School of Economics

Faculty of Arts and Social

Sciences

ECOS2002
Intermediate Macroeconomics
Semester 2, 2015
Unit of Study Outline
Coordinator/ Lecturer:
Phone:
Office:
Email:

Dr. Matthew Smith

9351 3074
Room 432, Merewether Building
matthew.smith@sydney.edu.au

Consultation Times: Wednesdays 2.00 3.00 pm, Fridays 2.00 4.00 pm (or other times by
appointment)
Classes (Lectures):
Stream 1: Tuesday 9am 11am
Stream 2: Wednesday 11am 1pm

Venue: Merewether Lecture Theatre 2

Venue: Bosch Lecture Theatre 2

Tutorials (weekly): begin in week 3 of semester (beginning 10 August).

Tutors:

Aylmer, Liam
Atif, Syed
Queiroz Pelaio, Felipe
St. John, Henry
Zhang, Haoyu

Email:

liam.aylmer@gmail.com
sati1640@uni.sydney.edu.au
qfel8641@uni.sydney.edu.au
hstj7422@uni.sydney.edu.au
haoyu.zhang@sydney.edu.au

1. Unit of study information

1.1. Faculty Handbook description
This unit of study develops models of the goods, money and labour markets, and examines issues in
macroeconomic policy. Macroeconomic relationships, covering consumption, investment, money and
employment, are explored in detail. Macro-dynamic relationships, especially those linking inflation and
unemployment, are also considered. Exchange rates and open economy macroeconomics are also
addressed. In the last part of the unit, topics include the determinants and theories of economic growth,
productivity and technology, the dynamics of the business cycle, counter-cyclical policy and the
relationship between micro and macro policy in the context of recent Australian experience.

This Unit of Study Outline MUST be read in conjunction with the Faculty of Arts and Social Sciences Student
Administration
Manual
(http://sydney.edu.au/arts/current_students/student_admin_manual.shtml)
and
all
applicable University policies. In determining applications and appeals, it will be assumed that every student has
taken the time to familiarise themselves with these key policies and procedures.

Pre-requisites: ECON1002; Co-requisites: ECMT1020

It will be assumed that students know (a) how to read and draw graphs (b) how to use algebra to solve
simple equations and (c) what a derivative is and how to differentiate simple functions. Students are also
assumed to have the basic knowledge in economics (especially, microeconomics) at the level of
ECON1001, ECON1002, and also preferably, although not necessary, ECOS2001. Certain combinations

of Maths/Stats may substitute for Econometrics. Consult the School of Economics

Undergraduate Coordinator.
1.2. Objectives and Outcomes
ECOS2002 follows on from ECON1002 Introductory Macroeconomics to give a basic understanding of
Macroeconomics, as well as providing a basic grounding in how the aggregate economy works, it provides
a basis for third year options such as ECOS3001 Capital and Growth, ECOS3007 International
Macroeconomics, and ECOS3010 Monetary Economics.
ECOS2002 is required for a major in Economics in the B.Com, B.Ec, B.Ec (Social Science) and related
degrees.
Subject specific learning outcomes:
1. Understand the theoretical models that form the body of contemporary macroeconomics;
2. Understand and apply macroeconomic models to various economic problems and issues;
3. Understand the associated empirical implications and policy issues;
Generic learning outcomes:
4. Be open to new ways of thinking and appreciate the importance of intellectual curiosity and reflection as
the foundation for continuous learning.
5. Identify, define and analyse problems and recommend creative solutions within real-world constraints.
6. Demonstrate a capacity to work independently including the ability to plan and achieve goals.
7. Critically evaluate underlying theories, concepts, assumptions, limitations and arguments in disciplinary
and cross-disciplinary fields of study.
8. Be intellectually ready to participate in public policy discussions arising in business and government
environments;
9. Manage, analyse, evaluate and use information efficiently and effectively.
1.3 Learning Structure
Learning in this unit involves students attending a one two-hour lecture and a one-hour tutorial each week
as well as accessing reading and other resource material from the blackboard website, Fisher library and
the textbook. Please note that students are required to attend 80% of their classes in the semester and
rolls for tutorials will be called. Students are expected to commit an average of 9 hours to class time and
study per week. The following provides an indicative break-up of this minimum requirement:

