TOPIC 1 BASIC ECONOMIC CONCEPTS
Three fundamental questions which the general economics is called upon to answer: what
shall be produced? how to produce? produce for whom?
The people's needs and the problem of their classification (the fundamentals of the
marginal utility theory). Production activity as the main way of meeting the needs.
Production factors, productive forces, the means of production, the instruments and the
objects of labor. Production technologies, the production function. Production costs and
the problem of their measurement.
Production efficiency as the attainment of the set goal with the minimal costs. The
problem of limited resources and the production-possibility curve; the law of diminishing
returns of the factors of production, the concept of a "trade-off" and "opportunity costs".
Division of labor and its main forms (in singular and social). Technological progress.
The process of reproduction as a unity of production, exchange, distribution and
consumption. Economic (production) relations and the subjects thereof.
Interest as a motive force of the economy. The concept of an economic
system. Property and its role in forming an economic system.
Fundamental features of the centrally planned economy and market economy. Mixed
Microeconomics as a section of general economics, dedicated to the analysis of specific
commodity markets' functioning. The normative and positive aspects in the science of
TOPIC 2 ECONOMI ANALYSIS TOOLS
The concept of an economic model (theory) as the chief tool for disclosing the main
economic relationships. The role of abstraction (simplifying assumptions) in forming
economic models. Incremental sophistication of models as a manifestation of the
universal method of scientific study that consists in the advancement from the abstract
to the concrete. A model as a scientific hypothesis before the comparison of
conclusions flowing therefrom with the facts of real life. Economic models and their
verification against concrete data. Characteristics of the main types of data used in
economics: time-series data, grouping of data. The method of index for data
representation. Nominal and real variables in the economic analysis. The tradition of
using a graphic interpretation of economic models in microeconomics and
macroeconomics. The method of comparative statics, its advantages and limitations.
TOPIC 3 A GENERAL DESCRPTION OF SUPPLY, DEMAND AND
EQUILIBRIUM IN THE COOMODITY MARKETS
Demand and supply as factors of the price function. Supply and demand curves. Factors
that determine the position of the demand curve (prices of "tie-in sales", consumer
incomes, consumer tastes). Factors that determine the position of the supply
curve (production technology, prices of goods used in production, government
regulation). A graphic representation of market balance. Free markets and price control.
TOPIC 4 DEMAND. THE INFLUENCE OF PRICES AND INCOME ON THE
Price sensitivity of demand. Easiness of substitution as the main factor affecting the price
demand elasticity. The employment of the price demand elasticity indicator for
determining the amount of products supplied to the market that maximizes the consumers'
general expenditures on their purchasing. The concept of cross-elasticity of demand.
Income demand elasticity and the classification of goods into normal goods (including the
necessary goods and luxury goods) and goods of inferior quality. Inflation affecting
TOPIC 5 CONSUMER CHOICE THEORY
Main elements of the consumer choice theory (consumer income, prices of goods,
consumer tastes, as well as the assumption of maximum efficiency consumer behavior).
Budget restraint and the budget curve. Consumer tastes and the concept of the substitution
of one good for another.
The basis behind the diminishing marginal rate of substitution assumption and the
indifference curve map. The mechanism of utility maximization by the consumer.
The changes in the consumer choice due to changes (a) of income, (b). of the prices of
goods. The concept of the substitution effect and the effects of a changing real income in
the situation of relative prices' changes. The Griffen good. Diminishing
character of the individual demand curve for most goods. The market curve of demand for
goods as a result of a parallel addition of its individual curves.
TOPIC 6 PRODUCTION. ORGANIZATIONAL FORMS AND BASIC
Organizational forms of enterprises: firms founded on the basis of individual
te property; partnerships; limited liability companies (corporations) (open
and closed joint stock companies). The specificity of the Russian legislation on
the issue of the enterprises' organizational forms.
The goal of the firm in the contemporary market economy. Incomes and costs as the chief
parameters that determine the firms' decision-making on the output of goods. Main
financial documents - profit and loss account and the balance - and their significance. The
concept of the cash flow and the stock.
