Description: The course introduces the fundamental principles of economic theories, models and tools employed by the Government, firms and other stakeholders to manage the economy. It examines various microeconomic topics, including: demand and supply models; cost of production; resource allocation; market structures; elasticity and market efficiency.

Background: The economy encompasses everything related to the production and consumption of goods and services in an area. The economy and the factors affecting the economy have spawned one of the largest fields of study in human history - economics. The study of economics can be broken into two major areas of focus, microeconomics and macroeconomics.

Understanding at least the basic mechanisms of a nation's economy is essential if one is to be a better-informed citizen and voter. Economic fluctuations can affect all or specific industries and, as such, the stability of your job. Further, knowledge of the economy may influence your choice of careers or encourage a decision to change occupations. Additionally, having an understanding of how the economy works can help in making sound investment choices.

Description: The course demonstrates how to use macroeconomic indicators such as: GDP; economic growth; inflation; unemployment; aggregate demand and supply; GDP; employment and inflation to analyse and evaluate the macroeconomic factors that affect the economic wellbeing of stakeholders in the market system.

Background: Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of an economy as a whole, rather than individual markets. This includes national, regional, and global economies.

Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions. Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance.

Macroeconomics vs. Microeconomics
Microeconomics focuses on the market’s supply and demand factors that determine the economy’s price levels. In other words, microeconomics concentrates on the ‘ups’ and ‘downs’ of the markets for services and goods, and how the price affects the growth of these markets. An important aspect of this economy is also to examine market failure, i.e. when the markets do not provide effectual results. In our present time, microeconomics has become one of the most important strategies in business and economics. Its main importance is to analyze the economic forces, consumer behavior, and methods of determining the supply and demand of the market.

On the other hand, macroeconomics studies similar concepts, but with a much broader approach. The focus of macroeconomics is basically on a country’s income, and the position of foreign trades, with the study of unemployment rates, GDP and price indices. Macroeconomists are often found to make different types of models, and relationships, between factors such as output, national income, unemployment, consumption, savings, inflation, international trade, investment, and international finances. Overall, macroeconomics is a vast field that concentrates on two areas, economic growth and changes in the national income.

While the two studies are different, with microeconomics focusing on the smaller business sectors, and macroeconomics focusing on the larger income of the nation, they are interdependent and work in harmony with each other. The main differences are:

1. Microeconomics focuses on the market’s supply and demand factors and determines the economic price levels.
2. Macroeconomics is a vast field, which concentrates on two major areas, increasing economic growth and changes in the national income.
3. Microeconomics facilitates decision making for smaller business sectors.
4. Macroeconomics focuses on unemployment rates, GDP and price indices, of larger industries and entire economies.

Microeconomics and macroeconomics are the fundamental tools to be learned, in order to understand how the economic system is administered and sustained.

Description: The course provides experience in research and application for understanding and addressing sources of market failure; structural market failure; transactional and natural market failure in the process of economic policy making.

Background: What is Monetary Policy?

The actions of a central bank, currency board, or other regulatory committees that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as increasing the interest rate, or changing the amount of money banks need to keep in the vault (bank reserves).

In the United States, the Federal Reserve is in charge of monetary policy. Monetary policy is one of the ways that the U.S. government attempts to control the economy. If the money supply grows too fast, the rate of inflation will increase; if the growth of the money supply is slowed too much, then economic growth may also slow. In general, the U.S. sets inflation targets that are meant to maintain steady inflation of 2% to 3%.
What are the Objectives of Monetary Policy?

The Reserve Bank Board sets interest rates so as to achieve the following objectives:

• the stability of the currency
• the maintenance of full employment
• the economic prosperity and welfare of the people

Monetary policy aims to achieve this over the medium term so as to encourage strong and sustainable growth in the economy. Controlling inflation preserves the value of money. In the long run, this is the principal way in which monetary policy can help to form a sound basis for long-term growth in the economy.

Discription: The course provides experience in research and application for understanding and addressing trade issues including: exchange rate; interest rates; trade barriers; tariffs and taxation.

Background: Currency Exchange

An exchange rate is a rate at which one currency can be exchanged for another. In other words, it is the value of another country's currency compared to that of your own. If you are traveling to another country, you need to "buy" the local currency. Just like the price of any asset, the exchange rate is the price at which you can buy that currency.

Fixed Exchange Rate
There are two ways the price of a currency can be determined against another. A fixed, or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange rate. A set price will be determined against a major world currency (usually the U.S. dollar, but also other major currencies such as the euro, the yen or a basket of currencies). In order to maintain the local exchange rate, the central bank buys and sells its own currency on the foreign exchange market in return for the currency to which it is pegged.

In order to maintain the rate, the central bank must keep a high level of foreign reserves. This is a reserved amount of foreign currency held by the central bank that it can use to release (or absorb) extra funds into (or out of) the market. This ensures an appropriate money supply, appropriate fluctuations in the market (inflation/deflation) and ultimately, the exchange rate. The central bank can also adjust the official exchange rate when necessary.

Floating Exchange Rate
Unlike the fixed-rate, a floating exchange rate is determined by the private market through supply and demand. A floating rate is often termed "self-correcting," as any differences in supply and demand will automatically be corrected in the market. Look at this simplified model: if demand for a currency is low, its value will decrease, thus making imported goods more expensive and stimulating demand for local goods and services. This in turn will generate more jobs, causing an auto-correction in the market. A floating exchange rate is constantly changing.

In reality, no currency is wholly fixed or floating. In a fixed regime, market pressures can also influence changes in the exchange rate. Sometimes, when a local currency reflects its true value against its pegged currency, a "black market" (which is more reflective of actual supply and demand) may develop. A central bank will often then be forced to revalue or devalue the official rate so that the rate is in line with the unofficial one, thereby halting the activity of the black market.

In a floating regime, the central bank may also intervene when it is necessary to ensure stability and to avoid inflation. However, it is less often that the central bank of a floating regime will interfere.

Description: The course provides experience in research and application understanding the sub-branches of economics including: financial economics; international economics; transaction cost economics; labour economics; and environmental and energy economics.

Background: Financial economics is the branch of economics characterized by a "concentration on monetary activities", in which "money of one type or another is likely to appear on both sides of a trade". Its concern is thus the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. It has two main areas of focus: Asset pricing (or "Investment theory") and corporate finance; the first being the perspective of providers of capital and the second of users of capital.

The subject is concerned with "the allocation and deployment of economic resources, both spatially and across time, in an uncertain environment". It, therefore, centres on decision making under uncertainty in the context of the financial markets, and the resultant economic and financial models and principles, and is concerned with deriving testable or policy implications from acceptable assumptions. It is built on the foundations of microeconomics and decision theory.

Financial econometrics is the branch of Financial Economics that uses econometric techniques to parameterize these relationships. Mathematical finance is related in that it will derive and extend the mathematical or numerical models suggested by Financial Economics. Note though that the emphasis there is mathematical consistency, as opposed to compatibility with economic theory.