Economics Specific Learning Objectives

				Cognitive
Chapter		Candidates Learning Outcome		Levels
1	Introduction	Candidates should be able to:		K   U   A
1.1	Microeconomics	a.	State the importance of studying economics	*
		b.	Differentiate between microeconomics and macroeconomics		*
		c.	Identify and explain the basic concepts of microeconomics, i.e. supply/demand, elasticity and		*
			inelasticity, consumer preferences, supply demand curve and equilibrium
		d.	Discuss the production function		*
		e.	Discuss the terms opportunity cost, sunk cost, marginal cost, average cost, production cost		*
1.2	Macroeconomics	a.	Discuss the basic framework of macroeconomics, i.e. National Income, Inflation,		*
			Unemployment, Exchange rate and Trade Imbalances
		b.	Discuss the macroeconomic goals of achieving full employment, economic growth and stability		*
		c.	Discuss marginal benefit and marginal cost and the relationship between the two		*
		d.	Discuss consumer and producer surplus		*
		e.	Explain deadweight loss, overproduction, underproduction		*
		f.	Explain the concept of trade offs		*
		g.	Describe the characteristics of perfect competition, oligopoly, monopoly, monopolistic		*
			competition
		h.	Recall the principles of macroeconomic policies for a sustainable economy	*
1.3	Macroeconomic methods	a.	Identify the importance of theory, data and forecasting	*
1.4	Modern macroeconomics	a.	Recall the controversies in modern macroeconomics	*

Demography	Candidates should be able to:		K   U   A
2.1   Concepts of national	a.	Explain economic models		*
income
	b.	List the different measures of national input and output	*
	c.	Define National Income and explain why this is important when aiming to achieve economic		*
		growth
	d.	Define and explain Gross National Product		*
	e.	Define and explain Gross Domestic Product		*
	f.	Recall the formula of expenditure-approach method for calculating GDP	*
	g.	Explain the Expenditure approach		*
	h.	Recall the formula for Income approach method of calculating GDP	*
	i.	Explain the Income approach		*
	j.	Explain the output method of calculating GDP and how does this approach avoid the problems		*
		of double counting
	k.	List the problems in using GNP as a measure of welfare	*
	l.	Define poverty reduction strategy papers (PRSPs)	*
	m.	Define social safety nets or social economic safety nets	*
	n.	List the type of transfers that safety nets usually include	*
	o.	Interpret the Lorentz curve and explain how it portrays inequitable distribution of income		*

3.	Inflation	Candidates should be able to:		K	U	A
3.1	Concepts of inflation	a.	List and explain the types of inflation (cost push, demand pull wage, pricing power, sectoral		*
			inflation)
		c.	Recall the concept of hyperinflation and fiscal inflation	*
		d.	Define and discuss the impact of stagflation, deflation, disinflation, reflation, depression		*
		e.	Interpret the negative impacts of inflation			*
		f.	Interpret the positive impacts of inflation			*
		g.	Differentiate between inflation rate and the price level		*
		h.	Define GDP deflator	*
		i.	Define Consumer Price Index (CPI) or headline inflation	*
		j.	Recall the formula for calculating CPI for single and multiple goods	*
		k.	List the different price indices used in Pakistan over the fiscal year	*
		l.	Discuss how inflation is measured in Pakistan		*
		m.	Identify the reasons why inflation in Pakistan has reached double digits in the recent years	*
4.	Unemployment	Candidates should be able to:		K	U	A
4.1	Concepts of unemployment	a.	List and explain the different types of unemployment		*
		b.	Recall the formula to calculate the unemployment rate	*
		c.	Discus the causes of unemployment		*
		d.	Define Okun’s Law	*
		e.	Define the concept of Phillips curve	*
		f.	Recall the short run/long run Phillips curve	*
		g.	Explain the Phillips Curve concept using aggregate supply/aggregate demand and the output		*
			gap
		h.	Explain the factors that influence short run/long run aggregate supply and real GDP		*
		i.	Explain movement along the long-run and short-run aggregate supply curves		*

