Download Macroeconomics - Study questions for first exam

Fall 2003 Macroeconomics - Study guide for final exam
Eighty percent of your final exam will be based on this list. (We may edit
it as we go over the answers together in class.) Spell out all labels for
your graphs. For the remainder of the exam, review your study questions,
previous exams, and material since the last test.
1.
Define/explain: inflation rate, unemployment rate (including what it
means to be unemployed), phases of the business cycle, GDP, productivity,
fiscal policy, monetary policy, potential output.
2.
Explain the CPI.
Assume the following values:
1892-1984: base period
1993 – 144.5
1994 – 148.2
1995 – 152.4
2002 – 178.9
Oct 2002 – 181.3
Aug 2003 – 184.6
Sep 2003 – 185.2
Oct 2003 – 185.0
Interpret these CPI values.
Provide all monthly and yearly
inflation rates that can be
derived from this data.
3.
Illustrate with a Keynesian cross an economy operating at its potential.
4.
a. Use a Keynesian cross to illustrate an economy with a level of GDP
below its potential.
b. In Keynesian terms, list and explain what may have caused this
performance, other than fiscal or monetary policies.
c. Explain the appropriate fiscal policy responses according to the
Keynesians.
d. Name and define the three tools of the Fed and explain how each is used
to enhance GDP.
5.
Repeat question 4 for an economy operating above its potential.
6.
Explain how the multiplier works.
7.
Explain the trade-off in the Keynesian model.
8.
Briefly explain four policies intended to promote long run growth.
9.
Based on Affluenza, critique the macroeconomic goal of increasing GDP.
(Include chapter themes from Part I of the book, and chapter 29; prepare
a full discussion.)
Illustrate with a Keynesian cross.
Figuring your needed final exam grade
(Lowest test grade) times (0.1) =
(Higher test grade) times (0.25) =
Targets:
A is 93; AB+ is 87; B
C+ is 77; C
D+ is 67; D
is
is
is
is
90;
83; B- is 80;
73; C- is 70;
63; D- is 60.
(Higher test grade) times (0.25) =
(Higher test grade) times (0.25) =
Reminder: You need a C- to proceed to
Microeconomics.
(Paper grade) times (0.10) =
(Affluenza grade) times (0.05)
Sum of points already earned
=
_____ Your target
minus
_____ points already earned
equals
_____ *points you still need to earn*
so,
(needed final exam) times (.25) = *points you still need to earn*
and,
needed final exam = (*points you still need to earn*)/ 0.25
Note: Final grades will not be available prior to you receiving them
in the mail.
McEachern’s chapter 3 key
RECOMMENDATION: Write out answers to
the questions BEFORE you look over this
key.
RATIONALE: The process of developing
your answers helps you learn the
material. Also, by simply looking over
the key, you do not get a good
indication of whether or not you
understand the material. Simply
recognizing that an answer makes sense
is not a good indication that you can
generate a correct answer, and it can
easily lead to the self-deception that
you have gotten it.
Macroeconomic Final Exam, Fall 2002
Name:
Spell out all labels for your graphs.
Please answer the questions in order.
Questions off of the study guide together count 80 percent of the points.
1.
Graph a recessionary gap.
QUESTIONS 2-5 REFER TO THIS TYPE OF GAP.
2.
In Keynesian terms, list and explain two possible causes of the gap.
3.
Explain the appropriate policy response according to the Classical economists.
4.
Explain the appropriate policy response according to the Keynesians.
5.
Name and define the three tools of the Fed and explain how each is used to
diminish a recessionary gap.
6.
a. If the desired change in output is $30 billion and the MPC is 0.75, how big a
change in autonomous spending is needed to obtain the desired equilibrium income
level? Show your work.
b. Graphically illustrate.
7.
a. Based on Affluenza, critique the macroeconomic goal of increasing GDP.
b. Do you support this goal? Why, or why not?
8.
a. What does the acronym NAIRU stand for?
b. Fully explain the concept.
9.
a. Define Gross Domestic Product.
b. Name and briefly explain the two methods the Department of Commerce uses to
measure GDP.
10. What all counts as reserves for banks?
11. Define “potential output.”
Honor code:
Grades will not be available from me prior to when they are mailed to you.
