Subject: Macroeconomics I

Scientific Area:



64 Hours

Number of ECTS:




Overall objectives:

1 - Students will be able to describe, solve and use the main theoretical models of a basic complexity, in the field of macroeconomics.
2 - Students will be able to develop a critical, comparative and quantitative analysis of the problems of modern macroeconomics.


1 - 1) Introduction 1.1) Scope of macroeconomics 1.2) Macroeconomic variables and their evolution over time (Portugal) 1.3) Brief history of macroeconomic theory
2 - 2) Neoclassical theory 2.1) Production of goods and the labour market 2.1.1) Production function 2.1.2) Labour demand 2.1.3) Labour supply 2.1.4) Employment, real wage and production of goods 2.2) Money market, prices and nominal wage 2.2.1) Money demand 2.2.2) Money supply 2.2.3) Price level and the quantity theory of money 2.2.4) Inflation rate 2.2.5) Nominal wage 2.3) Neoclassical dichotomy 2.4) Unemployment and nominal wage 2.5) Market for investment and savings, law of Say and interest rate 2.5.1) Savings function 2.5.2) Investment function 2.5.3) Real interest rate 2.5.4) Law of Say 2.5.5) Nominal interest rate and the Fisher equation 2.6) Wicksell's approach and the endogenous money supply
3 - 3) Economic theory of Keynes 3.1) Money market 3.1.1) Money demand and liquidity trap 3.1.2) Money supply 3.1.3) Nominal interest rate 3.2) Aggregate demand, savings and nominal production 3.2.1) Investment function and animal spirits 3.2.2) Consumption function and the fundamental psychological law 3.2.3) Savings function 3.2.4) Nominal production and the principle of effective demand 3.3) Labour market 3.3.1) Employment 3.3.2) Nominal wage 3.3.3) Real wage and involuntary unemployment 3.4) Prices, inflation and real interest rate 3.4.1) Price level and inflation rate 3.4.2) Real interest rate
4 - 4) Elements of neoclassical and Keynesian economic policy 4.1) Economic policy instruments 4.1.1) Money multiplier and monetary base 4.1.2) Government budget and public deficit 4.1.3) Public debt 4.2) Elements of neoclassical economic policy 4.3) Elements of Keynesian economic policy 4.3.1) Multiplier in a closed economy 4.3.2) Theorem of Haavelmo 4.3.3) Multiplier in an open economy 4.4) Elements of international economic policy 4.4.1) Competitiveness 4.4.2) Exports 4.4.3) Imports 4.4.4) International trade 4.4.5) Competitiveness and the quantity theory of money 4.4.6) Competitiveness and the mark-up pricing equation 4.4.7) Some important identities in an open economy
5 - 5) Neoclassical synthesis in a closed economy 5.1) Hicks's model or the IS-LM model 5.1.1) The IS curve 5.1.2) The IS curve without government 5.1.3) The IS curve with government 5.1.4) The LM curve 5.1.5) Real interest rate, production of goods and employment 5.2) Pigou's effect 5.3) Keynes's effect 5.4) Nominal wage and employment 5.5) Special cases of the IS-LM model and economic policies 5.5.1) Liquidity trap 5.5.2) Quantity theory of money 5.5.3) Pure Keynesian case
6 - 6) Neoclassical synthesis in an open economy 6.1) Current account 6.2) Capital account 6.3) Mundell and Fleming's model or the open-economy IS-LM model 6.3.1) Balance of payments 6.3.2) The BP curve 6.3.3) The IS curve in open economy 6.3.4) Internal and external equilibrium 6.3.5) Two special cases of the BP curve 6.4) Exchange rate regimes 6.4.1) Fixed exchange rate 6.4.2) Flexible exchange rate 6.4.3) Exchange rate market 6.5) Economic policies in the open-economy IS-LM model 6.5.1) Fixed exchange rate and perfect capital mobility 6.5.2) Flexible exchange rate and perfect capital mobility
7 - 7) Keynesian trade-off theory, monetarism and new classical macroeconomics 7.1) Keynesian trade-off theory and the AD-AS model 7.1.1) The AD curve 7.1.2) The Phillips curve 7.1.3) The Keynesian trade-off theory of the AS curve 7.1.4) Employment in the Keynesian trade-off theory 7.2) Monetarism and the Friedman's theory of the AS curve 7.3) New classical macroeconomics and the Lucas's theory of the AS curve
8 - 8) New Keynesian macroeconomics 8.1) The NAIRU model 8.1.1) Price-setting equation or mark-up pricing equation 8.1.2) Wage-setting equation and the Shapiro and Stiglitz's model 8.1.3) The NAIRU level 8.2) Hysteresis 8.3) New Keynesian theory of the AS curve 8.4) Nominal interest rate and Taylor rule


Andini C. , 2016 , Teorias e Políticas Macroeconómicas , Universidade da Madeira

Assesssment methods and criteria:

Classification Type: Quantitativa (0-20)

Evaluation Methodology:
The teaching methodology is mainly based on the oral and written transmission of knowledge from the instructor to the students during the contact hours. However, it also includes the analysis of case studies or problems as well as sessions to discuss practical applications of the theory. The materials most used for the transmission of knowledge are documents prepared by the instructor and websites. The assessment is periodical and consists of two mid-term exams. Each mid-term exam has a weight of 50%. All non mid-term exams have a weight of 100%.