Country Level Economics: Part 2

This course will enable you to assess the macroeconomic environment in which a business operates. We start by examining how various components of macroeconomy contribute to the aggregate demand for goods and services and thereby generate income for labor and other factors of production. Next, we distinguish between the short run, when prices trends are relatively rigid, and the long run, when prices are fully flexible. We first focus on the short run equilibrium of the market for aggregate goods and services, taking into account the feedback from aggregate income to aggregate demand and vice versa. We then combine the result with the money market equilibrium derived in Part 1 and characterize the macroeconomic equilibrium that determines income, interest rate, exchange rate, and unemployment rate in the short run. We use this model to analyze the short-run consequences of monetary and fiscal policies. In our next step, we examine how income, exchange rate, and inflation rate are determined in the long run. Then, we proceed with linking the short-run outcomes and long-run processes in a dynamic model, which helps us assess the full effects of macroeconomic policies and other factors. This course pays particular attention to the macroeconomic consequences of globalization and the roles played by government policies, institutions, and the public's expectations about the future course of the economy.

You will:
• Understand how the market for aggregate goods and services interacts with the money market to shape the macroeconomic equilibrium that determines income, interest rate, and exchange rate in the short run.
• Understand the links between the short-run and long-run processes
• Assess the dynamic effects of macroeconomic policies and understand the roles of globalization, government policies, institutions, and expectations in macroeconomic outcomes.