Download Aspects of Microeconomics and Macroeconomics with Special

ISS5026:
Aspects of Microeconomics and Macroeconomics
with Special Focus on Size and Insularity Factors
MICROECONOMICS
1. Demand, supply and market clearing
(a) What is the meaning of scarcity, choice and opportunity cost?
(b) What factors influence demand for a product?
(c) What factors influence supply of a product?
(d) What factors give rise to shifts in the demand and supply curves?
(e) What do you understand by market equilibrium and how do shifts in the demand and
supply curve affect the equilibrium price and quantity?
(f) Show how a shift in the demand curve and the supply curve can change the market
equilibrium price and quantity.
(g) What are the effects of a maximum price and a minimum price imposed by the
government?
(h) What is the meaning of price elasticity of demand and how is it measured?
2. Cost of Production
(a) What do you understand by (eventually) diminishing marginal product?
(b) Draw a diagram representing total variable costs, total fixed costs and total costs? And
explain their meaning.
(c) Draw a diagram representing average cost and marginal cost and explain their meaning.
(d) What do you understand by normal profit?
(e) What is the most important difference between the short run and the long run with regard
to costs of production?
(f) Explain the factors that give rise to increasing returns to scale?
(g) Explain the factors that give rise to decreasing returns to scale?
3. Market Structures
(a) What do you understand by marginal revenue and marginal cost of a firm?
(b) Why should marginal cost be equal to marginal revenue for a firm to maximize total
supernormal profit?
(c) Distinguish between normal profit (just covering opportunity costs) and supernormal
profit.
(d) Distinguish between (a) perfect competition (b) monoplitistic competition, (c) oligopoly
and (d) monopoly.
(e) Why is it likely that in supernormal profits are eliminated in the long run while in a
monopoly such profits persist in the long run?
(f) What major implications regarding consumer welfare can be derived when comparing
perfect competition with monopoly?
4. Public goods and externalities
(a) What do you understand by public goods?
(b) What do you understand by externalities?
(c) What do you understand by market failure?
(d) Why should government intervene to correct market failure?
(e) What measures can be taken by the government to correct market failure?
(f) Why are environmental concerns associated with public goods and externalities?
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STRUCTURED QUESTIONS RELATING TO INTRODUCTORY MACROECONOMICS
Prepared by Lino Briguglio
Suggested Textbooks:
Macreconomics and the Maltese economy. Lino Briguglio
Economics Principles and Policies. W. Baumol and A. Blinder (latest edition)
Economics, John Sloman (latest edition)
1. Aggregate Economic Activity
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Describe the three approaches for measuring GDP?
How is GDP measured in real terms over time?
What are the major shortcomings of GDP as an indicator of economic well-being?
Describe the circular flow of income in an economy composed of only households and firms
producing goods and services.
Describe the circular flow of income in an economy composed of households, firms and the
government.
Describe the circular flow of income in an economy composed of households, firms and the
government, where firms retain a portion of income generated from production, where there is
income from and to abroad, and where capital stock is depreciated.
2. The Multiplier Process
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What do you understand by the income multiplier process?
Assuming a closed economy without government, explain how a change in investment
expenditure affects national income, through the multiplier process.
9. Assuming a closed economy with government, explain how a change in investment expenditure
affects national income, through the multiplier process.
10. Assuming an open economy with government, explain how a change in investment expenditure
affects national income, through the multiplier process.
11. Why is the income multiplier coefficient in a small state likely to have small magnitude?
3. Domestic Final Expenditures
12. What do you understand by a consumption function?
13. What do you understand by a savings function?
14. Discuss the main non-income factors that affect consumption expenditure? What happens to
the consumption function if these factors change?
15. What do you understand by investment expenditure?
16. In what way do interest rates influence investment expenditure?
17. What do you understand by the accelerator principle?
18. What factors other than the interest rate and output changes influence investment
expenditure?
19. What do you understand by fiscal policy?
20. Describe the main headings of government expenditure.
21. Distinguish between progressive, proportional and regressive taxation.
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4. Foreign Trade
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What do you understand by the balance of payments?
What factors determine export competitiveness?
What factors influence demand for imports?
What do you understand by gains from trade and comparative advantage?
Discuss the meaning of import controls.
Why are the main benefits of free trade? Is free trade always desirable?
What are the main functions of the World Trade Organization?
What do you understand by exchange rates?
Distinguish between a floating and a fixed exchange rate regime.
What factors influence the exchange rate of a currency? (refer to the fluctuations of the
exchange rate of the euro)
Distinguish between devaluation and depreciation in the context of exchange rates.
In what way does a depreciation (devaluation) of the domestic currency influence exports and
imports?
How can the balance of trade adjust under a freely floating exchange rate regime?
How can the balance of trade adjust under a fixed exchange rate regime?
What do you understand by the J curve?
5. Aggregate Demand, Employment and Inflation
37. What do you understand by aggregate demand and in what way is this related to the price
level?
38. What do you understand by aggregate supply and in what way is this related to the price level?
39. How is equilibrium between aggregate demand and aggregate supply determined?
40. Discuss the effects of shifts in the aggregate demand curve on the aggregate price level.
41. Discuss the effects of shifts in the aggregate supply curve on the aggregate price level.
42. What do you understand by supply-side economics?
43. What do you understand by inflation, and how is it measured?
44. Distinguish between demand-pull and cost-push inflation.
45. Why is inflation often considered undesirable?
46. What do you understand by unemployment?
47. What do you understand by full employment?
48. What is the natural rate of unemployment?
49. What theory exists to describe the relationship between inflation and unemployment?
50. Is the Phillips curve stable in the long run?
6. Money
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What is money and what are its functions?
What factors influence demand money?
What factors influence the supply of money?
What do you understand by the money multiplier?
What do you understand by monetarism?
What do you understand by monetary policy?
What are the functions of the Central Bank?
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