Macroeconomics-习题集

习题集二PART AQUESTION 1An increase in the marginal propensity to consume from 0.5 to 0.7 will cause:a)the ZZ line to become steeper and a given change in government spending (G) tohave a smaller effect on output.b)the ZZ line to become steeper and a given change in government spending (G) tohave a larger effect on output.c)the ZZ line to become flatter and a given change in government spending (G) tohave a smaller effect on output.d)the ZZ line to become flatter and a given change in government spending (G) tohave a larger effect on output.QUESTION 2Base on the model of the ―goods market‖, we know that an equal and simultaneous reduction in G and T will cause:a)an increase in outputb)no change in outputc) a reduction in outputd)an increase in investmentQUESTION 3Using the information below, answer the following questionC =1000+.8YDI = 800G = 2000T = 1000The equilibrium level of GDP for the above economy equals:a)6000b)8000c)10000d)15000QUESTION 4Suppose the central bank wishes to conduct expansionary monetary policy. Given this, we would expect which of the following to occur?a) A central bank purchase of bonds and an increase in the interest rate.b) A central bank purchase of bonds and a reduction in the interest rate.c) A central bank sale of bonds and increase in the interest rate.d) A central bank sale of bonds and reduction in the interest rate.QUESTION 5An increase in income will tend to cause:a)an increase in bond prices and an increase in the interest rateb) a reduction in bond prices and an increase in the interest rate.c)an increase in bond prices and a reduction in the interest rated) a reduction in bond prices and an increase in the interest rateNote: Y↑→ M d↑→ i↑→ bond price↓QUESTION 6Which of the following occurs as the economy moves rightward (downward) along the IS curve?a) A reduction in the interest rate causes investment spending to increase.b) A reduction in the interest rate causes money demand to increase.c) A reduction in the interest rate causes an increase in the money supply.d)An increase in government spending causes an increase in demand for goods. QUESTION 7Suppose the economy is operating on the LM curve but not on the IS curve. Given this information, we know that:a)the goods market is in equilibrium and the money market is not in equilibrium.b)The money market and bond markets are in equilibrium and the goods market isnot in equilibrium.c)The money market and goods market and goods market are in equilibrium and thebond market is not in equilibrium.d)The money, bond and goods markets are all in equilibrium.QUESTION 8Suppose investment spending depends only on the interest rate. Given this information. A reduction in government spending:a)will cause investment to decreaseb)will cause investment to increasec)may cause investment to increased)will have no effect on outputQUESTION 9Suppose these is a simultaneous tax cut and open market purchase of bonds. Which of the following must occur as a result of this?a)Output increaseb)Output decreasec)The interest rate increased)The interest rate decreaseQUESTION 10An increase in the aggregate price level. P. will most likely have which of thefollowing effects?a) A rightward shift in the IS curve.b) A leftward shift in the IS curve.c)An upward shift in the LM curve.d) A downward shift in the LM curve.QUESTION 11Efficiency wage theory suggests that:a)workers will be paid more than their reservation wageb)productivity might drop if the wage rate is too high.c)The government can only set tax rates tax rates so high before people will prefernot to workd)Unskilled workers will have a lower turnover rate than skilled workers QUESTION 12In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the price-setting equation will appear as :a) a vertical lineb) a horizontal linec)an upward- sloping lined) a downward –sloping lineQUESTION 13In the aggregate supply relation, an increase in current output causes:a) a shift of the aggregate supply curveb)an increase in the current price levelc) a change in the expected price level this yeard)an increase in the labour force.QUESTION 14In the aggregate demand relation, a reduction in the price level cause output to increase because of its effect on:a)government spendingb)the interest ratec)the nominal waged)firm‘s markup over labour costsQUESTION 15Which of the following represents the medium-run effect of an increase in the target price level?a) a decline in outputb)an increase in the interest ratec) a decrease in the price leveld)none of the aboveNote: an increase in the target price level is an expansionary monetary policy. No effect in the medium run.QUESTION 16―Money is neutral ‖ means that either an expansionary or a contractionary monetary policy:a) will change output in the medium runb) will not change output in the short runc) will not change output in the medium rund) will not change the price level in the short run QUESTION 17The following equation can be used to represent how individuals expectations of inflation: πe t =θπ1-t . From 1970 on, the value of θ in the above equation:a) became gradually larger and approached 1.b) Became gradually smaller and approached zero.c) Remained constant at zero.d) Remained constant negative oneNote: please see page 190 of the text book.QUESTION 18Use the following Phillips curve equation to answer the following question t t t z αμμππ-+=--)(1A permanent reduction in the unemployment rate causes:a)an increase in the markup over labor costs b)a decrease in the markup over labor costs c) an increase in the inflation rate over time d) a decrease in the inflation rate over time QUESTION 19The ―Lucas critique ‖ is that:a) policy changes affect expectations, which in turn affect the impact of the policy b) increasing unemployment to reduce inflation is more costly to society than economists traditionally thinkc) in the medium run, output always returns to its natural leveld) ‗credibility ‘ is not an issue for macroeconomic policy QUESTION 20Okun‘s law illustrates the relationship between which of the following?a)the inflation rate and the unemployment rateb)the inflation rate and the change in the unemployment ratec)the money growth rate and the change in output growth rated)the growth rate of output and the change in the unemployment rateQUESTION 21If the nominal interest rate in year is 9%, and the expected inflation rate for year is 3%, then the real interest rate in year t is approximately:a)2%b)3%c)6%d)9%QUESTION 22When the IS curve is drawn with the nominal interest rate on the vertical axis, an increase in the expected inflation rate will cause:a)the IS curve to shift rightwardb)the IS curve to shift leftwardc)the IS curve to become steeperd)the IS curve to become flatterQUESTION 23Assume that the yield curve is downward- sloping. This suggests that financial market participants expect short-term interest rates to:a)increase in the futureb)decrease in the futurec)be unstable in the futured)not change in the futureQUESTION 24Assume that the one-year interest rate is on the vertical axis of the IS-LM model and that the yield curve is initially upward sloping. If financial market participants now expect a monetary contraction in one year, we know with certainty that:a)the yield curve will become steeperb)the yield curve will become flatterc)the yield curve will become horizontald)the yield curve will become downward slopingQUESTION 25The ―life cycle‖ and ―permanent income‖ theories of consumption share which of the following features?a)Consumption spending depends on income, rather than wealthb)Consumption spending should fluctuate widely from year to yearc)Consumers look ahead to the future in making current spending decisionsd)All of the aboveQUESTION 26Suppose there is an increase in the capital stock. This increase in the capital stock must cause other things equal:a)an increase in profit per unit of capitalb) a decrease in profit per unit of capitalc)no change in profit per unit of capitald)ambiguous effects on profit per unit of capitalQUESTION 27Which of the following will cause aggregate private spending to decrease?a)an increase in expected future real interest ratesb) a decrease in government spendingc) a reduction in future taxesd)all of the aboveQUESTION 28Assume that the uncovered interest parity condition holds. Also assume that the U.S. interest rate is greater than the U.K. interest rate. Given this information, we know that investors expect:a)the UK pound to depreciateb)the UK pound to appreciatec)the dollar-pound exchange rate to remain fixedd)the U.S. interest rate to fallNote: i t≈ i t* - (E e t+1 - E t) /E t (interest parity relation)Therefore, if i > i*, then E e t+1 < E t ( domestic currency are expected to depreciate.) if i < i*, then E e t+1 > E t( domestic currency are expected to appreciate.)QUESTION 29Assume that the domestic economy is an open economy. Which of the following will make the government spending multiplier larger?a) A smaller marginal propensity to importb) A larger value for foreign outputc) A smaller marginal propensity to consumed)All of the aboveQUESTION 30Assume that the Marshall-Lerner condition holds. Which of the following wouldoccur as a result of a real depreciation?a)An improvement of the trade balanceb) A reduction in the quantity of importsc)An increase in domestic outputd)All of aboveQUESTION 31The evidence suggests that in high- income countries, a depreciation of the currency:a)immediately improves the trade balanceb)eventually improves the trade balancec)first improves but then worsens the trade balanced)has no effect on the trade balanceQUESTION 32When the interest parity condition holds, we know that the domestic interest rate must be equal to:a)the foreign interest rateb)the expected rate of depreciation of the domestic currencyc)the expected rate of appreciation of the domestic currencyd)the foreign interest rate minus the expected rate of appreciation of the domesticcurrencyNote: i t≈ i t* - (E e t+1 - E t) /E t (interest parity relation)QUESTION 33In an open economy under flexible exchange rates, a tax cut will cause which of the following?a)An appreciation of the domestic currencyb)An increase in the exchange rate, E.c)An increase in net exportsd)All of the aboveQUESTION 34Suppose a country implements simultaneously a fiscal expansion and monetary contraction. In a flexible exchange rate regime, we know with certainty that:a)the exchange rate and output would both increaseb)the exchange rate would increase and output would decreasec)the exchange rate would increased)the exchange rate would decrease and output would increaseNote: please draw IS-LM modle and the interest parity relation.QUESTION 35Suppose individuals suddenly expect deflation. This expected deflation will cause which of the following?a)The IS curve shifts rightwardb)The IS curve shifts leftwardc)The LM curve shifts upwardd)The LM curve shifts downward and the IS curve shifts rightward QUESTION 36Use the IS-LM model to answer this question. Suppose the economy is operating under the effects of a liquidity trap. Now suppose there is an open market purchase of bonds by the central bank. Based on this information, which of the following must occur?a)The interest rate will decreaseb)Output will increasec)The interest rate will not changed)The money supply, M, will not changeQUESTION 37Seignorage is defined as:a)the increase in the nominal money supplyb)real revenues from money creationc)the increase in income tax revenues that occurs during a hyperinflationd)the decrease in income tax revenues that occurs during a hyperinflation QUESTION 38In the medium run, a reduction in money growth will cause real money balances to change because of changes in:a)the real interest rateb)the nominal interest ratec)real outputd)all of the aboveQUESTION 39Time inconsistency refers to:a)the increasing inaccuracy of econometric models as the time horizon becomeslongerb)the tendency for the rise in output to be greater in the early years of a newc)frequent changes in political parties—and therefore policies—that occur in ademocracyd)the tendency to deviate from a pre-announced optimal policy once other playershave committed themselves to a course of actionQUESTION 40Which of the following is an implication of rational expectations theory?a)deviations of output from the natural rate are likely to be serious and long-livedb)The economy is like a complex machine that needs to be optimally controlled withthe proper policyc)Macro-econometric models based on past behavior will not be very useful informulating policyd)Wages and prices are set almost entirely at random, so it is pointless to try tomodel their behavior.PART BQUESTION 41Use Okun‘s law to explain why increased unemployment is often associated with disinflation policy.Answer: To answer this question, students need to explain Okun‘s law, disinflation or disinflation policy first. The intrinsic answer is behind the equation 9.3 at page 195 of the Textbook. The answer guide also exists at the lecture notes of module3(cont.).The basic idea is that low output growth is typically associated with an increase in the unemployment rate. Higher unemployment leads to lower inflation rate or decrease in the inflation rate (disinflation) because of less purchasing power of people.QUESTION 42Briefly discuss the importance of rational expectations for macroeconomic policy.QUESTION 43Define the following terms:Natural rate of unemploymentTerm structure of interest ratesCurrent account balanceRicadian equivalence : (p675-676) the proposition that neither government deficits nor government debt has an effect on economic activity.PART CQUESTION 44Despite a rise of 70% in the real price of oil over the last two years, ―Central banks‖strong reputations for fighting inflation have stopped the transformation of higher oil prices into wage price spirals‖(a)Use an appropriate macroeconomic to explain how, in an open economy, acountry‘s central bank could use monetary policy to achieve such success in the domestic economy.(b)Outline the effects of such monetary policy on price expectations in the centralbank‘s domestic economy.Answer:(a)Here students should understand why a rise of 70% in the real price of oil over the last two years has eventually no effect or a minimum effect on overall inflation rate. Overall inflation rate was within the reserve bank‘s target rate, 2-3%, during this time. That is why, transformation of higher oil prices did not occur into wage price spirals. Now the question is: what type of monetary policy was taken for this success (to keep lower inflation rate).An expansionary monetary policy, such as lowering the interest rate by the central bank, helped to achieve this success. A decrease in interest rate leads to increase in overall output. An increase of output, other things being equal, helped to keep the overall inflation rate within the bank‘s target level though the oil price was higher. (Note: students can use the fig. 14.5 of page 333 and fig.17.4 of page 394, or they can use AD-AS model to show lower price because of higher output). In the figure 17.4, expectation also plays a role to have a greater impact on output of the expansionary monetary policy. [This effect can be considered as short run effect].(b)This is the secondary effect of expansionary monetary policy. Because of lower interest rate if output is greater than the natural level, and lower interest rate continues, eventually unemployment will be below the natural rate. From the Phillips curve relation, we know that as long as unemployment is below the natural rate, inflation increases (page 335 of the TEXT). So ul timately one can expect higher prices in the central bank‘s domestic economy. [Remember, in the medium run output will go back to the natural level, unemployment will go back to the natural rate of unemployment, and higher inflation will occur].QUESTION 45In its recent report, The Economic Implications of an Ageing Australia, the Australian Productivity Commission found that:(1)―Ageing will reduce economic growth at the same time that it intensifies demandsfor public services, such as health, aged care and the age pension. With presentpolicy settings, age-related spending will exceed the growth of tax revenue. This will open a fiscal gap equal to around 61/2 per cent of GDP by 2044-45‖, and that (2)―…in the absence of other policy actions to reduce fiscal pressures, taxation levelswould need to rise by 21% by 2044-45, or the debt burden of ageing would be twice the size of Australia‘s GDP‖.Use an appropriate macroeconomic model to explain the short and medium-run economic effects on an economy of a change in taxation policy to accommodate the ageing problem.Note: You do not need any knowledge of the Australian economy to answer this question. The analysis could apply to any economy with an ageing population problem.Answer: Please see module 3(c ont.) about the effect of tax↑(contractionary fiscal policy). You should draw AS-AD and IS-LM curves to show the short and medium-run economic effects of tax↑ (contractionary fiscal policy).- 11 -。

