AIC101 - Capital Markets and Real Estate

Outline info
Last revision date 2013-05-27 01:40:52.231
Last review date 2013-07-15 00:15:19.794

Subject Title
Capital Markets and Real Estate

Subject Description
This subject examines the impact of current monetary and fiscal policies on real estate investment decisions. The overall quality of production and the overall price level are used to monitor developments in the economy as a whole. The monetary system is studied as a crucial element in determining the long-run behaviour of price levels, the inflation rate, and other nominal variables. Monetary and fiscal policy is analyzed through open and closed economies.

Credit Status
This is a credit subject applicable towards the Appraisal Institute of Canada's CRA and AACI designations, as well as UBC's Diploma in Urban Land Economics. Successful completion of the AIC course components of the program also earns students 50-60 degree credits toward the Bachelor of Business in Real Estate Program (BBRE) offered by the University of British Columbia (UBC) and Thompson Rivers University (TRU).

Learning Outcomes
Upon successful completion of this subject the student will be able to:

1. Explain why, for the economy as a whole, total income equals total expenditures.

2. Explain the four major components of GDP.

3. Describe the relationship between nominal GDP, real GDP, and the GDP deflator.

4. Explain why productivity is the key determinant of living standards.

5. Explain how a country's policies influence its productivity growth.

6. Describe the concept of the catch-up effect and how it relates to diminishing returns.

7. Explain why savings and investment matter for long-run economic growth.

8. Describe how government budget deficits and surpluses affect the Canadian economy.

9. Identify the nature and functions of money.

10. Define the role of the Bank of Canada.

11. Explain how money is created with fractional-reserve banking.

12. Describe how the money supply can expand or contract without any actions being taken by the Bank of Canada.

13. Explain the main problems the Bank of Canada faces in controlling the money supply.

14. Identify the three ways that CPI can misrepresent actual changes in consumers' cost of living.

15. Describe why inflation results from a rapid growth in the money supply.

16. Explain the meaning of classical dichotomy and monetary neutrality.

17. Describe how velocity and quantity equations can help us analyze the quantity theory of money.

18. Explain what causes a country to experience hyperinflation.

19. Describe why differences in opportunity costs are the foundation of comparative advantage.

20. Recognize how comparative advantage forms the basis upon which specialization and exchange benefit trading partners.

21. Explain the relationship between saving, domestic investment, and net foreign investment.

22. Describe purchasing-power parity with respect to real exchange rates.

23. Explain how local interest rates are determined in a small open economy with perfect capital mobility.

24. Explain how an open economy's trade balance and exchange rate are determined.

25. Describe the effects on the economy of government changes in budget deficits and trade policies.

26. Explain how economic performance in the short-run differs from long-run economic behaviour.

27. Demonstrate an understanding of the operations of the aggregate demand/aggregate supply model of the economy.

28. Describe how liquidity preference theory can be used as a short-run explanation for the determination of interest rates.

29. Explain how monetary and fiscal policy affects interest rates and aggregate demand in open and closed economies.

30. Explain the crowding-out effect on investment.

31. Identify and explain the five important topics and issues that confront policy-makers:
a) Discretionary stabilization policy
b) Implementing monetary policy by rule or by discretion
c) Attaining a goal of zero inflation
d) Reducing the government debt
e) Reforming the tax laws to encourage more savings

Academic Integrity
Seneca upholds a learning community that values academic integrity, honesty, fairness, trust, respect, responsibility and courage. These values enhance Seneca's commitment to deliver high-quality education and teaching excellence, while supporting a positive learning environment. Ensure that you are aware of Seneca's Academic Integrity Policy which can be found at: Review section 2 of the policy for details regarding approaches to supporting integrity. Section 2.3 and Appendix B of the policy describe various sanctions that can be applied, if there is suspected academic misconduct (e.g., contract cheating, cheating, falsification, impersonation or plagiarism).

Please visit the Academic Integrity website to understand and learn more about how to prepare and submit work so that it supports academic integrity, and to avoid academic misconduct.

