ECON6002 · Macroeconomic Analysis
The Complete Exam Bible · S2 2026Macroeconomic Analysis
ECON6002 Macroeconomic Analysis is the University of Sydney's postgraduate macro-theory unit, building modern macroeconomics from micro-foundations — optimising households and firms — all the way to the full log-linearised New Keynesian DSGE model with financial frictions. Across ten topics you derive, rather than memorise, the consumption Euler equation, the Solow-Swan growth model, Real Business Cycle DSGE dynamics, the New Keynesian Phillips Curve, and monetary and macroprudential policy. The assessment rewards derivation and mechanism, not recall: both the 30% closed-book in-semester test (Topics 1-6) and the 55% closed-book final exam (Topics 7-10) are extended-response papers where the marks live in the working, the labelled diagrams, and the stated assumptions. The final in particular is built almost verbatim on Tutorials 7-10, so the payoff is fluency with constrained optimisation, Euler equations, Lagrangians and log-linearisation. Score high by showing every step and naming which parameter a shock moves before you touch the algebra.
What ECON6002 covers
The unit unfolds as one continuous build — static one-period optimisation, then time, then uncertainty, then nominal rigidity, then finance — so each of the ten topics below reuses the Euler-equation-and-log-linearisation machinery of the ones before it.
How ECON6002 is assessed
| Component | Weight | Format |
|---|---|---|
| Problem Set 1 (Online Quiz) | 7.5% | Canvas online quiz, ~30 minutes |
| In-Semester Test (Midterm) | 30% | Supervised in-person, closed-book, 1 hour, 4 extended-response questions (100 marks), Topics 1-6 |
| Problem Set 2 (Online Quiz) | 7.5% | Canvas online quiz, ~30 minutes |
| Final Exam | 55% | Supervised in-person, closed-book, 2 hours + 10 min reading, 3 questions (T/F/U + extended-response), 100 points, Topics 7-10 |
Two-Period Model — Euler Equation, Consumption and Saving
- 3(a) Eliminate S: from the period-2 constraint, S = (C₂ − Y₂)/(1+r); substitute into the period-1 constraint to collapse both into the lifetime budget constraint C₁ + C₂/(1+r) = Y₁ + Y₂/(1+r).
- 4(b) The first-order conditions (by substitution or Lagrange) give 1/C₁ = λ and β/C₂ = λ/(1+r). Combining them yields the Euler equation 1/C₁ = β(1+r)·(1/C₂), i.e. C₂ = β(1+r)·C₁.
- 3(c) Substitute the Euler equation into the lifetime constraint: C₁ + β(1+r)C₁/(1+r) = C₁(1+β) = W, where lifetime wealth W = Y₁ + Y₂/(1+r) = 60 + 44/1.1 = 100.
- 3Solve for the levels: C₁ = W/(1+β) = 100/1.9 ≈ 52.63, and C₂ = β(1+r)C₁ = 0.9·1.1·52.63 ≈ 52.11.
- 3(d) Saving S = Y₁ − C₁ = 60 − 52.63 = 7.37 > 0, so the household saves: first-period income (60) is high relative to second-period income (44), so to smooth the log-utility consumption path it moves resources forward by saving.
Key terms
- Micro-foundations
- Deriving macroeconomic relationships from the optimising behaviour of individual households and firms rather than assuming aggregate rules; the organising principle of the whole unit.
- Euler equation
- The intertemporal optimality condition u'(C_t) = β(1+r)·u'(C_{t+1}): marginal utility today equals the discounted, return-weighted marginal utility tomorrow. Reused (with tweaks) in every dynamic model in the course.
- IES (intertemporal elasticity of substitution)
- 1/σ — how willingly a household shifts consumption across time when the price of future consumption (the interest rate) changes; governs which of the substitution, income and wealth effects dominates.
- Solow-Swan model
- The benchmark growth model with an exogenous, constant saving rate: capital accumulation drives catch-up, but long-run per-capita growth equals the exogenous technology rate g, independent of the saving rate.
- Golden rule
- The steady-state capital stock (and saving rate) that maximises consumption per effective worker, characterised by f'(k*) = n+g+δ; saving above it means dynamically inefficient over-accumulation.
- TFP / Solow residual (A)
- Total factor productivity — the part of output not explained by measured capital and labour; empirically the largest source of cross-country income gaps, and famously called the measure of our ignorance.
- DSGE
- Dynamic Stochastic General Equilibrium model — the workhorse framework (Real Business Cycle and New Keynesian) in which optimising agents respond to shocks under rational expectations.
- Log-linearisation
- A first-order Taylor approximation around the steady state that turns a non-linear DSGE system into a linear one, solvable with linear algebra or numerically via Dynare.
- Calvo pricing
- A sticky-price mechanism in which each firm can reset its price only with a constant probability (1−θ) per period; the micro-foundation of the New Keynesian Phillips Curve, with average price duration 1/(1−θ).
- New Keynesian Phillips Curve (NKPC)
- The micro-founded aggregate-supply relation π̂_t = β·E_t π̂_{t+1} + κ·ỹ_t: inflation depends on expected future inflation and the output gap (or real marginal cost); purely forward-looking, so it has no intrinsic persistence.
