Introductory Macroeconomics

What macroeconomics studies and why it was born in the Great Depression; the four sectors; stocks and flows; the circular flow of income built up sector by sector, with leakages and injections.

Final and intermediate goods; domestic territory and normal residents; the eight aggregates and the three conversions between them; all three methods of estimation worked on one dataset; the item-treatment table; real versus nominal GDP and the deflator; GDP and welfare.

Barter and its five drawbacks; the functions of money; M1 to M4 and high-powered money; commercial banks and credit creation worked round by round; the six functions of the RBI; the quantitative and qualitative instruments of monetary policy.

Aggregate demand and supply; ex ante and ex post; the consumption and saving functions with APC, APS, MPC and MPS; equilibrium by both the AD = AS and S = I routes; the investment multiplier; excess and deficient demand and their correction; the paradox of thrift.

Objectives of the budget; public goods and the free-rider problem; revenue and capital receipts and expenditure with the two tests; balanced, surplus and deficit budgets; the revenue, fiscal and primary deficits and their implications; the government expenditure and tax multipliers.

The balance of payments and its two accounts; balance of trade versus current account balance; autonomous and accommodating transactions; the foreign exchange market and the determination of the exchange rate; depreciation, devaluation and the three exchange rate systems; the real exchange rate and purchasing power parity.