Attendance at lectures (2hrs per week)

Preparation for lectures (1hr per week)

Attendance at tutorials (1hr per week)

Preparation and reading for tutorials (2hrs per week)

Preparation for assessments (averages out to about 3hrs per week)

1.4 Online Learning

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This unit requires regular use of the Universitys Learning Management System (LMS), also known as
Blackboard Learn. You will need reliable access to a computer and the Internet to use the LMS. A summary
description of learning resources on the units blackboard website is provided in 2.5 below.
The easiest way to access is through MyUni (click on the MyUni link on the university home page,
http://sydney.edu.au or link directly to the service at https://myuni.sydney.edu.au/. There is a
BlackBoard LMS icon in the QuickLaunch window on the left hand side of the screen.
If you have any difficulties logging in or using the system, visit the Student Help area of the LMS site,
http://sydney.edu.au/elearning/student/help/.
Mobile Learn
You can also access your LMS sites via the Sydney Uni App for iPhone and Android. The full set of features
available on the mobile app for the University LMS can be found in detail in this PDF document: Features in
the mobile App for the University LMS (PDF)
To download the University of Sydney mobile app directly to your phone or mobile device you need to be
able to access the marketplace associated with your device's operating system.

iTunes store on your iPhone/ iPod touch or iPad

Play Store or the Android Marketplace (depending on the phone's OS)

BlackBerry App World on your BlackBerry smartphone device

Palm App Catalog on your HP webOS device

Once you are at the marketplace or app store:

1. Search for University of Sydney
2. Install the app
3. Open the app and click on the icon 'Bb Learn' to access the LMS
4. Login to the LMS with your UniKey and password.
Important: due to the limitations of mobile devices you cannot submit assignments using the assignment
tool. You should not complete graded tests (quizzes) using your mobile device due to the possibility of
internet drop out.
The Universitys Privacy Management Plan governs how the University will deal with personal information
related to the content and use of its web sites. See http://sydney.edu.au/privacy.shtml for further details.

2. Topics, Assessment and Learning Resources

2.1 Unit Schedule
Semester Two 2015

Week
1
2
3
4
5
6
7
8
9
BREAK
10

Week
beginning
27 July
03 August
10 August
17 August
24 August
31 August
07 September
14 September
21 September
28 September
05 October*

Lecture Topics: for their Contents see

Section 4 below
Topic 1
Topic 2
Topic 2
Topic 3
Topic 4
Topic 5
Topic 5
Topic 6
Topic 7
SESSION BREAK
Topic 7

Tutorial Topic

Topic 1
Topic 2
Topic 2
Topic 3
Topic 4
Topic 5
Topics 5/6
Topic 6

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11
12
13
STUVAC
EXAMS

12 October
19 October
26 October
02 November
09 November

Topic 8
Topic 9
Topic 9

Topic 7
Topics 7/8
Topics 8/9

STUVAC
EXAM PERIOD commences

* NB: Public holiday on Monday 5 October.

