Course Outline

Course title: Macro Economics Course No: BS (A/F): ECO 150

Class: BS (A&F), BS (Commerce) Course No: BS (Commerce): ECO 150
B.Com (Annual System) B.Com (Annual System): Part I, Paper VI

Course Objectives:
1. To develop in students a clear understanding of Macro Economic concepts and indicators.
2. To equip them with adequate knowledge so that they have an informed and comprehensive
understanding of the building blocks and drivers of National Economy

Lecture Topic Source Section

04 (1). National Income Accounting Book1 Ch.6 Section A
Concept of measuring GNP, Book2 Ch.5
GDP via income and expenditure approach, Book4 Ch.2
Nominal and Real GDP, Book5 Ch.21
GDP deflator, valuation of output of industry. Book6 Ch.2
04 (2.1). Money Book1 Ch.13 Section A
What is Money, Financial Intermediaries, Book2 Ch.9
Financial Book4 Ch.7
Regulation, deregulation, and innovation, how Book5 Ch.25-26
banks create money, Quantity theory of money, Book6 Ch.14&17
Functions of money. Money demand
04 (3). Determinants of National Income Book2 Ch.6 Section A
Consumption, Saving and Investment Book4 Ch.4
Book5 Ch.22
Book6 Ch.21
03 (4). Monetary Policy Book1 Ch.14 Section A
The federal reserve system, controlling money Book2 Ch.10
supply, demand for money, interest rate Book4 Ch.14 part2
determination, effect of monetary policy on Book5 Ch.26
output and prices Book6 Ch.18

03 (5). Fiscal Policy Book1 Ch.12 Section A

The federal budget, fiscal policy multipliers, Book2 Ch.8
fiscal policy multipliers and the price level, fiscal
Book5 Ch.20&24
policy multipliers and aggregate supply Book6 Ch.4&6
03 (6). IS/LM framework Book3 Ch.24 Section B
Book4 Ch.9&11 part3
Book6 Ch.7&8
03 (7). Inflation. Book1 Ch.15 Section B
Significances, inflationary and anti inflationary Book3 Ch26
measures. Demand pull and cost push inflation, Book4 Ch12
effects of inflation, Book5 Ch32
Phillip curve, interest rate and inflation,
03 (8). Aggregate Supply and Aggregate Demand Book1 Ch.7 Section B
Model Book3 Ch.20/25
Components of AD, AD and national output, Book3 Ch.4
AS/AD and adjustment to equilibrium, Book4 Ch9
Book5 Ch20&23
Book6 Ch9

04 (9). Balance of Payment Book1 Ch.19(part A&B)

Section B
Importance, details of accounts, equilibrium and Book2 Ch.13
 disequilibrium Book4 Ch 5
Book5 Ch29
Book6 Ch15
02 (10). Exchange Rate. Book1 Ch.19( part A &B)
Section B
Types of Exchange Rates Book2 Ch.13
Book4 Ch13
Book5 Ch29
Book6 Ch15
03 (10.1) Book1 Ch.19 (part A&B)
Section B
Determination of exchange rate. Demand and Book2 Ch.13
supply of foreign exchange. Market equilibrium Book4 Ch13
Book5 Ch29
Book6 Ch15
03 (11). Business Cycles Book1 Ch.16 Section C
Features, theories and forecasting, cycles, Book2 Ch.7
patterns, aggregate demand theories of business Book4 Ch8
cycles, real business cycle theory. Book5 Ch23
03 (12).Employment and Unemployment Book1 Ch.8 Section C
Measuring unemployment, impact of Book2 Ch.15(B)
unemployment, economic interpretation of Book4 Ch4&12
unemployment, labor market issues. Book5 Ch31
Book6 Ch1
03 Pakistan’s Macro Economic Indicators Internet Access Section C
Current status of economy, economic survey
review, SBP latest/fresh quarterly report review.

Recommended Text:
1. Parkin Michael (1997) Macro Economics 4th edition Addison Wesley New York.
2. Nordhaus D William, Samuelson A Paul (2005) Macro Economics 18th edition McGraw-Hill Irwin
3. Begg David, Fischer Stanley, Dornbusch Rudiger (2003) Economics 7th edition McGraw Hill
4. Abel B Andrew Bernanke S. Ben (2007) Macro Economics 6th edition Addison Wesley New York.
5. Nordhaus D William, Samuelson A Paul (2004 ) Economics 18th Edition MacGraw Hill
6. Froyen T Richards (2008) Macro Economics Theories and policies 8th edition Pearson.

Further Readings:
1. Frank Robert. H, Bernanke S. Ben (2004) Principles of Macro Economics 2nd edition McGraw Hill
2. Bamford Colin (2002) Economics for AS and A Level Cambridge University Press
3. H. Craig Peterson W. Cris Lewis (2004) Managerial Economics 4th edition Pearson
4. Evans K. Michael (2004) Macro Economics for Managers Black Well.
5. Internet Material

Economic Advisor’s Wing Ministry of Finance www.finance.org.pk

State Bank of Pakistan www.sbp.org.pk
 Model Paper for B.Com Part I
Annual Examination System 2009 & Onwards
Macro Economics

Subjective Part Time Allowed = 90 Minutes Max Marks = 45

INSTRUCTIONS TO CANDIDATES:
• This paper comprises of 3 Sections.

