Principles of Economics 2

Syllabus

LECTURES 1 WEEK Gross domestic product. Alternative ways of measuring economic performance. Aggregate demand, aggregate supply, model AD-AS Measurement of economic activity - GDP, methods of GDP calculation, nominal and real GDP. GDP imperfections and alternative ways of measuring economic performance. Definition of the terms aggregate demand and aggregate supply, factors influencing the size of AD and AS. AD-AS model as a basic model of macroeconomic balance. WEEK 2 Consumption, savings and investment Consumption as the largest component of aggregate demand. Changes in consumption and their impact on AD. Consumption function, average and marginal propensity to consume. Savings and savings function. Average and marginal propensity to save. Expenditure balance in a closed economy. Investments and their effects. Investment multiplier and its importance. WEEK 3 Long-term economy: Economic growth Economic growth, its measurement. Sources of economic growth. Ways to ensure sustainable growth. Problems of economic growth in developed and less developed countries. WEEK 4 Short-term economics: Economic cycle Economic cycle - its course, basic and boundary phases. Specifics of economic cycles in the 20th century and early 21st century. The influence of the economic cycle on changes in basic macroeconomic variables. The cycle caused by shocks on the AD side, resp. shocks on the AS side. Illustration of economic cycle phases in AD-AS model. Okun's law. WEEK 5 Money, the money market and the banking system The nature and function of money. Development of forms of money. Money supply and monetary aggregates. Money demand and basic theories of money demand and their implications. Liquidity preference theory and quantitative money theory. Forming equilibrium in the money market. Financial intermediaries - creation of bank money and multiplier of money supply. WEEK 6 Inflation Inflation and its measurement using price indices. Classification of inflation by individual forms. Expected and unexpected inflation. Demand-driven and cost-driven inflation. The cost of inflation. Deflation and its impact on the economy. WEEK 7 Unemployment and the Phillips curve Definition of basic terms (working population, workforce, employed, unemployed). Unemployment measurement. Forms of unemployment. Causes of the existence of frictional, structural and cyclical unemployment. Natural unemployment rate. Unemployment costs. Ways to solve the problem of unemployment. Phillips curve - original approach and monetarist approach. WEEK 8 Macroeconomic approaches to economic policy The concept and forms of macroeconomic economic policy. Macroeconomic economic policy objectives. Domestic and supranational entities of macroeconomic economic policy. The concept of the magic n-gon. Demand-oriented macroeconomic policy and supply-oriented macroeconomic policy. Approaches of individual theoretical schools in preferring economic policy goals. WEEK 9 Fiscal policy Fiscal policy. National budget. State budget revenues and expenditures. State budget deficit and state debt. Objectives and transmission mechanism of fiscal policy. Stabilization fiscal policy and the use of automatic stabilizers. Discrete fiscal policy measures. Extrusion effect. Short-term and long-term effects of fiscal policy in the AD-AS model. Fiscal multipliers. WEEK 10 Monetary policy Monetary policy objectives. The position and role of the central bank in the economy. Types of monetary policy. Monetary policy transmission mechanism. Indirect monetary policy instruments - open market operations, minimum reserves, key CB interest rates and foreign exchange market interventions. Short-term and long-term effects of monetary policy in the AD-AS model. WEEK 11 International Trade. International movement of goods, services and capital International trade - the essence, causes of the existence of international trade. Theories of international trade - theory of absolute and comparative costs. Free trade and economic efficiency. Liberal vs. protectionist foreign trade policy. Protectionist trade policy instruments - tariffs and quotas and their effects on the efficiency of resource allocation. International capital movements - foreign direct investment and portfolio investment. Balance of payments and its importance. Balance of payments structure. WEEK 12 Exchange rate mechanism and international monetary relations. International economic integration Exchange rate - nominal and real exchange rate. Exchange rate formation, basic exchange rate systems, their advantages and disadvantages. Demand and supply by currency in the foreign exchange market. Factors influencing demand and supply in the foreign exchange market. Purchasing power parity theory. International economic integration and its forms. Development and current state of international economic integration within the EU. WEEK 13 Final summary and repetition of the most important topics ______________________________________________________________ SEMINARS 1 WEEK Introductory seminar Ob