Type

Weighting

Due Date

1. Assignment

20%

Friday, 25 September, 4 pm

2. Mid-semester exam (in-class: 1.5 hour)

30%

Tuesday, 15 September 6 pm - 8 pm
Venue: Eastern Avenue Auditorium

3. Final examination (2 hours)

Total
2.2 Assessment details

50%

TBA (Exam period 09-21 November)

100%

1. Assignment:
It is worth 20 % of the overall mark for the course. The review essay will be a maximum length of 800
words (excluding bibliography).
The aim is to summarise and critically evaluate an article. Each student is required to choose an article to
evaluate from a list of four articles set by me in relation to its prescribed topic. The list along with the
prescribed topic will be posted on Blackboard by the end of Week 2.
Students should discuss and critically analyse the article in relation to the prescribed topic, demonstrating
an understanding of the authors fundamental argument and its limitations and/or weaknesses. Students
are encouraged to employ additional references to understand the prescribed topic and to form an
informed view of the authors argument.
Assignments must be physically submitted by 4 pm, Friday 25 September 2015 with electronic copies
sent via Blackboard.
2. Mid-semester exam:
It is worth 30% of the overall mark for the course. The mid-semester exam will be closed-book. It will
consist of 15 multiple choice questions (worth 10%) and two short answer essays (each worth 10%)
covering topics 2-5 in the course. The exam will be 90 minutes in duration with 5 minutes reading time.
3. Final exam:
It is worth 50% of the overall mark for the course. The end-of-semester exam will be closed-book and
cover all topics in the course. It will consist of 20 multiple choice questions (worth 20%) and two essay
questions (each worth 15%). The final exam will be 2 hours in duration with 10 minutes reading time.
2.3 Assessment Criteria
This unit uses standards referenced assessment for award of assessment marks. Students assessment will
be evaluated solely on the basis of students achievement against criteria and standards specified to align
with learning outcomes. For reference to criteria and standards, please consult the grade descriptors for
the School of Economics at http://sydney.edu.au/arts/economics/student-resources/index.shtml
2.4 Submission of Written Work
Compliance Statements
All students are required to submit an authorised statement of compliance with all work submitted to the
University for assessment, presentation or publication. A statement of compliance certifies that no part of
the Work constitutes a breach of Academic Dishonesty and Plagiarism Policy.

5
The format of the compliance statement will differ depending on the method required for submitting your
work (see Assessment Submission below). Depending on the submission method, the statement must be
in the form of:
a. a University assignment cover sheet;
b. a University electronic form; or
c. a University written statement.

Dual online and paper submission of the Assignment

As indicated above in 2.3 your assignment must be submitted both online via the Blackboard site for this
Unit of Study, and in hard copy via the Economics drop boxes in the Merewether Building foyer by 4pm
Friday 25 September 2015.
Penalty for Late Work
Assignments not submitted on or before the due date are subject to penalty, refer to
http://sydney.edu.au/arts/current_students/late_work.shtml for the Policy on Late Work.
2.5 Learning and Teaching Resources
The UoS is conducted through weekly lectures delivered with the aid of power-point slides. These lectures
set out the basic analytical framework employed with examples to illustrate the usefulness of the
framework. The lectures will be accompanied by a weekly tutorial program for which you will be required
to attend and to participate in discussion.
The following additional teaching resources will be used:
Textbook:
The textbook for this course is:
Gordon, Robert J. (2012) Macroeconomics, Pearson New International Edition (as based on the
original hard-copy 12th edition), Pearson (hereafter Gordon).
It can be purchased from the University Co-op Bookshop.
Note: Often materials and notations covered in lectures will be different from the textbook. Not all
materials in the textbook will be covered in this course. See Lecture and Reading Guide in section 5 below
for details.
Other Readings:
Besides the text, there are other essential readings (denoted by *) which you will be expected to read in
studying the material. There are also additional readings for topics which will be referred to in lectures and
be the basis for some discussion questions in tutorials. A selection of four of additional readings will be set
for the assignment (see section 2.3 above). All these readings will be accessible electronically from the
eReader Collection of Fisher library (using your login details) or by external link. The surest way to access
the readings from Fisher Library is to simply search under the lecturers name (i.e. me) and/or the course
code.
MyEconlab:
The Gordon text comes with the MyEconLab website (www.Myeconlab.com) which provides self-study
resources in the form of quizzes and tests as well as downloadable material from the text, including its
power-point slides, data and search capability of its e-text. Each student who purchases the Gordon
textbook new will be supplied with an access code to register at and use MyEconLab. For access, the
Course ID is smith16902 Students can also separately purchase from Pearson access to MyEconlab with
an e-version of the text.
Blackboard:
Blackboard will be used for:

