Macroeconomics

COMPETENCES AND SKILLS THAT WILL BE ACQUIRED AND LEARNING RESULTS
The objective of this course is to give an introduction to macroeconomic theory at an intermediate level.
To attain this objective the student must acquire knowledge, abilities and attitudes. By the end of this
class, the student should be able to:

- To understand the importance of technological and demographic change as well as capital
accumulation in explaining the observed differences in GDP per capita across countries, as well as their
differences in growth rates.
- To understand the relationship between factor marginal productivity and prices.
- To understand the concept of money neutrality and its relationship with price flexibility.
- To analyze the long and short run effects of fiscal and monetary policies.
- To analyze the effects of supply and demand shocks in closed as well as open economies.
- To formalize intertemporal consumption and saving decisions.

The abilities acquired by the students can be classified in two groups.

Specific abilities:

- Being able to find the relationship between prívate and public savings with investment and
current account déficit.
- Being able to analyze the short and long run effects of fiscal and monetary policy.
- Finding the steady state of the Solow model.
- Finding the equilibrium of the IS-LM and Mundell-Fleming model economies.
- Solving a two period optimization problem.

General skills:

- The student must be able to critically evaluate the power of the theories studied in class to
understand the macroeconomic evidence.
- The student must be able to solve complex tasks working with other classmates.

DESCRIPTION OF CONTENTS: PROGRAMME

The main objective is to present the basic foundations of macroeconomic theory, starting with the basic
macroeconomic model in the long run where prices are flexible. Next, we wil study the long run using the Solow model and we will study the effects of fiscal and monetary policies. Next, we turn to study the
short run, when prices are rigid. We will analyze the evidence about fluctuations in GDP and its
components and the effects of fiscal and monetary policies.

PART 1: Classical Theory
1. Natinal income, relationhsip between factor marginal productivity and prices. Factoral
distribution of GDP. relationhsip between public and private savings and investment in the logn run.
2. Money and inflation. The quantitative theory of money. The Fisher equation.

PART 2: Growth: Solow model. Population and technological growth.

PART 3: Business cycles.
1. The IS-LM model for the closed economy.
2. The Mundell-Fleming model for the open economy.

PART 4: Microfundations: Consumption and savings.

PART 5: Economic policy debates: Public debt and ricardian equivalence.

LEARNING ACTIVITIES AND METHODOLOGY
(1) A considerable amount of instruction will be in the form of lectures. The objective is to develop
a conceptual framework for understanding macroeconomics.
(2) In-class discussion in order to apply the conceptual tools learned in class to case studies, current events, and recent policy debates.
(3) Working with data, such as the Penn World Tables, in order to study relevant macroeconomic
variables as well as assess the predictions of the models studied in class.
(4) Problem sets. By solving the problem assignments, students are supposed to acquire required
capacities and self-evaluate their knowledge.
(5) The solution of the problem set will be done in class together with the students in order for them to
gain a better insight into the conceptual tools and knowledge related to each assigned problem. This
should help students develop the ability to analyze and communicate relevant information for solving
these problems.

ASSESSMENT SYSTEM
The final grade will depend on homeworks (10%), quizzes in class (10%), midterms (40%) and a final exam (40%).
The homeworks will be reviewed in class. Quizzes and midterms will take place in class time.

% end-of-term-examination: 40
% of continuous assessment (assigments, laboratory, practicals?): 60