Saving and Investment
Definition and Kinds of Investment; Autonomous and Induced etc. Determinants of investment. Present Value Criteria for Investment. Investment Demand and Output Growth. Tobin’s Q-Theory. Lags in Investment Demand. Derivation of IS-curve, Shape of IS-curve. Volatility of Investment. Investment Demand and Fiscal Policy. Shifts in Investment Demand Curve and output determination.
Money Market: The Demand and Supply of Money
Money Demand and its Determinants, Regressive Expectation Model. Portfolio Balance Approach, Empirical Estimation of Income and Interest Elasticities. Supply of Money, Determinants of Money Supply. Measurement of Money Supply and its implications, Instruments of Monetary Policy.
Interest Sensitivity of Money Supply. Quantity Theory of Money and its Critical Review. Fischer effect, Money, Prices and Inflation. Derivation of LM Curve and its Slope. LM Curve and Money Market Equilibrium. Interaction of IS-LM and Equilibrium.
Aggregate Demand, Supply and Stabilization Policy
Keynesian Models: Liquidity Trap. Effectiveness of Policy and Price Rigidity. Slope of Aggregate Supply and Demand Curves. Liquidity Trap. Grand Aggregate Demand Curve. Interaction of IS-LM and Determination of output: Short-run and Long-run analysis: Aggregate Demand and Supply and their Slopes. Slope of IS-LM in Short-run and Long-run. Vertical / Horizontal Shapes of these Curves. Classical and Keynesian Models. Shocks to Aggregate Demand and Supply and Stabilization Policy. Supply Side Economics. Stagflation and Stabilization Policies, Shocks to IS-LM and its Outcomes and Policy Implications. Short-run – Long-run Philip Curves. Long-run and Vertical Aggregate Supply Curve. Ineffectiveness of Keynesian Policies, Technical Change and Shift in Vertical Aggregate Supply Curve.
Open Economy and Macroeconomic Stabilization
Exchange Rates and their Determinants: Mundell - Fleming Model (MFM): Small open Economy with perfect Capital Mobility. IS-LM: Goods and Money Market. Small Open Economy, Floating Exchange Rate and Fiscal Policy. Fixed Exchange Rate and Fiscal Policy. Flexible and Managed Exchange Rates.
Monetary Policy, Devaluation and Recovery from great depression. Trade Policy: Mundell-Fleming Model (MFM) with changing Price Level. MFM and large open Economy. Depreciation and its impacts. Income Absorption Approach and exchange Adjustment and Balance of Payment.
Labor Market, Price Expectation and Unemployment
Demand and Supply of Labour, Equilibrium in the Labour Market. The Sticky Wage Model, Insider-Outsider Models. The Workers - Misperception Model, The Imperfect - Information Model, The Sticky Price Model. Rational Expectation (RE), Adaptive Expectations, RE and Painless Disflation, Hysteresis and challenge to Natural rate Hypothesis.
Macroeconomic Policy Debate
Policy Actions: Active or Passive, Ignorance, Expectations and the Lucas Critique. Conduct of Policy: Rule vs. Discretion, Distrust of Policy makers and Political Process. Macroeconomics Policy: Rules for Fiscal Policy, making Policy in uncertain World. Seignorage and Inflation: What can Policy Accomplish? Monetarists vs. Activists debate. Phillips Curve: Short run and Long run analysis. The expectation augmented Phillips Curve. Money Inclusion and output. Short Run and Long Run Adjustment. Perfect Foresight and Adjustment.
Government Debt and Budget Deficit
The size of Government Debt, Measurement Problem: Inflation, Capital Assets, Business Cycle etc. Ricardian view of Debt: Ricardian Equivalence, Consumers and Future Taxes. Tax shooting, Delayed Stabilization, Ricardo and Ricardian Equivalence and Debate. Model of Debt Crises.
Economic Fluctuation and Its Sources
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