Sorry.
Have a great break!
And, if applicable,
A Wonderful Holiday!!
Fall 2002 Macroeconomics - Study guide for final exam
Eighty percent of your final exam will be based on this list. (We may edit
it as we go over the answers together in class.) Spell out all labels for
your graphs. For the remainder of the exam, review your study questions,
previous exams, and material since the last test.
10. Provide Colander’s definitions for inflation, unemployment rate
(including what it means to be unemployed), business cycle, growth, and
GDP.
11. Graph a recessionary gap.
12. In Keynesian terms, list and explain what may have caused it, other than
fiscal or monetary policies.
13. Explain the appropriate policy response according to the Classical
economists.
14. Explain the appropriate policy response according to the Keynesians.
15. Explain how the multiplier works.
16. If the desired change in output is $200 billion and the MPC is 0.9, how
big a change in autonomous spending is needed to obtain the desired
equilibrium income level? Show your work. (Other numbers may be
substituted for these.) Graphically illustrate.
17. Name and define the three tools of the Fed and explain how each is used
to reduce a recessionary gap.
18. Repeat questions 2, 3, 4, 5, and 8 for an inflationary gap.
19. Briefly explain four policies intended to promote growth.
20. Based on Affluenza, critique the macroeconomic goal of increasing GDP.
(Include chapter themes from Part I of the book, and chapter __.)
Figuring your needed final exam grade
(Lowest test grade) times (0.1) =
(Higher test grade) times (0.25) =
Targets:
A is 93; AB+ is 87; B
C+ is 77; C
D+ is 67; D
is
is
is
is
90;
83; B- is 80;
73; C- is 70;
63; D- is 60.
(Higher test grade) times (0.25) =
Reminder: You need a C- to proceed to
Microeconomics.
(Paper grade) times (0.15) =
Sum of points already earned
=
_____ Your target
minus
_____ points already earned
equals
_____ *points you still need to earn*
so,
(needed final exam) times (.25) = *points you still need to earn*
and,
needed final exam = (*points you still need to earn*)/ 0.25
Macroeconomics – Third exam
Answer the questions in order.
Name:
Fully label all graphs.
Answer all parts.
1.
Explain the Keynesian trade-off.
2.
a. What is meant by the “multiplier effect”?
b. Use either the circular flow or our chart to explain the multiplier effect
(15).
3.
a. Graph the multiplier model and indicate the equilibrium income level.
b. Assume that expenditures are below the actual output level. Explain the
adjustment process predicted by the model (16).
4.
a.
b.
c.
d.
5.
Briefly explain how each of Colander’s two policy suggestions would help the
long run prospects of social security (6).
Who (all) holds
The size of the
The size of the
Briefly explain
(No graph is necessary; 6 pts.)
the debt of the federal government?
debt today is at a historic high. How so?
debt today is not at a historic high. How so?
the four ways in which the debt is a problem (19).
For the problems, show all of your work.
6.
The marginal propensity to consume is .75, and autonomous expenditures are
$3000. What is the level of equilibrium income for the economy? (5)
7.
a. The mpc is .66 and a decline in consumer confidence reduced C0 by $30.
will happen to equilibrium income?
b. Demonstrate graphically (9).
8.
a. The mpc is .8, investment is $2000, government spending is $4000, autonomous
consumption is $1000, and net exports are $2000. What is the level of
equilibrium income for the economy?
b. What is the level of consumption for the economy? (6)
9.
a.
to
of
b.
What
Given the consumption function
the right, what is the value
the mpc?
What is the value of C0? (5)
10.
Affluenza chapters 11 and 12 concern the impacts of growth on the planet.
Distinguish between the main points of these two chapters. Write a brief summary
essay of each, including some of the authors’ evidence (13).
Honor code:
Table 1.
Revenues, Outlays, Surpluses, Deficits, and Debt Held by the Public, 1962-2001 (In
billions of dollars)
Revenues Outlays Surplus or Deficit (-) Debt
Held by the Public b
OnBudget a Social Security Postal Service a Total
R
Outlays Def
Total
1962 99.7
106.8
-5.9
-1.3
n.a.
-7.1
248.0
1963 106.6
111.3
-4.0
-0.8
n.a.
