POST GRADUATE PROGRAMME IN MANAGEMENT

AY 2015-16
TERM: II
TITLE OF THE COURSE: MACROECONOMICS
CREDITS: 4
_______________________________________________________________________________
Name of the Faculty
Faculty Block/ Email
Telephone
Room No.
Number
Prof. Dipayan D. Chaudhuri
A 101
dipayan@iimidr.ac.in
+91-731-2439511
Prof. Ganesh Kumar N
B 208
ganesh@iimidr.ac.in
+91-731-2439552
Prof. Indrajit Thakurta
C 211
indrajit@iimidr.ac.in
+91-731-2439595
Prof.Subhasankar
B 205
subhasankarc@iimidr.ac.in +91-731-2439549
Chattopadhyay
COURSE DESCRIPTION
The course covers macroeconomic theory and its applications particularly in the Indian context.
The main theoretical framework for the course will be IS-LM and Aggregate Demand - Aggregate
Supply. We begin the course with understanding national income accounts. We then set up with
simple models of national income determination and relax the assumptions to set up more
complex models. These models are necessary to understand and analyze the effects of fiscal and
monetary policy on the economy. The course will help participants to develop analytical skills to
understand the monetary policy announcements of the central banks and broad fiscal policies of
the government and their impact on the economy.
In the context of globalization of economies , we will discuss the linkages of national economy
with global economy and explore interdependencies among countries. We have allocated 5 out of
the total 20 sessions for international linkages of national economy.
COURSE OBJECTIVES
The course aims at helping participants understand the complex macroeconomic environment,
which confronts business. The participants will be able to understand the rationale behind the
economic policy announcements and anticipate policy changes. The course will equip participants
with analytical tools to decipher the effects of economic policy announcements, particularly
Monetary and Fiscal policy, on crucial macroeconomic factors such as interest rate, income,
inflation etc.
PEDAGOGY/TEACHING METHOD:
The pedagogy will be predominantly lectures and classroom discussions. Applications of
macroeconomic theory and case studies are discussed to reinforce understanding of concepts.
TEXT BOOK: Dornbush, R., Fischer, S. & Startz, R. (2012), Macroeconomics, New Delhi: Tata
McGraw-Hill. (Hereafter referred to as Dornbush (2012).)

LEARNING OUTCOMES
Expected Learning Outcomes and Associated Measures
At the end of the course student is expected to accomplish the following learning outcomes (CLO).
Alignment of CLO with the Programme Level Goals & Objectives and Assessment of the learning
outcomes of the course is presented below.
Course Learning Outcome
1. Will be able to
understand
macroeconomic
environment
2. Will be able to appreciate
linkages between
domestic and world
economy
3. Will be able to
understand rationale
behind macroeconomic
policies
4. Apply tools of IS-LM and
or AS-AD to understand
the impact of
macroeconomic polici es
EVALUATION
Quizzes
Mid Term
End Term
Class Participation
Total

Program Level Goals/ Outcome

Assessment Tool(s)

3.1 Clearly identifies decision

problem

Embedded Question(s)in
Mid-Term

3.2 Uses available information

and suggested sources

Embedded Question(s)in
End-Term

3.3 Identifies and presents

appropriate evidence
supporting the analysis of
alternatives

Embedded Question(s)in
End-Term

3.4 Evolves ones own

Embedded Question(s)in
perspective or takes a position / End-Term
makes judgement

WEIGHTAGE
20
35
35
10

100%

SCHEDULE OF SESSIONS
MODULE I:

Overview of Macroeconomics

Module Objective: To discuss dynamics of price- output determination for an economy in

different time horizons and to understand basic concepts in national income accounting
SESSIONS AND OBJECTIVE
Sessions 1 & 2: Introduction and National Income Accounting
Objective: To discuss dynamics of price- output determination for an economy in different time
horizons and to understand basic concepts in national income accounting
Reading: Chap. 1, pp.1-17; Chap 2 pp. 22-42 in Dornbush (2012).

