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Advanced Macroeconomic Theory- II [1]

Paper Code: 
25DECO 812
Credits: 
6
Contact Hours: 
90.00
Max. Marks: 
100.00
Objective: 
  1. To help the students analyze the post Keynesian theories involving IS - LM analysis
  2.  To acquaint the students with the ideas of New Classical and New Keynesian macroeconomics
  3. To develop an understanding of trade cycles and open economy macroeconomics

 

Course Outcomes: 

Course Outcomes (COs):

Course

Learning outcome (at course level)

Learning and teaching strategies

Assessment Strategies 

Course Code

Course Title

25DECO 812

Advanced Macroeconomic Theory –II

(Theory)

Students will-

CO151:analyze equilibrium in goods market and money market and evaluate the effects of monetary and fiscal policies on these equilibria

CO152:examine theories pertaining to new classical and new Keynesian macroeconomics

CO153: analyze the relationship between inflation and unemployment and related policy measures.

CO154:analyze various theories of trade cycles and related aspects

CO155: analyze the open economy macroeconomics.

CO156: contribute effectively in course-specific interaction.

 

Approach in teaching: Interactive Lectures, Discussion, Case studies.

 

Learning activities for the students:

Presentations, Assignments and Group discussions.

Class activity, Assignments, Quiz and Semester end examinations.

 

 

18.00
Unit I: 
IS LM Model
  • Money market equilibrium: the LM curve – construction, factors that determine the slope of LM curve, factors that shift the LM curve
  • Goods market equilibrium: the IS curve - construction, factors that determine the slope of IS curve, factors that shift the IS curve
  • The IS and LM curves combined
  • Factors that affect the equilibrium income and interest rate;
  • Relative effectiveness of monetary and fiscal policy

 

18.00
Unit II: 
New Classical and New Keynesian Macroeconomics
  • Monetarist-Fiscalist debate on Policy Activism
  • New classical approach to macroeconomics
  • Real Business Cycle models
  • New Keynesian Macroeconomics- Sticky Price (Menu Cost) Model, Efficiency Wage Hypothesis

 

18.00
Unit III: 
Inflation and unemployment
  • Inflation –Unemployment trade off - The Phillips Curve
  • The natural rate of unemployment hypothesis and Adaptive expectation hypothesis
  • Relationship between short run and long run Phillips Curve
  • Sacrifice Ratio and Policy of disinflation

 

18.00
Unit IV: 
Theories of Trade Cycle
  • Concept and Phases of Trade Cycle
  • Theories of Trade Cycle- Innovations theory, Monetary theory, Keynes’ theory, Kaldor’s Theory, Samuelson’s Multiplier-Accelerator Model and Hicks’ Theory
  • Control of business cycles – relative efficacy of monetary and fiscal policies

 

18.00
Unit V: 
Open Economy Macroeconomics
  • Mundell - Fleming model of a small open economy under imperfect and perfect capital mobility with fixed and flexible exchange rate regimes
  • Analysis of effectiveness of monetary and fiscal policies

 

 

Essential Readings: 
  1. Froyen, R. T., Macroeconomics: Theories and Policies, Pearson Education India; 10thedition, 2013
  2. Vaish, M.C. Macroeconomic Theory, Vikas Publishing House, New Delhi, 14th Edition, 2014

 

 

References: 

Suggested Readings:

  1. Branson, W. H., Macroeconomic Theory and Policy, Affilated East-west Press Pvt Ltd.; 3rd edition, 2005.
  2. Mankiw,N. G., Macroeconomics, Worth Publishers Inc.,10thedition, 2019.
  3. Edgemond, P., Macroeconomics, Prentice Hall of India, 1999.
  4. Rana, K.C.&Verma, K.N., Macroeconomic Analysis, Vishal Publishing Co., 11th edition, 2014.
  5. Ahuja, H. L.,Macroeconomics – Theory & Policy, S. Chand, 20th edition, 2019.

 

E Resources:

  • Mundell, R.A. (1963). Capital mobility and stabilization policy under fixed and flexible exchange rates. Canadian Journal of Economics and Political Science, 29(4), 475-485.
  • Fleming, J.M. (1962). Domestic financial policies under fixed and floating exchange rates. IMF Staff Courses.9. 369-379.

 

Journal:

  • Journal of Macroeconomics, Elsevier

 

Academic Session: 
2025-26 [2]

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Source URL: https://economics.iisuniv.ac.in/courses/subjects/advanced-macroeconomic-theory-ii-0

Links:
[1] https://economics.iisuniv.ac.in/courses/subjects/advanced-macroeconomic-theory-ii-0
[2] https://economics.iisuniv.ac.in/academic-session/2025-26