Face-to-face , second term, 30 hours of theory and 15 hours of exercises.

Second term
Tuesday from 09:00 to 11:00 at 43 Botanique 5

The course and reference book are in French. The reference book is also available in English.

Following the Economy I course, Economy II offers an introduction to the economic analysis of the functioning of a market economy. The Economy II course first finishes the introduction to microeconomics started in Economy I. The second part of the course focuses on subjects of macroeconomic nature (measure of overall economic activity, growth, unemployment, public dept...). The content of the course will be detailed below, in the Content section.

The course should enable the students:

• To master the fundamental concepts of (micro- and macro-) economic analysis;
• To familiarise himself with the fundamental explanatory mechanisms of theoretical economic analysis;
• To use theoretical economic analysis to:
- Understand a number of studied economic phenomena;
- Consider with critical eye certain (recommendations of) economic policies;
- …

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The first part of the course completes the introduction to microeconomic analysis started in Economy I. The following topics will be studied:

1. Public goods and common resources (Chapter 1).

Public goods and common resources are two cases of failures in competitive markets. If there were only competitive logic at work, the supply of public goods would be insufficient and, in many cases, non-existent; common resources would be overexploited. We examine why and evoke public interventions likely to solve or alleviate these problems.

This chapter is only part of the Economics II course programme, if it could not be covered during the first half of the year in the Economics I course.

2. Competition imperfections (Chapters 2 and 3)

We examine the characteristics of markets where competition is not perfect, either there are few suppliers on these markets or there are few buyers. We will study in detail the case of monopoly and then quickly fly over other forms of imperfect competition. The role played by the state in the regulation/supervision of these imperfect competition markets is discussed.

3. An introduction to financial markets (Chapter 4)

First of all we will present a number of fundamental concepts in the field of Finance (interest rate and rate of return, discount factor, price of a financial asset...) and outline an initial analysis of their determinants.

The next step is to use the case of financial markets as an illustration of market failures arising from informational imperfections, such as information asymmetries between economic agents (lenders and borrowers in the case of financial markets).

The second (and longest) part of the course is an introduction to macroeconomic analysis. It will study the following topics:

1. Introduction to the measure of the economic activity of a nation (chapter 5).

After a presentation of the nominal and real variable as well as price index notions, this chapter will answer the following questions: What is the GDP (GNP) and how can it be calculated? What does the GNP indicator measure (or does not measure) par capita? How can we measure inflation?

2. Economic fluctuations: long-term tendencies and short-term fluctuations (chapter 5)

We will present a number of fundamental concepts (growth trend, short-term cycles (peak and off peak), recession). Then we will propose a small macroeconomic model, which offers a first step in understanding the causes of short-term and long-term economic fluctuations.

3. The determinants of long-term economic growth (chapter 6)

After having put economic growth through the centuries into a historical perspective, this chapter will address the following topics: What are (were) the driving forces of economic growth? Why are there poor countries and rich countries? Why do some countries remain poor whereas others develop rapidly? Can growth be a sustainable phenomenon? ...

4. Employment and unemployment

5. Currency and inflation.

a) Lecture

The lecture consists of the presentation of explanatory concepts and mechanisms. It is illustrated by concrete cases.

b) Exercise sessions
The exercise sessions will give the students the opportunity to test their acquired knowledge and to discuss some points in particular. There is no use in attending these sessions if no preparatory work on the course material has been done.

c) Personal work

Regular individual work is essential to pass the examination. As the course progresses, each student should devote sufficient time to personal study to make sure that he understands the subject matter. The student should not discover the course at the end of the term, during the exam preparation period; this time should be used to revise a subject matter that has already been understood.

The personal work should not be a simple memorisation. The student will not be assessed on his restitution capacity but rather on his understanding of the explanatory concepts and mechanisms, and his ability to use them.

In order to help the students in their daily work, the professor and assistants will meet with the students that request it. Appointments should be requested by email.

The final evaluation is a written examination. It includes theoretical questions, exercise solving (similar, but not identical to those made in class) and simple applications of the theory to problems inspired by historical and current economic issues.

Reference book: Mankiw, Gregory et Mark Taylor, Principes de l'Economie, de Boeck, collection Ouvertures économiques, 1ère édition 2010 ou 2ième édition 2011.Mankiw,

The microeconomic section of the course closely follows this book. The macroeconomic part is not as close.

In addition to the reference book:
1) A copy of the slides used during the lecture is available at the reprography service and on the course website

2) A copy of the exercises completed in class will also be available at the two same sources

3) A number of other documents relating to the course (e.g. examinations of previous years, lists of questions relating to comprehension of the course subjects…) are available online on eSaintLouis, in the directory of this course. Students are encouraged to register as users of this website (online registration), which will allow them to be informed of any additional documents made available.