Welcome to ECON A232 Introduction to Macroeconomics.
This course is a one-semester, five-credit, middle-level course for HKMU students seeking one of the following degrees:
- Bachelor of Social Sciences in Economics (BSSCE, BSSCHE or BSSCHEM, BSSCHEF, BSSCHEEC);
- Diploma or Higher Diploma in Economics (DE, HDE);
- Bachelor of Social Sciences in Police and Security Management (BSSCPSM);
- Bachelor of Business Administration (with many different concentrations); or
- Diploma or Higher Diploma in Business Studies (DBS, HDBS).
The 200-level number of this course indicates ECON A232 Introduction to Macroeconomics is a middle-level course, yet there is no specific prerequisite for enrolment. In other words, ECON A232 is an introductory course offered at the middle level. The aim is to provide you with knowledge about the macroeconomy that is essential for understanding the outcomes of interactions between different groups of people and sectors in society.
The study units, textbook, assignments and self-tests will help you master the topics over a period of around 16 weeks.
Purpose of this Course Guide
As this course might be the first course that you have taken at Hong Kong Metropolitan University (HKMU), you might not be aware of the study skills required and how HKMU courses are organized. If you have taken one before, then you should be well aware of both the skills required and the course organization. Whichever group you belong to, it is recommended that you read this Course Guide thoroughly before looking at the study units or your textbook.
This Course Guide tells you briefly what this course is about, and how you can work your way through the course materials. It suggests the amount of time you will likely need to complete the course, and it gives you a general idea of when your assignments are due. For detailed information on assignments, however, please refer to the Assignment File, and for information concerning due dates for the submission of work, please refer to the Presentation Schedule. Both will be made available on the University's Online Learning Environment in due course.
The study units for ECON A232 have been prepared by your university professor. You can read and work through these specially designed study materials at your own pace at times and places that suit you best.
You can think of working through each study unit as reading your lectures instead of hearing them from a lecturer. But in the same way that a lecturer might set you some reading to do, the study units will tell you when to read your textbook or other materials.
In the same way that a lecturer may give you an in-class exercise, your study units will also provide exercises (i.e. self-tests and activities) for you to do at appropriate points. You should do your best to complete them all, as these exercises and questions give you the practice necessary to achieve the objectives of the course and pass the examination. Finally, just as you 'make notes' in a direct face-to-face lecture, you are advised to take notes as you work through the study units and your textbook, and to read and think about them in relation to each other.
Course aims
This course aims to introduce you to the problems of macroeconomics, and to enable you to explore the ways in which private and government agents deal with these problems. It will cover macroeconomic indicators, the nature of macroeconomic problems, and macroeconomic policy.
Course learning outcomes
Upon completion of ECON A232, you should be able to:
- explain national income accounting, and apply this framework to measure economic activity in the macroeconomy;
- analyse the long-run performance of the aggregate economy, and discuss the role played by the monetary system;
- explain the key business cycle factors related to short-run economic fluctuations; and
- discuss macroeconomic stabilization for both closed and open economies.
Course description
ECON A232 Introduction to Macroeconomics has been designed to create a structured yet stimulating environment in which you will learn the fundamental concepts of this fascinating subject. The course includes the topics presented in the 'Course overview' table below, which is followed by brief descriptions of each unit in the section 'Study units'.
Course overview
The following chart gives a general overview of the course structure.
Unit | Title | No. of weeks | Assessment activity (end of unit) |
1 | What is macroeconomics? | 1 | |
2 | The data of macroeconomics | 3 | |
3 | The real economy in the long run | 3 | Assignment 1 |
4 | Money and prices in the long run | 3 | |
5 | Short-run economic fluctuations | 3 | Assignment 2 |
6 | The macroeconomics of open economies | 2 | |
| Revision | 1 | |
| Total | 16 | |
Study units
There are six study units for this course. The discussions and topics start by first defining and measuring basic macroeconomic variables, to analysing what happens to the macroeconomy in the long run, then to introducing models that attempt to explain fluctuations in the short run, and finally to an extension to the international economy. Generally, units start by introducing and explaining some macroeconomic variables. The next step is then to look at some theories that attempt to explain their movements.
You have a well-written textbook — Mankiw, Quah and Wilson's Principles of Economics: Asian edition (3rd edition) — as the basis for your studies in this course. The following units are based on groups of chapters from this excellent resource.
Unit 1 What is macroeconomics?
This introductory unit explains how the economy as a whole works. It introduces some well-known observations economists have made in the past about the macroeconomy. When studying other units, what you've learned in Unit 1 will give you a better idea of the general picture of the economy that different models try to explain.
Unit 2 The data of macroeconomics
This unit seeks to consider two fundamental macroeconomic questions that concern individuals — the level of income one can earn, and the general prices of goods and services in an economy. The first part of this unit defines what is meant by income and expenditure and their equivalence in an economy. The different measurements of gross domestic product (GDP) are considered. Then the relationship between the magnitude of GDP and economic well-being is explored. The second part of the unit deals with two methods of measuring the general level of prices, and discusses problems in using these price indices to measure the cost of living.
Unit 3 The real economy in the long run
After you've learned about methods to count production and prices in an economy, this unit focusses on looking at real production in the long run. First, the basic elements of economic growth are identified. Then variations in the level of development between different economies across long periods are considered, and a model of savings and investment is used in an attempt to explore the underlying causes of such discrepancies. Policies to reduce such gaps are also briefly discussed. The last part of this unit looks into the nature of unemployment and policies aimed at reducing its impact.
Unit 4 Money and prices in the long run
This unit moves from the real economy, i.e. the production of goods, to the monetary sector. The main aim is to look into how the monetary system works to facilitate economic activity, through the interactions between the central bank and the banking system. The next part of the unit moves on to look at some long-run theories on the nexus between the quantity of money in circulation and inflation in the economy.
Unit 5 Short-run economic fluctuations
In this unit, the focus is on the study of deviations from economic outcomes predicted by the long-run economic theories you learned about in Units 3 and 4. The concept of short- versus long-run is defined in the context of the aggregate demand and aggregate supply (AD–AS) model. The short-run variations in economic activity and their adjustment back to equilibrium in the long-run is then explained.
The AD–AS framework is then used to look at potential policy levers that can be used by authorities to correct short-run recessionary and expansionary tendencies. The tools of fiscal and monetary policies are analysed, and potential pitfalls in using them are explored.
The last part of this unit introduces the Phillips curve framework to link short-run economic fluctuations with the trade-off between unemployment and inflation. Using this framework, the costs of a reduction in long-run inflation are evaluated.
Unit 6 The macroeconomics of open economies
In this unit, the simplifying assumption that the economy is cut off from the rest of the world is dropped. Allowing interactions between economies around the world opens new possibilities that there will be new imbalances, for example, between domestic saving and domestic investment. Also, new considerations such as the foreign exchange market must be examined.
To make sense of these extra influences on the economy, an open-economy model is developed to link domestic saving and investment with the international flow of financial capital and the exchange rate. This model is then used to illustrate the long-run outcomes of some economic policies.