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In this course,we will examine the main bodies of economic theory that have been used to guideeconomists’ and policy makers’ understanding of the macroeconomy. Macroeconomicsis a word derived from the Greek prefix “makros”, meaning large. It is the studyof economic aggregates, of national and international economies and of theeconomic management role played by governments and international organisations.
The founder ofmodern macroeconomics, the British economist John Maynard Keynes, famously wrote“The ideas of economists and political philosophers, both when they are rightand when they are wrong are more powerful than is commonly understood. Indeed,the world is ruled by little else. Practical men, who believe themselves to bequite exempt from any intellectual influences, are usually slaves of somedefunct economist.” This will be the key theme we explore in the course, theinfluence of theory and the way that policy responses to events like recession,unemployment, inflation and the Global Financial Crisis, reflect that theory.
We will coverimportant macroeconomic concepts such as the national accounts, unemploymentand inflation, explain how the ideas associated with John Maynard Keynes laidthe foundation for governments’ active management of the macroeconomy in thepost war era, and examine the intellectual basis for the monetary and fiscalpolicy responses to the Global Financial Crisis. Economists’ approaches to the analysis oflong run economic growth will also be considered. The approach will becritical. There are few areas of human endeavour that attract so much debateand disagreement as the management of a modern industrial economy. We will notshy away from those debates. But what we will do is emphasise the systematictheorising that underlies the way macroeconomists and policy makers approachtheir task. The aim is to enable those who take the course to become informedanalysts of the macroeconomy and of current (and past) macroeconomic policydebates.
Image source: Nilss Olekalns University of Melbourne 2012
Overview
Syllabus
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The overall aim of this subject is to provide an introduction to macroeconomic theory and policy, economic aggregates such as aggregate production and employment, the general level of prices and inflation, the exchange rate, the volume of money and the balance of payments. Analysis is particularly directed to models of an open economy and to current economic problems and policy issues.