6
1. Announcements concerning all aspects of the course (e.g., forthcoming assessments, assessment
results and additional instructions about the tutorial program). You should check Blackboard regularly for
such notices.
2. As a repository for learning materials such as this UoS outline with lecture program, the tutorial
program and my PowerPoint slides. The last you should print out in handout form to accompany lectures.
Also, I will be posting on blackboard answers to the questions/problems at the end of each chapter of the
Gordon text.
2.6 Feedback
Feedback on assessments should be taken seriously to help you achieve your learning goals. Students will
receive timely feedback on their assessments. Marks on assessment will be posted on blackboard and
students will have ample opportunities to discuss their performance with teaching staff. Note that final
grades for this unit will not be posted in Grade Centre.
2.7 Appeals against academic decisions

University policy http://sydney.edu.au/senate/policies/Ac_Appeals_Rule.pdf

Faculty policy & procedures http://sydney.edu.au/arts/current_students/appeal_academic_decision.shtml

2.8 Academic honesty and plagiarism

Academic honesty is a core value of the University. The University requires students to act honestly,
ethically and with integrity in their dealings with the University, its members, members of the public and
others. The University is opposed to and will not tolerate academic dishonesty or plagiarism, and will treat
all allegations of academic dishonesty or plagiarism seriously.
The Universitys Academic Dishonesty and Plagiarism Policy 2012 and associated Procedures are available
for reference on the University Policy Register at http://sydney.edu.au/policies/ (enter Academic
Dishonesty in the search field). The Policy applies to the academic conduct of all students enrolled in a
coursework award course at the University.
Under the terms and definitions of the Policy,

academic dishonesty means seeking to obtain or obtaining academic advantage (including in the
assessment or publication of work) by dishonest or unfair means or knowingly assisting another
student to do so.
plagiarism means presenting another persons work as ones own work by presenting, copying or
reproducing it without appropriate acknowledgement of the source.

The presentation of another person's work as one's own without appropriate acknowledgement is regarded
as plagiarism, regardless of the authors intentions. Plagiarism can be classified as negligent (negligent
plagiarism) or dishonest (dishonest plagiarism).
An examiner who suspects academic dishonesty or plagiarism by a student must report the suspicion to a
nominated academic in the relevant faculty. If the nominated academic concludes that the student has
engaged in dishonest plagiarism or some other sufficiently serious form of academic dishonesty, the
matter may be referred to the Registrar for further disciplinary action under the terms of the Academic
Dishonesty and Plagiarism Policy 2012 and Chapter 8 of the University of Sydney By-Law 1999 (as
amended).
2.9 Use of Similarity Detecting Software
Students should be aware that written assignments submitted in this Unit of Study will be submitted to
similarity detecting software known as Turnitin. The detection and identification of work that may be
suspected of plagiarism is an academic judgment for the unit coordinator, and similarity detecting software
is one of the tools that an examiner or marker may use to inform a decision that plagiarism has occurred.
Turnitin searches for matches between text in your written assessment task and text sourced from the
Internet, published works and assignments that have previously been submitted to Turnitin for analysis. It

7
produces an originality report showing matches with various sources, and an overall level of match or
similarity index.
There will always be some degree of text-matching when using Turnitin. These are caused by the use of
direct quotations, technical terms and phrases, and the listing of bibliographic material. This does not
mean you will automatically be accused of plagiarism. Further information about Turnitin is available at
http://sydney.edu.au/arts/current_students/plagiarism_and_turnitin.shtml
2.10 Special Consideration
The Faculty of Arts and Social Sciences assesses student requests for assistance relating to completion of
assessment in accordance with the regulations set out in the University Assessment Policy 2011 and
Assessment Procedures 2011. Students are expected to become familiar with the Universitys policies and
Faculty procedures relating to Special Consideration and Special Arrangements.
Students can apply for:

Special Consideration - for serious illness or misadventure

Special Arrangements - for essential community commitments
Simple Extension an extension of less than 5 working days for non-examination based
assessment tasks on the grounds of illness or misadventure.