The difference of economic costs from the cash expenditures flow (interpretation of credit
debts, depreciation, stock changes). The difference between economic costs and bookkeeping costs and the concept of opportunity costs.
The selection of a production technology and the costs curve. The concept of the factor
intensity of production. The prices influence upon the choice of a technology and the
TOPIC 7 PRODUCTION. COSTS, INCOME AND OUTPUT
Total, average and marginal costs. The concept of the total and marginal income. the
curve shape of the total and marginal income. Marginal costs equalization
with the marginal income as a general principle of the output scale optimization.
The need for a separate consideration of the problem of costs in short- and long-terms
(partial and full adaptation of production factors to the changing market conditions).
Thrift and losses caused by the production scale in the long-term prospect and the Ushape of the long-term average costs curve. The presence of the fixed and variable factors
of production and, respectively, of the fixed and variable short-term costs. The connection
of the U-shape of the short-term average costs curve with the diminishing efficiency of
the variable factor of production.
The problems of profit maximization and loss minimization and the there associated
specificity of decision-making on the short-term and long-term optimal output.
TOPIC 8 MARKET STRUCTURE. PERFECT COMPETITION AND PURE
The concept of a market structure. The general definition of the perfect competition and a
pure monopoly market (monopsony).
Conditions for the existence a of perfect competition market (a large number of
producers, each having a negligible share in the total output of the industry; the output of
standard items by all firms within the industry; availability of full information to
consumers about the quality of products manufactured by different firms; a free
"entrance" into the market and a free "exit" therefrom). Short-term and long-term
marginal costs and the short-term and long-term supply curves of the firm and the
industry. Marginal income equal to the price and the modification of conditions for an
optimal output. The concept of a "marginal firm" and the conditions for the existence of a
horizontal long-term supply curve for the industry. The effects for the output of the
industry of the (a) changes in the overall level of costs and (b) demand for the products.
The absence of real and tentative domestic and foreign competitors as a condition for a
pure monopoly. Profit maximization algorithm by a pure monopoly. The reasons for the
absence of the supply curve in a pure monopoly. The concept of the measure of monopoly
power and of monopoly super-profit. Comparison of a competitive industry with a
monopolized one and composed of many enterprises. The social price of a monopoly
composed of many enterprises. Natural monopolies and the problems of their activity
regulation. Discrimination monopoly in the conditions of a likelihood for market
segmentation. The monopoly and technological progress.
TOPIC 9 MARKET STRUCTURE. OLIGOPOLY AND MONOPOLY
The concept of a non-perfectly competitive firm. Two types of non-perfect competition:
oligopoly and a sector of monopoly competition.
The conditions for the existence of a monopoly competition sector (a lot of small firms,
free "entry" and "exit", diminishing demand curve for the products of each firm. The
causes that generate the non-horizontal character of the demand curve for the output of
these firms. The mechanism of a "tangency equilibrium" under the conditions
of monopoly competition. Particular features of the firm's monopoly power manifestation
under these conditions.
oligopoly: a conflict between the desire for a collusion and competition. A kinked
demand curve in an oligopoly. The Cournot equilibrium. The significance of the games
theory for describing the behavior of oligopolies. Natural and engineered barriers to the
nce" into the sector.
A classical view of the factors that lay the groundwork for market structures. The role of
a marginal scale of output and of the concentration of production connected therewith.
Corrections entered by the new industrial economics: the role of the firms' behavior and
of potential competition for the formation of the market structure.
TOPIC 10 THE PRICE FORMATION FOR THE SERVICES OF THE PRODUCTION
FACTORS AND THE INCOME FROM THEIR USE
Interdependency of production factors and the random character of demand for them.
Marginal (physical) and marginal value product of the production factor (labor, capital,
land). The condition for an optimization of the number of production factors involved in
the production (equating a marginal value product of each production factor to the price
of services provided by it, or, which is the same thing, equating the quotient of each
production factor's marginal physical product by the price of services provided by it with
the value inverse to the end products produced by these factors). The curve of the
marginal value product of the production factor as a firm's demand curve for this product.
The curves of production factors' supply by individual households and firms. The general
supply and demand curves of the production factors. The equilibrium prices of production
factors and the revenue allocation.
