SIXTH SEMESTER

ECO-302 MACROECONOMIC THEORY

Theories of Consumption: Duesenbury Hypothesis; Keynesian Consumption Function. Permanent Income Hypothesis / Life Cycle Hypothesis; Beyond Permanent Income Hypothesis; Kuznet's findings and Reconciliation of Marginal Propensity to Consume and Average Propensity to Consume and Evidences; Mathematical derivation of Consumption Models; The MPS Model; Wealth effect in the Static Model; Implications of Consumption Theories for Policy Formulation and Stabilization Policy; Random Walk Model. Investment and its theories


Aggregate supply models; The sticky wage model; the imperfect information model; the sticky — price model; The Worker Misperception Model. The concept of inflation; Demand pull and Cost push inflation; hyperinflation; social cost of inflation; theory of stagflation; The Relation of Wages Changes to Unemployment; The Philips curve — the theoretical basis for the Philips curve. Unemployment and price expectations; The long-run Philips curve; Deriving the Philips curve from the aggregate supply curve; Adaptive expectations and inflation inertia; The Natural Rate Theory; Monetarist View of the Philips Curve; Keynesian view of the Philips curve. The size of Government

Debt; Measurement Problem: Inflation; Capital Assets; Business Cycle etc; Ricardian view or Debt: Ricardian Equivalence; Consumers and Future Taxes; Tax shooting; Delayed Stabilization; Ricardo and Ricardian Equivalence and Debate; Model or Debt Crises.


The theory of real business cycles; interpretation; labor market; technology shocks; household behavior; the persistence of output fluctuation; limitations of the models Samualsons multiplier — accelerator interaction theory of trade cycles; Kaldors model of the business cycle. Hickss theory of business cycle; AD-AS theories of output functions; Basic neoclassical growth model/Solow growth model — the accumulation of capital; determination of steady state equilibrium in the long-run; how savings affects growth; the golden rule level of capital; how population affects the steady state level; technological progress in the Solow model; policies to promote growth endogenous growth theory.


Recommended Books:


Branson, William H., (1979), Macroeconomic Theory and Policy*, Harper and Row Publishers, New York / London. 


Froyen, R. T., Macroeconomics: Theories and Policies*, (Latest Edition), Prentice Hall, 7th Edition, 2002. 


Branson, William H., and Litvack James M., Macroeconomics*, (Latest Edition), Princeton University. 


Glahe, Fred R., (Latest Edition), Macroeconomics, Theory and Policy, Harcourt Brace Jovanovich Inc. 


Mankiw, Gregory N., (2000) Macroeconomics*, Worth Publishers, New York. 

Peel D. and Minfow P., (2002). Advance Macroeconomics, Edward Elgar, Cheltenham, U.K. 

Delorme. Jr., Macroeconomics, 2nd Edition. 


Romer, David, (200I). Advanced Macroeconomics*, McGraw Hills, New York, London. 


Sargent, Thomas J., (Latest Edition) Rational Expectations and Inflation*, Harper and Raw Publishers, New York / London.