Outline

Overview

This unit of study develops models of the goods, money and labour markets, and examines issues in macroeconomic policy. Macroeconomic relationships, covering consumption, investment, money and employment, are explored in detail. Macro-dynamic relationships, especially those linking inflation and unemployment, are also considered. Exchange rates and open economy macroeconomics are also addressed. In the last part of the unit, topics include the determinants and theories of economic growth, productivity and technology, the dynamics of the business cycle, counter-cyclical policy and the relationship between micro and macro policy in the context of recent Australian experience.

Unit details and rules

Unit code	ECOS2002
Academic unit	Economics
Credit points	6
Prohibitions ?	ECON2002 or ECON2902 or ECOS2902
Prerequisites ?	ECON1002 or ECON1040
Corequisites ?	None
Assumed knowledge ?	None
Available to study abroad and exchange students	Yes

Teaching staff

Coordinator	Matthew Smith, matthew.smith@sydney.edu.au

Type	Description	Weight	Due	Length
Final exam (Record+)	Final exam essay and multiple choice	50%	Formal exam period	2 hours
Outcomes assessed:
In-semester test (Record+)	Mid-Term Exam essay and multiple choice	30%	Week 07 Due date: 20 Sep 2021 at 08:00	1.5 hours
Outcomes assessed:
Online task	Review Essay written essay assessment	20%	Week 09 Due date: 11 Oct 2021 at 23:59 Closing date: 10 Dec 2021	800 word review essay of article
Outcomes assessed:
= Type B final exam ? = Type B in-semester exam ?

Assessment summary

Detailed information for each assessment will be announced in lectures and posted on Canvas closer to the relevant assessment. The final exam is worth 50% of the grade for this unit, the mid-semester exam is worth 30% of the grade for this unit, and there are four assignments that combined are worth 20% of the grade for this unit.

Assessment criteria

The University awards common result grades, set out in the Coursework Policy 2014 (Schedule 1).

As a general guide, a High distinction indicates work of an exceptional standard, a Distinction a very high standard, a credit a good standard, and a pass an acceptable standard.

Result name	Mark range	Description
High distinction	85 - 100
Distinction	75 - 84
Credit	65 - 74
Pass	50 - 64
Fail	0 - 49	When you don’t meet the learning outcomes of the unit to a satisfactory standard.

For more information see sydney.edu.au/students/guide-to-grades

For more information see guide to grades.

Late submission

In accordance with University policy, these penalties apply when written work is submitted after 11:59pm on the due date:

Deduction of 5% of the maximum mark for each calendar day after the due date.
After ten calendar days late, a mark of zero will be awarded.

Academic integrity

The Current Student website provides information on academic integrity and the resources available to all students. The University expects students and staff to act ethically and honestly and will treat all allegations of academic integrity breaches seriously.

We use similarity detection software to detect potential instances of plagiarism or other forms of academic integrity breach. If such matches indicate evidence of plagiarism or other forms of academic integrity breaches, your teacher is required to report your work for further investigation.

You may only use artificial intelligence and writing assistance tools in assessment tasks if you are permitted to by your unit coordinator, and if you do use them, you must also acknowledge this in your work, either in a footnote or an acknowledgement section.

Studiosity is permitted for postgraduate units unless otherwise indicated by the unit coordinator. The use of this service must be acknowledged in your submission.

Learning support

Simple extensions

If you encounter a problem submitting your work on time, you may be able to apply for an extension of five calendar days through a simple extension.  The application process will be different depending on the type of assessment and extensions cannot be granted for some assessment types like exams.

Special consideration

If exceptional circumstances mean you can’t complete an assessment, you need consideration for a longer period of time, or if you have essential commitments which impact your performance in an assessment, you may be eligible for special consideration or special arrangements.

Special consideration applications will not be affected by a simple extension application.

Using AI responsibly

Co-created with students, AI in Education includes lots of helpful examples of how students use generative AI tools to support their learning. It explains how generative AI works, the different tools available and how to use them responsibly and productively.

