Semester-II

Macroeconomic data- Basic concepts of National Income accounting. The circular flow. Concepts of GNP, GDP, NNP, and NDP at market price and at factor cost. The measurement of National Income-Value Added Method and Expenditure Method. The problem of double counting. The role of Government. Concepts of Corporate Income, Corporate Savings, Personal Income, Personal Disposable Income and Personal Savings. Saving-Investment gap and its relation with budget deficit and trade surplus. National Income accounting and cost of living. Basic idea of India‘s national income.

The Simple Keynesian Model (SKM) in a Closed Economy without Government- the Keynesian Consumption Function; the Keynesian Saving Function; income determination in SKM; stability of equilibrium; the concept of effective demand- the concept of demand-determined output ; the Simple Keynesian Multiplier; the paradox of thrift; the SKM in a Closed Economy with Government; government expenditure and tax; the government expenditure multiplier and the tax rate multiplier; the balanced budget multiplier; the budget surplus; effects of tax changes and government purchases on budget surplus; the full employment budget surplus.

Basic ideas of Classical Macroeconomics; Say‘s Law and Quantity Theory of Money, Loanable fund theory; the Classical Theory of Income and Employment determination; full Employment and wage-price flexibility; Classical Dichotomy and Neutrality of Money.

The bond market as the mirror image of the money market-the Walras‘ Law. Relationship between bond price and rate of interest- the concept of Keynesian liquidity preference schedule-speculative demand for money and liquidity trap.

Investment function: Concepts of Marginal productivity of capital, marginal efficiency of capital (MEC) and marginal efficiency of investment (MEI)- Jorgenson‘s neo-classical theory- Acceleration principle- fixed and variable. Multiplier-accelerator interaction.

• Continuous and differentiable functions: partial derivatives and Hessian matrix. Homogeneous and homothetic functions.

• Euler‘s theorem, implicit function theorem (without proof) and its application to comparative statics problems.

• Economic applications- the idea of level curves, theories of consumer behaviour and theory of production.

• Optimization of nonlinear functions: Convex, concave, and quasi-concave functions; Unconstrained optimization.

• Constrained optimization with equality constraints- Lagrangian multiplier method; role of Hessian determinant.

• Inequality constraints and Kuhn-Tucker Conditions.

• Value function and Envelope theorem; Economic applications – consumer behaviour and theory of production.

• Optimization of linear function: Linear programming; concept of slack and surplus variables (graphical solution only). Concept of convex set. The Duality Theorem

• Economic Applications of Linear programming

• Finite difference; Equations of first and 2^nd orders and their solutions

• Application in Economics- Cobweb model, Multiplier-Accelerator model.

• Solution of Differential equations of first order and second order of linear differential equations.

• Economic application-price dynamics in a single market- multimarket supply demand model with two independent markets.

• Qualitative graphic solution to 2x2 linear simultaneous non-linear differential equation system- phase diagram, fixed point and stability. Economic applications in microeconomics and macroeconomics