With microeconomics, macroeconomics is one of the most fundamental fields in economics, dealing with the aggregated economic variables such as GDP, unemployment rate, price index, and so on.
This course provides a basic view of macroeconomics at the undergraduate level. The first half of this course covers measurement of macroeconomic activity, households' consumption-saving behavior, firms' production-investment behavior, and the role of financial asset markets and money. Then, the second half focuses on how major macroeconomic variables are determined in both long-run and short-run equilibria. We also discuss the effectiveness of fiscal and monetary policies.
The aim of this course is twofold. First, students can precisely explain the definitions of the aforementioned major macroeconomic variables which they roughly know through newspapers and evening news. Second, they can construct a simple mathematical model to analyze the mechanics of how the variables are determined.
By the end of this course, students will be able to:
1) Using the definitions, calculate major macroeconomic variables, including GDP, inflation rate, unemployment rate, current account, etc.
2) Understand how decisions made by economic agents (e.g., households and firms) determine such macroeconomic variables.
3) Explain the role of money, financial markets, and banks by using a simple model.
4) Grasp the differences between long-run and short-run macroeconomic equilibrium and discuss the effectiveness of fiscal and monetary policies in each time frame.
nominal GDP, real GDP, GDP deflator, consumption price index (CPI), unemployment rate, consumption, investment, saving, long-run macroeconomic equilibrium, short-run macroeconomic equilibrium, IS-LM model
Intercultural skills | Communication skills | Specialist skills | Critical thinking skills | Practical and/or problem-solving skills |
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✔ | - | ✔ | - | - |
I will give students homework assignments after we have finished each topic covered in this course.
Course schedule | Required learning | |
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Class 1 | Introduction to Macroeconomics | Understand the purpose of macroeconomics and the meanings of macroeconomic variables observed in real life. |
Class 2 | Measuring the Macroeconomic Performance (1): Nominal GDP, Real GDP and Price Index | Explain the definition of GDP, the difference between nominal GDP and real GDP, and the role of price index. |
Class 3 | Measuring the Macroeconomic Performance (2): Unemployment and Balance of Payments | Explain the definition of unemployment (rate) and international balance of payments. |
Class 4 | Households's Behavior (1): Intertemporal Choice of Consumption Plan in a Two-period model | Derive the optimal consumption through intertemporal utility maximization. |
Class 5 | Households' Behavior (2): The Role of Savings | Explain the role of savings from the viewpoint of utility maximization. |
Class 6 | Firms' Behavior of Production of Investment | Derive the optimal investment plan of firms. |
Class 7 | The Role of Financial Asset Markets for the Macroeconomy | Understand the role of financial asset markets for the macroeconomy. |
Class 8 | Money and the Central Bank | Understand the definition of money, and explain how the central bank affects us through monetary policy. |
Class 9 | Midterm Examination | Review of the first half of the course (classes 1-8) and midterm exam. |
Class 10 | Long-run Macroeconomic Equilibrium (1): Determination of GDP in Equilibrium | Derive the two-period macroeconomic equilibrium with flexible prices. |
Class 11 | Long-run Macroeconomic Equilibrium (2): Effects of Fiscal and Monetary Policies in the Long-run | Understand the role of the government in the long-run. |
Class 12 | Short-run Equilibrium (1): Multiplier Effect | Understand the multiplier effect. |
Class 13 | Short-run Equilibrium (2): Setup of the IS-LM Model and Derivation of Equilibrium | Set up the IS-LM model and derive the equilibrium output and interest rate. |
Class 14 | Short-run Equilibrium (3): Effects of Fiscal and Monetary Policies in the Short-run | Understand the role of fiscal and monetary policies in the short-run. |
Class 15 | Review | Briefly review the topics covered in this course, and discuss the remaining issues to be covered in Macroeconomics II. |
Handouts or slides used for each class will be available on the corresponding page of Tokyo Tech OCW.
Mankiw, N.G. Macroeconomics, Worth Publishing.
Futagami, K. and Hori, K. Macroeconomics, Yuhikaku (in Japanese)
Shibata, A. and Unayama, T. First Steps in Macroeconomics, Yuhikaku (in Japanese)
Hiraguchi R. and Inaba, M. Macroeconomics: From Basic Principles to Applications, Yuhikaku (in Japanese)
The final grade is based on examination (70%) and homework assignments (30%).
Although there is no explicit prerequisite for this course, basic knowledge of microeconomics covered in "Microeconomics I" is highly recommended.