Economics Theory I

Mitsuyoshi YANAGIHARA Professor

Department: School of Economics / Graduate School of Economics

Class Time: 2004 Fall Wednesday
Recommended for: Economics students

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Course Aims

In this course we will study the basics of macroeconomics, which analyzes a country's economic activities as a whole, especially from the viewpoint of Keynesian economics. Through this course, I show some macroeconomic data on the Japanese economy, so that students can understand how we grasp the real economy based on the theories.

Key Features

This course, "Economic Theory 1" is the first course on economics that economic majors take upon entering Nagoya University. Whether this class will become a guiding hand toward the world of economics is an important issue for me, and for the students, whether this course helps to make the remaining courses easier and more meaningful is just as important. With these in mind, I would like to point out some of the things I take care in my lessons.

Understanding the definitions

Some of the technical terms used in economics, at times, have different meanings from those which we normally perceive in our daily life, or some words we may barely know. To allow economic beginners to understand the definitions, the process of defining words are done with care.

Understanding the basic framework

The number of topics to be discussed in this course is strictly limited. In my opinion, only about half to three- quarters of macroeconomic topics can be treated for this course. Things like aggregate demand and supply analysis, economic growth, and classical/ neoclassical macroeconomic theory are not discussed here. Still, understanding economic theories and methods of economic analysis is critical when studying more advanced theories. For this reason, I hope to provide the basic concept of 'macroeconomic thinking' from its basics.

Effective usage of macroeconomic data

Learning basic economic theories itself is important. However, due to a rising interest in qualification exams, a portion of students find meaning only in calculation problems and such that are required for those exams. It is more important to apply what we have learned to the real economic situation. Therefore, I intend to show a wide variety of up-to-date macroeconomic data, and provide a chance to put theory and real-world economics together.

Maintaining interaction between lessons and comments

At the end of each topic, I set aside a few minutes of the lecture for a short Q&A session, not only to see if the students understood the lesson, but also to confirm if I was able to properly communicate what I intended to. Also, listening to questions from other students can be helpful, because they may reveal hints that might have gone unnoticed. I look forward to answering questions at any time.

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Course Aims

In this course we will study the basics of macroeconomics, which analyzes a country's economic activities as a whole, especially from the viewpoint of Keynesian economics. Through this course, I show some macroeconomic data on the Japanese economy, so that students can understand how we grasp the real economy based on the theories.

Course Requirements and Recommended Courses



Please feel free to ask me questions at any time, either during or after sessions. Since it is quite likely that other people have the same questions, asking them may assist others in their study. Also, I expect you to place emphasis on reviewing each lesson. Using the reference books and websites listed will likely help you understand the lessons more.

Course Schedule

1 What is an Economy? What is Macroeconomics?
First, we will discuss 'What is an economy?' and 'What and How is economics applied to? Also, there will be an introduction on the background of Keynesian economics, one of the main issues in this course.
2 National Economy (1)
A country's economic activity consists of four different markets. With clarifying these relations, we overview the SNA (System of National Accounts) showing the overall economic activities, particularly from the perspective of recent GDP growth/ level data.
3 National Economy (2)
We'll take a look at the Principle of Equivalent of Three Aspects, and how it is visible in Japan's recent macroeconomic data.
4 National Economy (3)
There are two price indices. In this session we will focus on their merits and demerits. In addition, we'll also discuss 'contribution', a key factor in determining GDP growth.
5 Determining GDP (1)
We will discuss the goods market equilibrium from a viewpoint of Keynesian economics. We'll start off with a simple introduction of Keynesian consumption function.
6 Determining the GDP (2)
A government operates in an economy in ways such as public spending. Here, we will see how they affect GDP by means of the 'multiplier effect'.
7 Consumption and Savings (1)
By comparing theory with real-world data, we can see some of the problems that the Keynesian consumption function possesses. We'll also discuss the characteristics of our consumption activities.
8 Consumption and Savings (2)
For solving the problems that Keynesian consumption function possesses, another two consumption theories will be introduced. We'll take a look at their basic concepts.
9 Investment Theory (1)
We will look for answers to questions like "What is investment?" and "What kinds of investment are there?" in macroeconomics. We'll also have a brief look at Keynesian theory on investment.
10 Investment Theory (2)
"Present Value" is an important factor in investment decision-making. We will introduce how to calculate it. In addition, we show other investment theories and see their basic structures.
11 Money (1)
Here we will discuss the roles of currency, first from the money demand. We'll look into interest rates, a key factor in determining money demand, along with the mechanisms associated with determining its rate.
12 Money (2)
We will explain what the money supply is and show the data regarding the money supply. Then, we'll be looking at how central banks interfere with the monetary market, and how it is affected by the intervention.
13 IS-LM Analysis (1)
Putting together what we've learned over the past sessions, we'll describe the simultaneous equilibrium both of the goods and the money markets. Then, we'll understand how the fiscal policies such as expanding public investments and the monetary policies such as a monetary expansion would affect the equilibrium.
14 IS-LM Analysis (2)
The effectiveness of fiscal as well as monetary policies depends on various 'elasticities' in the demand side. By using figures, we will explain what those elasticities are and see how the effectiveness of fiscal and monetary policies would be affected by those differences.
15 Exercises
We'll work on some numerical exercises. This should help in understanding the previous lessons.


Evaluation will be based on the end-of-term examination.

Note: Those who disrupt the lectures, or act in any inappropriate behavior, if no improvement in behavior is apparent afterwards, will not be graded and no score will be given.

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Lecture Handouts

Note: All files are in Japanese.

Session 1
What is economics? What is macroeconomics? (PDF, 181KB)
Session 2
National Economy (1) (PDF, 801KB)
Supplementary handouts (PDF, 1004KB)
Session 3
National Economy (2) (PDF, 482KB)
Supplementary handouts (PDF, 645KB)
Session 4
National Economy (3) (PDF, 748KB)
Session 5
Determining GDP (1) (PDF, 117KB)
Session 6
Determining GDP (2) (PDF, 130KB)
Session 7
Consumption and Savings (1) (PDF, 124KB)
Session 8
Consumption and Savings (2) (PDF, 106KB)
Session 9
Investment Theory (1) (PDF, 377KB)
Session 10
Investment Theory (2) (PDF, 132KB)
Document handouts (PDF, 875KB)
Session 11
Money (1) (PDF, 164KB)
Session 12
Money (2) (PDF, 239KB)
Session 13
IS-LM Analysis (1) (PDF, 117KB)
Session 14
IS-LM Analysis (2) (PDF, 127KB)
Session 15
Exercises (PDF, 208KB)

Related websites

Statistics Bureau, Ministry of Internal Affairs and Communications

Economics and Social Research Institute (ESRI), Cabinet Office

Ministry of Finance

Ministry of Economy, Trade, and Industry

Bank of Japan

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Page last updated July 6, 2009

The class contents were most recently updated on the date indicated. Please be aware that there may be some changes between the most recent year and the current page.

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