Download Macro-Module 2- Introduction to Macroeconomics

Unit I Handout
Module 2
Introduction to Macroeconomics
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What is a business cycle and why do policy makers seek to diminish their severity?
How are employment and unemployment measured?
What is aggregate output and how does it change over the business cycle?
What is inflation, deflation, and why is price stability important?
How are models and long-run economic growth important to a country’s well being?
Explain what the unemployment rate is and how its measured?
Describe aggregate output and how the business cycle is related to it.
Unit II Handout
Module 11-21
Measuring the Nation’s economy/Fiscal Policy
1. What is the difference between real GDP and nominal GDP?
2. Why is real GDP the appropriate measure of real economic activity?
3. Describe how real GDP is calculated. Use Table 11.1.
4. Refer to table 11.2: Explain why real GDP is more useful then nominal GDP.
5. How is unemployment measured?
6. What is the significance in tracking the unemployment rate for the economy?
7. How are the unemployment rate and economic growth related?
8. What are the three different types of unemployment and their causes?
9. What are the factors that determine the natural rate of unemployment?
10. How is the inflation rate measured?
11. What is the multiplier and why do initial changes in spending lead to further changes?
12. What is the Marginal propensity to consume (MPC)
13. What is the Marginal propensity to save (MPS)
14. Explain why and how each of the following can shift the AD curve.
A. Changes in expectations
B. Changes in wealth
C. Size of the existing stock of physical capital
D. Government policies and AD
E. Fiscal policy
F. Monetary policy
15. How does the aggregate supply curve illustrate the relationship between the aggregate price
level and the quantity of aggregate output supplied?
16. What are the factors that can shift the aggregate supply curve?
17. Why are the short run and long run aggregate supply curves different?
18. Why fiscal policy is an important tool for managing economic fluctuations?
19. Which fiscal policies are considered expansionary and contractionary?
Explain how increases in government spending multiply as a component of GDP.
Unit III Handout
Module 23-29
Monetary Policy
1. What is the definition and what are the functions of money?
2. What are some of the roles and forms money takes in the economy?
3. How does the concept of present value help make decisions when time is a factor?
4. Explain why having a dollar today is worth more than having a dollar year from now.
5. What is the role of banks in the economy?
6. What are the reasons for and types of banking regulation?
7. How do banks create money?
8. What is the structure of the Federal Reserve System?
9. Explain why the Federal System was created.
10. Explain the role of open-market operations and the FOMC.
11. What are the functions of the Federal Reserve System?
12. What are the major tools the Federal Reserve uses to serve its functions
13. Explain the reserve requirement what the federal funds market is.
14. Explain the discount rate and how it is both similar and different than the reserve
requirement.
15. What is the money demand curve?
16. How does the loanable funds market match savers and investors?
17. What are the determinants of supply and demand in the loanable funds market?
Unit IV Handout
Module 31-37
Conditions for Economic growth
1. How does the Federal Reserve implement monetary policy?
2. Why is monetary policy the main tool for stabilizing the economy?
3. What is the difference between cost-push inflation and demand-pull inflation?
4. Describe the issues regarding printing money to pay government bills. Why is it called an
inflation tax?
5. What is the Phillips curve and the nature of the short-run trade-off between inflation and
unemployment?
6. Why is there no long-run tradeoff between inflation and unemployment?
7. How did Keynes and the experience of the Great Depression legitimize macroeconomic
policy activism?
8. What is monetarism and the limits of discretionary monetary policy?
9. Who is Milton Friedman?
10. How did challenges lead to a revision of Keynesian ideas and the emergence of the new
classical macroeconomics?
11. Describe the difference between the classical view and the Keynesian view of the macro
economy. .
12. Most economists agree that the central bank and monetary policy is vital to economic growth
because...
13. How do we measure long-run economic growth?
14. How does Real GDP change over time and in different countries?
16. What are some of the sources or reasons for long-run economic growth?
Unit V Handout
Module 41-45
International Trade
1. What is the balance of payments account?
2. What are the determinants of international capital flows?
3. What is the role of the foreign exchange market and the exchange rate?
4. What is the importance of real exchange rates and their role in the current account?
5. What is the difference between fixed exchange rates and floating exchange rates?
6. How and why do countries choose different exchange rate policies?
7. What is the meaning and purpose of devaluation and revaluation of a currency under a fixed
exchange rate regime?
8. Why do open-economy considerations affect macroeconomic policy under floating exchange
rates?
9. How do economists use macroeconomic models to conduct policy analysis?
10. What is the best approach to free-response macroeconomic questions?