BBS 2nd Year

Macroeconomics studies the economy as a whole — total output, employment, and the price level. This unit covers the meaning, scope, uses, and limitations of macroeconomics; the difference and interdependence between micro and macro; new classical and new Keynesian schools; and key concepts like stock vs flow variables, equilibrium, and static/dynamic analysis.

National income accounting measures the total economic activity of a nation. This unit covers the circular flow of income in two-, three-, and four-sector economies; the concepts of GDP, NDP, GNP, NNP, NI, PI, DI, and PCI; real vs nominal GDP and the GDP deflator; the three measurement methods (product, income, and expenditure); difficulties in measurement; and the importance of national income accounting.

The classical theory of employment, developed by Smith, Ricardo, and Say, argues that a free-market economy automatically achieves full employment through flexible wages, prices, and interest rates. This unit covers the concept and types of unemployment, Say's law of markets and its implications, the determination of equilibrium employment and output under classical theory, and the critical evaluation that led to the Keynesian revolution.

Keynesian macroeconomics, born from the Great Depression, argues that aggregate demand determines output and employment. This unit — the largest in the course (30 LH) — covers the principle of effective demand, the consumption function and its determinants, the saving function and the paradox of thrift, the investment function and marginal efficiency of capital, income determination in a two-sector economy, and the investment multiplier.

The IS-LM model, developed by John Hicks (1937) and Alvin Hansen, extends Keynesian theory to show simultaneous equilibrium in both the product market (IS) and the money market (LM). This unit covers the derivation of the IS curve from the product market, the derivation of the LM curve from the money market, and the general equilibrium where both markets clear simultaneously — determining both income (Y) and the interest rate (r).

Inflation is a sustained rise in the general price level. This unit covers the meaning and types of inflation (demand-pull, cost-push, built-in); measurement through the Consumer Price Index (CPI); causes, effects, and anti-inflationary measures; the Phillips curve linking inflation and unemployment; and the concepts of deflation and stagflation.

Business cycles are recurring fluctuations in economic activity around the long-run growth trend. This unit covers the concept, types, and characteristics of business cycles; the four phases (peak, recession, trough, expansion); and the monetary, fiscal, and other measures used to control them.

Monetary theory examines the role of money in the economy. This unit covers the concept and determinants of money supply; the Keynesian approach to the demand for money; money and capital markets; monetary policy (concept, types, objectives, and instruments); and the determination of equilibrium exchange rates under fixed and flexible exchange rate systems.

Government finance covers how the government raises revenue and spends it to achieve macroeconomic objectives. This unit covers the government budget (concept, classification, components); deficit financing (concept, objectives, methods); and fiscal policy (concept, types, objectives, instruments) — the use of taxes and spending to influence the economy.

This unit — the second largest (25 LH) — covers six major contemporary macroeconomic issues relevant to Nepal: privatisation, liberalisation, and globalisation; foreign direct investment; economic growth and development; foreign employment; poverty; and economic inequality. Each topic covers concepts, causes, current status in Nepal, and remedies.