Introduction to MacroeconomicsMultiple Choice Questions1.Macroeconomics is the study of ________ while microeconomics studies ________:a.firm behavior; market behaviorrge biological systems; political implications of nanotechnologyc.an individual firm; the overall economic performance of a nationd.the overall economic performance of the world; the economy of a single countrye.the overall economic activity and prices; an individual firm, household, or market2.An endogenous variable is typically:a.Taken as a given.b.Strictly explained by data.c.Strictly explained outside the model.d.Strictly explained inside the model.e.Strictly explained by graphical analysis.3.Which statement is true of an exogenous variable in an economic model?a.It is often a policy variable.b.It is explained inside the model.c.Its value within the model cannot be changed.d.It has no direct relation to the endogenous variables.e.All of the above.4.Macroeconomic models particularly focus on the following three economic data series.a.Inflation, unemployment, and business cycles.b.Bankruptcies, the unemployment rate, and depressions.c.Nominal GDP, the employment rate, and budget deficits.d.Endogenous variables, exogenous variables, and parameters.e.None of the above.Introduction to Macroeconomics5.An increase in government spending might be an example of a ________ policy for the purpose of :a.monetary; lowering unemploymentb.monetary; reducing inflationc.monetary; increasing savingd.fiscal; reducing inflatione.fiscal; lowering unemployment6.An increase in interest rates might be an example of a ________ policy for the purpose of:a.monetary; reducing inflationb.monetary; lowering unemploymentc.monetary; increasing the quantity of moneyd.fiscal; reducing inflatione.fiscal; lowering unemployment7.Nonactivists propose doing nothing in the face of economic hardship because:a."Markets self-correct pretty rapidly anyway".b.Activist policies can kick in at the wrong time and be counterproductive.c.In the face of high unemployment, activist policies would likely lead to surges in inflation.d.All of the above.e.None of the above.Introduction to MacroeconomicsDiscussion Questions1.Explain the difference between monetary policy and fiscal policy. What are some of the reasons that thesemacroeconomic policies are used?Fiscal policy refers to a government’s changing its taxes or spending or both.Monetary policy is a central bank’s control of interest rates and the amount of money in an economy.These policies are used for such purposes as influencing an economy’s saving rate, reducing or expanding the size of a government’s budget deficit, influencing the inflation rate and unemployment rate in an economy, or limiting business cycle fluctuations and stabilizing economic activity.2.What is stabilization policy? What two important debates occur among macroeconomists regarding its use andwho are the parties to these debates?Stabilization policy is the use of fiscal and monetary policies to stabilize economic activity by reducing business cycle fluctuations. One debate concerns how active stabilization policy should be. It pits nonactivists, macroeconomists who believe that the economy has a self-correcting mechanism that works rapidly to reduce unemployment without the need for stabilization policy, against activists who think this self-correcting mechanism is too slow and therefore call for the active use of fiscal and monetary policies to reduce unemployment when it is unacceptably high. A second debate arises between macroeconomists who advocate the use of policy rules to specify in advance precisely how policymakers must react to changes in unemployment or inflation and those who would allow policymakers greater latitude to use their discretionary judgment to formulate the policy response they believe is most appropriate in a given situation.3.For each of the following statements, explain which would make a reasonable hypothesis to test. Use theconcepts of normative and positive statements in your answers.a.Increases in the duration of unemployment benefits lead to higher rates of unemployment.b.Immigrations is bad for society.c.Increases in the labor force cause output to rise.d.Welfare payments make workers lazy.e.Higher tax rates increase work effort.Statements (a), (c), and (e) are positive statements that could be tested directly. Statements (b) and (d) are normative statements that involve value judgments and thus cannot be tested in an objective way.Introduction to Macroeconomics4.If you were studying the following relationships, which variable would be exogenous and which would beendogenous?a.The effect of investment growth on the growth rate of GDP.Investment, exogenous; GDP, endogenous.b.The relationship between the amount of sunshine and plant growth.Sunshine, exogenous; growth, endogenous.c.The relationship between hours of studying and grade point average.Studying, exogenous; GPA, endogenous.。

习题集四PART AQUESTION 1The definition of the term ‘long run’ is based directly on:1. time.2. macroeconomic adjustment.3. the natural level of output.4. the balance of trade.QUESTION 2The underground economy is:1. a term applied to the mining industry.2. that part of the economy that is not measured in official GDP data owing to illegal activities and tax avoidance.3. the adjustment that should be made to official GDP data owing to environmental degradation.4. the opportunity cost incurred when workers are involuntarily unemployed. QUESTION 3‘Disagreements among macroeconomists can be generated by the different weights they apply to objectives even when their views about how the economy works are the same’. This statement is:1. true.2. false.QUESTION 4In an economy there are 18 million people over 15 years of age, there are 12 million people employed and 3 million people unemployed. The unemployment rate is:1. 10.0 percent.2. 16.7 percent.3. 20.0 percent.4. impossible to calculate without further information.QUESTION 5‘If we assume that the quantity of money is determined by the government as a matter of policy, then the interest rate must remain fixed as the number or value oftransactions changes.’ This statement is:1. true.2. false.QUESTION 6If the net value of the autonomous and policy-determined expenditures in a closed economy is $200 billion and the marginal propensity to consume is 0.8, then equilibrium output is:1. $200 billion.2. $250 billion.3. $800 billion.4. $1,000 billion.5. impossible to calculate without further information, but must be greater than $200 billion.Note: Y = Z（equilibium condition of goods market）→Y = Z C + I + G = c0 + c1(Y-T) + I + G→(1- c1)Y= c0 + I + G - c1T→Y =〔1/ (1- c1) 〕(c0 + I + G - c1T )(c0+ I + G - c1T ) is the net value of the autonomous and policy-determined expenditure.So, Y =〔1/ (1- c1) 〕(c0 + I + G - c1T )=〔1/ (1- 0.8) 〕* ( 200)=1000QUESTION 7For the economy in question 6 above, if income tax levied by the government is a lump sum of $200 billion (T = 200), then equilibrium consumption is:1. $160 billion.2. $200 billion.3. $360 billion.4. $800 billion.5. impossible to calculate without further information, but must be at least equal to $640 billion.Note: C= c0+c1(Y-T)= c0+0.8(1000-200)= c0+640QUESTION 8Macroeconomic models that allow for adjustment over time are called:1. simulation models.2. regression models.3. dynamic models.4. equilibrium models.5. econometric models.QUESTION 9Which of the following lists contains variables that are all stock variables?1. Income, saving, investment.2. Wealth, saving, investment.3. Wealth, savings, quantity of money.4. Savings, quantity of money, investment.QUESTION 10Which of the following statements is true when wealth can be held as money or bonds only and consumption is determined by current income only?1. Demand for money and demand for bonds are independent of each other.2. Other things being equal, an increase in wealth causes the demand for money to increase.3. Other things being equal, an increase in the interest rate leads to an increase in the demand for bonds.4. More than one of the statements above is true.5. None of the above statements is true.QUESTION 11If the central bank purchases government bonds on the open market (open market operations), a macroeconomist would conclude that it wishes to impact:1. aggregate demand.2. real income.3. the nominal interest rate.4. the real interest rate.QUESTION 12The IS relation identifies all combinations of real interest rate and real income at which the:1. goods market is in equilibrium.2. money market is in equilibrium.3. bond market is in equilibrium.4. both the goods and money markets are in equilibrium.5. all of the goods, money and bond markets are in equilibrium.QUESTION 13A decision by a government to increase income tax and reduce government spending simultaneously is:1. fiscal contraction.2. monetary contraction.3. fiscal expansion.4. monetary expansion.QUESTION 14In the IS–LM model an increase in income will cause:1. an increase in consumption.2. an increase in investment.3. an increase in the demand for money.4. both 1 and 2 above.5. all of 1, 2 and 3 above.QUESTION 15‘If the government of a closed economy wished to reduce the interest rate with little or no decline in output, it would combine monetary expansion with fiscal contraction.’ This statement is:1. true.2. false.QUESTION 16In the table below data are provided for selected macroeconomic variables for the former West Germany around the time of unification.Data in the table are consistent with:1. contractionary monetary policy.2. expansionary monetary policy.3. neutral monetary policy.QUESTION 17In the dynamic IS–LM model it is normally assumed that the interest rate:1. and output both adjust slowly.2. and output both adjust quickly.3. adjusts slowly, but output adjusts quickly.4. adjusts quickly, but output adjusts slowly.QUESTION 18If the inflation rate in Australia in 2000 is expected to be 5.5 percent and the nominal interest rate is expected to be 7.5 percent per year, the real interest rate is expected to be approximately:1. –2.0 percent per year.2. zero.3. 2.0 percent per year.4. 5.5 percent per year.5. 7.5 percent per year.QUESTION 19If a shareholder in a business is expecting a real dividend of $550 one year from now, what is the expected present discounted real value of that dividend if the real rate of interest is 10 percent per year now and is expected to remain at that rate?1. $495.2. $500.3. $550.4. it is impossible to calculate expected present discounted real value without knowing the expected rate of inflation.QUESTION 20Other things being equal, in the short run an increase in expected inflation is associated with:1. a decrease in output.2. an increase in output.3. either a decrease or an increase in output depending on the size of the increase in expected inflation.QUESTION 21Which of the following statements may be assumed to be true in macroeconomic modelling?1. Both the IS and LM relations depend on the nominal interest rate.2. The difference between the real interest rates on money and bonds is normally less than the expected inflation rate.3. Money has a zero real interest rate.4. More than one of the statements above is true.5. None of statements above is true.QUESTION 22Consumption is likely to fluctuate:1. less than investment.2. more than investment.3. about as much as investment.QUESTION 23If the expected present discounted present value of a planned investment project is less than the cost of that investment project, a business firm should:1. borrow and proceed with the project.2. proceed with the project only if there are sufficient internal funds to finance the project.3. not proceed with the project.QUESTION 24‘The user cost of capital is equivalent to the initial purchase price of that capital.’ This statement is:1. true.2. false.QUESTION 25In comparing bonds carrying identical risk of default, but having different maturity dates, it is necessary to consider their:1. interest rates.2. yields to maturity.3. yield curves.4. coupon payments.QUESTION 26In recent years share prices on the major stock exchanges around the world have:1. been close to their fundamental values.2. often deviated from their fundamental values.3. been explicable only in terms of fads.4. been explicable only in terms of rational speculative bubbles.QUESTION 27Introducing expectations into the IS–LM model can be expected to make:1. the IS curve steeper without affecting the LM curve.2. the IS curve flatter without affecting the LM curve.3. both the IS curve and the LM curve shift.QUESTION 28The real exchange rate is defined as the:1. price of foreign currency in terms of domestic currency.2. price of foreign goods in terms of domestic goods.3. price of foreign goods divided by the price of domestic goods4. nominal exchange rate divided by the domestic price index.QUESTION 29In the following table some data on the balance of payments for an economy are provided.The current account balance for the economy is:1. –$0.2 billion.2. –$2.2 billion.3. –$2.4 billion.4. +$0.6 billion.5. +$3.0 billion.QUESTION 30If a country with a floating exchange rate has a current account surplus it will have a capital account balance that is:1. positive.2. negative.3. equal to zero.QUESTION 31Assume that the interest parity relation holds. If the interest rate on domestic bonds is less than the interest rate on foreign bonds, the:1. domestic currency is expected to appreciate.2. domestic currency is expected to depreciate.3. expected return on foreign bonds is greater than the expected return on domestic bonds.4. expected return on foreign bonds is less than the expected return on domestic bonds.QUESTION 32If a real depreciation of the exchange rate is to improve the trade balance, it is necessary that the quantity of:1. exports increase.2. imports decrease.3. exports increase and the quantity of imports decrease by enough to compensate for the increase in the price of imports.4. exports increase and the quantity of imports decrease by enough to compensate for the increase in the price of imports and the increase in the government budget deficit.QUESTION 33If total saving and investment in an economy are equal to each other, then net exports will be:1. positive.2. negative.3. zero.4. either positive or negative depending on the nominal exchange rate.Note: NX = S + (T - G) - IQUESTION 34Compared to the closed economy IS curve, the open economy IS curve is:1. steeper.2. flatter.3. neither steeper nor flatter.QUESTION 35In most high income economies wages are determined by:1. the interaction of labour supply and demand.2. the reservation wage.3. relative bargaining power of workers and employers.4. a combination of 1 and 2 above.5. a combination of 2 and 3 above.QUESTION 36If individual goods markets are not perfectly competitive, it can be assumed that the markup will be:1. positive.2. negative.3. zero.4. any one of the above depending on the Q ratios of firms in individual goods markets.QUESTION 37If the expected price level increases:1. there will be a one-for-one increase in output.2. there will be a one-for-one increase in the price level.3. the aggregate demand curve will shift down.4. the aggregate demand curve will become steeper.5. more than one, but not all, of the above will occur.QUESTION 38A change in the nominal stock of money will be associated with a change in output in:1. the short run only.2. the long run only.3. both the short and long run.QUESTION 39Olivier Blanchard has estimated that the relationship between changes in the inflation rate (πt –πt-1) and the rate of unemployment (u t) in the USA as (πt –πt-1) = 7.5 –1.15u t. If the rate of unemployment in the USA falls from 7.5 to 5.5 percent, the rate of inflation can be expected to:1. increase by2.3 percentage points.2. decrease by 2.3 percentage points.3. remain constant.4. increase by5.2 percent.5. decrease by 5.2 percentage points.Note: (πt –πt-1) = 7.5 – 1.15u t = – 1.15(u t–7.5/1.15)QUESTION 40Uncertainty of knowledge in macroeconomics should cause policy makers to use:1. more active policies than they otherwise would.2. less active policies than they otherwise would.3. monetary policy in preference to fiscal policy.4. fiscal policy in preference to monetary policy.PART BQUESTION 41Define both of the following terms:(a) Eurosclerosis: p637 of text book.( “欧洲硬化症”: 用来描述欧洲经济萎靡不振，欧洲经济为高失业率和低增长率所困扰。