All students and employees have the right to study and work in an environment that is free from discrimination and/or harassment. Language or activities that defeat this objective violate the College Policy on Discrimination/Harassment and shall not be tolerated. Information and assistance are available from the Student Conduct Office at

Accommodation for Students with Disabilities
The College will provide reasonable accommodation to students with disabilities in order to promote academic success. If you require accommodation, contact the Counselling and Accessibility Services Office at ext. 22900 to initiate the process for documenting, assessing and implementing your individual accommodation needs.

Micro Foundations of Real Estate Economics AIC100 (BUSI100)

Topic Outline

  • National Income Accounts
  • Production and Growth
  • Savings, Investment, and the Financial System
  • The Monetary System
  • Inflation: Causes and Measurement
  • Gains from International Trade
  • International Trade, Investment, and Exchange Rates
  • Macroeconomic Theory in an Open Economy
  • Economic Fluctuations: Balancing Aggregate Demand and Supply
  • Economic Fluctuations: Effects of Fiscal and Monetary Policy
  • Debates over Macroeconomic Policy

Mode of Instruction
Students learn through classroom lectures and hands-on assignments during classroom hours.  There are homework assignments.  Students must have ready access to a computer with Word for Windows in order to complete homework assignments.  Students have access to computers through the Microcomputer Centre or micro labs where applicable.

Prescribed Texts
Principles of Macroeconomics.  Fifth Canadian Edition,  ISBN 0-17-610524-7.  Thomson, Nelson

Course Workbook:  Capital Markets and Real Estate.  Latest Edition, The University of British Columbia.

Note:  Photocopied texts are not permitted. 

You may order textbooks directly from UBC

Reference Material

Required Supplies
Notebook or three-ring binder, paper, pens, highlighter, above noted text, calculator.

All students must have access to a personal computer when taking any Appraisal Institute course. You will find that a computer is a necessary tool in preparing and submitting your assignments, viewing your assignment answer guides, and for creating effective study notes to help you prepare for your examination. Students should also ensure that they have a high-quality printer (e.g., an inkjet or a laser) which will provide clear printouts of information from the Real Estate Division website.

All students must arrange for some form of Internet access. All of the Appraisal Institute’s courses offer numerous online course resources. Students should ensure they have Internet access prior to beginning their course work.

Promotion Policy

Grading Policy
A+90%  to  100%
A80%  to  89%
B+75%  to  79%
B70%  to  74%
C+65%  to  69%
C60%  to  64%
D+55%  to  59%
D50%  to  54%
F0%    to  49% (Not a Pass)

For further information, see a copy of the Academic Policy, available online ( or at Seneca's Registrar's Offices.

Modes of Evaluation
Since this is a professional credit subject, marking standards reinforce professional practice by demanding legible, neat documents. Material should be grammatically correct as a result of accurate proof-reading, proper spelling and punctuation. Late assignments are penalized at the discretion of the instructor.

Students must pass the final examination to pass the subject.

Absenteeism and Tests

  • Students should be aware that absenteeism will almost guarantee their inability to achieve satisfactory grades.
  • If you are absent for a test or examination due to an emergency (death in the family, motor vehicle accident – not a business trip) official documentation must be provided to the Faculty of Continuing Education and Training Program Coordinator’s office, fax number 416-756-4360, prior to the test or examination and no later than the following day.
  • Assignments, tests or examinations missed without official documentation and approval, see previous bullet, result in a grade of zero.

Note: The required pass mark for all subjects in the Appraisal Institute of Canada Program is 60%.  This is also the required pass mark for the University of British Columbia.

Grading is based on the following marking scheme:  
Assignments 15%
Project No. 1 15%
Project No. 2 20%
Final Exam 50%


Project 1: Questions on lessons 1-6:  15% of final grade

Project 2: Questions on lessons 7-11:  20% of final grade

Final exam: Multiple choice and short-answer written questions: 50% of final grade.

Please keep this document for future reference.  It will be required if you apply to another educational institution and seek advanced standing.

Approved by: Susan Horne