This course is the third in a sequence of four courses on Macroeconomics distributed throughout the Degree in Economics, and it is offered in the second semester of the second year. It is divided into two blocks. The first block covers different aspects of short-term Macroeconomics, such as aggregate spending, aggregate demand, aggregate supply and macroeconomic equilibrium. Block 2 introduces students into the microeconomic foundations of the aggregate demand function (consumption and investment) in order to build the foundations required to understand the debates about monetary and fiscal stabilization policies.



The skills of the course are related to the SDGs (Sustainable Development Goals) of the UN 2030 Agenda in various dimensions. We outline the following:

- SDG 1 End of poverty (goals 1.1 and 1.2). The course analyzes the fluctuations in the economy’s income and short-term employment. The aggregate supply and demand model is studied to analyze the determinants of national income and short-term unemployment. The effects of different economic policies (monetary, fiscal, commercial) on economic fluctuations are analyzed and the dilemma that the economic authorities face in the short term between fighting inflation and fighting unemployment is studied as well. This course also analyzes the different schools of thought that exist on how policy makers should respond to the business cycle.

- SDG 3 Health and well-being (goals 3.8, 3.11 and 3.12). The course addresses the role of public spending in determining national income and employment, both of which are important determinants of well-being. If the Government’s responsibilities include the achievement of universal health coverage and the support of research and development of vaccines and medicines, Government budget should include expenditure items for these purposes. This course analyzes whether the Government should always balance the budget and, if not, when a deficit or a public surplus is desirable. The roles of the budget deficit and public debt in the economy are analyzed.

- SDG 10 Reduce inequality in and between countries (goal 10.4). The course analyzes the determinants of economic fluctuations taking into account what happens outside the borders of one's own country, including international trade and finance.

SPECIFIC SKILLS pursued in the course:

S1. Ability to bring rationality to the analysis and the description of the macroeconomic reality focusing on short-term issues.

S2. Ability to evaluate consequences of different macroeconomic policies and select the best one given the objectives in a short-term context.

S3. Ability to derive relevant information from macroeconomic data regarding short term issues, impossible to be recognized by non-professionals.

S4. Ability to analyze the effectiveness of active, passive, rules-based and discretionary policies in achieving the stabilization of the economy.

S5. Ability to write reports in the light of available statistical data of the macroeconomic magnitudes applying the acquired knowledge and making use of appropriate technological resources.

S6. Ability to model the behavior of some of the main economic aggregates from a microeconomic perspective.



The TARGETS of the subject, as a realization of its skills, are the following:

T1. Understand the impact of monetary and fiscal policy as a tool to stabilize the economy by reducing the severity of the effects of economic cycles.

T2. Use the IS-LM model to study the effect that fiscal policy and monetary policy have on interest rates and income in the short run in closed economies.

T3. Use the Mundell-Fleming model to assess the impact of fiscal policy and monetary policy in an open economy under fixed and flexible exchange rate regimes

T4. Proper use of the concepts of aggregate demand and supply.

T5. Analyze and interpret the choice between inflation and unemployment in the short term through the Phillips curve.

T6. Use the concepts of rational and adaptive expectations in the assessment of fiscal policy and monetary policy.

T7. Discuss the problems of measurement of the government deficit and alternative theories on government debt.

T8. Identify the impact of active and passive policies in the effect of economic fluctuations

T9. Learn about the effects of economic policies managed on a discretionary basis or by fixed rules.

T10. Analyze the micro-foundations of aggregate consumption and investment demands.





EXPECTED OUTCOMES of the subject are:

O1. Interpret the assumptions and foundations of macroeconomic models for the study of short-term issues, being able to use graphical analysis and mathematically solve related problems.

O2. Analyze the effect of fiscal and monetary policies in the context of the models presented in the course.

O3. Write evaluative reports which, based on the results of a quantitative exercise, support simple economic policy recommendations.



The TRANSFERABLE SKILLS of the subject are:

T1. Identify relevant sources of economic information and analyze its content.

T2. Use communication and information technologies.

T3. Read and communicate in the professional field in more than one language, especially in English.

T4. Communicate fluently in the professional environment.

T5. Work as a team.