习题集二PART AQUESTION 1An increase in the marginal propensity to consume from 0.5 to 0.7 will cause:a)the ZZ line to become steeper and a given change in government spending (G) tohave a smaller effect on output.b)the ZZ line to become steeper and a given change in government spending (G) tohave a larger effect on output.c)the ZZ line to become flatter and a given change in government spending (G) tohave a smaller effect on output.d)the ZZ line to become flatter and a given change in government spending (G) tohave a larger effect on output.QUESTION 2Base on the model of the ―goods market‖, we know that an equal and simultaneous reduction in G and T will cause:a)an increase in outputb)no change in outputc) a reduction in outputd)an increase in investmentQUESTION 3Using the information below, answer the following questionC =1000+.8YDI = 800G = 2000T = 1000The equilibrium level of GDP for the above economy equals:a)6000b)8000c)10000d)15000QUESTION 4Suppose the central bank wishes to conduct expansionary monetary policy. Given this, we would expect which of the following to occur?a) A central bank purchase of bonds and an increase in the interest rate.b) A central bank purchase of bonds and a reduction in the interest rate.c) A central bank sale of bonds and increase in the interest rate.d) A central bank sale of bonds and reduction in the interest rate.QUESTION 5An increase in income will tend to cause:a)an increase in bond prices and an increase in the interest rateb) a reduction in bond prices and an increase in the interest rate.c)an increase in bond prices and a reduction in the interest rated) a reduction in bond prices and an increase in the interest rateNote: Y↑→ M d↑→ i↑→ bond price↓QUESTION 6Which of the following occurs as the economy moves rightward (downward) along the IS curve?a) A reduction in the interest rate causes investment spending to increase.b) A reduction in the interest rate causes money demand to increase.c) A reduction in the interest rate causes an increase in the money supply.d)An increase in government spending causes an increase in demand for goods. QUESTION 7Suppose the economy is operating on the LM curve but not on the IS curve. Given this information, we know that:a)the goods market is in equilibrium and the money market is not in equilibrium.b)The money market and bond markets are in equilibrium and the goods market isnot in equilibrium.c)The money market and goods market and goods market are in equilibrium and thebond market is not in equilibrium.d)The money, bond and goods markets are all in equilibrium.QUESTION 8Suppose investment spending depends only on the interest rate. Given this information. A reduction in government spending:a)will cause investment to decreaseb)will cause investment to increasec)may cause investment to increased)will have no effect on outputQUESTION 9Suppose these is a simultaneous tax cut and open market purchase of bonds. Which of the following must occur as a result of this?a)Output increaseb)Output decreasec)The interest rate increased)The interest rate decreaseQUESTION 10An increase in the aggregate price level. P. will most likely have which of thefollowing effects?a) A rightward shift in the IS curve.b) A leftward shift in the IS curve.c)An upward shift in the LM curve.d) A downward shift in the LM curve.QUESTION 11Efficiency wage theory suggests that:a)workers will be paid more than their reservation wageb)productivity might drop if the wage rate is too high.c)The government can only set tax rates tax rates so high before people will prefernot to workd)Unskilled workers will have a lower turnover rate than skilled workers QUESTION 12In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the price-setting equation will appear as :a) a vertical lineb) a horizontal linec)an upward- sloping lined) a downward –sloping lineQUESTION 13In the aggregate supply relation, an increase in current output causes:a) a shift of the aggregate supply curveb)an increase in the current price levelc) a change in the expected price level this yeard)an increase in the labour force.QUESTION 14In the aggregate demand relation, a reduction in the price level cause output to increase because of its effect on:a)government spendingb)the interest ratec)the nominal waged)firm‘s markup over labour costsQUESTION 15Which of the following represents the medium-run effect of an increase in the target price level?a) a decline in outputb)an increase in the interest ratec) a decrease in the price leveld)none of the aboveNote: an increase in the target price level is an expansionary monetary policy. No effect in the medium run.QUESTION 16―Money is neutral ‖ means that either an expansionary or a contractionary monetary policy:a) will change output in the medium runb) will not change output in the short runc) will not change output in the medium rund) will not change the price level in the short run QUESTION 17The following equation can be used to represent how individuals expectations of inflation: πe t =θπ1-t . From 1970 on, the value of θ in the above equation:a) became gradually larger and approached 1.b) Became gradually smaller and approached zero.c) Remained constant at zero.d) Remained constant negative oneNote: please see page 190 of the text book.QUESTION 18Use the following Phillips curve equation to answer the following question t t t z αμμππ-+=--)(1A permanent reduction in the unemployment rate causes:a)an increase in the markup over labor costs b)a decrease in the markup over labor costs c) an increase in the inflation rate over time d) a decrease in the inflation rate over time QUESTION 19The ―Lucas critique ‖ is that:a) policy changes affect expectations, which in turn affect the impact of the policy b) increasing unemployment to reduce inflation is more costly to society than economists traditionally thinkc) in the medium run, output always returns to its natural leveld) ‗credibility ‘ is not an issue for macroeconomic policy QUESTION 20Okun‘s law illustrates the relationship between which of the following?a)the inflation rate and the unemployment rateb)the inflation rate and the change in the unemployment ratec)the money growth rate and the change in output growth rated)the growth rate of output and the change in the unemployment rateQUESTION 21If the nominal interest rate in year is 9%, and the expected inflation rate for year is 3%, then the real interest rate in year t is approximately:a)2%b)3%c)6%d)9%QUESTION 22When the IS curve is drawn with the nominal interest rate on the vertical axis, an increase in the expected inflation rate will cause:a)the IS curve to shift rightwardb)the IS curve to shift leftwardc)the IS curve to become steeperd)the IS curve to become flatterQUESTION 23Assume that the yield curve is downward- sloping. This suggests that financial market participants expect short-term interest rates to:a)increase in the futureb)decrease in the futurec)be unstable in the futured)not change in the futureQUESTION 24Assume that the one-year interest rate is on the vertical axis of the IS-LM model and that the yield curve is initially upward sloping. If financial market participants now expect a monetary contraction in one year, we know with certainty that:a)the yield curve will become steeperb)the yield curve will become flatterc)the yield curve will become horizontald)the yield curve will become downward slopingQUESTION 25The ―life cycle‖ and ―permanent income‖ theories of consumption share which of the following features?a)Consumption spending depends on income, rather than wealthb)Consumption spending should fluctuate widely from year to yearc)Consumers look ahead to the future in making current spending decisionsd)All of the aboveQUESTION 26Suppose there is an increase in the capital stock. This increase in the capital stock must cause other things equal:a)an increase in profit per unit of capitalb) a decrease in profit per unit of capitalc)no change in profit per unit of capitald)ambiguous effects on profit per unit of capitalQUESTION 27Which of the following will cause aggregate private spending to decrease?a)an increase in expected future real interest ratesb) a decrease in government spendingc) a reduction in future taxesd)all of the aboveQUESTION 28Assume that the uncovered interest parity condition holds. Also assume that the U.S. interest rate is greater than the U.K. interest rate. Given this information, we know that investors expect:a)the UK pound to depreciateb)the UK pound to appreciatec)the dollar-pound exchange rate to remain fixedd)the U.S. interest rate to fallNote: i t≈ i t* - (E e t+1 - E t) /E t (interest parity relation)Therefore, if i > i*, then E e t+1 < E t ( domestic currency are expected to depreciate.) if i < i*, then E e t+1 > E t( domestic currency are expected to appreciate.)QUESTION 29Assume that the domestic economy is an open economy. Which of the following will make the government spending multiplier larger?a) A smaller marginal propensity to importb) A larger value for foreign outputc) A smaller marginal propensity to consumed)All of the aboveQUESTION 30Assume that the Marshall-Lerner condition holds. Which of the following wouldoccur as a result of a real depreciation?a)An improvement of the trade balanceb) A reduction in the quantity of importsc)An increase in domestic outputd)All of aboveQUESTION 31The evidence suggests that in high- income countries, a depreciation of the currency:a)immediately improves the trade balanceb)eventually improves the trade balancec)first improves but then worsens the trade balanced)has no effect on the trade balanceQUESTION 32When the interest parity condition holds, we know that the domestic interest rate must be equal to:a)the foreign interest rateb)the expected rate of depreciation of the domestic currencyc)the expected rate of appreciation of the domestic currencyd)the foreign interest rate minus the expected rate of appreciation of the domesticcurrencyNote: i t≈ i t* - (E e t+1 - E t) /E t (interest parity relation)QUESTION 33In an open economy under flexible exchange rates, a tax cut will cause which of the following?a)An appreciation of the domestic currencyb)An increase in the exchange rate, E.c)An increase in net exportsd)All of the aboveQUESTION 34Suppose a country implements simultaneously a fiscal expansion and monetary contraction. In a flexible exchange rate regime, we know with certainty that:a)the exchange rate and output would both increaseb)the exchange rate would increase and output would decreasec)the exchange rate would increased)the exchange rate would decrease and output would increaseNote: please draw IS-LM modle and the interest parity relation.QUESTION 35Suppose individuals suddenly expect deflation. This expected deflation will cause which of the following?a)The IS curve shifts rightwardb)The IS curve shifts leftwardc)The LM curve shifts upwardd)The LM curve shifts downward and the IS curve shifts rightward QUESTION 36Use the IS-LM model to answer this question. Suppose the economy is operating under the effects of a liquidity trap. Now suppose there is an open market purchase of bonds by the central bank. Based on this information, which of the following must occur?a)The interest rate will decreaseb)Output will increasec)The interest rate will not changed)The money supply, M, will not changeQUESTION 37Seignorage is defined as:a)the increase in the nominal money supplyb)real revenues from money creationc)the increase in income tax revenues that occurs during a hyperinflationd)the decrease in income tax revenues that occurs during a hyperinflation QUESTION 38In the medium run, a reduction in money growth will cause real money balances to change because of changes in:a)the real interest rateb)the nominal interest ratec)real outputd)all of the aboveQUESTION 39Time inconsistency refers to:a)the increasing inaccuracy of econometric models as the time horizon becomeslongerb)the tendency for the rise in output to be greater in the early years of a newc)frequent changes in political parties—and therefore policies—that occur in ademocracyd)the tendency to deviate from a pre-announced optimal policy once other playershave committed themselves to a course of actionQUESTION 40Which of the following is an implication of rational expectations theory?a)deviations of output from the natural rate are likely to be serious and long-livedb)The economy is like a complex machine that needs to be optimally controlled withthe proper policyc)Macro-econometric models based on past behavior will not be very useful informulating policyd)Wages and prices are set almost entirely at random, so it is pointless to try tomodel their behavior.PART BQUESTION 41Use Okun‘s law to explain why increased unemployment is often associated with disinflation policy.Answer: To answer this question, students need to explain Okun‘s law, disinflation or disinflation policy first. The intrinsic answer is behind the equation 9.3 at page 195 of the Textbook. The answer guide also exists at the lecture notes of module3(cont.).The basic idea is that low output growth is typically associated with an increase in the unemployment rate. Higher unemployment leads to lower inflation rate or decrease in the inflation rate (disinflation) because of less purchasing power of people.QUESTION 42Briefly discuss the importance of rational expectations for macroeconomic policy.QUESTION 43Define the following terms:Natural rate of unemploymentTerm structure of interest ratesCurrent account balanceRicadian equivalence : (p675-676) the proposition that neither government deficits nor government debt has an effect on economic activity.PART CQUESTION 44Despite a rise of 70% in the real price of oil over the last two years, ―Central banks‖strong reputations for fighting inflation have stopped the transformation of higher oil prices into wage price spirals‖(a)Use an appropriate macroeconomic to explain how, in an open economy, acountry‘s central bank could use monetary policy to achieve such success in the domestic economy.(b)Outline the effects of such monetary policy on price expectations in the centralbank‘s domestic economy.Answer:(a)Here students should understand why a rise of 70% in the real price of oil over the last two years has eventually no effect or a minimum effect on overall inflation rate. Overall inflation rate was within the reserve bank‘s target rate, 2-3%, during this time. That is why, transformation of higher oil prices did not occur into wage price spirals. Now the question is: what type of monetary policy was taken for this success (to keep lower inflation rate).An expansionary monetary policy, such as lowering the interest rate by the central bank, helped to achieve this success. A decrease in interest rate leads to increase in overall output. An increase of output, other things being equal, helped to keep the overall inflation rate within the bank‘s target level though the oil price was higher. (Note: students can use the fig. 14.5 of page 333 and fig.17.4 of page 394, or they can use AD-AS model to show lower price because of higher output). In the figure 17.4, expectation also plays a role to have a greater impact on output of the expansionary monetary policy. [This effect can be considered as short run effect].(b)This is the secondary effect of expansionary monetary policy. Because of lower interest rate if output is greater than the natural level, and lower interest rate continues, eventually unemployment will be below the natural rate. From the Phillips curve relation, we know that as long as unemployment is below the natural rate, inflation increases (page 335 of the TEXT). So ul timately one can expect higher prices in the central bank‘s domestic economy. [Remember, in the medium run output will go back to the natural level, unemployment will go back to the natural rate of unemployment, and higher inflation will occur].QUESTION 45In its recent report, The Economic Implications of an Ageing Australia, the Australian Productivity Commission found that:(1)―Ageing will reduce economic growth at the same time that it intensifies demandsfor public services, such as health, aged care and the age pension. With presentpolicy settings, age-related spending will exceed the growth of tax revenue. This will open a fiscal gap equal to around 61/2 per cent of GDP by 2044-45‖, and that (2)―…in the absence of other policy actions to reduce fiscal pressures, taxation levelswould need to rise by 21% by 2044-45, or the debt burden of ageing would be twice the size of Australia‘s GDP‖.Use an appropriate macroeconomic model to explain the short and medium-run economic effects on an economy of a change in taxation policy to accommodate the ageing problem.Note: You do not need any knowledge of the Australian economy to answer this question. The analysis could apply to any economy with an ageing population problem.Answer: Please see module 3(c ont.) about the effect of tax↑(contractionary fiscal policy). You should draw AS-AD and IS-LM curves to show the short and medium-run economic effects of tax↑ (contractionary fiscal policy).- 11 -。