Weekly schedule

WK	Topic	Learning activity
Week 01	National Accounting, the Keynesian Income-Expenditure Model and Fiscal Policy	Lecture and tutorial (3 hr)
Week 02	National Accounting, the Keynesian Income-Expenditure Model and Fiscal Policy	Lecture and tutorial (3 hr)
Week 03	The Financial System and Monetary Policy	Lecture and tutorial (3 hr)
Week 04	The IS-LM Model and Macroeconomic Policy	Lecture and tutorial (3 hr)
Week 05	The AS-AD Model	Lecture and tutorial (3 hr)
Week 06	The AS-AD Model	Lecture and tutorial (3 hr)
Week 08	Inflation and Unemployment: The Phillips Curve	Lecture and tutorial (3 hr)
Week 09	Inflation and Unemployment: The Phillips Curve	Lecture and tutorial (3 hr)
Week 10	Economic Growth	Lecture and tutorial (3 hr)
Week 11	Economic Growth	Lecture and tutorial (3 hr)
Week 12	Consumption and Investment	Lecture and tutorial (3 hr)
Week 13	Open Economy Macroeconomics	Lecture and tutorial (3 hr)

Attendance and class requirements

Attendance: According to Faculty Board Resolutions, students in the Faculty of Arts and Social Sciences are expected to attend 90% of their classes. If you attend less than 50% of classes, regardless of the reasons, you may be referred to the Examiner’s Board. The Examiner’s Board will decide whether you should pass or fail the unit of study if your attendance falls below this threshold.
Lecture recording: Most lectures (in recording-equipped venues) will be recorded and may be made available to students on the LMS. However, you should not rely on lecture recording to substitute your classroom learning experience.
Preparation: Students should commit to spend approximately three hours’ preparation time (reading, studying, homework, essays, etc.) for every hour of scheduled instruction.

Study commitment

Typically, there is a minimum expectation of 1.5-2 hours of student effort per week per credit point for units of study offered over a full semester. For a 6 credit point unit, this equates to roughly 120-150 hours of student effort in total.

Required readings

LECTURE AND READING GUIDE

Note: Dates shown below are only approximate. Essential readings are starred.

The text for this unit is R. Gordon, Macroeconomics, Pearson International Edition, 2012. It is accessible as an ebook in Fisher Library.

For preliminary reading students are referred to Chapter 1 of Gordon. For those interested in current issues of the Australian economy you are referred to the monthly Reserve Bank of Australia (RBA) Bulletin, the quarterly statement of monetary policy and the RBA Annual Report available at www.rba.gov.au/PublicationsAndResearch/.

The Australian Economic Review also publishes articles that are closely related to material covered in the course.

Topic 1: National Accounting, the Keynesian Income-Expenditure Model and Fiscal Policy

(Weeks 1 & 2, beginning 9 & 16 August)
The circular flow and national accounting; conception of macroeconomic equilibrium; Keynesian Income-Expenditure Model and Fiscal Policy Issues; an open economy model and trade balance constraint

Reading:

* Gordon Chs 2 (25-50), 3 (pp. 58-80, 89-91), and 6 (pp. 168-97, 184-91).

* Stegman T. and Junor B. (1993) Introductory Macroeconomics, Harcourt Brace-Jovanovich, Ch. 6 (pp. 84-113).

Topic 2: The Financial System and Monetary Policy

(Week 3, beginning 23 August)

The demand for money, its supply and a financial market model; the conduct of monetary policy and the key causal relationship between interest rates and expenditure; the yield curve and the expectations hypothesis

Reading:

* Gordon Chs 3 (pp. 76-83), 5 (pp. 129-60), 13 (pp. 446-57, 462-4).

* McLeay, M., Radia, A. and Thomas, R. (2014) ‘Money Creation in a Modern Economy’, Bank of England Quarterly Bulletin, Q1, pp. 14-27.

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf

* Atkin, T. and La Cava G. (2017) ‘The Transmission of Monetary Policy: How does it work?’, Reserve Bank Bulletin, September Quarter, pp. 1-8. https://www.rba.gov.au/publications/bulletin/2017/sep/pdf/bu-0917-1-the-transmission-of-monetary-policy-how-does-it-work.pdf

*Also see ‘Explainer: Transmission of Monetary Policy’ in RBA’s March Bulletin via link:

https://www.rba.gov.au/education/resources/explainers/the-transmission-of-monetary-policy.html

Lewis, M.K. and Mizen, (2000) ‘The transmission mechanism’, Monetary Economics, Oxford University Press, Ch. 13.

Goodhart C. (1989) ‘Monetary Base’, The New Palgrave: Money, Eatwell J, Milgate M & Newman P (eds), pp. 206-11.

Otto, G. (2007) ‘Central bank operating procedures: How the RBA achieves its target for the cash rate’, Australian Economic Review, 40 (2), pp. 216-24.