MODULE

II Economy in the Short Run

Module Objective: To discuss the behaviour of goods market and money market and to
understand the impact of monetary and fiscal policy in a closed as well as in an open economy
in the short run
SESSIONS AND OBJECTIVE
Session 3: The Goods Market: Models of National Income Determination - I: Consumption and
Investment
Objective: To understand the process of determination of national income in a market driven
economy
Re ading: Chap. 9, pp.194-205 in Dornbush (2012).
Session 4: The Goods Market: Models of National Income Determination - II: Consumption,
Investment and Government
Objective:To understand the role of government in determining the national income
Readin g: Chap. 9, pp. 206-215 in Dornbush (2012).
Session 5: Models of Nati onal Income Determination - III: Goods Market (IS Curve)
Objective:To derive IS- curve from the goods market
Reading: Chap.10 pp. 224-232 in Dornbush (2012).
Session 6: The Money Market: Demand for Money
Objective:To discuss the components of money stock and motives for holding money
Reading: Chap. 15, 372-388 in Dornbush (2012).
Sessions 7 & 8 : The Money Market: Central Bank, Money Supply and Credit: Money Stock
Determination and Money Multiplier
Objective:To discuss money multiplier and different instruments of monetary control
Readings: Chap. 16 pp. 393-406 in Dornbush (2012).
Samuelson, P. A., Nordhaus, W.D., & Chaudhuri, S. (2012). Monetary Policy and the Economy in
Macroeconomics (pp. 297-301). New Delhi: Tata McGraw Hill.
Ganesh, K., & Shukla, R. (2015). The 2008 Subprime Crisis and the Indian Economy [Class handout].
IIM Indore, Indore, India.
Chattopadhyay, S. (2015). Monetary policy framework in India [Class handout]. IIM Indore, Indore,
India.
Session 9: Models of Nati onal Income Determination - III: Goods & Money Markets (IS-LM Model)
Objective:To derive LM curve and to discuss equilibrium condition for goods and money markets
Readings: Chap. 10 pp. 232-243 in Dornbush (2012).
D'Souza, E. (2014). IS-LM in India in Macroeconomics (pp. 223-225). New Delhi: Pearson
Education.

Session 10: Stabilisati on Policies in a Closed Economy: Monetary Policy

Objective:To understand the transmission mechanism in monetary policy in a closed economy
Reading: Chap. 11 pp. 248-259, Chap.16 pp. 406- 412 in Dornbush (2012).
Session 11: Stabilisati on Policies in a Closed Economy: Fiscal Policy
Objective:To understand the impact of fiscal policy in a closed economy
Readings: Chap. 11 pp. 259-275 in Dornbush (2012) .
Chattopadhyay, S. (2015). Meeting budget deficit target in India [Class handout]. IIM Indore,
Indore, India.
Session 12: International Linkages: Extensions of IS-LM in the Context of International Mobility of
Goods
Objective:To understand the concepts of balance of payment, fixed and flexible exchange rates
Readings: Chap.12, pp. 279-295 in Dornbush (2012).
Economic Survey (2014-15). Impact of Falling Global Crude Prices and Fuel Policy Reforms (Box
2.3) & Implications of Global Crude Oil Price Movements (Box 4.1) in Economic Survey, 2014-15.
New Delhi: Govt. of India.
Sessions 13 & 14: International Linkages: Extensions of IS-LM in the Context of International
Mobility of Capital
Objective: To discuss the impact of monetary and fisc al policies in an open economy with free
mobility of capital
Reading: Chap. 12 pp. 295-309 in Dornbush (2012) .
MODULE

III Economy in the Medium / Long Run

Module Objective: To discuss the relationship between 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 aggregate demand
can change output in the short run and prices in the long run
Reading: Chap. 10, pp.241-242, Chap. 5 pp. 97- 115 in Dornbush (2012) .
Sessions 16, 17 & 18: Aggregate Supply: Wages, Prices and Unemployment
Objective: To discuss the relationship between inflation and unemployment in the short run and
in the long run and to derive aggregate supply curve
Readings: Chap. 6 pp. 118-141 in Dornbush (2012).
Ganesh, K. (2015). High Inflation During 2009-13 and RBI's Response [Class handout]. IIM Indore,
Indore, India.
D'Souza, E. (2014). Unemployment and Wages in India in Macroeconomics (pp. 193-194). New
Delhi: Pearson Education.

Sessions 19 & 20: International Adjustments and Interdependence: Adjustments under Flexible
Exchange Rates; Inflation Differentials, Interest Differentials and Exchange Rate; Exchange Rate
Fluctuations and Interdependencies
Objective: To discuss the impact of monetary and fiscal policies in an open economy with flexible
exchange rates in the long run
Reading: Chap. 20, pp. 527-542 in Dornbush (2012) .

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