Macroeconomics, 8e (Parkin) Testbank 2Chapter 5 Measuring GDP and Economic Growth1) Gross domestic productA) includes all the goods and none of the services produced in an economy in a giventime period.B) measures the value of the aggregate production of goods and services in a countryduring a given time period.C) measures the value of labor payments generated in an economy in a given time period.D) is generally less than federal expenditure in any time period.2) Gross domestic product is a measure of the total value of allA) sales in an economy over a period of time.B) consumer income in an economy over a period of time.C) capital accumulation in an economy over a period of time.D) final goods and services produced in an economy over a period of time.3) Gross domestic product (GDP) is the ________ in a given time period.A) value of personal consumption expenditures, gross private domestic investment, and federal government expendituresB) sum of wage and salary compensation of employees and corporate profitsC) value of all final and intermediate goods and services produced by the economyexcluding those goods exported to foreign nationsD) market value of final goods and services produced by the economy4) Gross domestic product (GDP) measures theA) number of final goods and services produced in the economy in a given time period.B) number of final goods and services sold in the economy in a given time period.C) market value of old and new final goods and services sold in the economy in a given time period.D) market value of final goods and services produced in the economy in a given time period.5) GDP is defined as the market value of all ________ in a given time period.A) final goods produced in a countryB) final goods and services produced by citizens of a particular country regardless ofwhere in the world they are locatedC) final goods and services produced in a country by only the citizens of the countryD) final goods and services produced in a country6) In the GDP definition, market value refers toA) valuing production in production units.B) not counting intermediate products.C) valuing production according to the market price.D) when the production took place.7) In the United States, GDP is typically measuredA) monthly.B) quarterly.C) daily.D) weekly.8) If Nike, an American corporation, produces sneakers in Thailand this wouldA) count as part of U.S. GDP since it is a U.S. corporation.B) count for both Thailand's GDP and U.S. GDP.C) add to Thailand's GDP but not to U.S. GDP.D) add to neither U.S. GDP nor Thailand's GDP.9) The word "final" in the definition of GDP refers toA) not counting intermediate goods or services.B) the time period when production took place.C) valuing production at market prices.D) counting the intermediate goods and services used to produce GDP.10) A loaf of bread purchased by one of your instructors would be best described asA) an intermediate good.B) a financial asset.C) a used good.D) a final good.11) In 2006, Ozzie purchased a 1999 Ford Escort from his neighbor for his son,purchased a 1999 "one owner" Camry from Larchmont Toyota for his wife, bought a 2006 new Ford for himself, and sold his 1993 Dodge Caravan to his teenage nephew.Which, if any, of these transactions will be included in GDP in 2004?A) all four transactionsB) all three purchases but not the saleC) the purchase of the Ford and the CaravanD) only the purchase of the Ford12) Which of the following expenditures associated with the production of a newhigh-performance SUV will be directly included in GDP?A) the sale of bonds to finance the construction of the assembly plantB) the purchase of used welding robots to assemble to vehiclesC) the purchase of new tires to be installed on the new vehiclesD) the purchase of new machine tools to manufacture the engines13) Intermediate goods are excluded from GDP becauseA) their inclusion would involve double counting.B) they represent goods that have never been purchased so they cannot be counted.C) their inclusion would understate GDPD) the premise of the question is incorrect because intermediate goods are directlyincluded in calculating GDP.14) A ton of coal purchased by your local utility to burn to make electricity would be bestdescribed asA) an intermediate good.B) a financial asset.C) a used good.D) a final product.15) Which of the following expenditures is for an intermediate good?A) The government buys new tires for its military vehicles.B) A U.S. tire firm sells new tires to Canada.C) General Motors buys new tires to put on the cars it's building.D) You buy new tires for your used car.16) GDP does not directly include intermediate goods becauseA) intermediate goods are not valuable.B) intermediate goods are not useful to consumers.C) that would count the intermediate goods twice.D) that would understate the true size of GDP.17) The calculation of the final goods and services sold in an economy would NOTincludeA) the purchase of a lawnmower by a household.B) General Motors' purchases of tires for new automobiles.C) Ford Motor Company's purchase of a new industrial robot to be used to produce cars.D) the purchase of a service by a household.18) In computing GDP, it is essential toA) avoid double counting.B) include government transfer payments.C) include government tax revenues.D) count all intermediate products directly as they are produced.19) Double counting (counting the same thing twice) in GDP accounting is avoided bynot includingA) net exports.B) intermediate goods.C) illegal activities.D) depreciation.20) GDP counts only final goods and services because thisA) method avoids including any goods that are produced this year and sold next year.B) method avoids double counting of goods going through several stages of production.C) amount can be more easily determined in the marketplace.D) method avoids understating the value of GDP produced during a given year.。

Part1Real GDP－measure these values using the prices of a base year.实际国内生产总值衡量经济中（对物价水平进行了调整的）所有人的总收入。

Inflation rate－measure how fast prices are rising. 通货膨胀率衡量物价上升的速度。

Unemployment rate－measure the fraction of the labor force that is out of work. 失业率衡量失去工作的劳动力比例。

Market clearing－a assumption of a market goes to the equilibrium of supply and demand.一种假设市场将自动走向供求均衡的假设称为市场出清。

Part2★Gross domestic product (GDP)－is the total market value of all final goods and services produced in an economy (within a country) in a given (usually one-year) period of time. 国内生产总值是一个国家的总收入及其用于产品与服务产出的总支出。

Consumer price index (CPI)－measure the level of prices. 消费物价指数衡量物价水平。

Value added－the value added of a firm equals the value of the firm’s output less the val ue of the intermediate goods that the firm purchases. 一个企业的增加值等于该企业产出的价值减去企业购买的中间产品的价值。

宏观经济学习题及答案（1）Introduction to MacroeconomicsMultiple Choice Questions1.Macroeconomics is the study of ________ while microeconomics studies ________:a.firm behavior; market behavior/doc/9e6487946.html,rge biological systems; political implications of nanotechnologyc.an individual firm; the overall economic performance of a nationd.the overall economic performance of the world; the economy of a single countrye.the overall economic activity and prices; an individual firm, household, or market2.An endogenous variable is typically:a.Taken as a given.b.Strictly explained by data.c.Strictly explained outside the model.d.Strictly explained inside the model.e.Strictly explained by graphical analysis.3.Which statement is true of an exogenous variable in an economic model?a.It is often a policy variable.b.It is explained inside the model.c.Its value within the model cannot be changed.d.It has no direct relation to the endogenous variables.e.All of the above.4.Macroeconomic models particularly focus on the followingthree economic data series.a.Inflation, unemployment, and business cycles.b.Bankruptcies, the unemployment rate, and depressions.c.Nominal GDP, the employment rate, and budget deficits.d.Endogenous variables, exogenous variables, and parameters.e.None of the above.Introduction to Macroeconomics5.An increase in government spending might be an example of a ________ policy for the purpose of :a.monetary; lowering unemploymentb.monetary; reducing inflationc.monetary; increasing savingd.fiscal; reducing inflatione.fiscal; lowering unemployment6.An increase in interest rates might be an example of a ________ policy for the purpose of:a.monetary; reducing inflationb.monetary; lowering unemploymentc.monetary; increasing the quantity of moneyd.fiscal; reducing inflatione.fiscal; lowering unemployment7.Nonactivists propose doing nothing in the face of economic hardship because:a."Markets self-correct pretty rapidly anyway".b.Activist policies can kick in at the wrong time and be counterproductive.c.In the face of high unemployment, activist policies would likely lead to surges in inflation.d.All of the above.e.None of the above.Introduction to MacroeconomicsDiscussion Questions1.Explain the difference between monetary policy and fiscal policy. What are some of the reasons that thesemacroeconomic policies are used?Fiscal policy refers to a government’s changing its taxes or spending or both.Monetary policy is a central bank’s control of interest rates and the amount of money in an economy.These policies are used for such purposes as influencing an economy’s saving rate, reducing or expanding the size of a government’s budget deficit, influencing the inflation rate and unemployment rate in aneconomy, or limiting business cycle fluctuations and stabilizing economic activity.2.What is stabilization policy? What two important debates occur among macroeconomists regarding its use and who are the parties to these debates?Stabilization policy is the use of fiscal and monetary policies to stabilize economic activity by reducingbusiness cycle fluctuations. One debate concerns how active stabilization policy should be. It pitsnonactivists, macroeconomists who believe that the economy has a self-correcting mechanism that works rapidly to reduce unemployment without the need for stabilization policy, against activistswho think this self-correcting mechanism is too slow and therefore call for the active use of fiscaland monetary policies to reduce unemployment when it is unacceptably high. A second debate arisesbetween macroeconomists who advocate the use of policy rules to specify in advance preciselyhow policymakers must react to changes in unemployment or inflation and those who would allowpolicymakers greater latitude to use their discretionary judgment to formulate the policy response theybelieve is most appropriate in a given situation.3.For each of the following statements, explain which would make a reasonable hypothesis to test. Use theconcepts of normative and positive statements in your answers.a.Increases in the duration of unemployment benefits lead to higher rates of unemployment.b.Immigrations is bad for society.c.Increases in the labor force cause output to rise.d.Welfare payments make workers lazy.e.Higher tax rates increase work effort.Statements (a), (c), and (e) are positive statements that could be tested directly. Statements (b) and (d) arenormative statements that involve value judgments and thus cannot be tested in an objective way.Introduction to Macroeconomics4.If you were studying the following relationships, which variable would be exogenous and which would beendogenous?a.The effect of investment growth on the growth rate of GDP.Investment, exogenous; GDP, endogenous.b.The relationship between the amount of sunshine andplant growth.Sunshine, exogenous; growth, endogenous.c.The relationship between hours of studying and grade point average.Studying, exogenous; GPA, endogenous.。

