Faculty
TBA

Course Coordinator
TBA

This is the second semester of a year long course, so any exchange students wanting to take this course must either have had the first half here or CBS or have had the following courses prior to taking PoE2: Statistics, Organisational Economics, Industrial Economics

(Note to exchange students: This course is shared by two CBS undergraduate programs, so you might find yourself enrolled in either BLC-12EC or ASP-ECA2. Both codes are valid for this course, Principles of Economics II.)

The modules of this second part of the course are focused on macro-economics and international economics. Along the two modules the level of the discussion is first moved from the single market to the whole country economy, and then from there to the relationship between different countries through international markets.

The initial module sketches first the mechanisms through which economic actors interact in a country-wide economy. All the basic aggregates the students need to be familiarized with will be introduced in this context, to give an overall picture of the main concepts.

After this broad introduction, each aggregate will be separately analyzed. The concept of demand will be recalled from Principles of Economics I and reframed in order to make it match the new context. Consumption, investment and savings, taxes and government spending will be described and the mechanisms relating all of the them analyzed. Greater attention will be devote to the market for money and to the role of money in the economic system. All these concepts will be used (and summarized by) a model (called IS-LM) developed in the subsequent lecture. This model is widely recognized as a fundamental pedagogical tool to provide the students with an overall vision of the whole system of the aggregates of their relations. More than that, it is flexible enough to allow students to adapt the model to the specific situations under analysis, and thus facilitate the connection between theory and practice. Through this model students will learn how central banks and governments carry out policies to stabilize economic shocks or foster growth.

As a next step, a further move closer to real-life situations will be performed studying two crucial macro-economic phenomena: inflation and unemployment. The last part of this module, dedicated to these phenomena, will explain not only why inflation and unemployment are the two main targets of policy makers, governments and public institutions, but also how they relate each other and what determines their equilibrium.

The last part of the course is aimed at analyzing the economic relationship between different countries. After an introduction to the basic aggregates that will be used in the module, markets for goods, services, financial assets and money will be recalled and reframed in order to account for the new perspective applied here. The key variable that will lead the discussion across all the lectures of this module, the exchange rate between two different countries currencies, will naturally emerge as a crucial trait d’union. On this basis, a model (AA-DD) suitable to discuss international markets and economic relationship between different countries, will be presented and discussed. Students will learn how the different policies discussed in the previous module act in an open economy, i.e. when other countries’ influence is taken into account. In particular, students will learn to apply the AA-DD model adapting it to different situations and will be encouraged to use it in different contexts.

To conclude and put what has been taught into practice, students are given the opportunity to read two cases as optional readings. The first proposed set of readings approaches the integration of the European Union through both the theory of the Optimal Currency Area and the instruments developed during the course. The second set instead focuses on East Asian economies’ success and crisis, and again uses the tools learnt during the course.

Structure:

This final part of the course will be composed 9 lectures and by 8 classes, all of them lasting 2 hours. As in the previous part of the course, during classes students will be divided into groups in order to increase the level of interaction.

Upon completion of Principles of Economics 2 students will be able to:

Module 4 (MACROECONOMICS)

Module 5 (INTERNATIONAL ECONOMICS)

This final part of the course Principles of Economics II will be composed of nine lectures and by eight classes - all of them lasting two hours. As in the previous part of the course, during class, students will be divided into groups in order to increase the level of interaction.

The exam for this last part of the course is developed as follows:

a) The examination is a written, four-hour closed book examination

b) Study aids are not allowed: the only aid students are allowed to bring to the exam is a dictionary

c) The examination is done individually

d) An examiner and an internal censor do the grading

Please, refer to SiteScape to find updates on the date of the exam, room etc.

Notes, lecture slides and other material used in the lectures have also to be considered as part of the syllabus. In particular, exercises in class may refer to material that is not included in the books, and that will be distributed among the students in the way that best suits the typology of the exercises.