	Exchange Rate	Candidates should be able to:		K   U   A
5.1	Trade Balance	a.	Explain the purpose of balance of payment (BoP) account		*
		b.	List the payments included in the BoP	*
		c.	Recall the reporting format for calculating the BoP	*
		d.	Define and explain the concept of current account and capital account and discuss the		*
			relationship between the two
		e.	Define and explain balance of trade, trade deficit, trade surplus		*
		f.	Discuss the BoP accounts of Pakistan		*
5.2	Exchange rate	a.	Define exchange rate system	*
		b.	List and define the types of exchange rates	*
		c.	Differentiate between nominal and real exchange rates		*

		d.	Discuss the crucial role of interest rate policy in the coordination of monetary and exchange		*
			rate policies
		e.	Compare real interest rates to nominal interest rates		*
		f.	Discuss the impact of change in interest rates to exchange rates		*
		g.	Define closed economy and open economy	*
		h.	Discuss the exchange rate policies in Pakistan		*
6.	Money	Candidates should be able to:		K   U   A
6.1	Evolution of money	a.	Define and explain the basic functions of money and discuss why cheques and credit cards are		*
			not counted as money
		b.	Discuss the evolution of the various forms of money in Pakistan		*
6.2	Monetary Theories	a.	Recall the quantity theory of money	*
		b.	Define the liquidity preference theory	*
		c.	Define the portfolio management theory	*

Supply of Money	Candidates should be able to:		K   U   A
	a.	Explain the demand for money in an economy		*
	b.	Illustrate the four main factors that influence the demand for money			*
	c.	Interpret the creation of money			*
	d.	Illustrate the expansion of credit through the banking system			*
	e.	Explain the composition of M1, M2 and M3 measures of money		*
	f.	Describe the components of Reserve Money (M0) and Money Multiplier		*
	g	Interpret the behavior of the money multiplier and its policy implications		*

	Policy	Candidates should be able to:		K	U	A
		a.	Summarize the objectives of a Monetary Policy		*
		b.	Discuss the monetary policy tools undertaken by the Central Bank to stabilize inflation		*
		c.	Discuss the concept of contractionary monetary policy		*
		d.	Discuss the concept of expansionary monetary policy		*
9.	Objective of Fiscal Policy	Candidates should be able to:		K	U	A
		a.	Discuss the fiscal policy tools undertaken by the government to stabilize the economy		*
		b.	Explain the concept of crowding out effect		*
		c.	Explain discretionary fiscal policy and its limitation		*
		d.	Explain automatic stabilizers		*
		e.	Differentiate between discretionary fiscal policy and automatic stabilizers		*

	the impact of Banking
	Sector Credit	Candidates should be able to:			K	U	A
10.1	Channels through which	a.	Define a credit channel and explain the implications that an increase/decrease in the policy			*
	monetary policy affects		rates has on economic growth, inflation and lending
	the economy
		b.	Explain the impact of an increase/decrease in the policy rates under the money or interest rate			*
			channel on consumption, investment inflation and economic growth
		c.	Explain the impact of an increase/decrease in the policy rates under the exchange rate channel			*
			on currency, imports, exports, economic growth and inflation
		d.	Demonstrate the impact of the increase/decrease in the policy rates under the asset price				*
			channel on wealth, assets, economic growth and inflation
11.	Central Banks and
	Monetary Policy
	Regimes	Candidates should be able to:			K	U	A
		a.	Define Monetary targeting		*
		b.	Define Inflation targeting		*
		c.	Discuss the various choices of policy anchor			*
			•	Volume of money
			•	Interest rate
			•	Exchange rate
		d.	Illustrate the relationship between exchange rate and monetary policy				*
		e.	Compare the effects of the monetary policy under a fixed and a flexible exchange rate regime			*
		f.	Provide brief overview of the monetary policy and the role of the State Bank of Pakistan		*

Equilibrium	Candidates should be able to:		K   U   A
	a.	Define policy mix	*
	b.	Explain what aspects of the economy the mix of fiscal and monetary policy aims to influence		*
	c.	Illustrate the impact of fiscal policy on AD-AS equilibrium			*
	d.	Illustrate the impact of monetary policy on AD-AS equilibrium			*
	e.	Analyze the impact of fiscal and monetary in the short run vs the long run			*
	f.	Compare the effects of the fiscal policy under a fixed and a flexible exchange rate regime		*
	g.	Interpret the fiscal and monetary policy relationship as applied to Pakistan’s economy			*

Institutions	Candidates should be able to:		K   U   A
13.1  History and overview	a.	Provide a brief history of the International Monetary Institutions	*
	b.	Discuss the objectives of IMF, World Bank, Asian Development Bank and Bank of International		*
		Settlement
	c.	Recall the world crisis of 2008 and its impact on the banking industry	*
	d.	Explain the role of international lenders in debt management and poverty reduction of Pakistan		*
	e.	Identify the performance criteria of the IMF program	*

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