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MEC-102: Macroeconomic Analysis - Important Concepts for Exams
Focus on these key topics that are frequently covered in exams and assignments for MAEC.
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Most Important Topics
High Priority
Core principles that are asked in exams almost every year
Key Topics:
- IS-LM Model
Derivation and interpretation of IS and LM curves, Equilibrium output and interest rate using IS-LM, Effectiveness of fiscal and monetary policies using IS-LM
- Solow Growth Model
Steady state conditions, Golden rule of capital accumulation, Effects of technological progress
- Ramsey-Cass-Koopmans Model
Central planner's problem, Modified golden rule
- Endogenous Growth Models
Explanation and comparison to Solow, AK Model specifics,
- Phillips Curve
Short-run vs long-run trade-off between inflation and unemployment,Effects of adaptive expectations
- Fiscal and Monetary Policy
Effectiveness under flexible and fixed exchange rates, Policy tools and their limitations (eg, in liquidity traps)
- Inflation-Unemployment Trade-off
Explained via Phillips curve and expectations, Dynamic inconsistency and policy credibility
- Consumption Theories
Life Cycle Hypothesis, Permanent Income Hypothesis, Random Walk Hypothesis
- Rigidities
Wage and price (real and nominal) rigidities, Efficiency wage theory, Menu costs
- Unemployment Theories
Natural rate of unemployment, Insider-Outsider model, Search theory
- Real Business Cycle Theory
Features and critiques
- Lucas Critique and Rational Expectations
Policy ineffectiveness theorem, Lucas supply function
- Convergence Concepts in Growth
Absolute vs conditional convergence
- Political Business Cycle
- Balance of Payments and Exchange Rate Systems
Fixed vs flexible exchange rates, External sector adjustments