TOPIC 11 LABOR MARKET AND WAGES
The definition of wages under the conditions of free competition in the labor market. The
factors that lay the groundwork for the demand on labor (the quality of workforce, capital
accumulated, the quality of technologies applied, the art of management). Factors which
determine the supply of labor (the dynamism of the size of population, particular features of
the population's desire to increase its labor contribution). Equilibrium in the labor market
and the main reasons for the difference in the labor remuneration (difference which
compensates harsh working conditions; difference in the quality of work; the rent elements
in the wages and salaries of unique specialists; existence
of groups within the workforce that are not competing with each other). Trade unions and
their effect on the labor market.
Specificity of labor relations regulation in the Russian Federation.
TOPIC 12 THE MARKETS OF LAND AND THE MONEY MARKETS. THE
RENT, THE INTEREST AND THE PROFIT
The rent as an income from the fixed factors of production. The rent's derivativeness for
the natural factor of production from the price generated with the help of this productdriven factor. The role of the rent and of other factor-driven incomes in maintaining
efficiency when using limited resources.
Capital and the "roundabout" modes of production. The rental fee for using capital goods
and the return on capital. Savings, financial assets and their
discounted value. The mechanism for defining the return on capital and the level of the
rate of interest. The short-term and long-term equilibrium in the money market, the
concept of a natural rate of interest. The influence produced on the money market by the
uncertainty and the risk and by technological changes.
The nature of profit.
TOPIC 13 UNCERTAINTY AND RISK IN THE ECONOMY
The concepts of uncertainty and risk. Risk aversion and its connection with the
conception of diminishing utility. Insurance as a way of risk distribution. The money
market as an instrument for risk distribution.
Non-insurable risks as a manifestation of a "market failure". The problem of moral hazards
and the adverse selection. The opportunities of social security insurance.
Speculative markets as instruments of the transfer of goods and services in time and space
flowing from surplus to deficit (arbitration between space- distant markets, speculative
activities aimed to draw profit from a possible change of prices in time). Speculation and
risk distribution; the hedging of risks. The role of speculation in maximizing the utility.
Negative aspects of speculative behavior.
TOPIC 14 INTRODUCTION INTO THE WELFARE ECONOMICS
Justice and efficiency. Perfect competition and the Pareto efficiency. Market structures'
imperfection as well as the absence of individual markets
- the side-effects markets (for example, the pollution of the environment), the markets for
most "future goods", the markets of all types of risks (i.e. the existence of non-insurable
risks) - as the major causes for the existent market failures). Incomplete information at the
disposal of economic agents, the existence of public goods and the market failures.
TOPIC 15 THE GENERAL EQUILIBRIUM THEORY AND THE WELFARE
Production functions of separate goods and services and society's production possibilities
frontier. Substantiation (for a two commodity market model) of the general equilibrium in
the point of the production possibilities frontier where the marginal rate of transformation
of one commodity into another equals the inverse value of their price ratio. The Pareto
efficiency of the general equilibrium point,
The model of a general equilibrium with due account for the time factor. The definition
of the equilibrium level of savings, investments and the rate of interest.
TOPIC 16 MARKET SETBAKS (FAILURES) AND THE ECONOMIC
FUNCTIONS OF THE STATE
Intervention by the government as a response to the market failures. The nature of the
present-day mixed economy.
The fundamentals of an anti-monopoly and and industrial policy. Nationalization ans
The state and the distribution of income: is intervention necessary? The social functions
of the contemporary state.
Budget as the state's major instrument. Introduction into the tax theory. The
nature of the market structure's distortions due to the activity by the state and
the "second best" policy.
TOPIC 1 TURNOVER OF GOODS AND PAYMENTS. THE NATIONAL
The subject-matter of macroeconomics.
Three ways of measuring the economic activity: by production scales, the size of income
and expenditure. The gross and intermediate output; value added by procession.
Aggregate demand and its elements (consumer and investment expenditures, government
spendings on goods and services, net export).
Injections into the goods and payments turnover and the outflows therefrom. Indirect and
direct taxes, government subsidies and transfers, savings.
