Topic 15 for a course in basic economics

TOPIC 15

Modern Macroeconomics

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Keynesian macroeconomics dominated economic theory and economic policy-making from the 1940s through the next quarter of a century. In the 1970s it was seriously challenged and the basic model was modified to accommodate the need to explain the real world experience of rising inflation and unemployment. Alternative explanations of macroeconomic experience were also introduced: monetarism, supply side economics, rational expectations, and real business cycle theory.

Objectives:

To explain the modifications made in Keynesian theory in the later post-World War II period, specifically the introduction of a flexible price model
To survey the development of alternative macroeconomic systems including monetarism, supply side economics, the new classical school, and real business cycle theory.