MACROECONOMICS

6 ECTS credits

School of Economics and Business
Dubrovnik International University

Macroeconomics examines the workings of the economy as a whole—including all consumers, traders and producers—and answers questions such as:

• What causes the economy to grow over time?
• What can be done to promote growth in the economy?
• What causes short-run fluctuations in the economy?
• What can be done to limit fluctuations in the economy and what are the dangers of such policies?

Ultimately, of course, the macro economy is composed of a large number of interconnected markets for goods and for the resources that are used to produce those goods—the factors of production. Therefore, one needs to be aware of the workings of individual markets in order to understand the workings of the overall economy and one should always be aware that policies designed to help one sector (or set of markets) of the economy may have negative effects on other parts of the economy. There will always be a trade-off in the introduction of a policy: for example, taxes may be used to build infrastructure that will promote growth but higher tax rates will have a negative effect on private enterprise.
Because of these inherent tradeoffs, macroeconomic analysis is not easy and leads to a lot of debate. In recent years, with the onset of the “great recession,” these debates have become more heated and different groups of people assign the blame for the recession to different factors and also propose different solutions. The great questions in macroeconomics will probably never be answered in the same way that a physical science can come to a definitive conclusion but clarity can be gained from informed debate that is based on rigorous analysis. And the answers—however tentative—have a large effect on our lives.
This course aims to present the basic concepts and challenges in modern macroeconomics in a manner that is simple, interesting, and intuitive. Why are some countries rich and others poor? How can poorer countries catch up with richer countries, if at all? How do stock markets and the financial system drive economic prosperity? What can go wrong and what is the role of government?
At the end of the course, students are expected to have an informed opinion on each of these topics. Moreover, students should be able to draw upon some of the most basic models in macroeconomics in order to better express those opinions.  Arguments should be based on an understanding of the basic ideas that have been developed in order to understand macroeconomic problems and to propose solutions. Of course, there are many controversies in modern macroeconomics and students will be given a basic understanding of some of the main competing theories, including the Solow Model and the economics of ideas, Real Business Cycles, and New Keynesian economics.