-4.8
254.0
1964 112.6
118.5
-6.5
0.6
n.a.
-5.9
256.8
1965
1966
1967
1968
1969
116.8
130.8
148.8
153.0
186.9
118.2
134.5
157.5
178.1
183.6
-1.6
-3.1
-12.6
-27.7
-0.5
0.2
-0.6
4.0
2.6
3.7
n.a.
n.a.
n.a.
n.a.
n.a.
-1.4
260.8
-3.7
263.7
-8.6
266.6
-25.2
289.5
3.2
278.1
1970
1971
1972
1973
1974
192.8
187.1
207.3
230.8
263.2
195.6
210.2
230.7
245.7
269.4
-8.7
-26.1
-26.4
-15.4
-8.0
5.9
3.0
3.0
0.5
1.8
n.a.
n.a.
n.a.
n.a.
n.a.
-2.8
283.2
-23.0
303.0
-23.4
322.4
-14.9
340.9
-6.1
343.7
1975
1976
1977
1978
1979
279.1
298.1
355.6
399.6
463.3
332.3
371.8
409.2
458.7
504.0
-55.3
-70.5
-49.8
-54.9
-38.7
2.0
-3.2
-3.9
-4.3
-2.0
1980
1981
1982
1983
1984
517.1
599.3
617.8
600.6
666.5
590.9
678.2
745.8
808.4
851.9
-72.7
-74.0
-120.1
-208.0
-185.7
-1.1
-5.0
-7.9
0.2
0.3
1985
1986
1987
1988
1989
734.1
769.2
854.4
909.3
991.2
946.4
-221.7
9.4
n.a.
-212.3
1,507.4
990.5
-238.0
16.7
n.a.
-221.2
1,740.8
1,004.1
-169.3
19.6
n.a.
-149.8
1,889.9
1,064.5
-194.0
38.8
n.a.
-155.2
2,051.8
1,143.7
-205.2
52.4
0.3
-152.5
2,191.0
1990
1991
1992
1993
1994
1,032.0
1,055.0
1,091.3
1,154.4
1,258.6
1,253.2
1,324.4
1,381.7
1,409.5
1,461.9
-277.8
-321.6
-340.5
-300.5
-258.9
1995
1996
1997
1998
1999
1,351.8
1,453.1
1,579.3
1,721.8
1,827.5
1,515.8
1,560.6
1,601.3
1,652.6
1,701.9
-226.4
60.4
2.0
-164.0
3,604.8
-174.1
66.4
0.2
-107.5
3,734.5
-103.4
81.3
*
-22.0
3,772.8
-30.0
99.0
0.2
69.2
3,721.6
1.8
124.7
-1.0
125.5
3,632.9
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
58.2
53.5
50.7
46.8
56.8
-53.2
-73.7
-53.7
-59.2
-40.7
394.7
477.4
549.1
607.1
640.3
-73.8
711.9
-79.0
789.4
-128.0
924.6
-207.8
1,137.3
-185.4
1,307.0
-1.6
-1.3
-0.7
-1.4
-1.1
-221.2
-269.4
-290.4
-255.1
-203.3
2,411.8
2,689.3
3,000.1
3,248.8
3,433.4
2000 2,025.2
1,788.8
86.6
151.8
-2.0
236.4
3,410.1
2001 1,991.0
1,863.9
-33.4
162.8
-2.3
127.1
3,320.0
SOURCE: Congressional Budget Office.
NOTE: n.a. = not applicable; * = less than $500 million.
a. In 1962 through 1988, the Postal Service was on-budget and included in the onbudget total.
b. End of year.
Table 2.
Revenues, Outlays,
percentage of GDP)
Revenues Outlays
Held by
the Publicb
OnBudgeta Social
Security Postal
Servicea Total
1962 17.5
18.8
1963 17.8
18.5
1964 17.5
18.5
Surpluses, Deficits, and Debt Held by the Public, 1962-2001 (As a
-1.0
-0.7
-1.0
-0.2
-0.1
0.1
1965
1966
1967
1968
1969
17.0
17.3
18.3
17.6
19.7
17.2
17.8
19.4
20.5
19.3
-0.2
-0.4
-1.6
-3.2
-0.1
*
n.a.
