Topic-wise Readings: Unit 1. IS‐LM Analysis (11 hours) Derivations of the IS and LM functions; IS‐LM and aggregate demand; shifts in the AD curve (i) Dornbusch, Fischer and Startz: Chapter 10 (Boxes & Section 10.5 to be excluded) (ii) Dornbusch, Fischer and Startz: Chapter 11 (Boxes & Section 11.4 to be excluded) Unit 2. Short-run and medium-run equilibrium (11 hours) The labour market, Wage determination; wages, prices and unemployment; natural rate of unemployment; from employment to output, Derivation of aggregate supply curve, Interaction of aggregate demand and supply to determine equilibrium output, price level and employment. (i) Blanchard and Johnson: Chapters 6 and 7 Unit 3. Phillips Curve and Theory of Expectations (8 hours) Inflation, unemployment and expectations, Phillips Curve; adaptive and rational expectations; policy ineffectiveness debate. (i) Blanchard and Johnson: Chapter 8 (ii) Attfield, Demery and Duck: pp 6 – 9, 18 – 28 Unit 4. Microeconomic foundations of macroeconomic behaviours (10 hours) Consumption: Keynesian consumption function; Fisher’s theory of optimal intertemporal choice; life-cycle and permanent income hypothesis; other theories of consumption expenditure. Investment: determinants of business fixed investment, residential investment, and inventory investment. (i) Dornbusch, Fischer and Startz: Chapter 13 (Boxes & Optional on pp 338 to be excluded) (ii) Dornbusch, Fischer and Startz: Chapter 14 (Boxes to be excluded)