University of Zimbabwe
Department of Economics and Development
Module Name: Principles of Macroeconomics
Module Code: ECD104
First Year (Semester 2)
Lecturers:
Mr. R. Makoto (Office 234 Commerce Building) richmakoto@gmail.com
Ms M Dengedza (Office 212 Commerce Building) amiliadengedza6@gmail.com
Mr. A. Marufu (Office 6, WTO Reference Centre) marufutaku@gmail.com
Mr. B M W Zwizwai (Office 11, Social Studies Building) bmutzwizwai@yahoo.com
Mr. T J Mukura (Office 208 Commerce Building) tmukura@gmail.com
Contact hours: 48 hrs
Lectures – 36 hrs
Tutorials – 12 hrs
A. PURPOSE OF THE MODULE
This module intends to give students an awareness of the how the macroeconomy works through an
understanding of the how different economic agents and economic variables interact to determine the
state of affairs in an economy. This is the bedrock for equipping learners with the critical basic
economic tools needed in advanced modules, with the particular goal of developing models that
promote innovation and industrialisation in Zimbabwe. The module gives students a good foundation
to the concepts they will learn in their areas of specialization.
B. MODULE AIM
This module seeks to introduce macroeconomics, the study of the behaviour of the overall economy
as opposed to the behaviour of individuals, firms, or a particular market. Over the course of the
semester we will study the theory of income determination including national income concepts,
business cycles, unemployment, inflation, economic growth and development, monetary and fiscal
policy, public debt, patterns of government expenditures, international trade and finance. We will
relate these concepts to currents events in Zimbabwe and around the world.
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C. MODULE OBJECTIVES:
This module seeks to:
1. familiarize students with the fundamental macroeconomic concepts and principles;
2. help them use those concepts and principles to critically analyze current macroeconomic issues
and situations;
3. develop a global awareness from an economic perspective;
4. explain macroeconomic problems using different theories and devise appropriate policies to
avert them;
5. help students understand the use and choose the appropriate economic policies in solving
economic problems; and
6. help students appreciate how and why nations trade, the issue exchange rates fluctuations and
effects of balance of payments problems.
D. LEARNING OUTCOMES
By the end of this module it is expected that the student will:
a. know the basic principles of macroeconomics;
b. have some knowledge of competing theories;
c. be familiar with key macroeconomic variables and the measurement of such variables;
d. have a good understanding of the basic relationships between different macro-economic
variables;
e. be able to recognise the relationships amongst the following variables: national income,
unemployment, budget deficit, money supply, interest rate, inflation rate, exchange rate and
trade deficit;
f. be able to understand a simple macroeconomic model based on aggregate demand and
aggregate supply;
g. be able to understand the implications of international trade and capital movements for
macroeconomic aggregates in a small open economy;
h. be able to understand how government policies affect macroeconomic outcomes and the
current debates about the choice of appropriate policies.
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E. PREREQUISITES
Many students feel at a disadvantage if they have not studied economics previously at high school
level. This feeling is entirely unnecessary as the module is commenced based on no previous
knowledge of economics. The only required prerequisites are a willingness to learn and, in particular,
the ability and motivation to read all material prescribed.
F. TEACHING METHODS
The course will be taught based on 3 lecture hours and one tutorial per week. In general, lectures
will concentrate on the application of the techniques being discussed, while tutorials will focus on the
techniques themselves. Tutorials will cover some material that has not been covered in lectures.
Lectures and tutorials are both compulsory. All students must register for tutorials. Tutorial questions
for each week will be posted on Elms learning platform.
G. STUDENT ASSESSMENT
Each module has its own language, so students are encouraged to use economics terms. The tests will
include multiple choice and structured questions whilst the final exam will have structured questions
only. Coursework contributes 50% while the final exam contributes 50% to the overall assessment. If
a student has no coursework, s/he will not be allowed to sit for the final exam. Students are highly
advised to read their textbooks and participate in tutorials.
N.B. if a student misses a test for no valid reason, the mark allocated is zero.