Further information on special consideration policy and procedures is available on the Faculty website at
http://sydney.edu.au/arts/current_students/special_consideration.shtml
School of Economics application of approved special consideration
If an application for Special Consideration is approved, the following form of consideration will be granted:
Action taken by
student

Assessment
Final exam
Class test / midsemester test

Did not attend exam

Further test

Did not attend the test

Did not attend further
test

Second further test

Did not attend second

further test

Assignment

Late submission

Consideration that will be

granted
Further test (after end of semester
exam period)
Further test (after end of semester
exam period)
Second further test (start of
following semester)
EITHER Grade of Absent Fail ( for
repeated short-term illness) OR
grade of Discontinue (Not to count as
Fail) for ongoing serious illness or
misadventure
Grant extension or re-weight other
assessments

3. Other Policies and Procedures Relevant to this Unit of Study

The Facultys Student Administration Manual is available for reference at the Current Students section of
the Faculty Website (http://sydney.edu.au/arts/current_students/). Most day-to-day issues you encounter
in the course of completing this Unit of Study can be addressed with the information provided in the
Manual. It contains detailed instructions on processes, links to forms and guidance on where to get further
assistance.
3.1 Staying on Top of Your Study
For full information visit http://sydney.edu.au/arts/current_students/staying_on_top.shtml
The Learning Centre assists students to develop the generic skills, which are necessary for learning and
communicating knowledge and ideas at university. Programs available at The Learning Centre include
workshops in Academic Reading and Writing, Oral communications Skills, Postgraduate Research Skills,

8
Honours, masters Coursework Program, Studying at University, and Workshops for English Language and
Learning. Further information about The Learning Centre can be found at
http://sydney.edu.au/stuserv/learning_centre/.
The Write Site provides online support to help you develop your academic and professional writing skills.
All University of Sydney staff and students who have a Unikey can access the WriteSite at
http://writesite.elearn.usyd.edu.au/.
The Faculty of Arts and Social Sciences has units at both an Undergraduate and Postgraduate level that
focus on writing across the curriculum or, more specifically, writing in the disciplines, making them
relevant for all university students. To find out more visit
http://sydney.edu.au/arts/teaching_learning/writing_hub/index.shtml and
http://sydney.edu.au/arts/teaching_learning/pg_writing_support/index.shtml.
In addition to units of study on writing, The FASS Writing Hub offers drop-in sessions to assist students
with their writing in a one-to-one setting. No appointment is necessary, and this service is free of charge
to all FASS students and/or all students enrolled in WRIT units. For more information on what topics are
covered in a drop-in session and for the current schedule, please visit
http://sydney.edu.au/arts/teaching_learning/writing_hub/drop_in_sessions.shtml.
Pastoral and academic support for Aboriginal and Torres Strait Islander students is provided by the
STAR Team in Student Support services, a dedicated team of professional Aboriginal people able to
respond to the needs of students across disciplines. The STAR team can assist with tutorial support,
mentoring support, cultural and pastoral care along with a range of other services. More information about
support for Aboriginal and Torres Strait Islander students can be found at
http://sydney.edu.au/current_students/student_services/indigenous_support.shtml.
The Library offers students free, online tutorials in library skills at http://sydney.edu.au/library/skills.
There's one designed especially for students studying in the Humanities and Social Sciences at
http://libguides.library.usyd.edu.au/. And don't forget to find out who your Faculty Liaison Librarians are.
3.2 Other Support Services
Disability Services is located on Level 5, Jane Foss Russell Building G20; contact 8627 8422 or email
mailto:disability.services@sydney.edu.au. For further information, visit their website at
http://sydney.edu.au/stuserv/disability/.
Counselling and Psychological Services (CAPS) are located on Level 5, Jane Foss Russell Building G20;
contact 8627 8433 or email mailto:caps.admin@sydney.edu.au. For further information, visit their website
at http://sydney.edu.au/current_students/counselling/.

