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 will 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. We will study the dynamics of inflation and output in the short run and the effects of monetary policy rules.
PART 1: Classical Theory
1. National income, the relationship between factor marginal productivity and prices. Factorial distribution of GDP. the relationship between public and private savings and investment in the long run.
2. Money and inflation. The quantitative theory of money. The Fisher equation.
3. Open economies. Trade, capital flows, real and nominal exchange rates.
PART 2: Growth: Solow model. Population and technological growth.
PART 3: Business cycles.
1. The IS-LM model for the closed economy.
2. The model AS-AD
3. Short-run aggregate supply, inflation/output tradeoffs Phillips curve.
4. Inflation and output dynamics in the short-run (dynamic IS-LM model)
5. Monetary policy rules (Taylor rule)