MEX 2503 Macroeconomics

Course Code MEX 2503
Course Title Macroeconomics
Number of Credits 5
Year 2
Medium of Instruction Sinhala and English

This module is expected to give understanding about the aggregate economic system. For this purpose, it deals mainly with the concepts of aggregate demand, aggregate supply, national income, consumption and investment. In additionally the role of the government with the use of fiscal and monetary policies will be discussed. This module will also describe the factors that influence aggregate economic outcomes such as growth in national output, fluctuations in income, unemployment and inflation. It also provides a basis for the other economic related subjects and further economic analysis.

1. To introduce basic structure of the Macroeconomics concepts, theories and techniques.
2. To give an understanding about economic objectives, and their impact on economy.
3. To discuss about aggregate economic policies and Macroeconomic issues using appropriate models
4. To provide better understanding about ongoing macroeconomic issues such as macroeconomic policy, economic growth, inflation rate and economic growth fluctuations.

At the end of the course, the students will be able to understand;
1. The basic Macroeconomic concepts and measurements,
2. The economic structure and the interrelationships among the various actors in the economy,
3. The economic objectives and aggregate expenditure,
4. The way of drive IS _ LM curves and equilibrium,
5. Practical importance of monetary and fiscal policies and
6. The interrelationship between Inflation and Unemployment as well as the cause of inflation.



Main Topics Sub Topics No. of Hours
1 Introduction to Macroeconomics


1.1.      Difference between Microeconomics and Macroeconomics

1.2.       Aggregate Demand, Aggregate Supply & Equilibrium

1..3     Macroeconomic Objectives


02 hrs

2. Macroeconomic Measurements 2.1    Gross Domestic Product

2.2     Gross National Product

2.3    Net National Product

2.4     GDP Deflator


02 hrs

3. Circular Flow Model    3.1.  Two sector Economy Circular Flow Model

3.2.  Four sector Economy Circular Flow Model

3.3  Injections and withdrawals


04 hrs

4. National income Accounting Identity


   4.1 Two sector Economy

4.2. Three sector Economy

4.3. Four sector Economy


06 hrs

5. Consumption, Savings and Investment 5.1 Consumption Function

5.2 Savings Function

5.3 Investment Function


08 hrs

6. Equilibrium National Income 1.1  Income Expenditure Approach

6.1.1Two sector Economy

6.1.2. Three sector Economy

6.1.3. Four sector Economy


08 hrs

7. Multipliers Analysis


7.1     Expenditure Multiplier

7.2     Tax Multiplier

7.3     Transfer Multiplier

7.4     Import Multiplier



08 hrs

8. IS Analysis


8.1  Goods Market Equilibrium  and Changes in equilibrium

8.2 Derivation of IS Curve

8.3 Slope and Intercept of IS Curve


06 hrs

9. Money Market and LM Curve


9.1 Demand for Money and Supply of Money

9.2 Equilibrium of Money Market

9.3  Derivation of LM curve

9.4 Slope and Intercept of LM curve



10. IS – LM Analysis


10.110.1 IS – LM Equilibrium

10.210.2 Changes in IS – LM Equilibrium Model

04 hrs
11 Fiscal policy and Monetary policy 11.1          Fiscal and Monetary Policy

11.2    Effectiveness of   Fiscal Policy and Monetary    Policy


08 hrs

12  Aggregate  Demand  and Aggregate Supply 12.1 Aggregate Demand

12.2 Aggregate Supply

12.3 Equilibrium of the Economy


05 hrs

13.Macroeconomic Issues 13.1 Inflation

13.2 Unemployment

13.3 Business Cycle


08 hrs

Mode of Study Seminar/ Self Study
Mode of Evaluation Final examination will be conducted

1. Paul A. Samuelson and William D. Nordhaus, Macroeconomics, 19th Edition, Tata McGraw-Hill Education Private Ltd. New Delhi, 2012
2. Robert J. Gordon, Macroeconomics, 12th Edition, PHI Learning Private Ltd. New Delhi, 2011