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ECON2004 Macroeconomic Analysis and Applications

Unit Description

This intermediate-level unit studies the main macroeconomic models in use, keeping close contact with current macroeconomic events. The focus is on product, financial and labour markets in an open economy, examining their key features in short, medium and long run equilibrium. We study the link between macroeconomics and finance leading to a deep understanding of the drivers of bond, stock housing and exchange rate markets, as well as the sources of pathologies like financial crises and the emergence of cryptocurrencies. Monetary and fiscal policy design is analysed in depth, enabling students to evaluate current debates on macroeconomic policy in a real-world context.

General Information

• Unit convenor and teaching staff: Jeffrey Sheen
• Credit points: 10
• Prerequisites: ECON1021 or ECON110
• Corequisites: None
• Co-badged status: None
• Unit description: As described above

Learning Outcomes

On successful completion of this unit, you will be able to:

• Analyse and apply theoretical models of macroeconomic issues
• Critically analyse models and theories to address contemporary macroeconomic problems
• Critique macroeconomic phenomena both individually and as a member of a team

Assessment Tasks

• Professional practice: Macroeconomic in practice (30%): Presentation, due in Week 12 tutorial
• Formal and observed learning: Exam (50%): Examination, due in the final examination period
• Skills development: Quiz (20%): Quiz/Test, due Friday midnight in Week 3, Week 6, Week 9, and Week 12

Delivery and Resources

• Lectures: Wednesdays, 3 pm
• Lecture slides will be available prior to the lecture on the unit web page
• Required text: "Macroeconomics" by Blanchard, Sheen, Huangfu, and Wang, 5th edition, Pearson, 2025
• Technology Used and Required: Lecture and tutorial material as well as up-to-date information concerning any aspect of the unit will be available to students by logging on to the unit web page

Unit Schedule

Topics 1-13 will be covered in Weeks 1-13. Some topics will require more and some less than a week.

1. Introduction: A tour of key contemporary issues in the world; key macroeconomic concepts
2. Modelling Short Run Equilibrium: The IS-LM model, monetary policy, and fiscal policy
3. Extending the IS-LM model: Real and nominal interest rates, risk, and risk premia, financial shocks, and crises
4. Modelling Medium Run Equilibrium: The labour market, the WS-PS model, wage and price setting, the natural rate of unemployment
5. The Phillips Curve (PC), inflation, and the natural rate of unemployment
6. The IS-LM-PC model: Adjustment from the short run to the medium run equilibrium
7. Modelling Long Run Equilibrium: The facts of growth, why some countries are rich and some poor, convergence, sources of growth, the basic Solow growth model
8. The Solow growth model with technological progress and population growth: The future of technological progress, AI, and productivity growth, inequality, climate change
9. Extension of the Core Model - The Role of Expectations in Financial Markets: Financial markets and expectations, PDVs, yield curve, stock markets, and housing, asset price bubbles
10. Expectations effects on consumption, investment, and equilibrium output: Uncertainty
11. Extension of the Core Model - The Open Economy: Openness in all markets, the nominal and real exchange rate, multilateral exchange rates, the balance of payments, interest parity condition
12. The open economy IS-LM-IP model: Fixed vs flexible exchange rate regimes
13. Extension of the Core Model - Back to Policy - A Summary: Uncertainty and macro policy, credibility of policy-makers, fiscal policy, and the government budget constraint, government debt, monetary policy, and financial stability

Policies and Procedures

Macquarie University policies and procedures are accessible from Policy Central. Students should be aware of the following policies in particular with regard to Learning and Teaching:

• Academic Appeals Policy
• Academic Integrity Policy
• Academic Progression Policy
• Assessment Policy
• Fitness to Practice Procedure
• Assessment Procedure
• Complaints Resolution Procedure for Students and Members of the Public
• Special Consideration Policy

Academic Integrity

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Student Support

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• Academic Success provides resources to develop your English language proficiency, academic writing, and communication skills.
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