-0.2
37.9
-0.1
n.a.
-0.5
34.8
0.5
n.a.
-1.1
32.8
0.3
n.a.
-2.9
33.3
0.4
n.a.
0.3
29.3
1970
1971
1972
1973
1974
19.0
17.3
17.6
17.6
18.3
19.3
19.4
19.6
18.7
18.7
-0.9
-2.4
-2.2
-1.2
-0.6
0.6
n.a.
-0.3
27.9
0.3
n.a.
-2.1
28.0
0.3
n.a.
-2.0
27.4
*
n.a.
-1.1
26.0
0.1
n.a.
-0.4
23.8
1975
1976
1977
1978
1979
17.9
17.2
18.0
18.0
18.5
21.3
21.4
20.7
20.7
20.1
-3.5
-4.1
-2.5
-2.5
-1.5
0.1
-0.2
-0.2
-0.2
-0.1
1980
1981
1982
1983
1984
18.9
19.6
19.1
17.4
17.3
21.6
22.2
23.1
23.5
22.1
-2.7
-2.4
-3.7
-6.0
-4.8
*
n.a.
-2.7
26.1
-0.2
n.a.
-2.6
25.8
-0.2
n.a.
-4.0
28.6
*
n.a.
-6.0
33.0
*
n.a.
-4.8
34.0
1985
1986
1987
1988
1989
17.7
17.5
18.4
18.1
18.3
22.9
22.5
21.6
21.2
21.2
-5.4
-5.4
-3.6
-3.9
-3.8
0.2
0.4
0.4
0.8
1.0
n.a.
-5.1
36.4
n.a.
-5.0
39.6
n.a.
-3.2
40.6
n.a.
-3.1
40.9
*
-2.8
40.5
1990
1991
1992
1993
1994
18.0
17.8
17.5
17.6
18.1
21.8
22.3
22.2
21.5
21.0
-4.8
-5.4
-5.5
-4.6
-3.7
1.0
0.9
0.8
0.7
0.8
*
*
*
*
*
1995
1996
1997
1998
1999
18.5
18.9
19.3
19.9
20.0
20.7
20.3
19.5
19.1
18.6
-3.1
0.8
-2.3
0.9
-1.3
1.0
-0.3
1.1
*
1.4
*
Surplus or Deficit (-) Debt
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
-1.3
-0.8
-0.9
-3.4
-4.2
-2.7
-2.7
-1.6
-3.9
-4.5
-4.7
-3.9
-2.9
43.6
42.3
40.0
25.3
27.5
27.8
27.4
25.6
42.0
45.4
48.2
49.5
49.4
*
-2.2
49.2
*
-1.4
48.5
*
-0.3
46.0
*
0.8
43.0
1.4
39.8
2000 20.8
18.4
0.9
1.6
*
2.4
35.0
2001 19.6
18.4
-0.3
1.6
*
1.3
32.7
SOURCE: Congressional Budget Office.
NOTE: n.a. = not applicable; * = between -0.05 percent and 0.05 percent.
a. In 1962 through 1988, the Postal Service was on-budget and included in the onbudget total.
b. End of year.
Table 3.
