module specification

This module builds on the foundations of macroeconomic theory covered at level 4. It aims to develop students’ knowledge and understanding of key macroeconomic concepts, issues and policy alternatives that have been discussed and applied in the rapidly changing UK economy in recent decades.

The module will explore the key macroeconomic processes that determine equilibrium in the short-run, medium-run and long-run. It will examine the workings of financial, goods and labour markets, and relationships between these markets and the wider economy. It will also consider microeconomic foundations to macroeconomics in terms of consumption, saving, investment, productivity, and employment. It will proceed to the discussion on macroeconomic policies, and the competing and apparently conflicting policy goals pursued since the start of the new millennium. Public spending and taxation policy will be reviewed in relation to monetary policy, with an investigation into increasing pressures to return to expanding fiscal policy as a central tool of economic management in recent years. This is further developed throughout by considering the impacts of the global financial crisis, Brexit, Covid-19 pandemic, and other economic ‘shocks’ on the British economy.

In addition to the subject specific knowledge, the module aims to develop a number of transferable skills of students, e.g. critical thinking, problem solving, oral and written communication skills, subject research, quantitative and analytical skills.

Main macroeconomic variables, issues, policies and objectives.

National income accounting. Circular flow of income. Measuring GDP, GNP and net national income.

Economic growth. Business cycle. Actual vs potential growth. Sources of short-run and long-run economic growth. Output gaps. Labour productivity. Benefits and costs of economic growth. Demand and supply side policies to boost economic growth.

Inflation. Demand-pull vs cost-push inflation. Hyperinflation. Disinflation. Deflation. Stagflation. Cost of inflation. Monetary and fiscal policies to tackle inflation. Role of expectations. Fisher effect. Money illusion. Labour market. Demand and supply of labour. Wage determination. Causes of equilibrium and disequilibrium unemployment. Costs of unemployment. Policies to boost employment. NAIRU. Okun's law. Evolution of Phillips curve.

Goods market. Determination of equilibrium output using algebra, output-expenditure model and circular flow of income. Consumption and tax multipliers. Full employment vs equilibrium national income. Inflationary and deflationary gaps. Paradox of thrift.

Financial market. Demand and Supply of money. Interest rate determination. Monetary policy tools. Discount rate. Bonds. Open market operations. Quantitative easing. Liquidity trap. Negative interest rates. Credit creation and money multiplier. Credit crunch. Financial crowding out. Quantitative theory of money and velocity of circulation. Long-run neutrality of money.

The IS-LM model. Deriving IS and LM curves. IS-LM relations and impacts of changes in the goods and money markets. Policy analysis using the IS/LM model. Monetary transmission mechanism.

AD-AS model. Deriving AD curve from the IS-LM model. Short-run vs long-run AS curves. Macroeconomic equilibrium. Impacts of monetary and fiscal policies, budget deficit and national debt, fiscal drag. Stabilisation policies.

Further analyses – e.g. the effects of inflation, money illusion, role of expectations, impacts of recent economic shocks like the global financial crisis, Brexit, Covid-19 pandemic, Ukraine-Russia war and the Middle East conflict

Students’ learning is centred on direct contact time with the teaching team, and refective independent learning. The direct contact time takes place through lectures and seminars. Students are expected to complement this 'formal' learning activity with further reading of the material suggested in the teaching sessions, addressing macroeconomic problems using economic analysis and research.

Student weekly contact time is normally 3 hours. Lectures are typically of 2 hours duration and deliver core subject knowledge in applied macroeconomics. They also provide opportunities for interactive learning. The module emphasises knowledge and applications of macroeconomic policy. The aim is that the students become conversant with macroeconomic policy choices and the processes that precede them. This involves awareness and understanding of different views of ‘stabilisation’ policy. The module examines the theoretical division of analysis of the economy into the short-run, medium-run and long-run.

Seminars are typically 1 hour in duration and emphasise the solution of practical macroeconomic problems facing the UK government and businesses, based on topics addressed in the lecture. The emphasis is on student participation, and students are expected to prepare the answers to seminar questions before they attend the seminar. The module develops students’ ability to think as policy advisers by understanding macroeconomics data and processes and providing suggestions on the application of macroeconomic policy. These sessions enhance students’ ability to provide an economic interpretation of empirical findings, analyse policy debates and develop peer learning through participation and collaboration.

Inititative and independence are developed through the module and students are encouraged to take greater responsibility for their learning. Professional and transferable skills are developed in lectures and seminars and reinforced through independent directed learning and assessment. Module learning activities will enable the students to develop analytical, communication, presentation, and problem solving skills.

The module makes extensive use of virtual learning environment platforms (WebLearn, Publisher E-resources) where module lecture material, course handbooks, seminar questions, assessment details, and other learning material are made available.

On successful completion of this module students will be able to:

1. Access and understand empirical resources such as data and policy statements related to the evolution of the actual economic trends and cycles in the UK;

2. Interpret real movements in the economy through theoretical concepts, so to explain macroeconomic phenomena to aid policy understanding for business, government and other organisations;

3. Use economic and financial information generated by macroeconomic processes through written and oral exposition;

4. Through a grasp of the real dynamics of the UK economy demonstrate a critical awareness of a range of issues and dilemmas faced by governments and macroeconomic policy makers.

Books

Core Texts

Blanchard, O. (2021). Macroeconomics, 8th ed., Harlow, Pearson

Sloman, J., Garratt, D. and Guest, J. (2022) Economics, 11th Edition, Harlow, Pearson

Other Texts

Abel, A. B., Bernanke, B. and Croushore, D. (2023) Macroeconomics, 11th Global Edition, Harlow, Pearson

Burda, M. and Wyplosz, C. (2022) Macroeconomics: A European Text, 8th Edition, Oxford, OUP

Frank, R. H., Bernanke, B. S., Antonovics, K. and Heffetz, O. (2020) Principles of Macroeconomics, 8th Edition, New York, McGraw-Hill Education

Keegan, W. (2019) Nine Crises: Fifty Years of Covering the British Economy from Devaluation to Brexit, Biteback publishing

King, A. and Crewe, I. (2024) The Blunders of our Governments, One World Publications

Mankiw, N. G. (2022) Macroeconomics, 11th ed., Macmillan

Mishkin, F. S. (2016) Macroeconomics: Policy and Practice, Global Edition, 2nd Edition, Harlow, Pearson

Sawyer M. (2005) The U.K. Economy: A Manual of Applied Economics, 16th Edition, Oxford, OUP

Other useful resources:

NIESR Economic Review

Oxford Review of Economic Policy

Institute of Fiscal Studies: https://www.ifs.org.uk

https://fred.stlouisfed.org

https://www.ons.gov.uk

https://ourworldindata.org

https://www.bankofengland.co.uk

https://www.ecb.europa.eu/home/html/index.en.html

https://data.worldbank.org

http://www.oecd.org http://www.imf.org/en/data