Session 11 : Stabilisation Policies in a Closed Economy : Fiscal Policy

Objective : To understand the impact of fiscal policy in a closed economy

Readings: Chap. 11 pp. 283- 301 in Macroeconomics by R.Dornbush et.al. Tenth Edi
tion , 2008.
Case study : "Much Ado About Multipliers" , The Economist ,September 24, 2009.
Session 12 : International Linkages : Extensions of IS-LM in the Context of Inte
rnational Mobility of
Goods
Objective : To understand the concepts of balance of payment, fixed and flexible
exchange rates
Readings : Chap.12, pp. 304- 320 in Macroeconomics by R.Dornbush et.al. Tenth Ed
ition , 2008.
Sessions 13 & 14 : International Linkages : Extensions of IS-LM in the Context o
f International
Mobility of Capital
Objective : To discuss the impact of monetary and fiscal policies in an open eco
nomy with free
mobility of capital
Readings: Chap. 12 pp. 320- 334 in Macroeconomics by R.Dornbush et.al. Tenth Edi
tion , 2008.
Case Study : 1. "German Unification and External Problems" pp. 303 in Macroecono
mics by
R.Dornbush et.al. Tenth Edition , 2008.
2. " Burger - Thy - Neighbour - Policy" in The Economist, September 5, 2009
MODULE III ECONOMY IN THE MEDIUM / LONG RUN
MODULE OBJECTIVE
To discuss the relationship beween inflation and unemployment and to understand
the impact of
monetary and fiscal policy in an open economy in the long run.
SESSIONS AND OBJECTIVE
Session 15 : Aggregate Demand and Supply
Objective : To derive the aggregate demand curve and to show how shifts in aggre
gate demand
can change output in the short run and prices in the long run
Readings : Chap. 10, pp.262-263 , Chap. 5 pp. 118- 136 in Macroeconomics by R.Do
rnbush et.al.
Tenth Edition , 2008
Sessions 16 & 17 : Aggregate Supply : Wages , Prices and Unemployment
Objective : To discuss the relationship between inflation and unemployment in th
e short run and
in the long run and to derive aggregate supply curve
Readings: Chap. 6 pp. 139- 162 (entire ch6) in Macroeconomics by R.Dornbush et.a
l. Tenth Edition , 2008.
Case "Curve Ball", The Economist, September 28, 2006.
Sessions 18 & 19 : International Adjustments and Interdependence : Adjustments u
nder Fixed
Exchange Rate System
Objective : To understand the role of prices, devaluation and trade balance in a
n open economy
with fixed exchange rate system
Readings : Chap. 20 535- 555 in Macroeconomics by R.Dornbush et.al. Tenth Editio
n , 2008
Case Study : "Mexico's External Balance" pp. 516-517 in Macroeconomics by R.Dorn
bush et.al.
Tenth Edition , 2008

Session 20 : International Adjustments and Interdependence : Adjustments under F

lexible
Exchange Rates; Inflation Differentials, Interest Differentials and Exchange Rat
e; Exchange Rate
Fluctuations and Interdependencies
Objective : To discuss the impact of monetary and fiscal policies in an open eco
nomy with flexible
exchange rates in the long run
Readings : Chap. 20 pp. 555- 571 in Macroeconomics by R.Dornbush et.al. Tenth Ed
ition , 2008.
Case Study : "Unsustainable Deficits and the Dollar Bubble" pp. 540-541 in Macro
economics by
R.Dornbush et.al. Tenth Edition , 2008.
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