Revenues by Major Source, 1962-2001 (In billions of dollars)
Individual
Income
Taxes Corporate
Income
Taxes Social
Insurance
Taxes Excise
Taxes Estate
and Gift
Taxes Customs
Duties Miscellaneous
Receipts Total
Revenues
1962 45.6
20.5
17.0
12.5
2.0
1.1
0.8
99.7
1963 47.6
21.6
19.8
13.2
2.2
1.2
1.0
106.6
1964 48.7
23.5
22.0
13.7
2.4
1.3
1.1
112.6
1965
1966
1967
1968
1969
48.8
55.4
61.5
68.7
87.2
25.5
30.1
34.0
28.7
36.7
22.2
25.5
32.6
33.9
39.0
14.6
13.1
13.7
14.1
15.2
2.7
3.1
3.0
3.1
3.5
1.4
1.8
1.9
2.0
2.3
1.6
1.9
2.1
2.5
2.9
116.8
130.8
148.8
153.0
186.9
1970
1971
1972
1973
1974
90.4
86.2
94.7
103.2
119.0
32.8
26.8
32.2
36.2
38.6
44.4
47.3
52.6
63.1
75.1
15.7
16.6
15.5
16.3
16.8
3.6
3.7
5.4
4.9
5.0
2.4
2.6
3.3
3.2
3.3
3.4
3.9
3.6
3.9
5.4
192.8
187.1
207.3
230.8
263.2
1975
1976
1977
1978
1979
122.4
131.6
157.6
181.0
217.8
40.6
41.4
54.9
60.0
65.7
84.5
90.8
106.5
121.0
138.9
16.6
17.0
17.5
18.4
18.7
4.6
5.2
7.3
5.3
5.4
1980
1981
1982
1983
1984
244.1
285.9
297.7
288.9
298.4
64.6
61.1
49.2
37.0
56.9
157.8
182.7
201.5
209.0
239.4
24.3
40.8
36.3
35.3
37.4
6.4
6.8
8.0
6.1
6.0
7.2
8.1
8.9
8.7
11.4
1985
1986
1987
1988
1989
334.5
349.0
392.6
401.2
445.7
61.3
63.1
83.9
94.5
103.3
265.2
283.9
303.3
334.3
359.4
36.0
32.9
32.5
35.2
34.4
6.4
7.0
7.5
7.6
8.7
12.1
13.3
15.1
16.2
16.3
1990
1991
1992
1993
1994
466.9
467.8
476.0
509.7
543.1
93.5
98.1
100.3
117.5
140.4
380.0
396.0
413.7
428.3
461.5
35.3
42.4
45.6
48.1
55.2
11.5
11.1
11.1
12.6
15.2
16.7
15.9
17.4
18.8
20.1
28.0
23.6
27.3
19.5
23.2
1,032.0
1,055.0
1,091.3
1,154.4
1,258.6
1995
1996
1997
1998
1999
590.2
656.4
737.5
828.6
879.5
157.0
171.8
182.3
188.7
184.7
484.5
509.4
539.4
571.8
611.8
57.5
54.0
56.9
57.7
70.4
14.8
17.2
19.8
24.1
27.8
19.3
18.7
17.9
18.3
18.3
28.6
25.5
25.5
32.7
34.9
1,351.8
1,453.1
1,579.3
1,721.8
1,827.5
2000 1,004.5
207.3
652.9
68.9
3.7
4.1
5.2
6.6
7.4
29.0
6.7
8.0
6.5
7.4
9.3
279.1
298.1
355.6
399.6
463.3
12.7
13.8
16.2
15.6
17.1
517.1
599.3
617.8
600.6
666.5
18.6
20.0
19.5
20.3
23.3
19.9
734.1
769.2
854.4
909.3
991.2
42.8
2,025.2
2001 994.3
151.1
694.0
66.1
28.4
SOURCE: Congressional Budget Office.
19.4
37.8
1,991.0
Study questions for third exam, in addition to previously assigned questions and
problems from your book.
Chapter 9:
1. Graph the “more complicated” version of the AD/AS model, and explain/discuss
your graph. In which “range” is the Keynesian tradeoff evident? Explain.
Chapter 10:
2. Distinguish between “aggregate expenditures” and “aggregate demand.”
3. Distinguish between autonomous spending and induced spending.
4. MPC: define, mathematical formula, graphical representation, interpret (e.g.,
mpc = .75 means what?)
5. MPS: define, mathematical formula, interpret (e.g., mpc = .1 means what?)
6. Consumption function: equation, graph, slope, shift
7. Autonomous expenditures: components, graph, slope, shift, intercept
8. Algebraically derive the equilibrium income level. (Hint: begin with the
equilibrium condition and solve for Y.)
9. Use the circular flow model and our chart to explain the multiplier effect.
10. What makes the size of the multiplier larger? Explain or illustrate. What
happens to the size of the multiplier if we include government and the foreign
sector? Explain.
11. Graph the aggregate production curve. What does it illustrate?
12. Graph the multiplier model. Assume that the income level exceeds the
equilibrium. Explain the adjustment process. Repeat for below.
