Learning outcomes

In this course, students learn how a simple macroeconomic model can be used to answer questions such as:

  • How can the central bank reduce inflation?
  • How do tax cuts affect the unemployment rate?
  • Are fixed or flexible exchange rates better?
  • How can we get out of a recession if the nominal interest rate is zero?
  • What happened during the 2008-2009 financial crisis? 
  • How does the savings rate affect economic growth?
  • How does an increase in market power affect real wages?

Content

The course covers the basic theory of the determination of aggregate output, unemployment, interest rates, prices, inflation, and exchange rates. The focus of the analysis lies on the short run and the medium run. Various real world applications are analyzed and the effects of different macroeconomic policies are discussed.

The course consists of 5 parts.

The first part gives an introduction and explains the main macroeconomic variables. Furthermore, it presents some basic concepts of national income accounting.

The second part deals with the short run which is characterized by rigid wages and prices. This part contains an analysis of the market for goods and services and of financial markets, and introduces the IS-LM model. This model is then used to analyze the effects of monetary and fiscal policies and to understand some aspects of the financial crisis that started in 2008.

The third part of the course deals with the medium run in which wages and prices are flexible. The labor market is studied and the link between inflation, expectations and unemployment is analyzed. The IS-LM-PC model is introduced and used to analyze the effects that monetary and fiscal policies, as well as supply shocks, have in the medium run.

The fourth part analyzes the open economy and the impact of different exchange rate regimes.

The fifth part (if there is enough time) studies various topics related to the importance of expectations in macroeconomics.

Table of contents

Part 1: Introduction

Part 2: Short run

Part 3: Medium run

Part 4: Open economy

Part 5: Expectations (if enough time)

Exercices

In order to enable students to apply the theoretical knowledge and to get familiar with the required calculations, various exercises are solved and discussed in the tutorials and during the lectures. Students are encouraged to prepare the exercises in advance and to actively participate in the tutorials. The problem sets are uploaded on Webcampus in advance and the solutions later on. During the tutorials, students can ask various questions related to the content of the course.

Assessment method

The different parts of the course are closely related. In order to understand the content, regular studying is required. Students are advised to carefully read the related chapters in the book and to prepare the exercises in advance.

The exam is written and closed book. The exam covers all 5 parts of the course and contains questions about the content of the course and exercises. Only the use of non-programmable calculators is allowed during the exam. The dates of the exam inspection(s) are announced via Webcampus after the exam.

Sources, references and any support material

O. Blanchard et D. Cohen, Macroéconomie, 8ème édition, Pearson France, 2020.

Some old exam questions with solutions (available on Webcampus)

Language of instruction

Anglais