Xavier Institute of Management
XIM University
Course Name
Macroeconomic Theory and Policy (MTP)
Programme
Batch
Term
Credits
Course Instructor
MBA-BM
2023-25
Second
Three
Prof. Biswa Swarup Misra
1. Course Introduction and Objectives
This course introduces the key economic principles and theories which help to understand how
the macro economy works. We will focus on five key macroeconomic indicators i.e. growth,
employment, inflation, interest rates and exchange rates which help to assess the state of the
macroeconomy of a country. The discussions in the class would be oriented to appreciate the
factors governing the above five indicators, theories that study the inter-relationship among
these indicators. Being a course designed for managers, emphasis will be on the discussion of
theories that explain the short term fluctuation in economic activity. The efficacy of monetary
and fiscal policies which are used as stabilization measures will be discussed in the course. The
theories governing trade and effectiveness of monetary, fiscal and trade policies under different
exchange rate frameworks will covered in the course. The discussion will be centering round the
Indian context so that participants can relate what is covered in the classroom to what is
happening around them in the real life situations and appreciate the subject of discussion.
2. Course Content
 The significancy of studying macroeconomics
 Introduce key macroeconomic indicators which help to assess the state of the
macroeconomy of a country
 How economic activity is measured and what are the limitations associated with them
 How price pressure in the economy is assessed
 How unemployment is measured in an economy
 What factors govern whether a country is rich or poor
 How we depict equilibrium of an economy
 Why economic activity fluctuates in the short run
 Why there is a need for economic policy and how economic activity can be stabilized
using policy
 Under what conditions monetary policy is more effective than fiscal policy
 How the central banks controls money supply in an economy
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How interest rates and exchange rates are determined in an economy
Should countries promote free trade
What is Balance of Payment crisis and why it occurs
3. Course Learning Outcomes (CLO)
CLO 1: Learn to measure performance of an economy through key macroeconomic indicators.
CLO 2: Understand the characteristics of business cycles
CLO 3 Understand how the central banks controls money supply in the economy
CLO 4 Understand how government influences economic activity
CLO 5 Learn efficacy as well limitations of monetary and fiscal policy in stabilizing economic
activity
CLO 6: Understand the theoretical basis for trade and implications of monetary, fiscal and trade
policy under fixed and flexible exchange rate frameworks.
4. Session Plan
Sessions
Topics
Session Learnings
Session-1
What
Macroeconomics is
all about and
Why we should be
studying
macroeconomics
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Sessions 2- Measuring the
3
Value of Economic
Activity through
National Income
Accounting
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Sessions 45
Distinction
between GDP at
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Reading Materials
Distinction between Micro Presentation Slides
and Macro economics
Important Macroeconomic
Variables: Growth,
Inflation, Unemployment
Kinds of Macroeconomic
Policy: Monetary and Fiscal
Distinction between Stock
and Flow
Distinction between
Output and Wealth
Circular flow of Income
Concepts of GDP, GNP,
NDP, NNP
Interrelations amongst
different concepts of GDP
Reading
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 10
Nominal vs. real GDP
Implication of Rebasing
Reading
Principles of
Macroeconomics -
2
Presentation Slides
Session-6
Current prices and
Constant prices
Mankiw (8th edition)
Chapter- 10
GDP Deflator based
Inflation
Presentation Slides
Case let
GDP at 2011-12
base
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Limitations of GDP
as a measure of
economic welfare
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Session-7
Inflation:
Measuring Price
pressure in an
Economy
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Sessions-8 Meaning and
and 9
measurement of
Unemployment
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GDP at basic price, market
price and factor cost
GDP at 2011-12 baseMethodological Changes
Limitations of GDP
Prices are not values.
Nonmarket activities are
excluded.
The shadow economy is
missing.
Environmental degradation
isn’t counted.
Leisure doesn’t count.
GDP ignores distribution.
Reading
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 10
Meaning of Inflation
Measurement
Inflation through alternate
indicators in India- GDP
Deflator, WPI, CPI-IW,CPIAL, CPI-Rural, Cpi -Urban
and CPI-Combined
Biases in measurement of
Inflation
Costs of inflation
Reading
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 11
Computation of Labour
Force Participation rate
and Unemployment rate
Typology of
Unemployment-Frictional,
Structural Cyclical and
Natural rate of
unemployment
Unemployment
Measurement in India Usual Status, CDS, CWS
Readings
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 15
3
Presentation Slides
Presentation Slides
Presentation Slides
Session-10 Why trade is
beneficial for an
Economy
Session-11 Capturing
interaction of an
economy with the
rest of the world
through the
Balance of
Payments
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Session-12 Supply side
approach to
Growth-Factors
that determine
living standards of
countries
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Session-13 Determination of
equilibrium income
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The absolute advantage
theory
The comparative advantage
theory
Reading
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 3
Presentation Slides
Current, Capital and
Financial Account in the
BoP
Classification of credit and
debit entries in BoP
Why Balance of Payments
always balances
Concept of deficit in the
BoP
How exchange rates are
determined
Role of different factors on
exchange rate
Purchasing power parity
theory of exchange rate
Reading
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 18
Long run determinants of
Growth through
production function
Importance of Productivity
Concept of Natural Rate of
Output
Catch up effect and
Convergence of Income
across nations
Proximate and Ultimate
causes of growth
Role of Institutions in
Growth
Reading
Income and Expenditure
model to determine
Equilibrium Income
Concept of Multiplier
Role of fiscal policy in
equilibrium income
Reading
4
Presentation Slides
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 12
Presentation Slides
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 21
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Session 14- Business Cycles and
16
Monetary and
Fiscal Policy to
Stabilise economic
activity
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Session-17 How money supply
is defined and is
influenced through
policy
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Fiscal Policy and Its
Presentation Slides
Limitations
Schools of Macroeconomic
Thought-Mercantilism,
Classical, Marxian,
Neoclassical and Keynesian
Stylized facts about Short
run economic fluctuations
Predicting business cycles
with leading Indictor
Analysis.
