• Short Name N/A
  • Course code ECO 202
  • Semester Fifth Semester
  • Full Marks 100
  • Pass Marks 45
  • Credit Hrs 3
  • Elective/Compulsary Compulsary

Macro Economics

Chapter wise complete Notes.

Course Description

Course Objectives

This module aims to develop students' understanding of the macroeconomic concepts to enhance their skills in analyzing business environment for decision-making.


ourse Description

Macroeconomics: concepts and importance. National income accounting: concepts, measurement approaches and measurement difficulties of national income. Consumption, saving and investment functions, paradox of thrift, acceleration coefficient. Income determination models: classical and Keynesian theories, IS – LM model, concept of multipliers. Business cycles: phases and economic stabilization policy. Inflation: theories of inflation, computation of rate of inflation, Unemployment, macroeconomic policies: monetary policy, fiscal policy. Macroeconomic issues: Nepalese perspective.

Unit Contents

Course Details

Unit 1: Introduction to Macroeconomics                                                                                         LH 2

Meaning and scope of macroeconomics, Static and dynamic analysis of Macroeconomics, Macroeconomics and business environment.

Case Studies

Unit 2: National Income Accounting                                            LH 7

Circular flow of income and expenditure (two, three and four sector economy), Meaning of national income: Various concepts of NI: GDP, NDP, GNP and NNP (both in – market price and factor cost terms), Nominal GDP, Real GDP and GDP deflator, Potential and actual GDP, Personal income, Disposable income and Saving, Per capital income. Three approaches of measurement of NI (Product, Income and

Expenditure), Measurement Difficulties of NI.

Numerical assignments and Case studies

Unit 3: Consumption, Saving and Investment                          LH 8

Meaning, technical attributes and determinants of consumption function

  • Psychological law of consumption function
  • Meaning, Technical attributes and determinants of saving function
  • Paradox of thrift
  • Meaning and types of investment
  • Concept of MEC and investment demand curve
  • Determinants of induced investment
  • Principle of acceleration coefficient (Tabular explanation)

Numerical assignments and case studies


Unit 4: Theories of National Income Determination                                                                                                                                 LH 12

Classical Theory of output and Employment Keynesian Model of Income Determination

  • Income determination in a Two sector economy, change in aggregate demand and investment multiplier
  • Income determination in a Threesector economy, fiscal multipliers (tax multiplier, government expenditure multiplier and balanced budget multiplier)
  • Income determination in a Four sector Economy, foreign trade multiplier IS – LM Model of Income Determination
  • Derivation of IS curveand product market equilibrium
  • Derivation of LM curve and money market equilibrium
  • Determination of equilibrium income
  • Shift in IS curve and effect on equilibrium income
  • Shift in LM curve and effect on equilibrium income
  • Shift in IS and LM curvesand simultaneous effect on equilibrium income
  • Monetary policy and effect on equilibrium income
  • Fiscal Policy and effect on equilibrium income
  • Monetary– Fiscal Policies mix and effect on equilibrium income

Numerical assignments and Case studies

Unit 5: Inflation, Unemployment and Business cycles                                                         LH 7


Meaning, types (on the basis of rate and control), Theories of inflation – Demand-pull and costpush, Effects (production and distribution of income and wealth), Computation of rate of inflation (Using PPI, CPI and GDP inflator only), Meaning of Deflation and stagflation Unemployment: Meaning and types, costs of unemployment, Inflation and unemployment Business cycles: Meaning and characteristics, Phases of business cycles, Economic stabilization policy.

Numerical assignments and Case studies

Unit 6: Macroeconomics Policies                                       LH 5

Macroeconomic Policy: Meaning and Objectives

Money Supply: Meaning and sources

Monetary policy: Meaning, types, instruments, indicators, targets, goals.

Fiscal Policy: Meaning, methods, instruments, goals Deficit Financing: Meaning and significance Budget: Meaning and components

Case studies

Unit 7: Macroeconomics Issues: Nepalese Perspective                                                         LH 7

Balance of Payments : Meaning and components

Exchange rate: Meaning and types, exchange rate determination (demand supply approach) Economic growth and development, Sources of economic growth, Privatisation, economic liberalisation and globalization, market failure, Foreign direct investment Foreign employment: current status and role.

Case studies

Text and Reference Books


Bernake and Abel , Macroeconomics, Singapore, Pearson Education latest edition Froyen, R.T. Macroeconomics and Policies (8th edition)

Lipsey, R.S. and C. Harbury, Elementary Macroeconomics, New York, Oxford University Press latest edition

Mankiew, NG (1998), Principles of Macroeconomics, Orlando, The Dryden Press, Harcourt Brace College Publishers

McConnell and Brue, Economics : Principles, Problems and Policies, New York, McGraw Hill. Latest edition

Shrestha, R.G. and Adhikari, G.M. Macroeconomics, fifth edition

Todaro, M.P Economics in the Third World, Hyderabad, Orient Longman, Ltd. Latest edition

Other suggested readings: Various Publications and Journals of Nepal Rastra Bank, Ministry of Finance, National Planning Commission, Central Bureau of Statistics, World bank, Central Department of Economics (TU) and So on.