Part 1:

1. Aggregate demand in the closed economy I. Building the IS-LM model.

2. Aggregate demand in the closed economy II. Applying the IS-LM model.

3. The open economy revisited. The Mundell-Fleming model and exchange rate regime.

4. Aggregate supply and the short-run trade-off between inflation and employment.



Part 2:

5. Microfoundations of the theory of consumption in Macroeconomics.

6. Alternative perspectives on stabilization policy.

7. Government debt and budget deficits. The Ricardian Equivalence.

8. Microfoundations of the theory of investment in Macroeconomics.

[1] The timing of the distribution of the different sessions throughout the semester (time schedule) will be presented at the beginning of the course and will take into account, in any case, the time schedules determined by the Office of the Dean.



[2] The complementary teaching materials that the instructor finds appropriate for this course will be made available through the teaching platform used in the UPV/EHU, eGELA.

• Continuous Assessment System
• Final Assessment System
• Tools and qualification percentages:
  • Written test to be taken (%): 50
  • Individual works (%): 10
  • Team projects (problem solving, project design)) (%): 20
  • Multiple choice test (midterm exam) (%): 20

A. ORDINARY CALL



1. Evaluation by continuous assessment. It comprises the following items:



a) An individual exam with theoretical/practical questions.

b) A teamwork exam with theoretical/practical questions.

c) Individual assignments that will be proposed throughout the course. In this section the teacher will value the active and positive participation of students in class meetings, such as, for instance, resolution of problems on the blackboard.

d) A final exam with theoretical/practical questions. The final exam will be held on the date and place set by the Office of the Dean. Anyone not taking the final exam will be graded as “absent” and lose the points obtained in continuous assessment.



The weight of each of the preceding items in the final course grade will be announced at the beginning of the teaching season.



Those who do not take the final exam will be graded as "absent", even if they have scored points in the continuous assessment system.



2. Evaluation by final examination: The students who prefer evaluation by final exam to evaluation by continuous assessment can take one final comprehensive exam with theoretical/practical questions that counts 100% of the course grade. This final exam may be different from that for the students who opt for the continuous assessment system. This exam will be held on the date and place set by the Office of the Dean.



Should a student get a different mark in evaluation by continuous assessment and evaluation by final exam, her/his final grade of the course will be the highest of the two.



All the exams will be done in-person on the dates and places set by the Office of the Dean. If, because of exceptional circumstances, changes had to be implemented, they will be communicated in due course.

B. EXTRAORDINARY CALL



An exam with theoretical/practical questions representing 100% of the course grade.



The final exam will be done in-person on the date and place set by the Office of the Dean. If, because of exceptional circumstances, changes have to be implemented, they will be communicated beforehand.

Basic bibliography

[1] Mankiw, N. G. 2022. "Macroeconomics". 11th Edition. Worth Publishers. New York, USA.

[2] Blanchard, O. 2021. "Macroeconomics". 8th edition. Pearson: New York, USA.

[3] Other materials that will be uploaded to eGELA, the e-learning platform at the UPV/EHU.

In-depth bibliography

[1] Macroeconomics, by Rudiger Dornbusch, McGraw-Hill, Boston, 2008.
[2] Macroeconomics : principles, problems and policies, by Campbell R. McConnell, McGraw-Hill Higher Education, Boston, 2008.
[3] Macroeconomics, by Stephen D. Williamson, Pearson Addison Wesley, Boston, 2008.
[4] Macroeconomics, by J. Bradford DeLong, McGraw-Hill, Boston, 2002.
[5] Macroeconomics, by David Colander, McGraw-Hill/Irwin, Boston, 2001.
[6] Macroeconomics, by Robert J. Gordon, Addison-Wesley, Reading, Massachusetts, 2000.
[7] Macroeconomics, by Andrew B. Abel, Addison-Wesley, Boston, 2001.
[8] Macroeconomics, by Robert J. Barro, MIT Press, Cambridge, 1997.
[9] Macroeconomics: a European text, by Michael Burda, Oxford University Press, Oxford, 1997.
[11 Macroeconomics, by Robert E. Hall, W. W. Norton, New York, 1997.

Journals

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Web addresses

- INE: http://www.ine.es/
- European Central Bank, http://www.ecb.int/
- World Bank, http://www.worldbank.org/
- Eurostat: http://europa.eu.int/comm/eurostat/
- Eustat: http://www.eustat.es/
- Banco of Spain: http://www.bde.es/
- International Monetary Fond: http://www.imf.org/
- Nada es Gratis: https://nadaesgratis.es/