Macroeconomics, 8e (Parkin) Testbank 1Chapter 3 Demand and Supply3.1 Markets and Prices1) A relative price is theA) s lope of the demand curve.B) d ifference between one money price and another.C) s lope of the supply curve.D) r atio of one money price to another.Answer: DTopic: P rice and Opportunity CostSkill: C onceptual2) I f the price of a candy bar is $1 and the price of a fast food meal is $5, then theA) r elative price of a candy bar is 5 fast food meals.B) m oney price of a candy bar is 1/5 of a fast food meal.C) r elative price of a fast food meal is 5 candy bars.D) m oney price of a fast food meal is 1/5 of a candy bar.Answer: CTopic: P rice and Opportunity CostSkill: C onceptual3) I f the price of a hot dog is $2 and the price of a hamburger is $4, then theA) r elative price of a hot dog is 1/2 of a hamburger.B) m oney price of a hot dog is 2 hamburgers.C) r elative price of a hamburger is 1/2 of a hot dog.D) m oney price of a hamburger is 2 hot dogs.Answer: ATopic: P rice and Opportunity CostSkill: C onceptual4) T he opportunity cost of good A in terms of good B is equal to theA) m oney price of good A minus the money price of good B.B) m oney price of good B minus the money price of good A.C) r atio of the money price of good A to the money price of good B.D) r atio of the money price of good B to the money price of good A.Answer: CTopic: P rice and Opportunity CostSkill: A nalytical5) T he opportunity cost of a hot dog in terms of hamburgers is theA) r atio of the slope of the demand curve for hot dogs to the slope of the demand curve forhamburgers.B) r atio of the slope of the supply curve for hot dogs to the slope of the supply curve forhamburgers.C) m oney price of a hot dog minus the money price of a hamburger.D) r atio of the money price of a hot dog to the money price of a hamburger.Answer: DTopic: P rice and Opportunity CostSkill: A nalytical6) T he opportunity cost of a good is the same as itsA) m oney price.B) r elative price.C) p rice index.D) n one of the aboveAnswer: BTopic: S tudy Guide Question, Price and Opportunity CostSkill: C onceptual7) T he money price of a pizza is $12 per pizza and the money price of a taco is $2 per taco. Therelative price of a pizza isA) $12 per pizza.B) $24 per pizza.C) 6 tacos per pizza.D) 1/6 pizza.Answer: CTopic: S tudy Guide Question, Price and Opportunity CostSkill: A nalytical8) A relative price isA) a price expressed in terms of money.B) w hat you get paid for babysitting your cousin.C) t he ratio of one money price to another.D) e qual to a money price.Answer: CTopic: P rice and Opportunity CostSkill: R ecognition9) A n ice cream cone costs $1.50. A can of soda costs $0.75. The relative price of an ice creamcone isA) 1/2 can of soda, the opportunity cost of an ice cream cone.B) $1.50, the opportunity cost of a can of soda.C) 2 cans of soda, the opportunity cost of an ice cream cone.D) $0.75, the opportunity cost of a can of soda.Answer: CTopic: P rice and Opportunity CostSkill: A nalytical3.2 Demand1) W ants, as opposed to demands,A) a re the unlimited desires of the consumerB) a re the goods the consumer plans to acquire.C) a re the goods the consumer has acquired.D) d epend on the price.Answer: ATopic: D emandSkill: R ecognition2) D emands differ from wants becauseA) d emands are unlimited, whereas wants are limited by income.B) w ants require a plan to acquire a good but demands require no such plan.C) w ants imply a decision about which demands to satisfy, while demands involve nospecific plan to acquire the good.D) d emands reflect a decision about which wants to satisfy and a plan to buy the good,while wants are unlimited and involve no specific plan to acquire the good.Answer: DTopic: D emandSkill: C onceptual3) S carcity guarantees thatA) d emands will exceed wants.B) w ants will exceed demands.C) d emands will be equal to wants.D) m ost demands will be satisfied.Answer: BTopic: D emandSkill: C onceptual4) T he quantity demanded isA) a lways equal to the equilibrium quantity.B) i ndependent of the price of the good.C) t he amount of a good that consumers plan to purchase at a particular price.D) i ndependent of consumers' buying plans.Answer: CTopic: D emandSkill: R ecognition5) T he law of demand states that, other things remaining the same, the higher the price of agood, theA) s maller is the demand for the good.B) l arger is the demand for the good.C) s maller is the quantity of the good demanded.D) l arger is the quantity of the good demanded..Answer: CTopic: L aw of DemandSkill: C onceptual6) T he law of demand implies that, other things remaining the same,A) a s the price of a cheeseburger rises, the quantity of cheeseburgers demanded willincrease.B) a s the price of a cheeseburger rises, the quantity of cheeseburgers demanded willdecrease.C) a s income increases, the quantity of cheeseburgers demanded will increase.D) a s the demand for cheeseburgers increases, the price of a cheeseburger will fall.Answer: BTopic: L aw of DemandSkill: C onceptual7) T he law of demand states that the quantity of a good demanded variesA) i nversely with its price.B) i nversely with the price of substitute goods.C) d irectly with income.D) d irectly with population.Answer: ATopic: L aw of DemandSkill: C onceptual8) W hich of the following is consistent with the law of demand?A) A n increase in the price of a DVD causes an increase in the quantity of DVDs demanded.B) A n increase in the price of a soda causes a decrease in the quantity of soda demanded.C) A decrease in the price of a gallon of milk causes a decrease in the quantity of milkdemanded.D) A decrease in the price of juice causes no change in the quantity of juice demanded.Answer: BTopic: L aw of DemandSkill: C onceptual9) T he law of demand implies that if nothing else changes, there isA) a positive relationship between the price of a good and the quantity demanded.B) a negative relationship between the price of a good and the quantity demanded.C) a linear relationship between price of a good and the quantity demanded.D) a n exponential relationship between price of a good and the quantity demanded.Answer: BTopic: L aw of DemandSkill: A nalytical10) W hich of the following influences people's buying plans and does not shift the demand curve?A) t he price of the goodB) t he prices of related goodsC) i ncomeD) p referencesAnswer: ATopic: D emand Curve and Demand ScheduleSkill: R ecognition11) T he law of demand states thatA) a n increase in the price of a good shifts the demand curve leftward.B) a decrease in the price of a good shifts the demand curve leftward.C) o ther thing remaining the same, the higher the price of a good, the larger is the quantitydemanded.D) o ther things remaining the same, the higher the price of a good, the smaller is thequantity demanded.Answer: DTopic: D emand Curve and Demand ScheduleSkill: R ecognition12) T he law of demand implies that demand curvesA) s lope down.B) s lope up.C) s hift rightward whenever the price rises.D) s hift leftward whenever the price rises.Answer: ATopic: D emand Curve and Demand ScheduleSkill: C onceptual13) E ach point on the demand curve reflectsA) a ll the wants of a given household.B) t he highest price consumers are willing and able to pay for that particular unit of a good.C) t he highest price sellers will accept for all units they are producing.D) t he lowest-cost technology available to produce a good.Answer: BTopic: W illingness and Ability To PaySkill: C onceptual14) A drop in the price of a DVD shifts the demand curve for prerecorded video tapes leftward.From that you know DVDs and prerecorded tapes areA) c omplements.B) s ubstitutes.C) i nferior goods.D) n ormal goods.Answer: BTopic: C hange in Demand, Prices of Related GoodsSkill: A nalytical15) A substitute is a goodA) t hat can be used in place of another good.B) t hat is not used in place of another good.C) o f lower quality than another good.D) o f higher quality than another good.Answer: ATopic: C hange in Demand, Prices of Related GoodsSkill: R ecognition16) P eople buy more of good 1 when the price of good 2 rises. These goods areA) c omplements.B) s ubstitutes.C) n ormal goods.D) i nferior goods.Answer: BTopic: C hange in Demand, Prices of Related GoodsSkill: C onceptual17) W hich of the following pairs of goods are most likely substitutes?A) D VDs and DVD playersB) c ola and lemon lime sodaC) l ettuce and salad dressingD) p eanut butter and gasolineAnswer: BTopic: C hange in Demand, Prices of Related GoodsSkill: R ecognition18) T he demand for a good increases when the price of a substitute ________ and also increaseswhen the price of a complement ________.A) r ises; risesB) r ises; fallsC) f alls; risesD) f alls; fallsAnswer: BTopic: C hange in Demand, Prices of Related GoodsSkill: A nalytical19) A complement is a goodA) o f lower quality than another good.B) u sed in conjunction with another good.C) u sed instead of another good.D) o f higher quality than another good.Answer: BTopic: C hange in Demand, Prices of Related GoodsSkill: R ecognition20) S uppose people buy more of good 1 when the price of good 2 falls. These goods areA) c omplements.B) s ubstitutes.C) n ormal.D) i nferior.Answer: ATopic: C hange in Demand, Prices of Related GoodsSkill: C onceptual21) A s the opportunity cost of a good decreases, people buyA) l ess of that good and also less of its complements.B) l ess of that good but more of its complements.C) m ore of that good but less of its complements.D) m ore of that good and also more of its complements.Answer: DTopic: C hange in Demand, Prices of Related GoodsSkill: A nalytical22) P eople come to expect that the price of a gallon of gasoline will rise next week. As a result,A) t oday's supply of gasoline increases.B) t oday's demand for gasoline increases.C) t he price of a gallon of gasoline falls today.D) n ext week's supply of gasoline decreases.Answer: BTopic: C hange in Demand, Expected Future PricesSkill: C onceptual23) T he demand curve for a normal good shifts leftward if income ________ or the expectedfuture price ________.A) d ecreases; fallsB) d ecreases; risesC) i ncreases; fallsD) i ncreases; risesAnswer: ATopic: C hange in DemandSkill: A nalytical24) I f income increases or the price of a complement falls, theA) d emand curve for a normal good shifts leftward.B) d emand curve for a normal good shifts rightward.C) s upply curve of a normal good shifts leftward.D) s upply curve of a normal good shifts rightward.Answer: BTopic: C hange in DemandSkill: A nalytical25) I f income decreases or the price of a complement rises,A) t he demand curve for a normal good shifts leftward.B) t he demand curve for a normal good shifts rightward.C) t here is an upward movement along the demand curve for the good.D) t here is a downward movement along the demand curve for the good.Answer: ATopic: C hange in DemandSkill: A nalytical26) A consumer might consider in-line skates and elbow-pads to beA) p roducts with upward sloping demand curves.B) u nrelated goods.C) c omplements.D) s ubstitutes.Answer: CTopic: C hange in Demand, Prices of Related GoodsSkill: C onceptual27) A decrease in the price of a game of bowling shifts theA) d emand curve for bowling balls leftward.B) d emand curve for bowling balls rightward.C) s upply curve of bowling balls leftward.D) s upply curve of bowling balls rightward.Answer: BTopic: S tudy Guide Question, Change in Demand, Prices of Related Goods Skill: A nalytical28) N ormal goods are those for which demand decreases asA) t he price of a complement falls.B) t he price of a substitute falls.C) i ncome decreases.D) t he good's own price rises.Answer: CTopic: C hange in Demand, IncomeSkill: C onceptual29) A normal good is a good for whichA) t here are very few complements.B) d emand increases when income increases.C) t here are few substitutes.D) d emand decreases when income increases.Answer: BTopic: C hange in Demand, IncomeSkill: R ecognition30) A normal good is a good for which demandA) d ecreases when income increases.B) i ncreases when income increases.C) d ecreases when population increases.D) i ncreases when population increases.Answer: BTopic: C hange in Demand, IncomeSkill: R ecognition31) I nferior goods are those for which demand increases asA) t he price of a substitute falls.B) t he price of a substitute rises.C) i ncome decreases.D) i ncome increases.Answer: CTopic: C hange in Demand, IncomeSkill: C onceptual32) B y definition, an inferior good is aA) w ant that is not expressed by demand.B) n ormal substitute good.C) g ood for which demand decreases when its price rises.D) g ood for which demand decreases when income increases.Answer: DTopic: C hange in Demand, IncomeSkill: R ecognition33) I f a good is an inferior good, then purchases of that good will decrease whenA) i ncome increases.B) t he price of a substitute rises.C) p opulation increases.D) t he demand for it increases.Answer: ATopic: C hange in Demand, IncomeSkill: C onceptual34) A n inferior good is a good for which demandA) d ecreases when income increases.B) i ncreases when income increases.C) d ecreases when population increases.D) i ncreases when population increases.Answer: ATopic: C hange in Demand, IncomeSkill: C onceptual35) G ruel is an inferior good. Hence, a decrease in people's incomesA) s hifts the supply curve of gruel leftward.B) d ecreases the quantity of gruel supplied.C) s hifts the demand curve for gruel rightward.D) s hifts the demand curve for gruel leftward.Answer: CTopic: C hange in Demand, IncomeSkill: R ecognition36) W hen economists speak of preferences as influencing demand, they are referring toA) d irectly observable changes in prices and income.B) a n individual's attitudes toward goods and services.C) t he excess of wants over the available supplies.D) t he availability of a good to all income classes.Answer: BTopic: C hange in Demand, PreferencesSkill: C onceptual37) A n unusually warm winter shifts theA) s upply curve of gloves rightward.B) s upply curve of gloves leftward.C) d emand curve for gloves rightward.D) d emand curve for gloves leftward.Answer: DTopic: C hange in Demand, PreferencesSkill: A nalytical38) I n 2006 there were 200,000 gas grills demanded at a price of $500. In 2007 there were morethan 200,000 gas grills demanded at the same price. This increase could be the result any of the following EXCEPTA) a n increase in the supply of gas grills.B) a n increase in income if gas grills are a normal good.C) a fall in the price of natural gas, a complement for a gas grill.D) a n increase in population.Answer: ATopic: A Change in Quantity Demanded Versus a Change in DemandSkill: C onceptual39) A change in the price of a goodA) s hifts the good's demand curve and also causes a movement along it.B) s hifts the good's demand curve but does not cause a movement along it.C) d oes not shift the good's demand curve but does cause a movement along it.D) n either shifts the good's demand curve nor causes a movement along it.Answer: CTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: R ecognition40) I f shoes rise in price, the demand curve for shoes ________ and the quantity of shoesdemanded ________.A) s hifts leftward; decreasesB) s hifts leftward; does not changeC) d oes not shift; decreasesD) d oes not shift; does not changeAnswer: CTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: A nalytical41) A decrease in quantity demanded because of an increase in price is represented by aA) r ightward shift of the demand curve.B) l eftward shift of the demand curve.C) m ovement up and to the left along the demand curve.D) m ovement down and to the right along the demand curve.Answer: CTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: C onceptual42) A change in which of the following alters buying plans for cars but does NOT shift thedemand curve for cars?A) A 5 percent increase in people's income.B) A 10 percent decrease in the price of car insurance.C) A 20 percent increase in the price of a car.D) A n increased preference for walking rather than driving.Answer: CTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: A nalytical43) W hich of the following would NOT shift the demand curve for turkey?A) a n increase in incomeB) a decrease in the price of hamC) a change in tastes for turkeyD) a change in the price of a turkeyAnswer: DTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: C onceptual44) W hen we say demand increases, we mean that there is aA) m ovement to the right along a demand curve.B) m ovement to the left along a demand curve.C) r ightward shift of the demand curve.D) l eftward shift of the demand curve.Answer: CTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: A nalytical45) I n the figure above, which movement reflects an increase in demand?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: DTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: C onceptual46) I n the figure above, which movement reflects a decrease in demand?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: CTopic: A Change in Quantity Demanded Versus a Change in DemandSkill: C onceptual47) I n the figure above, which movement reflects a decrease in quantity demanded but NOT adecrease in demand?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: ATopic: A Change in Quantity Demanded Versus a Change in DemandSkill: C onceptual48) I n the figure above, which movement reflects how consumers would react to an increase inthe price of a non-fruit snack?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: DTopic: C hange in Demand, Prices of Related GoodsSkill: A nalytical49) I n the figure above, which movement reflects an increase in the price of a substitute for fruitsnacks?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: DTopic: C hange in Demand, Prices of Related GoodsSkill: A nalytical50) I n the figure above, which movement reflects an increase in the price of a complement forfruit snacks?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: CTopic: C hange in Demand, Prices of Related GoodsSkill: A nalytical51) I n the figure above, which movement reflects how consumers would react to an increase inthe price of a fruit snack that is expected to occur in the future?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: DTopic: C hange in Demand, Expected Future PricesSkill: C onceptual52) I n the figure above, which movement reflects an increase in income if fruit snacks are aninferior good?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: CTopic: C hange in Demand, IncomeSkill: A nalytical53) I n the figure above, which movement reflects an increase in income if fruit snacks are anormal good?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: DTopic: C hange in Demand, IncomeSkill: A nalytical54) I n the figure above, which movement reflects a decrease in population?A) f rom point a to point eB) f rom point a to point bC) f rom point a to point cD) f rom point a to point dAnswer: CTopic: C hange in Demand, PopulationSkill: A nalytical55) T he law of demand concludes that a rise in the price of a golf ball ________ the quantitydemanded and ________.A) i ncreases; shifts the demand curve for golf balls rightward.B) d ecreases; shifts the demand curve for golf balls leftward.C) d ecreases; creates a movement up along the demand curve for golf balls.D) i ncreases; creates a movement down along the demand curve for golf balls.Answer: CTopic: S tudy Guide Question, Law of DemandSkill: C onceptual56) I f a decrease in the price of gasoline increases the demand for large cars, thenA) g asoline and large cars are substitutes in consumption.B) g asoline and large cars are complements in consumption.C) g asoline is an inferior good.D) l arge cars are an inferior good.Answer: BTopic: S tudy Guide Question, Change in Demand, Prices of Related GoodsSkill: C onceptual57) A normal good is oneA) w ith a downward sloping demand curve.B) f or which demand increases when the price of a substitute rises.C) f or which demand increases when income increases.D) n one of the aboveAnswer: CTopic: S tudy Guide Question, Change in Demand, IncomeSkill: R ecognition58) S ome sales managers are talking shop. Which of the following quotations refers to amovement along the demand curve?A) "Since our competitors raised their prices our sales have doubled."B) "It has been an unusually mild winter; our sales of wool scarves are down from lastyear."C) "We decided to cut our prices, and the increase in our sales has been remarkable."D) n one of the aboveAnswer: CTopic: S tudy Guide Question, Change in Quantity DemandedSkill: C onceptual59) i Pods rise in price while CDs fall in price. The combined effect of these two changes is tocreate aA) r ightward shift of the demand curve for portable CD players.B) r ightward shift of the supply curve of portable CD players.C) l eftward shift of the demand curve for portable CD players.D) l eftward shift of the supply curve of portable CD players.Answer: ATopic: P arallel MyEconLab Questions, Change in DemandSkill: A nalytical60) W alkman Watch expects a recession to occur. Knowing that a Walkman is a normal good,you predict that the demand for a WalkmanA) w ill increase.B) w ill decrease.C) m ight increase or decrease.D) w ill remain unchanged.Answer: BTopic: P arallel MyEconLab Questions, Change in Demand, IncomeSkill: A nalytical61) T he quantity demanded of a good or service is the amount thatA) a consumer would like to buy but might not be able to afford.B) i s actually bought during a given time period at a given price.C) c onsumers plan to buy during a given time period at a given price.D) f irms are willing to sell during a given time period at a given price.Answer: CTopic: Q uantity DemandedSkill: R ecognition62) D emand is theA) w illingness to pay for a good if income is large enough.B) e ntire relationship between the quantity demanded and the price of a good.C) a bility to pay for a good.D) u nlimited wants of consumers.Answer: BTopic: D emandSkill: R ecognition63) I f, as people's incomes increase, the demand for a good increases, the good is calledA) a n inferior good.B) a complement.C) a substitute.D) a normal good.Answer: DTopic: C hange in Demand, IncomeSkill: R ecognition64) T he quantity of iPods that people plan to buy this month depends on all of the followingexcept theA) p rice of CD players.B) p rice of an iPod.C) t he technology used to produce an iPod.D) p rice of a music download from iTunes.Answer: CTopic: D emandSkill: R ecognition65) H am and eggs are complements. If the price of ham rises, the demand for eggs willA) i ncrease or decrease but the demand curve for ham will not change.B) d ecrease and the demand curve for ham will shift rightward.C) n ot change but there will be a movement along the demand curve for eggs.D) d ecrease and the demand curve for eggs will shift leftward.Answer: DTopic: C hange in Demand, Prices of Related GoodsSkill: C onceptual66) A n increase in the number of sellers of bikes will increase theA) d emand for inline skates, a substitute for bikes.B) p rice of a bike.C) d emand for bikes.D) d emand for knee pads, a complement for bikes.Answer: DTopic: C hange in Demand, Prices of Related GoodsSkill: C onceptual3.3 Supply1) W hich of the following is NOT one of the factors that influences the supply of a product?A) t echnologyB) i ncomeC) n umber of suppliersD) e xpected future pricesAnswer: BTopic: W hat Determines Selling Plans?Skill: R ecognition2) W hich of the following explains why supply curves slope upward?A) p rices and incomeB) i ncreasing marginal costC) r esources and technologyD) s ubstitutes in production and complements in productionAnswer: BTopic: T he Law of SupplySkill: C onceptual3) T he supply curve slopes upward when graphed against ________, because of ________.A) t he price of the good; increasing marginal costB) t he price of the good; decreasing marginal costC) i ncome; increasing marginal costD) i ncome; decreasing marginal costAnswer: ATopic: T he Law of SupplySkill: R ecognition4) T he quantity supplied of a good isA) t he same thing as the quantity demanded at each price.B) t he amount that the producers are planning to sell at a particular price during a giventime period.C) e qual to the difference between the quantity available and the quantity desired by allconsumers and producers.D) t he amount the firm would sell if it faced no resource constraints.Answer: BTopic: S upplySkill: R ecognition5) T he quantity supplied of a good or service is the quantity that a producer ________ at aparticular price during a given time period.A) i s willing to sellB) a ctually sellsC) n eeds to sellD) s hould sellAnswer: ATopic: S upplySkill: R ecognition6) A fall in the price of a good causes producers to reduce the quantity of the good they arewilling to produce. This fact illustratesA) t he law of supply.B) t he law of demand.C) a change in supply.D) t he nature of an inferior good.Answer: ATopic: T he Law of SupplySkill: C onceptual。