- Taylor principle
- For a determinate (unique, stable) equilibrium the policy rate must respond more than one-for-one to inflation (φ_π > 1), so the real rate rises with inflation and stabilises it.
- Divine coincidence
- The property that stabilising inflation also stabilises the output gap; it holds for demand and technology shocks but breaks down under a cost-push shock, which creates a genuine inflation-output trade-off.
ECON6002 FAQ
Can AI help me study ECON6002 Macroeconomic Analysis?
Yes — Sia is an AI tutor for ECON6002 Macroeconomic Analysis at University of Sydney. Ask any question from the unit and it explains the concept and the working step by step, grounded in how University of Sydney teaches and assesses it. It builds your understanding — a study aid, not an answer service, and it will not complete your assessments for you.
Where can I find ECON6002 past exam papers or practice questions?
This free guide is a strong starting point: it lays out every topic in the unit, the real assessment structure, key terms and fully worked exam-style examples — all free. For more, work through Tutorials 1-6 (the in-semester test practice) and Tutorials 7-10 (the only official practice for the final) on Canvas, and revisit past exam papers during STUVAC. You can also ask Sia to generate fresh practice questions in the style of ECON6002 and walk you through the working step by step — it explains how to solve them rather than just handing over answers.
How is ECON6002 assessed — is there a final exam?
Yes. ECON6002 Macroeconomic Analysis is assessed by two online Canvas quizzes (7.5% each, Problem Sets 1 and 2), a 30% supervised closed-book in-semester test covering Topics 1-6 (1 hour, four extended-response questions), and a 55% supervised closed-book final exam covering Topics 7-10 (2 hours plus 10 minutes reading, three questions of four parts each, with a standard log-linearised New Keynesian formula sheet provided). Both the test and the final are in-person and closed-book.
What makes ECON6002 hard?
The heavy mathematics. ECON6002 is unusually derivation-first: you must be comfortable with constrained optimisation, Lagrangians, the consumption Euler equation, and log-linearising a DSGE model around its steady state. Students find Topic 8 (the New Keynesian Phillips Curve) and Topic 9 (Monetary Policy) the most demanding — and they are also the most examined on the final — so the effort compounds if you build the optimisation-and-Euler toolkit early.
How should I prepare for the ECON6002 exams?
Work every tutorial by hand and treat derivations as the core skill. Because the exams are closed-book, rehearse each result until you can reproduce it without notes; for the final, learn the provided formula sheet and drill Tutorials 7-10, which the final is built on. Redo past exam papers under timed conditions during STUVAC, and practise stating assumptions and labelling diagrams — that is where the marks are.
What maths do I need for ECON6002?
Constrained optimisation (both the substitution and Lagrange methods), difference and simple differential equations, the CRRA/log-utility Euler equation, and first-order Taylor (log-linear) approximation. If any of these are rusty, shore them up in the first two weeks — Topics 1-2 introduce the exact machinery that every later topic reuses.
Which topics are most heavily examined?
For the final, only Topics 7-10 are examinable, with Topic 8 (the New Keynesian Phillips Curve) and Topic 9 (Monetary Policy in the NK model) carrying the two extended-response questions. The in-semester test covers Topics 1-6. The earlier growth and RBC topics are foundational for the final but are not directly examined there.
Is this study guide official or affiliated with the University of Sydney?
No. This is a free, independent study guide created by AskSia to help students learn ECON6002 Macroeconomic Analysis. It is not produced by, endorsed by, or affiliated with the University of Sydney. Always check the official unit outline on Canvas for the definitive syllabus, weights and dates.
How to study for the exam
Treat ECON6002 Macroeconomic Analysis at the University of Sydney as a single method drilled ten times rather than ten separate topics: master constrained optimisation, the Euler equation and log-linearisation once and you reuse them to the end. Start from the unit outline on Canvas to confirm the topic weights, then work every tutorial by hand — the in-semester test practice is Tutorials 1-6 plus Online Quiz 1, and the final's only practice set is Tutorials 7-10, so over-invest there (especially the NKPC and monetary-policy topics that carry Q2 and Q3). Because both tests are closed-book, rehearse derivations until you can reproduce them cold; for the final, learn the provided formula sheet's log-linearised NK model so you spend exam time deriving, not recalling. Use STUVAC to redo past exam papers and practice questions under timed conditions, write out the True/False/Uncertain explanations in full (the marks are in the mechanism plus one boundary case), and if you are chasing an HD, drill the comparative-statics twists — divine coincidence versus cost-push trade-offs, over- versus under-saving relative to the golden rule — that separate a Distinction from a High Distinction. WAM-conscious students should not neglect the two 7.5% Canvas quizzes, which are the cheapest marks in the unit. Ask Sia to generate similar practice questions and to check each step of your derivations as you go.
Your AI Business & Economics tutor for ECON6002
Stuck on a hard ECON6002 question? Sia is AskSia’s AI Business & Economics tutor — ask any ECON6002 Macroeconomic Analysis question and get a clear, step-by-step explanation grounded in how the course is actually taught and assessed. Read this whole study guide free, then take your hardest questions to Sia.