13. What were our three limitations to applying the multiplier model?
Chapter 11:
14. Define “expansionary” policy. What is its opposite?
15. What are the other three avenues of demand management? Give an example of a
policy pertaining to each.
16. Explain crowding out. Illustrate graphically. Is it a problem?
17. What are the other problems associated with fiscal policy?
18. What does Colander mean by “fiscal policy is a sledge hammer”?
19. Explain and give examples of how automatic stabilizers work.
Chapter 12:
20. Distinguish among deficit, surplus, and debt.
21. How large was our biggest deficit? (Answer two ways.)
22. Who holds our debt? Why is the debt a problem?
23. T or F, and explain: The debt is larger today than ever before. (Answer two
ways.)
24. Are deficits good or bad? Are surpluses good or bad? Explain.
25. Social security: pay-as-you-go, reform of 1980s (why and what?), concerning
raising social security taxes: the goal? the problem? the fear?
Affluenza questions
26. Chapters 11 and 12 concern the impacts of growth on the planet. Distinguish
between the main points of these two chapters. Write a brief summary essay of
each, including some of the authors’ evidence.
27. Write a brief summary essay of “Dissatisfaction Guaranteed.”
Chapter 12:
20. Distinguish among deficit, surplus, and debt.
21. How large was our biggest deficit? (Answer two ways.)
22. Who holds our debt? Why is the debt a problem?
23. T or F, and explain: The debt is larger today than ever before. (Answer two
ways.)
24. Are deficits good or bad? Are surpluses good or bad? Explain.
25. Social security: pay-as-you-go, reform of 1980s (why and what?), concerning
raising social security taxes: the goal? the problem? the fear?
Affluenza questions
26. Chapters 11 and 12 concern the impacts of growth on the planet. Distinguish
between the main points of these two chapters. Write a brief summary essay of
each, including some of the authors’ evidence.
27. Write a brief summary essay of “Dissatisfaction Guaranteed.”
Chapter 12:
20. Distinguish among deficit, surplus, and debt.
21. How large was our biggest deficit? (Answer two ways.)
22. Who holds our debt? Why is the debt a problem?
23. T or F, and explain: The debt is larger today than ever before. (Answer two
ways.)
24. Are deficits good or bad? Are surpluses good or bad? Explain.
25. Social security: pay-as-you-go, reform of 1980s (why and what?), concerning
raising social security taxes: the goal? the problem? the fear?
Affluenza questions
26. Chapters 11 and 12 concern the impacts of growth on the planet. Distinguish
between the main points of these two chapters. Write a brief summary essay of
each, including some of the authors’ evidence.
27. Write a brief summary essay of “Dissatisfaction Guaranteed.”
Chapter 12:
20. Distinguish among deficit, surplus, and debt.
21. How large was our biggest deficit? (Answer two ways.)
22. Who holds our debt? Why is the debt a problem?
23. T or F, and explain: The debt is larger today than ever before. (Answer two
ways.)
24. Are deficits good or bad? Are surpluses good or bad? Explain.
25. Social security: pay-as-you-go, reform of 1980s (why and what?), concerning
raising social security taxes: the goal? the problem? the fear?
Affluenza questions
26. Chapters 11 and 12 concern the impacts of growth on the planet. Distinguish
between the main points of these two chapters. Write a brief summary essay of
each, including some of the authors’ evidence.
27. Write a brief summary essay of “Dissatisfaction Guaranteed.”
Macroeconomics – Second Exam
Name:
Draw nice, big, clear, fully labeled graphs!
Be sure to answer all parts of all questions.
Please answer the questions in order.
1. a. Graph aggregate demand.
b. True or false? Synonyms for “aggregate demand” include “total spending,” “all
expenditures,” and “GDP.”
c. In a sentence, why is aggregate demand downward sloping?
d. Assume that the expectation grows that output is going to fall. How will AD
be affected? Graphically illustrate.
e. What is the wealth effect? Should it get stronger, how will AD be affected?
Illustrate graphically. (26 pts.)
2. a. Graph an economy that is at a simultaneous LR and SR equilibrium.
b. In what senses is this equilibrium a desirable state for the economy? (14)
3. a. Redraw your graph from the previous question. Now assume that the dollar
becomes stronger. Clearly indicate how your graph will change, i.e., which
curve(s) is(are) affected and how so.
b. In what senses is this outcome an undesirable state for the economy? (14)
4. a.
b.
c.
d.