Macroeconomics----------------------------------------------------------------------------------------------------------------------Part I IntroductionChapter 1 The Science of Macroeconomics【Mainpoints】1.Exogenous Variables and Endogenous VariablesExample: The total quantity and price level of pizza in a country.Exogenous variables are given in a model. [aggregate income, price of materials]Endogenous variables are what a model explains. [price level and total quantity of pizza]2.Flexible Price and Sticky PriceFlexible price: easy to adjust, in short run.Sticky price: hard to adjust, in long run.===========================================Chapter 2 The Data of Macroeconomics【Mainpoints】1.GDP(1) Real GDP and Nominal GDP, GDP deflator(2) economy's income = economy's expenditure(3) GDP = C + G + I + NX2.CPI(1) CPI measures the price of a basket of goods(2) CPI = ∑P m Q / ∑P n Q(3) difference between GDP deflator and CPI3. The Unemployment Rate(1) Labour Force = Number of Unemployment + Number of Employment(2) Unemployment Rate = Number of Unemployment / Labour Force × 100%---------------------------------------------------------------------------------------------------------------------- Part II Classical Theory: The Economy in the Long Run ---- Flexible Price Chapter 3 National Income: Where It Comes From and Where It Goes【Mainpoints】1.Total Production(1) Production Function: Y = F(L,K)(2) constant returns to scale: zY = zF(L,K)2. National Income Distribution(1) Factor Prices ---- Labour:MPL = F(L+1,K) - F(L,K)ΔProfit = ΔRevenue - ΔCost = MPL×P - WIn order to maximize profit, make ΔProfit = 0. So MPL=W/P, Real WageLabour Income = MPL×L(2) Factor Prices ---- CapitalMPK = F(L,K+1) - F(L,K)ΔProfit = ΔRevenue - ΔCost = MPK×P - RIn ordet to maximize profit, make ΔProfit= 0 . So MPK=R/P, Real Rental Price ofCapitalCapital Income = MPK×K3)The Cobb-Douglas Production FunctionLabour Income = MPL×L = (1-α)YCapital Income = MPK×K = αY→F(K,L) = AKαL(1-α) , A measures the productivity of the available technology3.Total Demand1)Consumption:Determined by disposable incomeC=C(Y-T)Marginal Propensity to ConsumeMPC=C(Y-T+1)-C(Y-T)2)Investment:Determined by interest rateI=I(r)When r is high, investors will give upinvestment because cost of loan is higherthan rate of return.3) Government PurchasesG vs T, measures government budget5. Equilibrium (in a closed economy)(1) Market of Goods and ServicesY=C(Y-T)+I(r)+G(2) Market of Loanable FundsS=Y-C(Y-T) - G = I(r)investment is crowded out ===========================================Chapter 4 Money and Inflation【Mainpoints】1.Concept of Money(1) Funtions of Money: 1) Store of Value. Example: You can hold your money and trade itfor goods and services at some time in the future.2) Unit of Account. Example: In store people use money to showprice.3) Medium of Exchage. Example: People use money as tool toexchange goods.(2) Types of Money: 1) Fiat Money. No value, example: Paper Money.2) Commodity Money. With value, example: Gold and Silver.(3) Control of Money: 1) Institution: Central Bank. Example: Deutsche Bundesbank2) Method: Open-Markt Operation. Example: Buy governmentbonds to increase money supply.2.The Quantity Theory of Money(1) Quantity Equation: MV=PT →MV=PYQuantity Theory of Money: MV=PY(2) Real Money Balances: M/P , measured in quantity of goods and services.The Money Demand Function: (M/P)d = L(Y,i) = M/P← Money Supply. Y↑, d↑; i↑,d↓(3) Money and Inflation: ΔM% + ΔV% = ΔP% + ΔY% So M↑, P↑3.Inflation and Interest Rate(1) Fisher Equation: i = r + π===========================================Chapter 5 The Open Economy【Mainpoints】1.International Trade in a Samll Open Economy(1) View of goods and capital flow: NX = Y- (C+G+I)(2) View of capital flow: NX = Y-C-G-I = S-I= S-I(r*)r* is World Interes Rate(3) Trade Policies: 1) Domestic Fiscal Policy, influenceG↑,T↓→S↓→NX↓2) Fiscal Policy Abroad, influenceG e↑, T e↓→S e↓→r*↑→NX↑3) Shift in investment demand. Example: Government provides aninvestment tax credit2.Exchange Rates(1) Nominal Exchange Rates(e) and Real Exchange Rates(ε)Nominal exchange rates are measured in currency. Example: 100 yen / 1 dollarReal exchage rates are measured in goods and services. Example: 2 Japan Car / 1 USA car ε = e × (P/P*) , P* means price level of foreign countries.(2) The Real Exchange Rates and Trade Balance:NX = NX(ε)ε↓, P/P*↓, means domestic goods and servicesare cheaper than abroad. NX↑When NX(ε) = S - I, ε is equilibrium real ex.rate.(3) Trade Policies: 1) Domestic Fiscal Policy:G↑,T↓ → S↓(Expansionary Fiscal Policy)2) Fiscal Policy Abroad:G e↑, T e↓→S e↓→r*↑→I↓3) Shift in investment demand.4) Shift in NX(ε) Example: Protectionist Trade Policies(4) Inflation and nominal exchange rates:e = ε × (P*/P) → Δe%= Δε% + (π* - π)(5) PPP(Purchasing-Power Parity): 1 Dollar can buy the same quantity of wheat in anycountry.===========================================Chapter 6 Unemployment【Mainpoints】1.Natual Rate of Unemployment(1) Concept: The rate of unemployment which the economy get closed to in the long run.(2) Calculation: L-Labour Froce, E-Number of Employed, U-Number of Unemployed, f-rate of job fiding, s-rate of job seperating.L=E+U, fU=sE → U/L=1/(1+f/s)2.Causes for Unemployment(1) Frictional Unemployment:Unemployed people need time to find jobs.e.g. sectoral shift, unemploymetn insurance.(2) Structural Unemployment:Wage Rigidity. Wage is above the equlibrium level.e.g. Minimum-Wage Laws, Unions, Efficiency Wages.---------------------------------------------------------------------------------------------------------------------- Part III Growth Theory: The Economy in the Very Long Run ---- Solow Growth Model Chapter 7 Economic Growth I: Capital Accumulation and Population GrowthAssumption: Constant Return to Scale【Mainpoints】1.Capital Accumulation(1) Production Function per worker: zY=F(zK,zL)→Y/L=F(K/L,1)→y=f(k),MPK=f(k+1)-f(k)(2) Output and consumption per worker: y=c+i→c=(1-s)y→i=sy→i=sf(k)(3) The Steady State: Capital stock growth Δk = 0Δk=i-δk, δ is depreciation rate→Δk=sf(k)-δk=0→sf(k*)=δk*(4)Golden Rule level of capital: k*gold which maximizes cc=y-i→c=f(k)-sf(k)→c*=f(k*)-δk*→c max:MPK=δ2. Population Growth(at rate of n)(1) The Steady State:Δk=i-k(δ+n)→Δk=sf(k)-k(δ+n)=0→sf(k*)=(δ+n)k*(2) Golden Rule level of capital:k*gold, c=y-i→c max:MPK=δ+nChapter 8 Economic Growth I: Technology, Empirics, and Policy1.Technological Progress in the Solow ModelAssumption: Technology growth is a given exogenous variable g(1) Efficiency of Labour: Y=F(K,EL)(2) The Steady State: Δk=sf(k)-(g+n+δ)k=0→sf(k*)=(g+n+δ)k*(3) Golden Rule level of capital: k*gold , c=y-i→MPK=g+n+δ2.Endogenous Growth TheoryAssupmtion: Technolgy growth is a endogenous function g(μ), capital includes knowledge (1) 2 Sector Model: Y=F[K,(1-μ)EL], ΔE=g(μ)E, ΔK=sY-δK---------------------------------------------------------------------------------------------------------------------- Part IV Business Cycle Theory: The Economy in the Short Run ---- Sticky Price Chapter 9 Introduction to Economic Fluctuations【Key Concepts】Recession: A period of falling output and rising unemployment.Business Cycle: Short-run fluctuations in output and employment.【Mainpoints】1.GDP and unemployment(1) Okun's Law: ΔReal GDP%=3%-2×ΔUnemployment Rate(2) Leading Economic Indicators: Forecasts. Example: Average work time, Index of stock prices, Money Supply....2.Aggregate Demand and Aggregate Supply( P=P(Y))(1) The Quantity Theory of Money→AD: MV=PY→M/P=(M/P)d=kY(2) AS: SRAS---P=P, LRAS---Y=Y(3) From Short Run to Long Run: M changes AD, Y is unchanged inthe long run, but P in the long run changes. (A→B→C)(4) Shocks to AD and AP:1) Shocks to AD. Example: Credit Card makes V rise.Policy: Reduce the Money Supply.2) Shocks to AP. Example: A drought that destroys crops. Cartel. Union. etc. P↑Policy: Wait! Then price returns original level eventually(But it takes longtime). Or expand AD(But price level will be high in long period of time).===========================================Chapter 10 Aggregate Demand I: Building the IS-LM Model (Y-r)【Mainpoints】1.IS Curve(1) Good and Service Market→The Keynesian Cross: Y=C+I+G, PE=AE(2) IS curve:Y=C(Y-T)+I(r)+G 1) r↑→I↓→Y↓ 2) Fiscal Policy: G↑→Y↑→IS→, Governmetn-purchases multiplier, tax multiplier.2.LM Curve(1) Money Market→The Theory of Liquidity Peference: M/ P=L(r), M s=M d(2) LM Curve: M/P=L(r,Y). 1) Y↑,M d↑, r↑ 2)M s↑,r↓,LM←3. The Short-Run Equilibrium=========================================== Chapter 11 Aggregate Demand II: Applying the IS-LM Model (Y-P) 【Mainpoints】1.IS-LM Model as a Theroy of Aggregate Demand(1) Derivation: P↑,(M/P)s↓,r↑,LM↑→Y↓(2) Shift in AD: G,T,M→IS/LM→Y(3) In long run and short run: In long run Y<Y===========================================Chapter 12 The Open Economy Revisited: The Mundell-Fleming Model and the Exchange Rate Regime【Mainpoints】1.Mundell-Fleming Model(1) IS* Curve: Y=C(Y-T)+I(r*)+G+NX(ε) (2) LM* Curve: M/P=L(r*,Y)2.Under Floating Exchange Rates(1)Fiscal Policy:Shift IS*,ineffectual; Monetary Policy:Shift LM*; Trade Policy:Shift NX(ε)→IS* 3.Under Fixed Exchange Rates(1) Theory: Arbitrageur arbitrage so that M changes.(2)Fiscal Policy shifts IS*→LM*; Monetary Policy:Shift LM*, ineffectual; Trade Policy: ShiftNX(ε)→IS*→LM*4. Policy Choice: Impossible Trinity5. Mundell-Fleming Model in Short andLong RunChapter 13 AS and the Short-Run Tradeoff Between Inflation and Unemployment1.Aggregate Supply ModelY=Y+α(P-P e)2.Inflation, Unemployment and Phillips Curve(1)Y=Y+α(P-P e)→P-P-1=P e-P-1+1/α(Y-Y)+v→π=πe+β(μ-μn)+v [Okun's Law] v-supply shock(2) Sacrifice Ratio: π↓1%, GDP ↓ ? %----------------------------------------------------------------------------------------------------------------------Part V Macroeconomic Policy DebateChapter 14 Stabilization Policy1.Inside Lag and Outside Lag(1) Inside lag is the time between economy shock and the policy anction responds. Example: Policy makers need time to recognize a shock and react.(2) Outside lag is the time between a policy action and its influence on the economy. Example: Change in money supply and interest rate.===========================================Chapter 15 Government Debt and Budget Deficits1.The Traditional View of Government Debt(1) In the short run, T↓,C↑,S↓,r↑,I↓,lower steady-state K and a lower level of Y.(2) In the lo ng run, T↓,C↑,IS→,AD↑, finally Y=Y, P is higher.(3) In open economy, T↓,C↑,IS→, ε↑2.The Ricardian View of Government Debt(1) Ricardian Equivalence: Consumers are forward-looking.They think that government will raise tax at some point in the future, in order to afford budget. So they won't change consumption. --------------------------------------------------------------------------------------------------------------------- Part VI More on the Microeconomics Behind MacroeconomicsChapter 18 Money Supply, Money Demand and the Banking System1.Money Supply(1) Money Supply (M) = Currency (C) + Demand Deposits (D)(2) Reserves: The money that bank receive but don't lend out. Reserve-deposit ratio-rr1) 100% Reserve Banking. 1C→1D, M remains constant.2) Fractional-Reserve Banking. 1C→rrD+(1-rr)C, M increases. And (1-rr)C can be put into another bank, the process of money creation can be continued.(3) Money Supply Model: M=C+D.B(Monetary Base)=C+R [Control by Central Bank]→ M=(cr+1)/(cr+rr)×B=m×B [cr is currency-deposit ratio](4) Monetary Policy Tool: open-market operation, reserve requirements, discout rate[the rate that banks borrow from central bank].2.Money Demand(1) Quantity Theory: (M/P)d=L(i;Y)(2) Portfolio Theory: (M/P)d=L(r s,r b,πe,W) [r s-expected real return on stock, r b-expected real return on bonds, W-real wealth]。