Main indicators of economic activity (gross domestic and gross national product, the net
product and the national income), their advantages and disadvantages. The system of
TOPIC 2 THE KEYNESIAN MODEL OF OUTPUT AND INCOME
The purpose of the model and its basic prerequisites. Potential and actual output.
The consumption and savings function; the concept of the marginal propensity to
consume and the marginal propensity to save. Autonomous and non-autonomous
expenditures; plotting the curve of the aggregate demand function.
Determination of the equilibrium value of output and income by means of the "Keynesian
cross". Equilibrium income multiplier. The paradox of thrift.
TOPIC 3 THE INFLUENCE OF THE FISCAL POLICY AND FOERIGN TRADE
ON THE AGGREGATE DEMAND
General concepts: the fiscal policy, stabilization policy, state budget deficit (surplus),
The specificity of influence of public procurement and net taxes on the equilibrium
output and income. The balanced budget multiplier.
A soft and a contractionary fiscal policy. The influence of the national budget deficit and
the government debt on the economy.
Specificity of export's and import's influence on the aggregate demand. Equilibrium
income multiplier in the open economy.
TOPIC 4 MONEY AND THE CONTEMPORARY BANKING BUSINESS
Money and its functions. Main types of payment instruments.
Monetary reserves and bank reserve requirements. Money supply and "monetary
aggregates". The functions of commercial banks and their role in forming the monetary
stock (supply). The mechanism of non-cash transactions.
Particular features of the monetary system in the epoch of paper money. The monetary
base and money multiplier. Factors which determine the size of the money multiplier.
TOPIC 5 THE ACTIVITY OF THE CENTRAL BANK AND THE MONETARY
The instruments for the Central Bank to influence the money supply: the establishment of
minimum reserve requirements, discounting rates, performance of "open market
The Central Bank as the "borrower of last resort". The role of the Central Bank in
managing the government debt and financing the deficit of the state budget. What is
The concept of the demand for money and the motives laying the basis for the latter. The
mechanism for establishing equilibrium in the financial market. The interest rate as the
"price of money".
TOPIC 6 THE MONETARY AND FISCAL POLICY IN A CLOSED ECONOMY
The influence of money and the interest rate on the size of consumer demand for
investment-available funds. The essence of the transmission mechanism. The fiscal policy
and the "crowding-out effect".
The IS/LM model and its application for making
clear the efficiency of the fiscal and
Demand management; varieties of the fiscal and monetary policies and the combinations
TOPIC 7 AGGREGATE SUPPLY, PRICE LEVEL AND THE SPEED OF
Dependency between the general level of prices and the size of the aggregate demand; the
curve of a macroeconomic demand.
Dependency of the aggregate supply on the state of the factor markets, and, first and
foremost, of the labor market. the vertical shape of the aggregate supply curve in the
event of the prevalence of the perfect competition laws in the labor market. Nosensical
attempts to influence the amount of output and income in these conditions by means of
stimulating the aggregate demand.
factors that account for the "stickness" of wages and salaries in the short term. The
influence of this circumstance on the shape of the short-term aggregate supply curve.
Economy's adaptation to the shocks caused by the demand and by the supply.
TOPIC 8 UNEMPLOYMENT
The characteristics of the main types of unemployment - frictional, structural, classic,
unemployment generated by the low demand. Voluntary and involuntary unemployment.
The natural level of unemployment. The characteristics of the supply-side policy and its
role in bringing down the natural level of unemployment.
The essence of the "hysteresis" phenomenon and its forms. Hysteresis as a factor that can
generate and preserve high unemployment for a long period.
TOPIC 9 INFLATION
Money supply and inflation. The quantity theory of money and its limitation. Interrelationship between inflation and the nominal rate of interest. The nature of hyperinflation. The deficit of the state budget and inflation.
Inter-relationship of inflation, on the one hand, and unemployment, on the other. The
Phillips curve and is contemporary interpretation. The absence of a "trade-off" between
inflation and unemployment in the situation of a shock from the side of supply.
The social costs connected with a high inflation ("the shoe leather costs" and "the menu
costs", problems connected with the institutional non-adjustment of the economy to
inflation, the costs of the unanticipated inflation and the costs due to the uncertainty of
Methods of combating inflation (the restrictive monetary and fiscal policy, the incomes
policy, institutional reforms). Adjustment to inflation.