Define “inflationary gap.”
Graph an inflationary gap.
What is the classical solution? Explain.
Illustrate the outcome of the classical solution with a new graph. (18)
5. Assume that wages rise by 3 percent and that productivity improves by 1 percent.
a. Which one of our “curves” is affected?
b. Graphically illustrate how it is affected. (6)
6. a. Distinguish between a stock and a bond.
b. Explain how stock values affect real GDP. (12)
7. Explain Affluenza’s impacts on communities. (10)
Honor code:
Macroeconomics – Study questions for second exam, in addition to
those already assigned. (There are some redundancies.)
1.
Distinguish among the four sources of growth in US GDP from 19281998. Rank them in order of the strength of their contributions
to GDP.
2.
Briefly explain Schumpeter’s theory of growth in GDP, i.e., what
causes the growth and what causes it to slow?
3.
From our conversation about the stock market, define, identify,
explain, and/or provide an example: stock, bond, secondary market
and its importance, stock exchange, stock index, how stock values
are determined (including what affects demand), how stock values
affect real GDP.
4.
Synonyms for “aggregate demand.”
5.
Explain all the reasons that AD may shift outward/rightward. Is
this an increase or decrease in AD?
6.
Explain how the multiplier affects the slope and the position of
AD.
7.
Explain what determines the slope and the position of AD, SRAS,
and LRAS.
8.
Graphically show that the economy is at SR disequilibrium.
will happen to output? Why? What is Keynesian about this
answer?
9.
Graphically show that the economy is at a LR equilibrium.
makes this classical?
Why is AD downward sloping?
What
What
10. Graphically show an economy at a simultaneous LR and SR
equilibrium.
11. Define and graph a recessionary gap. What is the classical
“solution”? What is the Keynesian “solution”? Repeat for
inflationary gap.
First exam study questions
1.
When and why did macroeconomics emerge as a field of study?
Explain the differences between Classical economics and Keynesian
economics.
2. Recount the evolution of the unemployment goal of macro policy.
Include an explanation of the NAIRU, and the current disagreement
about it.
3. Provide the various answers to: Whose responsibility is
unemployment?
4. Why do we care about unemployment?
5. Distinguish between receiving unemployment compensation and being
unemployed.
6. Distinguish between the old CPI and the new CPI. Explain the
bases for the political debate concerning which one we should use.
Macroeconomics – First test
Name:
Please answer the questions in order.
1.
Define “macroeconomics,” including its usual four emphases.
2.
List and explain (as we did in class) the differences between
classical and Keynesian economics.
3.
(a) What does the acronym NAIRU stand for?
(b) Fully explain the concept.
4.
(a) Define Gross Domestic Product.
(b) Name and briefly explain the two methods the Department of
Commerce uses to measure GDP.
5.
Simply list two among our policies intended to promote long term
growth in GDP.
6.
Briefly describe the two symptoms of affluenza that were presented
in the first two chapters of the book. (A couple of sentences per
chapter will suffice.)
OVER
Write your pledge here, if it applies:
7. For each of the following, indicate ON THIS PAGE whether the person
is counted by the government as employed, unemployed, or out of the
labor force.
______College student with a work-study job
______Person is not working because he quit a job, and is now looking
for a new job
______Person is not working because he was fired, and is now looking
for a new job
______Person is not working because she was laid off, and is now
looking for a new job
______Person is not working because she was replaced by automation,
and is now looking for a new job
______Discouraged worker
______Person is retired from IBM and now works five hours/week in a
gift shop
______Person is collecting unemployment insurance
______Woman works full time in her home taking care of the family
8. SHOW ALL OF YOUR WORK.
(a) Let 1990 be the base year.
write it in the blanks.
Price of basket
(b)
Find the price index for each year and
Nominal GDP
Price index
1990
$200
$500
___________
1991
205
515
___________
1992
212
535
___________
1993
214
545
___________
Interpret (as we did in class) the 1992 price index, i.e., what
does the value to you?
(c) In which years, if any did the economy actually produce more
goods and services than it did the previous year.