MACROECONOMICS PRACTICE TEST QUESTIONS FOR CHAPTERS 6 and 7Chapter 06Wages and Unemployment Multiple Choice Questions1. In the twentieth century, average real wages have risen substantially:A. only in the United States.B. in industrial countries excluding the United States.C. in industrial countries including the United States.D. in neither the United States nor other industrial countries.2. In the United Sates, the average annual rate of growth of real wages was fastest in the period:A. 1960-1973.B. 1960-1996.C. 1960-2001.D. 1973-1996.3. The growth rate of average annual earnings in the United States from 1973 to 1996 was:A. higher than it was from 1960 to 1973.B. lower than it was from 1960 to 1973.C. the same as it was from 1960 to 1973.D. roughly equal to zero.4. Following the 1960 and 1973 period, average real earnings of workers grew more ______ from 1973 to 1996 and then ______ from 1996 to 2004.A. slowly; grew more rapidlyB. slowly; slowed even moreC. slowly; grew at about the same rateD. rapidly; slowed5. In the United States the real wages of the least-skilled, least-educated workers have ______ and the wages of best-educated, highest-skilled workers have ______.A. increased; increasedB. declined; increasedC. increased; declinedD. declined; remained constant6. In the United States between 1980 and 2007, employment:A. was constant, while the over-sixteen population increased.B. decreased, while the over-sixteen population increased.C. grew more rapidly than the over-sixteen population.D. grew at approximately the same rate as the over-sixteen population.7. In the last two decades of the twentieth century, the number of people with jobs in the United States:A. declined more rapidly than the over-sixteen population.B. declined more slowly than the over-sixteen population.C. remained approximately constant.D. grew more rapidly than the over-sixteen population.8. One trend in labor markets is:A. a decrease in average real wages in the United States and other industrial countries.B. decreasing wage inequality in the United States.C. weak rates of job creation in the United States since 1980.D. a slowdown in real wage growth in the United States since 1973.9. One trend in labor markets is:A. a decrease in average real wages in the United States and other industrial countries.B. decreasing wage inequality in the United States.C. weak rates of job creation in the United States since 1980.D. a slowdown in the rate of real wage growth since the early 1970s.10. All of the following describe trends in labor markets EXCEPT:A. growing wage equality in the United States in recent decades.B. a slowdown in real wage growth since the 1970s.C. substantial growth in the level of employment in the United States.D. over-sixteen population growth rates that fall short of the growth rate of new jobs in the United States.11. All of the following describe trends in labor markets EXCEPT:A. growing wage inequality in the United States in recent decades.B. a slowdown in real wage growth since the 1970s.C. substantial growth in the level of employment in the United States.D. over-sixteen population growth rates that exceed the growth rate of new jobs in the United States.12. In the market for labor, the price of labor is the:A. same as price of the product produced by the labor.B. real wage.C. marginal product of labor.D. number of hours employed per year.13. The demand for labor depends on ______ and _______.A. the supply of labor; the marginal product of laborB. the supply of labor; the price of output producedC. the rate of price inflation; the price of the output producedD. the marginal product of labor; the price of output produced14. The marginal product of labor is the additional:A. wage paid for an additional hour of work.B. wage paid for an additional worker employed.C. labor employed to produce one more unit of output.D. output produced by one more worker.15. According to the principle of diminishing returns to labor, if the amount of capital and other inputs are held constant, employing additional workers:A. increases output at an increasing rate.B. increases output at a constant rate.C. increases output at a decreasing rate.D. decreases output at an increasing rate.16. The value of the marginal product of labor equals the marginal product of labor times the:A. real wage.B. nominal wage.C. price of output.D. quantity of labor.The following table provides information about production at the XYZ-TV Company.17. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $32,000?A. 0B. 1C. 2D. 318. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $30,000?A. 0B. 1C. 2D. 319. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $28,000?A. 1B. 2C. 3D. 420. How many workers will the XYZ-TV Company hire if the going wage for TV production workers is $60,000?A. 0B. 4C. 5D. More than 5High Tech, Inc. produces plastic chairs that sell for $10 each. The following table provides information about how many plastic chairs can be produced per hour.21. For simplicity, assume that labor is the only input. How many workers will be hired if the hourly wage for workers is $70?A. 1B. 2C. 3D. 422. For simplicity, assume that labor is the only input. How many workers will be hired if the hourly wage for workers is $30?A. 1B. 2C. 3D. 423. For simplicity, assume that labor is the only input. How many workers will be hired if the hourly wage for workers is $120?A. 0B. 3C. 5D. More than 524. Firms will hire additional workers as long as the wage:A. is less than the marginal product of labor.B. equals the marginal product of labor.C. is greater than the marginal product of labor.D. is less than the value of the marginal product of labor.25. An increase in the price of the output produced by labor will:A. increase the supply of labor.B. decrease the supply of labor.C. increase the demand for labor.D. decrease the demand for labor.26. The introduction of a new technology that increases the productivity of labor will:A. increase the supply of labor.B. decrease the supply of labor.C. increase the demand for labor.D. decrease the demand for labor.27. If the price of TVs produced by the XYZ-TV Company falls from $1,000 to $750 per TV set, then the:A. supply of labor to the XYZ-TV Company increases.B. supply of labor to the XYZ-TV Company decreases.C. demand for labor by the XYZ-TV Company increases.D. demand for labor by the XYZ-TV Company decreases.28. The demand for labor increases when the:A. real wage increases.B. real wage decreases.C. value of the marginal product of labor increases.D. value of the marginal product of labor decreases.29. If the price of tables sold by All-Oak Table Co. increases from $400 to $300, then the:A. supply of labor to All-Oak Table Co. increases.B. supply of labor to All-Oak Table Co. decreases.C. demand for labor by All-Oak Table Co. decreases.D. demand for labor by All-Oak Table Co. increases.30. Production data for Joe's Pizza Parlor are as follows. For simplicity assume that labor is the only input. Each pizza sells for $5.How many workers will Joe hire if he must pay each one $35 a day?A. 1B. 2C. 3D. 431. Production data for Joe's Pizza Parlor are as follows. For simplicity assume that labor is the only input. Each pizza sells for $5.How many workers will Joe hire if he must pay each one $45 a day?A. 1B. 2C. 3D. 432. The minimum payment you are willing to accept to do a job is your:A. nominal wage.B. real wage.C. reservation price.D. value of marginal product.33. An increase in the size of the working-age population:A. increases labor demand.B. decreases labor demand.C. increases labor supply.D. decreases labor supply.34. As the real wage decreases, the quantity of labor demanded ______ and the quantity of labor supplied _______.A. increases; increasesB. increases; decreasesC. decreases; decreasesD. decreases; increases35. Holding other factors constant, if food prices decline relative to the prices of other products, then the real wages of agricultural workers will ______ and employment of agricultural workers will _____.A. increase; increaseB. increase; decreaseC. decrease; not changeD. decrease; decrease36. Holding other factors constant, if computers allow factory workers to manufacture more products per hour, then the real wages of factory workers will ______ and employment of factory workers will _____.A. increase; increaseB. increase; decreaseC. decrease; not changeD. decrease; increase37. Holding other factors constant, if a larger proportion of the population enters the labor force as a result of a growing social acceptance of women working, then the real wages of workers will ______ and employment of workers will _____.A. increase; increaseB. increase; decreaseC. decrease; not changeD. decrease; increase38. Holding other factors constant, if oil prices rise relative to the prices of other products, then the real wages of oil workers will ______ and employment of oil workers will _____.A. increase; increaseB. increase; decreaseC. decrease; not changeD. decrease; increase39. Holding other factors constant, if the education and skills of the typical worker in an economy increases, then the real wages of workers will ______ and employment of workers will _____.A. increase; increaseB. increase; decreaseC. decrease; not changeD. decrease; increase40. If the existence of alternative opportunities makes people become less willing to work in poultry processing plants, then the real wage of unskilled workers in poultry processing plants is predicted to______ and the employment of unskilled workers in poultry processing plants is predicted to ______.A. increase; increaseB. increase; decreaseC. increase; not changeD. decrease; decrease41. Real wages increased in industrialized countries in the twentieth century because the demand for labor:A. increased more rapidly than the supply of labor increased.B. increased more slowly than the supply of labor increased.C. increased, while the supply of labor decreased.D. decreased, while the supply of labor increased.42. Holding other factors constant, technological progress ______ the real wage and ______ employment.A. increases; increasesB. increases; decreasesC. increases; does not changeD. decreases; increases43. The two most important factors contributing to increased productivity in industrialized countries in the twentieth century were:A. higher relative prices and a larger labor supply.B. higher relative prices and technological progress.C. technological progress and increases in the capital stock.D. technological price and increases in the labor supply.44. Long-term increases in productivity that have increased the demand for labor and the real wages of labor have resulted primarily from ______ and _____.A. technological progress; a modernized capital stockB. technological progress; an increased labor supplyC. a modernized capital stock; skill-biased technological changeD. a modernized capital stock; an increased labor supply45. Larger increases in the demand for labor than in the supply of labor explain:A. the substantial increase in real wages.B. the slowdown in real wage growth.C. increasing wage inequality.D. skill-biased technological change.46. Slower growth in labor demand in combination with increases in labor supply explains____________ accompanied by __________.A. a slowdown in real wage growth; a decline in employmentB. a slowdown in real wage growth; rapid employment growthC. a slowdown in real wage growth; increasing wage inequalityD. accelerated real wage growth; a decline in employment47. Holding other factors constant, an increase in the capital stock ______ the real wage and ______ employment.A. increases; increasesB. increases; decreasesC. increases; does not changeD. decreases; increases48. A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ______ and employment in Omega will ______.A. increase; increaseB. increase; decreaseC. increase; not changeD. decrease; decrease49. As a result of a war in the country of Omega, refugees flee to the country of Alpha to seek employment. Holding other factors constant, the influx of refugees will ______ the real wage in Alpha and ______ employment in Alpha.A. increase; increaseB. increase; decreaseC. decrease; decreaseD. decrease; increase50. Factors increasing the labor supply and thereby contributing to the slowdown in real-wage growth that began in the 1970s include ______ and _____.A. skill-biased technological change; globalizationB. increased labor force participation by women; the coming-of-age of the baby-boom generationC. technological progress; diminishing returns to laborD. increasing wage inequality; globalization51. The slowdown in the growth of real wages in the United States since 1973 is consistent with a concurrent:A. slowdown in productivity gains.B. slowdown in the growth of the working-age population.C. slowdown in immigration into the country.D. speedup in the rate of inflation.52. Slower real wage growth since the 1970s accompanied by rapid job growth can be explained by:A. skill-biased technological change.B. globalization.C. a productivity slowdown accompanied by an increase in the labor supply.D. a productivity slowdown accompanied by a decrease in the labor supply.53. In recent decades, slower growth in the demand for labor accompanied by an accelerated growth in the supply of labor in the U.S. explains:A. slower real wage growth and double-digit rates of unemployment.B. slower real wage growth and increasing wage inequality.C. slower real wage growth and an increase in the number of people with jobs.D. increasing wage inequality and double-digit rates unemployment.54. Two explanations for increasing wage inequality are ______ and ________.A. technological progress; a modernized capital stockB. increased labor supply; a slowdown in productivity growthC. increased worker mobility; transition aidD. globalization; skill-biased technological change55. Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, the demand for labor in the shoe industry ______ and the demand for labor in the computer industry ______.A. increases; increasesB. increases; decreasesC. decreases; increasesD. decreases; decreases56. Initially, workers in the shoe industry and the computer industry earn the same wage. Reductions in trade barriers give domestic consumers access to cheaper shoes produced abroad, so domestic shoe prices fall. At the same time, foreign consumers purchase more computers, raising the relative price of computers. As a result of these changes, wages in the shoe industry ______ and wages in the computer industry ______.A. increase; increaseB. increase; decreaseC. decrease; increaseD. decrease; decrease57. Macroland produces dishes and glassware. Before trade, a set of dishes sells for $100 and a set of glasses sells for $50. When Macroland opens to trade, foreign demand for domestically produced china is strong, raising the price of a set of dishes to $125. But foreign competition reduces the demand for domestically produced glasses, so that they now sell for $25 a set. Assuming workers cannot move between industries, the wages of workers producing dishes will ______ and the wages of workers producing glasses will ____.A. increase; increaseB. increase; not changeC. increase; decreaseD. decrease; increase58. Globalization ______ the wages of workers in the exporting industries and ______ the wages of workers in the import-competing industries.A. raises; raisesB. raises; lowersC. raises; does not changeD. lowers; raises59. Increasing wage inequality results when international trade leads to ______ wages for workers in exporting industries and ______ wages for workers in importing industries.A. higher; higherB. higher; lowerC. lower; no change inD. lower; higher60. An increase in the demand for workers producing computers for export versus producing agricultural products that can be imported more cheaply from abroad is an example of how increasing wage inequality can result from:A. the diminishing marginal product of labor.B. the diminishing marginal product of capital.C. increasing reservation prices.D. globalization.61. Globalization can increase wage inequality in the United States if international competition is primarily in industries requiring ______ workers.A. manyB. fewC. highly-skilledD. low-skilled62. The increase in wage inequality resulting from globalization can be reversed through:A. revoking the principle of comparative advantage.B. increases in worker mobility.C. decreases in worker mobility.D. making markets more competitive.63. Technological change that affects the marginal products of high-skilled and low-skilled workers differently is called ______ technological change.A. capital-laborB. skill-biasedC. marginal-productivityD. high-low64. Skill-biased technological change increases wage inequality by altering the ______ high-skilled workers relative to low-skilled workers.A. reservation price ofB. mobility ofC. supply ofD. demand for65. The introduction of word processing software that increases the demand for workers with computer skills relative to those without such skills is an example of:A. increasing reservation prices.B. skill-biased technological change.C. the diminishing marginal product of labor.D. globalization.66. Most economists generally argue ______ trying to block technological advances because these technological advances ______.A. in favor of; cause the economy to grow rapidlyB. in favor of; increase wage inequalityC. against; are necessary for improved standards of livingD. against; promote wage equality67. A Luddite is:A. someone who opposes the introduction of new technologies.B. a worker whose real wage rises as a result of globalization.C. a fictional character from American folk history.D. a consumer who refuses to buy imported goods, even if they are cheaper.68. If the Luddites had succeeded in ______ the introduction of labor-saving machinery, economic growth in Great Britain may have been ______.A. blocking; slowerB. blocking; more rapidC. promoting; slowerD. promoting; more rapid69. Skill-biased technological has different effects on the marginal products of ______ workers and ______ workers.A. male; femaleB. union; nonunionC. government; private-sectorD. highly-trained; low-skilled70. Globalization and skill-biased technological change have contributed to:A. the long-term growth in real wages.B. the slowdown in productivity since 1973.C. increasing wage inequality.D. high rates of employment in Western Europe.71. From an economic perspective, the best response to increased wage inequality is to:A. block future technological change.B. stop all international trade.C. provide transition aid to disadvantaged workers.D. make skill-biased technological change illegal.72. Each person who is 16 years or older is considered to be in one of the following categories:A. employed, unemployed, or discouraged worker.B. part-time worker, full-time worker, or unemployed.C. part-time worker, full-time worker, or out of the labor force.D. employed, unemployed, or out of the labor force.73. A person 16 years or older who does not work, but is actively looking for work, is officially classified as:A. employed.B. unemployed.C. chronically unemployed.D. out of the labor force.74. Who from among the following would be counted as unemployed?A. A person with a part-time job who wants and is looking for a full-time job.B. All of these people would be counted as unemployed.C. A person who is willing to work and has looked for a job in the last week.D. A person who is willing to work but has not looked for a job in two months.75. Who from among the following would be classified as out of the labor force?A. A person with a part-time job who wants and is looking for a full-time job.B. None of these people would be classified as out of the labor force.C. A person who is willing to work and has looked for a job in the last week.D. A person who is willing to work but has not looked for a job in two months.76. Which of the following events would increase the unemployment rate, if nothing else changed?A. Unemployed workers leave the labor force.B. Employed workers leave the labor force.C. Workers from outside the labor force become employed.D. Unemployed workers become employed.77. Based on the information in the table, what is the unemployment rate?A. 7.2%B. 8.0%C. 10.0%D. 28.0%78. Based on the information in the table, how big is the labor force?A. 576,000B. 720,000C. 800,000D. 1,000,00079. Based on the information in the table, how many people are out of the labor force?A. 144,000B. 200,000C. 280,000D. 576,00080. Who from among the following would be classified as employed?A. Brenda Smith, an 18 year old full-time college student.B. Mario Faubert, a NHL hockey player at home sick with the flu.C. Jack Little, a 21 year old new college graduate actively looking for his first job.D. Sarah Lopez, a retired public school teacher.81. Who from among the following would be classified as out of the labor force?A. Brenda Smith, an 18 year old college student employed part time at a fast food restaurant.B. Mario Faubert, a NHL hockey player at home sick with the flu.C. Jack Little, a 21 year old new college graduate actively looking for his first job.D. Amanda Pie, a full-time homemaker.82. The labor force equals the number of people:A. employed.B. aged 16 years and older.C. both employed and unemployed.D. employed, unemployed and discouraged.83. The unemployment rate equals the number of people:A. unemployed.B. unemployed divided by the number employed.C. unemployed divided by the labor force.D. unemployed plus discouraged workers divided by the labor force.84. The participation rate is the number of people:A. employed divided by the labor force.B. employed divided by the population aged 16 years and older.C. employed and unemployed divided by the labor force.D. employed and unemployed divided by the population aged 16 years and older.85. In a country with 200 million people aged 16 years and older, 120 million in the labor force, and 114 million employed, what is the participation rate?A. 40 percentB. 57 percentC. 60 percentD. 95 percent86. In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers. The remaining people did not have jobs, but wanted jobs. All but one of these had actively looked for a job in the previous four weeks. What is the unemployment rate in this town?A. 10.0%B. 11.0%C. 12.5 %D. 14.3%87. In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers. The remaining people did not have jobs, but wanted them. All but one of these had actively looked for a job in the previous four weeks. What is the participation rate in this town?A. 63.0%B. 72.0%C. 80.0%D. 87.5%88. The number of unemployed divided by the labor force equals the:A. labor-force participation rate.B. employment rate.C. unemployment rate.D. duration rate.89. The labor force divided by the working-age population equals the:A. unemployment rate.B. employment rate.C. participation rate.D. population rate.90. Data for an economy shows that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the working-age population in this economy?A. 333 millionB. 500 millionC. 800 millionD. 1.20 billion91. Data for an economy shows that the unemployment rate is 6%, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are unemployed in this economy?A. 12.0 millionB. 18.0 millionC. 28.8 millionD. 43.2 million92. Data for an economy shows that the unemployment rate is 6%, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force. How many people are employed in this economy?A. 30 millionB. 188 millionC. 282 millionD. 300 million93. Data for an economy shows that the unemployment rate is 10%, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the labor force in this economy?A. 80 millionB. 200 millionC. 800 millionD. 1.0 billion94. Data for an economy shows that the unemployment rate is 10%, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force. How many people are in the working-age population in this economy?A. 250 millionB. 800 millionC. 1.0 billionD. 1.6 billion95. Income lost by the unemployed is an example of the ______ cost of unemployment, while the additional spending to control crime is an example of the ______ cost of unemployment.A. social; psychologicalB. economic; socialC. economic; psychologicalD. psychological; economic96. Depression and lost self esteem are examples of the ______ costs of unemployment, while the lost income and tax revenue are examples of the ______ costs of unemployment.A. social; psychologicalB. economic; socialC. economic; psychologicalD. psychological; economic97. An unemployment spell is a period during which:A. the unemployment rate is less than 10 percent.B. the unemployment rate exceeds 15 percent.C. an unemployed individual leaves the labor force and then returns.D. an individual is continuously unemployed.98. Leaving the labor force or finding a job are two ways that:A. a person can become a discouraged worker.B. a person can become an involuntary part-time worker.C. an unemployment spell can begin.D. an unemployment spell can end.。