Topic 3: The IS-LM Model and Macroeconomic Policy

(Week 4, beginning 30 August)

Constructing IS and LM curves on the basis of interest-setting monetary policy; fiscal and monetary policy in the IS-LM model; economic crisis and the policy response

Reading:

* Gordon Chs 3 (pp. 80-84), 4 (pp. 94-118), 5 (pp. 129-40, 147-60).

* Romer, D. (2000) ‘Keynesian Macroeconomics without the LM Curve’, Journal of Economic Perspectives, 14 (2), pp. 149-169.

Topic 4: The AS-AD Model

(Weeks 5 & 6, 6 & 13 September)

Short run and long run equilibrium; aggregate demand with an interest rate rule using a price level target; aggregate supply and the natural level of income; price-wage flexibility versus non-flexibility; inflationary and deflationary shocks and policy responses

Reading:

* Gordon Ch 8 (pp. 243-73), 10 (pp. 353-62), 13 (pp. 464-72).

* Bernanke, B., Olekalns, N., and Frank R. (2005) ‘The Reserve Bank and the Economy’, Principles of Macroeconomics, 2nd edition, McGraw-Hill Irwin, Ch. 10, pp. 254-91.

Stegman and Junor (1993), pp. 248-67.

Topic 5: Inflation and Unemployment: The Phillips Curve

(Weeks 7 & 8, beginning 20 September and 4 October)

Inflation, unemployment and the Phillips Curve analysis; expectations and price inflation; the natural rate of unemployment; anti-inflationary policy, hysteresis and central bank independence; nominal and real interest rates and the Fisher hypothesis

Reading:

* Gordon Chs 9 (pp. 279-307) and 10 (pp. 330-43, 362-8).

* Dawson, G. (1996) ‘Unemployment and Inflation’, Economics and changing economics, MacIntosh M, Brown

V, Costello N, Dawson G, Thompson G & Trigg A (eds), The Open University, International Thomson Business Press, pp. 815-53.

Stevens, G. (2003) ‘Inflation Targeting: A Decade of Australian Experience’, RBA, www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_apr03/bu_0403_3.pdf

Topic 6: Economic Growth

(Weeks 9 & 10, beginning 11 & 18 October)

The aggregate production function and the Swan-Solow growth model; technological change and convergence theory; human capital and endogenous growth theory; critique of supply driven theories of growth and the alternative demand-led approach to explaining growth and development

Reading:

* Gordon Chs 11 (pp. 376-98) and 12 (pp. 407-440).

* Jones, C. I. (2002) Introduction to Economic Growth, 2nd edn., New York: W.W. Norton, Ch. 8 (pp. 156-68).

Kurz, H. and Salvadori, N. (2008) ‘New Growth Theory and Development Economics’, International Handbook of Development Economics, Dutt A K & Ros J (eds), Edward Elgar, ch. 15, pp. 207-22.

Topic 7: Consumption and Investment

(Week 11, beginning 25 October)

Theories of consumption: permanent income hypothesis, lifecycle hypothesis & relative income hypothesis; theories of investment: accelerator theory & the neoclassical theory; investment and cyclical activity

Reading:

* Gordon Chs 14 (pp. 479- 510) & 15 (pp. 517-39)

Ceballero, R. (1999) ‘Aggregate Investment’, Handbook of Macroeconomics, Taylor J B & Woodford M (eds), Elsevier, vol. 1B, Ch. 12, pp. 813-62.

Petri, F. (2005) ‘Capital Theory and Macroeconomics I: The Theory of Aggregate Investment’, General Equilibrium, Capital and Macroeconomics, Edward Elgar, Ch. 7, pp. 256-81.

Topic 8: Open Economy Macroeconomics

(Weeks 11 & 12, beginning 25 October and 1 November)

Nominal and real exchange rates; the balance of payments; international capital mobility and interest-rate parity conditions; Mundell-Fleming (IS-LM) model and macroeconomic policy; fixed versus flexible exchange rate regimes; optimal currency areas and external adjustment issues

Reading:

*Gordon Ch 7 (pp. 201-37).

*Blanchard, O. and Sheen, J. (2008), Macroeconomics, Australian 3rd edition, Pearson, pp. 421-5, 455-66.