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H. COURSE CONTENT
PART I:
1. INTRODUCTION TO MACROECONOMICS (WEEK 1)
1.1 What is macroeconomics?
1.1.1 Objectives of Macroeconomics
1.1.2 Tools of Macroeconomics: Fiscal & Monetary Policy
1.1.3 Circular Flow of Income
1.2 Measuring Economic Performance
1.2.1 National income accountingconcepts
1.2.2 Gross Domestic Product
1.2.3 Two ways of measuring GDP: Expenditure and Income Approaches
1.2.4 Price Indices (CPI and GDP Deflator) and Inflation
1.2.5 Shortcomings of GDP
PART II:
2. NATIONAL INCOME DETERMINATION (WEEK 2 & 3)
2.1 The Aggregate Expenditure Model
2.1.1 Consumption and Saving Functions, Investment function
2.1.2 Output determination by total expenditures
2.1.3 Output determination with saving and investment
2.1.4 The Multiplier
2.2 Aggregate Demand/Aggregate Supply Model
2.2.1 Determinants of AD and AS;Short Run AS (SRAS) and Long Run AS (LRAS)
2.2.2 Macroeconomic Equilibrium, Changes in Equilibrium GDP and the Multiplier
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PART III
3. MONEY, BANKING AND INTEREST RATES (WEEK 4 & 5)
3.1 Definition and Functions of Money
3.2 Introduction to Banking - fractional reserve& multiple bank system, creation of money;
3.3 Money multiplier
3.4 Money demand – motives and determinants
3.5 Money supply – components; monetary equilibrium and interest rate determination
***TEST I COVERS SECTION 1-3***
PART 1V
4. MACROECONOMIC POLICIES AND PROBLEMS (WEEK 6 & 7)
4.1 Central banking and monetary policy – functions of central bank and tools of monetary policy
4.2 Monetary transmission mechanism: monetary policy in AD-AS framework.
4.3 Effectiveness of monetary policy
4.4 Fiscal policy – tools for fiscal policy: government expenditures and taxes, government budget
4.5 Sideeffects of fiscal policy: expansionary and contractionary policies
4.6 Effectiveness of fiscal policy.
4.7 Fiscal and Monetary Interactions
5. MACROECONOMIC PROBLEMS (WEEK 8)
5.1 Inflation-definition, measurement of inflation, theories of inflation, anticipated Vs
unanticipated inflation, economic impacts of inflation, the Phillips curve, disinflation
programme.
5.2 Employment and unemployment –measuring unemployment, theories of unemployment,
economic cost of unemployment, solutions of unemployment.
***TEST II COVERS SECTION 4-5***
PART V
6. OPEN ECONOMY ECONOMICS (WEEK 9 & 10)
6.1 International trade – Why do countries trade?
6.2 The theory of comparative and absolute advantage - terms of trade and economic gains from
trade
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6.3 International Trade Restrictions
6.4 Balance of Payments Accounts (BOP) – Accounting for BOP transactions, current account,
financial account, official reserve account, policies to control BOP deficits/surpluses
6.5 International Finance - foreign exchange market, the determination of exchange rates
6.6 Exchange Rate Regimes, flexible exchange rate and fixed exchange rate- determinants of
exchange rates, disadvantages of flexible exchange rate system, fixed exchange rate, problems
and management of fixed exchange rate.
7. Public Sector Economics (WEEK 11)
7.1 Role of government: - efficiency, equality, economic stabilization
7.2 Government expenditures
7.3 Taxes –principles of taxation, type of taxes
7.4 The Government Budget
***TEST III Sections 6 and 7***
I. RECOMMENDED READING MATERIAL
Baumol W. J. and Blinder A. S., (2007), Economics Principles and Policy, Harcourt, San
Diego
J. ADDITIONAL READING MATERIAL
Lipsey R.G and Chrystal A. K., (2007), Economics, Oxford University Press, New York
McConnell C.R. and Bruce S.L., (2000), Economics, Principles, Problems And Policies,
McGraw-Hill, New York
Samuelson P.A. and Nordhaus W.D. (2005), Economics, 18th edition, McGraw-Hill New
Delhi
Sloman J, (2003), Essentials of Economics, Prentice Hall
K. E-RESOURCES
a. TSIME
b. E-books: http://www.uz.ac.zw/index.php/library.html
