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Macroeconomic Theory and Policy


  • Credit value: 30 credits at Level 5
  • Tutor: Professor Andy Ross
  • Assessment: coursework (20%) and a three-hour 15-minute examination (80%)

Module description

In this module we explain the main modern macroeconomic theories, tracing their development since the early twentieth century right up to today's macroeconomic debates.

Emphasising policy applications and underlying political perspectives throughout, we will explore competing policy approaches in the context of the UK experience. The approach is rigorous but accessible, emphasising intellectual engagement and insight, not technical sophistication.

Indicative syllabus

  • A brief history of UK macroeconomic policy since the Great Depression of the 1930s
  • A potted overview of Keynes versus the ‘Classics’
  • The Basic Neo-classical Approach and the Basic Keynesian Approach
  • Macro identities: the Quantity Theory of Money and the Fisher Equation of Exchange
  • Neo-classical synthesis
  • Endogenous and exogenous money
  • Nominal versus real
  • The demand for money and the ‘Cambridge Equation’
  • The self-equilibrating economy
  • Why inflation may matter
  • The monetarist experiment
  • Aggregate demand curves
  • Wealth vs current income: implications for demand stability
  • The Permanent Income Hypothesis
  • Crowding-out
  • Active versus non-discretionary macro-policy
  • Non-Accelerating Inflation Rate of Unemployment (NAIRU)
  • New Keynesian models
  • New consensus and Dynamic Stochastic General Equilibrium (DSGE)

Learning objectives

By the end of this module, you will be able to:

  • explain the evolution of macroeconomic theory and practice since the Great Depression
  • describe the major events and contributions from economists that have shaped the changing understanding of macroeconomics
  • use graphical representations of standard economic frameworks to analyse the workings of macroeconomic policy
  • critique the strengths and weaknesses of past and present macroeconomic policy approaches
  • engage in informed discussion with specialists and non-specialists on issues currently receiving widespread attention in the media and public debate generally, which will be particularly relevant in job interviews, etc.