.IN

DEVAN@IIML.AC.IN

SDMISRA@IIML.AC.IN

SANJAY@IIML.AC.IN

OFFICE TEL:

6696622

6696658

6696652

6696637

Credit

ONE

Session Duration

90 minutes

No. of Sessions

20

COURSE DESCRIPTION
Why do some countries grow at a faster rate than others? Why are there inflation, unemployment and
recessions? What are the sources of these aggregate economic fluctuations? Can the
government/policymakers do something about them? Should they? While the questions are clearly simply
stated, their importance to businesses and our lives cannot be overstated. This course provides a framework
to start thinking about, if not outright answering, these questions.
The course will introduce students to the definition and measurement of aggregate variables such as income
and expenditure, inflation and unemployment, and then develop a conceptual framework that provides
insights into the determinants of these aggregate measures that macroeconomics is concerned with. The
course will also include an analysis of the role of government and central bank with reference to monetary,
fiscal and foreign exchange rate policies.

COURSE OBJECTIVE
The course intends to create adequate understanding of important macroeconomic concepts, tools and
theories among management students. It integrates theory with policy making in business and government
in order to help understand the current Indian and global economic climate and develops expertise to learn
how to apply economic concepts to a variety of real-world events.
a) To expose the students to the fundamental principles and issues of macroeconomic theory

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-2b) To explore the relationship between macroeconomic theory and policy formulation
c) To enable application of macroeconomic tools and techniques in anticipating changes in the
macroeconomic environment that will help in taking effective business decisions with specific reference
to Indian economy

COURSE LEARNING OUTCOMES

By the end of this course, students should understand macroeconomic concepts, theories and models and be
able to interpret and analyze real world situations using these concepts, theories and models. Upon completion
of Macroeconomics, students should be able to:
a. Locate and interpret data describing current economic conditions.
b. Describe how economists measure output, prices, the labor market, savings and wealth and evaluate
any shortcomings associated with these measures.
c. Analyze how economies are linked to the rest of the world.
d. Use simple macroeconomic models to explain the behavior of the macroeconomy and the relationships
between macroeconomic variables such as inflation, aggregate demand, aggregate supply, the labor
market, and economic growth.
e. Explain how and why governments implement fiscal and monetary policies, and their roles in economic
stabilization, and policies to achieve higher growth rates.
f. Identify the main macroeconomic policy issues of the 21st century and appreciate the debates
associated with alternative policy advice.

ALIGNMENT OF INTENDED PROGRAM & COURSE LEARNING OUTCOMES

Sn.

Programme Objectives

To acquire knowledge and skills in key functional areas

2
3

To internalize the knowledge and skills in key functional areas

To master relational and interpersonal communication skills

Course Learning (CL)

outcomes
Sessions 1-18, exercises and
cases
Assignments and project report
Project presentation

REQUIRED COURSE MATERIALS AND READINGS

TEXTBOOK
Rudiger Dornbusch, Stanley Fischer, and Richard Startz, (DFS): Macroeconomics, McGraw-Hill Education,
Indian print of Twelfth International Edition, 2014.
Notes, cases and exercises will be shared during the classroom sessions.

REFERENCE BOOK
N. Gregory Mankiw: Macroeconomics, Worth Publishers, 2007, Sixth Edition

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Data Sources for Projects/Assignments

Reserve Bank of India, Report on Currency and Finance, Various Issues

Economic Survey, Government of India, Various Issues
Handbook of Statistics on Indian Economy, Reserve Bank of India, various issues
National Account Statistics, CSO, Government of India, Various Issues

EVALUATION
Examination: There will be two examinations. The mid-term examination is based on the
topics/chapters covered during the first ten sessions whereas the end-term includes all the topics from
first to last sessions.
Quiz and Assignment: There may be few quizzes/assignments. In general, quizzes are evaluated
individually whereas assignments may be evaluated individually or group-wise.
Group Project: Each student will be assigned to a group consisting of 5 - 7 students to complete a
project. A detailed note on the project assignment will be circulated and will also be discussed in
t h e class.
Class Participation: Students are responsible for all materials covered and readings assigned.
Be prepared to answer certain questions that had been emphasized in prior classes or from the
reading assignments. Your performance and participation will then be used to determine your
participation mark. In addition, due weights will be given to the attendance, discipline and overall
conduct of each student.

GRADING SCHEME
Mid Term Exam

25

End Term Exam

35

Quizzes, Assignments,
and Class Participation

20

Group Project

20

Total

100

ACADEMIC DISHONESTY
Student dishonesty, cheating and plagiarism are not permitted. The international best practices and methods
are put in place to deter students from resorting to plagiarism in the assignments, term papers and projects
reports submitted as part of the course. All the reports will be put through suitable application software and,
if it finds, they do not comply with the stipulated criteria, punishment including their rejection will be initiated.

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COURSE SCHEDULE
Session

Topics to be
covered in the course

Readings and Book Chapter(s)

Introduction
Microeconomics vs. Macroeconomics
Central Issues in Macroeconomics
Indian Macroeconomy Stylised Facts
National Income Accounting
Approaches to Measurement
Circular Flow of Income
National Income Concepts
CSO and National Accounting System in India
Aggregate Demand and Supply
Short Run vs. Long Run
Classical vs. Keynesian
Developed vs. Developing Economies

Chapter 1

The Simple Keynesian Theory of Income

Determination
Introduction to Income Determination
Consumption Function and Aggregate
Demand
Average and Marginal Propensity to Consume
Multipliers: Investment, Tax, Government
and Balanced Budget
Trends in Private Final Consumption in India
Money Demand and Money Supply Process

Chapter 10

8 - 10

Money,

Chapter 11

11 - 12

Fiscal

Chapter 12

2-3

5-6

13 - 15

16

Interest and Income

The Goods Market and the IS Curve
The Money Market and the LM Curve
Equilibrium in the Goods and Money Markets
Deriving the Aggregate Demand Curve
Relation between Money, Interest Rate & GDP
in India
and Monetary Policy
Effectiveness of Fiscal and Monetary Policies
The Policy Mix in Action
Indian Money Market
Nature and Trends in Fiscal Deficit in India

Chapter 2

Chapter 5
Mankiw,
Chapter 3

Chapter 16 and 17

Mankiw,
Chapter 14

Aggregate Supply: Wages, Prices, Unemployment and

Inflation
Models of Aggregate Supply
Unemployment-Inflation
Tradeoff:
The
Phillips Curve
Demand-Pull vis--vis Cost-Push Inflation
Okuns Law and Sacrifice Ratio
Rational Expectation and Painless Disinflation
Inflation in India: Monetary or Structural

Chapter 6, 7 and 8

Consumption and Saving Functions

Chapter 14

Mankiw,
Chapter 13

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Investment Function

18

Open Economy Macroeconomics

Balance of Payments
International Trade
Exchange Rate Determination
Indian External Account: Exports and Imports
IS-LM in an Open Economy

19 - 20

Macroeconomic Issues in the Context of the Indian

Economy, such as:
Economic Slowdown and Macroeconomic
Policy
Global Financial Crisis and Indian Economy
Issues in Measurement of Inflation in India
Fiscal Deficit and Economic Growth in India
Economic Reforms and Inclusive Growth
Money Demand and Money Supply in India
Savings and Investment Behaviour in India

Chapter 15
Chapter 13

Project Report and Presentation