TOPIC 10 THE FOREIGN EXCHANGE MARKET AND THE BALANCE OF
Factors that determine the demand for foreign currency and its supply. The fixed and the
floating exchange rate - two extreme varieties of the exchange rate regime. The
mechanism for maintaining balance in the foreign exchange market under the fixed and
the floating exchange rates. Devaluation and revaluation of currency.
The nominal and the real rate of exchange and the problem competitiveness of export and
The balance of payments; its current figures and items of capital. The concepts of the
balanced and unbalanced balance of payments; the financing of a deficit of the balance of
payments. Factors that affect the state of the current and capital items of the balance of
TOPIC 11 MACROECONOMICS OF THE OPEN ECONOMY
Relationship between the state of the economy and the balance of payments. Internal and
external balance in the economy.
Economy's adjustment to the internal and external shocks under a fixed rate of exchange
regime. The reasons for inefficiency in stimulating the demand by means of a monetary
policy under a fixed rate of exchange.
Increased short-term efficiency of the fiscal policy under a fixed rate of exchange. Shortterm, medium-term and long-term effects of the national currency's devaluation.
Adjustment of the economy to the internal and the external shocks under a floating rate of
exchange regime. The reasons for inefficiency in stimulating the demand by means of a
monetary policy under a floating rate of exchange. Increased short-term efficiency of the
monetary policy under a fixed rate of exchange.
TOPIC 12 THE LONG-TERM GROWTH AND THE SHORT-RUN
The problem of measuring economic growth: advantages and disadvantages
of various indicators.
The production function and the long-term economic growth. Malthus's theory. The neoclassical model of a steady-state economy. The role of technological changes. The
conception of zero growth.
The concept of business activity cycles. The fundamentals of cyclicality (the model of an
accelerator-multiplier, the concept of a political business cycle, the theory of a balanc
The economic growth and the policy of the government. Arrangements that affect the
aggregate demand and the aggregate supply.
TOPIC 13 THE GENERAL CHARACTERISTICS OF THE CONTEMPORARY
SCHOOLS OF ECONOMICS
Four major problems whose interpretation is the division line between the major trends of
the present-day economic thought: the speed at which the markets achieve a balanced
state; the character of expectations of the the economic transactors; uniqueness or
multiplicity of the long-term balance state; the relation to the long-term and the shortterm perspective.
The general characteristics of the new classical macroeconomic theory, monetarism, the
"eclectic" and the "extremist" Keynesianism.
TOPIC 14 INTERNATIONAL TRADE AND THE TRADE POLICY
Internationalization of production and the factors that lie behind it. The theory of
comparative advantage and the Heckscher-Ohlin theory The Leontief paradox. The
factors that condition the development of the international intrabranch exchange. The
problem of the gainers and loosers in the process of an international division of labor.
The essence of the trade policy. The costs and benefits connected with the application of
customs tariffs. The quotas, non-tariff barriers, export subsidies.
TOPIC 15 THE INTERNATIOAL MONETARY SYSTEM AND INTERNATIONAL
Characteristics of the gold standard.
The reasons for the emergence of the Bretton Woods currency system after the Second World
War and its particular features.
The factors that conditioned the crisis of the Bretton Woods system and then its
The mechanisms of foreign exchange and financial crises in the contemporary conditions and
the ways to counteract them. The role of international coordination in the economic policy.
The EU experience.
RECOMMENDED READING LIST:
1. Агапова Т.А., Серёгина С.Ф. Макроэкономика. 10-е изд. М.: МАРКЕТ ДС, 2013г.
2. N. Gregory Mankiw : Macroeconomics 9th Edition: Macmillan learning, 2016
3. N. Gregory Mankiw : Principles of Microeconomics, 8th Edition : Cengage, 2016
4. Frederic S. Mishkin: The Economics of Money, Banking and Financial Markets ,11th
Edition: The Pearson, 2015
5. Лаврушин О. Банковское дело. Учебник. 11-е изд. М:КноРус, 2014