Real Business Cycle Theory
Framework of Aggregate
Demand and Aggregate
supply to study business
cycles.
Models of aggregate
supply
Sticky wage, Sticky Price
and the ImperfectInformation models
Aggregate supply CurveShort run vs. Long run
Hard Landing vs. Soft
Landing
Use of monetary and fiscal
Policy to stabilize economic
activity
Four step approach to
study economic
fluctuations
Demand pull vs Cost push
Inflation
Stagflation
Reading
Money-Functions
The definition of Money
Banks and Money Supply
Deposit Multiplier
Role of Central banks in
influencing money supply
Money Multiplier
Reading
5
Principles of
Macroeconomics Mankiw (8th edition)
Chapters- 20 and 21
Presentation Slides
Teaching Notes
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 16
Presentation Slides
Session18-19
How output and
interest rates are
decided in an
Economy through
the IS-LM Model
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Session 20 Exchange Rate
Determination
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Alternate characterization
of goods market
equilibrium: SavingInvestment equality vs.
Equilibrium
Derivation of the IS Curve
The theory of liquidity
Preference
Derivation of the LM Curve
Equilibrium in the short run
Impact of monetary and
fiscal policy on short run
equilibrium
Reading
Macroeconomics Mankiw (10th edition)
Exchange rates;
Fixed vs. Flexible
Dirty Floating or Managed
Exchange rate regime
Mundell- Fleming model
Effectiveness of monetary
vs fiscal policy under fixed
and flexible exchange rate
regimes
Impossible Trinity
Reading
Macroeconomics Dornbusch, Fisher and
Statrtz (11th edition)
Presentation slides
Principles of
Macroeconomics Mankiw (8th edition)
Chapter- 18
Presentation Slides
5. Readings and References
Text Book (Readings from these Books are Mandatory):
1. Principles of Economics: Mankiw (Eighth Edition), 2017. Cengage
2. Macroeconomics: Mankiw (Ninth Edition), 2015. Worth Publishers
Further Readings:
Latest edition of the following Books
1. Macroeconomics - Abel and Bernanke
2. Macroeconomics: Dornbusch, Fischer, and Startz. Tata McGraw-Hill
3. Macroeconomics: Principles and policy: Baumol and Blinder, South-Western Publishing.
4. Macroeconomics: Olivier Blanchard, Pearson Education
6
Assessment Scheme
Component
Weight (Per cent)
Assessment of Course Leaning
Outcome(s)
Review Quizzes
10
CLO 1, CLO 2, CLO 3 and CLO 4
Quizzes
25
CLO 1, CLO 2, CLO 3 and CLO 4
Mid Term
20
CLO 1, CLO 2, CLO 3 and CLO 4
End Term
30
CLO 1, CLO 2, CLO 3 and CLO 4
Class Notes
10
CLO 1, CLO 2, CLO 3 and CLO 4
Classroom
Engagement
5
CLO 1, CLO 2, CLO 3 and CLO 4
7. Academic Discipline and Integrity
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Students are expected to come to class on time.
Students are expected to come to the class prepared after doing the necessary preparatory
studies
Late coming will award no attendance and sometimes barring from the class, if the reason
for coming late is found not satisfactory.
Utmost care will be taken to maintain class decorum, follow the exact evaluation norms,
conduct fair examinations, fair and transparent evaluation of examination papers, etc.
8. Mapping Course Leaning Outcomes (CLO) with the Program Learning Goals (PLG)
PLG#
Program Learning
Goals
Trait
PLG 1
Functional and
Business Skills
The students will demonstrate
understanding of elements of all
functional areas
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Addressed by
Course
Yes
No
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PLG 2
Analytical Skills
PLG 3
Collaboration and
Teamwork
Attributes
PLG 4
Ethical
Responsibility
PLG 5
Communication
The students will use analytical

techniques to identify a business
problem, and suggest a solution
The students will exhibit
voluntary cooperation and
effective teamwork in a group
setting
The students will understand the
ethical complexities of
conducting business. The
students will adopt techniques in
scenarios involving ethical
dilemma and offer resolution
The students will produce
reasonably good quality business
documents. The students will
become effective and confident
communicators
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