This course is a continuation of Macroeconomics I and aims to examine important issues in macroeconomic theory and policy. Upon successful completion of the course, students are expected to:

• Understand how an open economy functions and evaluate/analyze the effects of economic policy and exogenous events
• Understand and analyze the factors that lead to growth in per capita GDP
• Understand and analyze the factors that lead to changes in aggregate consumption and aggregate investment
• Understand and evaluate when a country is likely to accumulate public debt, when debt becomes unsustainable, and what this implies for the government securities market
• Be able to use functional relationships, diagrams, and empirical research findings to propose ways of addressing/resolving key macroeconomic issues
• Be able to solve exercises by determining macroeconomic variables and calculating how these variables change when exogenous events occur or when economic policy changes.

Open Economy: National income constraint, balance of payments, trade balance. Determinants of net exports. Interest rates, exchange rates, determinants of international capital flows. Equilibrium in the open economy. Analysis of the effects of economic policy and exogenous events. Role of the exchange rate system, role of the degree of international capital mobility.

Growth Theory: Saving, technology, human capital. Growth accounting, Solow residual. Generalized Solow model, dynamic adjustment and steady-state equilibrium. “Golden rule” of accumulation. Government sector. Poverty traps. Internationalization of markets. Absolute and relative income convergence. Endogenous growth, AK model.

Consumption and Investment Theory: Intertemporal choice, Life-Cycle Model, Permanent Income Hypothesis. Short-run and long-run propensity to consume. Investment, expectations, and uncertainty. Present value model, accelerator model, neoclassical investment model, Tobin’s q model.

Fiscal Deficits and Public Debt: Government budget constraint, methods of financing public expenditure. Causes of deficits. Sustainable and unsustainable debt. Monetization of public debt. Government securities market. Risk premiums, speculation, credit rating agencies.

Lectures (4 hours per week) and Tutorials (1 hour per week)

The language of assessment is Greek, and the assessment method consists of a final individual examination through a process of Multiple-Choice Questions, Short-Answer Questions, Essay-type questions and Problem Solving.

Students are given the option of taking an optional midterm/progress test.

The course syllabus, sample analytical questions, laboratory exercise assignments, course assessment criteria, as well as other teaching/learning material are posted on the e-class platform and are accessible to all students.

Use of IT in teaching, and in communication with the students (e-class).