• Attempt ONLY ONE question from each section

• Each question carries 15 marks.

Section-A

Q. 1) Can we justify the dominance of money over the barter system by the functions it performs? How
can financial intermediaries play their role in this regard?
Q. 2) Fiscal and Monetary policies are the two different approaches to achieve the same goal i.e. of
controlling imbalances. Discuss. Also explain the possible courses of action followed in both policies
to create balance in the economy?

Section-B

Q. 3) Why is it difficult to justify whether inflation has been due to demand-pull-side or cost-push-side?
Why and how does labor market suffer from it?
Q. 4) Why is it important to keep a record of country’s external trade? Explain the importance of current
account, capital and financial account in this respect?

Section-C

Q. 5) Why is it mandatory for an economy to be equipped with well functioning labor market? How do
rates of unemployment, labor force participation and employment to population help showing
performance of labor market?
Q. 6) Explain the highlights of State Bank of Pakistan’s 1st quarterly report for the year 2008.
 MODEL PAPER FOR B.COM PART 1
ANNUAL EXAMINATION SYSTEM 2009 & ONWARDS
MACRO ECONOMICS

OBJECTIVE PART TIME ALLOWED = 30 MINUTES MAX MARKS = 30

INSTRUCTIONS TO CANDIDATES:
• This paper comprises 30 MCQs.
• Each MCQ carries 1 mark.

• Encircle the correct option only.

• Cutting, overwriting and use of ink remover is not allowed.

Q 1) In GNP, we never measure b) Higher the money wage, lower would be the firm’s
a) Amount of Goods and Services produced in cost of production and higher would be the supply.
particular period of time. c) Lower the money wage, how would be the firm’s
b) The value in money terms of total output of Goods. cost of production and higher would be the supply.
c) Both (a&b) are wrong. d) Option (a) and (c) are correct.
d) Both (a&b) are right.
Q 2) We say that deposits are money because
a) They meet liquidity requirement.
b) They contain money.
c) Both (a&b) are wrong.
d) Both (a&b) are right.
Q 3) Consumption function shows
a) Relation ship between consumption and income.
b) Relation ship between personal consumption
expenditure and personal disposable income.
c) Both (a&b) are correct.
d) Both (a&b) are wrong.
Q 4) Monetary Policy is an exercise of
a) Ministry of Finance, to control the interest rate.
b) Central bank, over money supply.
c) Central bank, over interest rate.
d) All (a,b&c)are wrong.
Q 5) When govt. expenditure exceeds tax revenue
a) It leads aggregate expenditure curve to shift
upward.
b) It makes the govt. to experience deficit.
c) It increases the prices as aggregate demand rises
with aggregate supply curve positive in slope.
d) All (a,b&c) are right.
Q 6) IS and LM schedules
a) Former represents equilibrium in money market.
b) Later represents equilibrium in money market.
c) Former represents equilibrium in capital market.
d) All (a,b&c) are wrong.
Q 7) Demand pull inflation never results from
a) Decrease in money supply.
b) Decrease in exports and increase in money supply.
c) Increase in exports and in quantity of money.
d) All (a,b&c) are wrong
Q 8) Money wage and resource prices effects short run
aggregate supply because
a) They alter firm’s cost of production.
 c) Recession is brought by fall in animal spirit that
Q 9) Capital account helps keeping a record of bring right ward shift in aggregate supply curve.
a) Private investment in an economy. d) All (a,b&c) are wrong.
b) Official settlements of accounts. Q 13) Labor force represents
c) Change in foreign official assets. a) Labor that is employed.
d) All (a,b&c) are correct b) Labor that is unemployed.
Q 10) People demand foreign exchange c) Both (a&b) are wrong.
a) For using it against payments necessary to be made d) Both (a&b) are right.
for imports. Q 14) When demand for labor falls
b) So that in future they get additional foreign a) Real wage fall, but actual real wage never changes
currency if current exchange rate falls. immediately.
c) As exchange rate rises. b) Actual real wage never change immediately hence
d) All (a,b&c) are correct. unemployment is temporarily high.
Q 11) Business Cycle never reject c) Actual real wage never change immediately hence
a) Unprecedented up and down movement in unemployment is temporarily low.
economic activity. d) There would then be a surplus of labor.
b) Irregular and non repeating movement of business Q 15) According to 1st quarterly report of SBP, Large
activity. Scale Manufacturing Sector, recorded growth of
c) Both (a&b) are correct. a) 6.9%.
d) Both (a&b) are wrong. b) 6.4%.
Q 12) According to Keynesian school of thought c) 6.2%.
a) Recession is brought by fall in animal spirit that d) 8.7%.
brings right ward shift in aggregate demand curve.
b) Recession is brought by fall in animal spirit that
bring left ward shift in aggregate demand curve.

NOTE: Only 15 MCQs (5 MCQs from each section) are provided for specimen purposes. Actual paper will comprise 30
MCQs (10 MCQs from each section)