University of Zimbabwe

Transcription

1 University of Zimbabwe Department of Economics Principles of Macroeconomics (Econ109) Course Outline First Year (Semester 2) Lecturers: Dr. P. G. Kadenge (Office 13: Economics Dept) Mr. T. Makova (Office 234: Commerce Bldg) Mr. T. J. Mukura (Office208: Commerce Bldg) Contact hours: Lectures 45 hrs Tutorials 15 hrs A. PURPOSE OF THE COURSE This course intends to give students an awareness of the how the macroeconomy works through an understanding of the how different economic agents and economic variables interact to determine the state of affairs in an economy. It is offered to those students studying Economics, Business Studies, Accounting, Tourism, Real Estate Management and Rural and Urban Planning, among others, as it gives a good foundation to the concepts they will learn in their areas of specialization. B. AIM OF THE COURSE This course seeks to introduce macroeconomics, the study of the behaviour ofoverall economy as opposed to the behaviour of individuals, firms, or a particular market. Over the course of the semester we will study the theory of income determination including national income concepts, business cycles, unemployment, inflation, economic growth and development, monetary and fiscal policy, public debt, patterns of government expenditures, international trade and finance. We will relate these concepts to currents events in Zimbabwe and around the world. C. COURSE OBJECTIVES: This course seeks to: 1. familiarize students with the fundamental macroeconomic concepts and principles; 2. help them use those concepts and principles to critically analyze current macroeconomic issues and situations; 3. develop a global awareness from an economic perspective; 4. explain macroeconomic problems using different theories and devise appropriate policies to avert them; 5. help students understand the use and choose the appropriate economic policies in solving economic problems; and 1

2 6. help students appreciate how and why nations trade, the issue exchange rates fluctuations and effects of balance of payments problems. D. LEARNING OUTCOMES By the end of this course it is expected that the student will: a. know the basic principles of macroeconomics; b. have some knowledge of competing theories; c. be familiar with key macroeconomic variables and the measurement of such variables; d. have a good understanding of the basic relationships between different macro-economic variables; e. be able to recognise the relationships amongst the following variables: national income, unemployment, budget deficit, money supply, interest rate, inflation rate, exchange rate and trade deficit; f. be able to understand a simple macroeconomic model based on aggregate demand and aggregate supply; g. be able to understand the implications of international trade and capital movements for macroeconomic aggregates in a small open economy; h. be able to understand how government policies affect macroeconomic outcomes and the current debates about the choice of appropriate policies. E. PREREQUISITES Many students feel at a disadvantage if they have notstudied economics previously at high school level. This feeling is entirely unnecessary asthe course is commenced on the basis of no previous knowledge. The only requiredprerequisites are a willingness to learn and, in particular, the ability and motivation to read allmaterial prescribed. F. TEACHING METHODS The course will be taught on the basis of 3lectures and onetutorial per week.in general lectures will concentrate on the application of the techniques being discussed, while tutorials will focus on the techniques themselves. Tutorials will cover some material which has not been covered in lectures. Lectures and tutorials are both compulsory.all students must register for tutorials.tutorial questions for each week will be posted on TSIME and the Economics Dept Notice Board. G. STUDENT ASSESSMENT Each course has its own language, so students are encouraged to use economics terms in the in-class tests. The tests will include multiple choice and structured questions whilst the final exam will have structured questions only.coursework contributes 25% while the final exam contributes 75% to the overall course assessment.n.b.:if a student has no coursework, s/he will not be allowed to sit for the final exam. Students are highly advised to read their textbooks and participate in tutorials. 2

3 H. COURSE CONTENT PART I: 1. INTRODUCTION TO MACROECONOMICS(WEEK 1) 1.1 What is macroeconomics? Objectives of Macroeconomics Tools of Macroeconomics: Fiscal & Monetary Policy Circular Flow of Income 1.2 Measuring Economic Performance National incomeaccountingconcepts Gross Domestic Product Two ways of measuring GDP: Expenditure and Income Approaches Price Indices (CPI and GDP Deflator) and Inflation Shortcomings of GDP PART II: 2. NATIONAL INCOME DETERMINATION (WEEK 2 & 3) 2.1 The Aggregate Expenditure Model Consumption and Saving Functions, Investment function Output determination by total expenditures Output determination with saving and investment The Multiplier 2.2 Aggregate Demand/Aggregate Supply Model Determinants of AD and AS;Short Run AS (SRAS) and Long Run AS (LRAS) Macroeconomic Equilibrium, Changes in Equilibrium GDP and the Multiplier PART III 3. MONEY, BANKING AND INTEREST RATES (WEEK 4 & 5) 3.1 Definition and Functions of Money 3.2 Introduction to Banking - fractional reserve& multiple bank system, creation of money; 3.3 Money multiplier 3.4 Money demand motives and determinants 3.5 Money supply components; monetary equilibrium and interest rate determination ***TEST I COVERS SECTION 1-3*** 3

4 PART 1V 4. MACROECONOMIC POLICIES AND PROBLEMS (WEEK 6 & 7) 4.1 Central banking and monetary policy functions of central bank and tools of monetary policy 4.2 Monetary transmission mechanism: monetary policy in AD-AS framework. 4.3 Effectiveness of monetary policy 4.4 Fiscal policy tools for fiscal policy: government expenditures and taxes, government budget 4.5 Sideeffects of fiscal policy: expansionary and contractionary policies 4.6 Effectiveness of fiscal policy. 4.7 Fiscal and Monetary Interactions 5. MACROECONOMIC PROBLEMS (WEEK 8) 5.1 Inflation-definition, measurement of inflation, theories of inflation, anticipated Vs unanticipated inflation, economic impacts of inflation, the Phillips curve, disinflation programme. 5.2 Employment and unemployment measuring unemployment, theories of unemployment, economic cost of unemployment, solutions of unemployment. PART V 6. OPEN ECONOMY ECONOMICS (WEEK 9 & 10) 6.1 International trade Why do countries trade? 6.2 The theory of comparative and absolute advantage - terms of trade and economic gains from trade 6.3 International Trade Restrictions 6.4 Balance of Payments Accounts (BOP) Accounting for BOP transactions, current account, financial account, official reserve account, policies to control BOP deficits/surpluses 6.5 International Finance - foreign exchange market, the determination of exchange rates 6.6 Exchange Rate Regimes, flexible exchange rate and fixed exchange rate- determinants of exchange rates, disadvantages of flexible exchange rate system, fixed exchange rate, problems and management of fixed exchange rate. ***TEST II COVERS SECTION 4-6*** 4

5 7. Public Sector Economics(WEEK 11) 7.1 Role of government: - efficiency, equality, economic stabilization 7.2 Government expenditures 7.3 Taxes principles of taxation, type of taxes 7.4 The Government Budget I. REFERENCES 1. Baumol W. J. and Blinder A. S., (2007), Economics Principles and Policy, Harcourt, San Diego 2. Lipsey R.G and Chrystal A. K., (2007), Economics, Oxford University Press, New York 3. McConnell C.R. and Bruce S.L., (2000), Economics, Principles, Problems And Policies, McGraw-Hill, New York 4. Samuelson P.A. and Nordhaus W.D. (2005), Economics, 18 th edition, McGraw-Hill New Delhi 5. Sloman J, (2003), Essentials of Economics, Prentice Hall J. E-RESOURCES a. TSIME b. E-books: 5