* Hamilton, A. (2018) ‘Understanding Exchange Rates and Why They Are Important’, RBA Bulletin (December Quarter).

https://www.rba.gov.au/publications/bulletin/2018/dec/understanding-exchange-rates-and-why-they-are-important.html

Pomfret, R. (2005) ‘Currency Areas in Theory and Practice’, The Economic Record, 81 (June), pp. 166-76.

Learning outcomes

Learning outcomes are what students know, understand and are able to do on completion of a unit of study. They are aligned with the University's graduate qualities and are assessed as part of the curriculum.

At the completion of this unit, you should be able to:

LO1. understand theoretical models that form the body of contemporary macroeconomics
LO2. understand and apply macroeconomic models to various economic problems and policy issues
LO3. understand the associated empirical implications of policy issues
LO4. apply new ways of thinking and appreciate the importance of intellectual curiosity and reflection as foundation for continuous learning
LO5. identify, define and analyse problems and recommend creative solutions within real world constraints
LO6. demonstrate a capacity to work independently including the ability to plan and achieve goals
LO7. critically evaluate underlying theories, concepts, assumptions, limitations and arguments in disciplinary and cross-disciplinary fields of study
LO8. intellectually participate in public policy discussions arising in business and government environments
LO9. manage, analyse, evaluate and use information efficiently and effectively.

Graduate qualities

The graduate qualities are the qualities and skills that all University of Sydney graduates must demonstrate on successful completion of an award course. As a future Sydney graduate, the set of qualities have been designed to equip you for the contemporary world.

GQ1	Depth of disciplinary expertise Deep disciplinary expertise is the ability to integrate and rigorously apply knowledge, understanding and skills of a recognised discipline defined by scholarly activity, as well as familiarity with evolving practice of the discipline.
GQ2	Critical thinking and problem solving Critical thinking and problem solving are the questioning of ideas, evidence and assumptions in order to propose and evaluate hypotheses or alternative arguments before formulating a conclusion or a solution to an identified problem.
GQ3	Oral and written communication Effective communication, in both oral and written form, is the clear exchange of meaning in a manner that is appropriate to audience and context.
GQ4	Information and digital literacy Information and digital literacy is the ability to locate, interpret, evaluate, manage, adapt, integrate, create and convey information using appropriate resources, tools and strategies.
GQ5	Inventiveness Generating novel ideas and solutions.
GQ6	Cultural competence Cultural Competence is the ability to actively, ethically, respectfully, and successfully engage across and between cultures. In the Australian context, this includes and celebrates Aboriginal and Torres Strait Islander cultures, knowledge systems, and a mature understanding of contemporary issues.
GQ7	Interdisciplinary effectiveness Interdisciplinary effectiveness is the integration and synthesis of multiple viewpoints and practices, working effectively across disciplinary boundaries.
GQ8	Integrated professional, ethical, and personal identity An integrated professional, ethical and personal identity is understanding the interaction between one’s personal and professional selves in an ethical context.
GQ9	Influence Engaging others in a process, idea or vision.

Outcome map

Learning outcomes	Graduate qualities
Learning outcomes

Responding to student feedback

This section outlines changes made to this unit following staff and student reviews.

Some changes have been made to this unit since it was last offered.

Disclaimer

The University reserves the right to amend units of study or no longer offer certain units, including where there are low enrolment numbers.

To help you understand common terms that we use at the University, we offer an online glossary.

Current students

Overview

Overview

Unit details and rules

Teaching staff

Assessment

Assessment

Assessment summary

Assessment criteria

Late submission

Academic integrity

Learning support

Learning support

Simple extensions

Special consideration

Using AI responsibly

Weekly schedule

Weekly schedule

Attendance and class requirements

Study commitment

Required readings

Learning outcomes

Learning outcomes

Graduate qualities

Outcome map

Responding to student feedback

Responding to student feedback

Disclaimer

On this page

Useful links

Media

Student links

About us

Connect

Current students

ECOS2002: Intermediate Macroeconomics

Semester 2, 2021 [Normal day] - Remote

Overview

Overview

Unit details and rules

Teaching staff

Assessment

Assessment

Assessment summary

Assessment criteria

Late submission

Academic integrity

Learning support

Learning support

Simple extensions

Special consideration

Using AI responsibly

Weekly schedule

Weekly schedule

Attendance and class requirements

Study commitment

Required readings

Learning outcomes

Learning outcomes

Graduate qualities

Outcome map

Responding to student feedback

Responding to student feedback

Disclaimer

On this page

Useful links

Media

Student links

About us

Connect