4. Lecture and Reading Guide

Note: Dates shown below are only approximate. Essential readings are starred.
Topic 1: Introduction
(Week 1, beginning 27 July)
A brief overview of global conditions with a focus on Australias recent performance; key
macroeconomic variables: output, inflation and the unemployment rate.
Reading:
*Gordon Ch 1 (pp. 1-24)
Edey, M. (2009) The Global Financial Crisis and Its Effects, Economic Papers, 28(3), pp.
186-95
Pomfret, R. (2009) The Post-2007 Financial Crisis and Policy Challenges facing Australia,
Economic Papers, 28 (3), pp. 255-63

9
On the global financial crisis and its aftermath, from which the two articles above come,
see the special issue of the Economic Papers, volume 28, Issue 3.
The monthly RBA bulletin, the quarterly statement of monetary policy (see most recent
May 2014 statement) and the RBA Annual Report are good sources of up-to-date
information on the Australian economy. They are available at
www.rba.gov.au/PublicationsAndResearch/
The Australian Economic Review also publishes articles that are closely related to
material covered in the course. Check the for the student section at the back of the
journal.
Topic 2: National Accounting, the Keynesian Income-Expenditure Model and
Fiscal Policy
(Weeks 2 and 3, beginning 3 and 10 August)
The circular flow and national accounting; conception of macroeconomic equilibrium;
Keynesian Income-Expenditure Model and Fiscal Policy Issues; an open economy model
and trade balance constraint
Reading:
* Gordon Chs 2 (26-50), 3 (pp. 57-76, 89-91), and 6 (pp. 168-97)
* Stegman T. and Junor B. (1993) Introductory Macroeconomics, Harcourt BraceJovanovich, Ch. 6 (pp. 84-113).
Topic 3: The Financial System and Monetary Policy
(Week 4, beginning 17 August)
The demand for money, its supply and a financial market model; the conduct of
monetary policy and the key causal relationship between interest rates and expenditure;
the yield curve and the expectations hypothesis
Reading:
* Gordon Chs 3 (pp. 76-80), 5 (154-9), 13 (esp. pp. 464-72) and Chapter 13 (Money,
Banks, and the Federal Reserve) from original 12th edition of Gordon text. [URL:
http://opac.library.usyd.edu.au/record=b4833541]. 1
*Lewis, M.K. and Mizen, (2000) The transmission mechanism, Monetary Economics,
Oxford University Press, Ch. 13.
Goodhart C. (1989) Monetary Base, The New Palgrave: Money, Eatwell J, Milgate M &
Newman P (eds), pp. 206-11.
Otto, G. (2007) Central bank operating procedures: How the RBA achieves its target for
the cash rate, Australian Economic Review, 40 (2), pp. 216-24.
Topic 4: The IS-LM Model and Macroeconomic Policy
(Week 5, beginning 24 August)
Constructing IS and LM curves on the basis of interest-setting monetary policy; fiscal and
monetary policy in the IS-LM model; economic crisis and the policy response
Reading:
* Gordon Chs 3 (pp. 76-9), 4 (pp. 93-118, 123-6) & 5 (129-53)
Alternatively, for this chapter, you can use Bernanke, B., Olekalns, N. and Frank R. (2011) Principles of
Macroeconomics, 3rd edn, Chs 7 & 8 (or 2005 edn, Chs 8 & 9).
1

