Macroeconomics EC2065

This course introduces students to the most influential and compelling theories designed by macroeconomists to explain issues related to the determination of output, unemployment and inflation.

Students will acquire a logical and consistent framework for understanding the main macroeconomic facts and events, and develop the ability to employ the correct macroeconomic tool(s) to explain specific macroeconomic issues and justify policy proposals.


If taken as part of a BSc degree, courses which must be passed before this course may be attempted:

  • EC1002 Introduction to economics 
  • MT105a Mathematics 1 or MT1174 Calculus.

Topics covered

  • Aggregate demand in a closed economy: the determinants of consumption, investment, demand for and supply of money; wealth effects; the IS-LM model and policy prescriptions.
  • Aggregate demand in an open economy: exchange rate regimes, international trade and capital flows, and external balance; the IS-LM-BP model and policy prescriptions.
  • Aggregate demand, aggregate supply and the price level: the aggregate demand curve; short and long run aggregate supply curves; the aggregate demand-aggregate supply model and its applications to the determination of the price level and real income, and demand management policy; the neo-classical (Solow) growth model.
  • Inflation and unemployment; models of inflation; costs of inflation; counter-inflationary policy; full employment and the natural rate of unemployment; types and causes of unemployment, and policies to reduce them.

Learning outcomes

If you complete the course successfully, you should be able to define and describe:

  • Define and analyse the determinants of business cycles, long run economic growth, unemployment, inflation.
  • Use and apply a wide range of economic models to analyse contemporary and historical macroeconomic events, and formulate and propose appropriate macroeconomic policies.


Unseen written exam (3 hrs).

Essential reading

  • Blanchard, O. Macroeconomics. Prentice Hall.
  • Dornbusch, R., S. Fischer and R. Startz Macroeconomics. McGraw-Hill.
  • Mankiw, N.G. Macroeconomics. Worth.

Course information sheets

Download the course information sheets from the LSE website.