10
* Romer, D. (2000) Keynesian Macroeconomics without the LM Curve, Journal of
Economic Perspectives, 14 (2), pp. 149-169.
Topic 5: The AS-AD Model
(Week 6, beginning 31 August)
Short run and long run equilibrium; aggregate demand with an interest rate rule using a
price level target; aggregate supply and the natural level of income; price-wage
flexibility versus non-flexibility; inflationary and deflationary shocks and policy
responses
Reading:
* Gordon Ch 8 (pp. 243-76), 13 (pp. 464-72).
* Bernanke, B., Olekalns, N., and Frank R. (2005) The Reserve Bank and the Economy,
Principles of Macroeconomics, 2nd edition, McGraw-Hill Irwin, Ch. 10, pp. 254-91.
Topic 6: Inflation and Unemployment: The Phillips Curve
(Weeks 7 and 8, beginning 7 and 14 September)
Inflation, unemployment and the Phillips Curve analysis; expectations and price inflation;
the natural rate of unemployment; anti-inflationary policy, hysteresis and central bank
independence; nominal and real interest rates and the Fisher hypothesis
Reading:
* Gordon Chs 9 (pp. 279-319) and 10 (pp. 330-46, 353-68)
* Dawson, G. (1996) Unemployment and Inflation, Economics and changing economics,
MacIntosh M, Brown
V, Costello N, Dawson G, Thompson G & Trigg A (eds), The Open University, International
Thomson Business Press, pp. 815-53.
Stevens, G. (2003) Inflation Targeting: A Decade of Australian Experience, RBA,
www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_apr03/bu_0403_3.pdf

Mid-Semester Exam: Tuesday 16 September (Week 8)

Topic 7: Economic Growth
(Weeks 9 and 10, beginning 21 September and 5 October)
The aggregate production function and the Swan-Solow growth model; technological
change and convergence theory; human capital and endogenous growth theory; critique
of supply driven theories of growth and the alternative demand-led approach to
explaining growth and development
Reading:
* Gordon Chs 11 (pp. 375-98) and 12 (pp. 407-440)
* Jones, C. I. (2002) Introduction to Economic Growth, 2nd edn., New York: W.W. Norton,
Ch. 8 (pp. 156-68).
Kurz, H. and Salvadori, N. (2008) New Growth Theory and Development Economics,
International Handbook of Development Economics, Dutt A K & Ros J (eds), Edward Elgar,
ch. 15, pp. 207-22.
Semester Break: Common Week, 28 September 2 October

11

Topic 8: Consumption and Investment

(Week 11, beginning 12 October)
Theories of consumption: permanent income hypothesis, lifecycle hypothesis & relative
income hypothesis; theories of investment: accelerator theory & the neoclassical theory;
investment and cyclical activity
Reading:
* Gordon Chs 14 (pp. 479-511) & 15 (pp. 517-39)
Ceballero, R. (1999) Aggregate Investment, Handbook of Macroeconomics, Taylor J B &
Woodford M (eds), Elsevier, vol. 1B, Ch. 12, pp. 813-62.
Petri, F. (2005) Capital Theory and Macroeconomics I: The Theory of Aggregate
Investment, General Equilibrium, Capital and Macroeconomics, Edward Elgar, Ch. 7, pp.
256-81.

Topic 9: Open Economy Macroeconomics

(Weeks 12 and 13, beginning 19 and 26 October)
Nominal and real exchange rates; the balance of payments; international capital mobility
and interest-rate parity conditions; Mundell-Fleming (IS-LM) model and macroeconomic
policy; fixed versus flexible exchange rate regimes; optimal currency areas and external
adjustment issues
Reading:
*Gordon Ch 7 (pp. 201-38)
*Blanchard, O. and Sheen, J. (2008), Macroeconomics, Australian 3rd edition, Pearson, pp.
421-5, 455-66.
Pomfret, R. (2005) Currency Areas in Theory and Practice, The Economic Record, 81
(June), pp. 166-76.
STUVAC 2-6 November