2003－2004学年第二学期中级宏观经济学（Macroeconomics）考试试题答案(经济试验班021、022)Ⅰ.Choose the best answers (2＇×10)1.B2.A3.C4.B5.C6.A7.B8.C9.C 10.DⅡ. Explain the following terms. (20 points)1．Endogenous variables: 经济模型中要解释的变量。

Exogenous variables：模型给出作为既定的变量。

2. Menu costs：企业因通货膨胀改变价格的成本。

shoe-leather costs：为减少持有货币的损失而发生的成本。

3. GDP deflator ：名义GDP/实际GDP，是相对于基年商品和劳务价格的那一年的商品和劳务价格。

CPI：即消费价格指数，是相对于某个基年一篮子物品与劳务价格的同样一篮子物品与劳务的现期价格。

4. Adaptive expectation ：人们根据过去的经验或数据来预测未来。

rational expectation：人们尽可能地利用所有可以获得地信息，包括关于现在政府政策地信息预测未来。

5. Real exchange rate ：两国物品的相对价格。

nominal exchange rate：两国通货的相对价格。

Ⅲ.Answer the following questions by drawing or calculating. (10’ ×4) 1．We want to consider the effects of a tax cut when the LM* curve depends on disposable income instead of income: M/P = L[r, Y –T].A tax cut now shifts both the IS* and the LM* curves. Figure 12–22 shows the case of floating exchange rates. The IS* curve shifts to the right, from IS to IS . The LM* curve shifts to the left, however, from LM to LM .We know that real balances M/P are fixed in the short run, while the interest rate is fixed at the level of the world interest rate r*. Disposable income is the only variable that can adjust to bring the money market into equilibrium: hence, the LM* equation determines the level of disposable income. If taxes T fall, then income Y must also fall to keep disposable income fixed. In Figure 12–22, we move from an original equilibrium at point A to a new equilibrium at point B. Income falls by the amount of the tax cut, and the exchange rate appreciates. If there are fixed exchange rates, theIS* curve still shifts to the right; but the initial shift in the LM* curve no longer matters. That is, the upward pressure on the exchange rate causes the central bank to sell dollars and buy foreign exchange; this increases the money supply and shifts the LM* curve to the right, as shown in Figure 12–23. The new equilibrium, at point B, is at the intersection of the new IS* curve, IS , and the horizontal line at the level of the fixed exchange rate. There is no difference between this case and the standard case where money demand depends on income.2. a.将生产函数两边同时除以效率工人，则有：()4.04.06.04.0k L E K L E L E K L E Y y =⎪⎭⎫ ⎝⎛⨯=⨯⨯=⨯=b ．s=0.25 δ=5% n=2% g=3%; 带入经济稳定的条件：38.15.275.0)1(*84.15.2*6.45.2*1.025.0)()(3/23/24.03/54.0≈⨯=-=≈==≈==⋅++=⋅y s c k y k kk kg n k f s δc.当g 变为5%时，有： 63.11225*4.31225*12.025.0)()(3/24.03/54.0≈⎪⎭⎫ ⎝⎛==≈⎪⎭⎫ ⎝⎛==⋅++=⋅k y k kk kg n k f s δ 这种变化导致了效率工人的人均资本量减少，效率工人的人均产量下降；但总产出会增加。

习题集一Question 1In Australia ,using 2000-01 as the base year, we would find that:a)Nominal GDP is always larger than real GDP.b)Real GDP is always larger than nominal GDP for the period 1960 to 2000.c)Real GDP is larger than nominal GDP from 1998 to 2002.d)Real GDP is smaller than nominal GDP from 1988 to 1995.e)Real GDP and nominal GDP would be equal for the entire period.Note: please see figure 2.1 on page 31 of the text book.Question 2During the date 1990s, Japan experienced reductions in the GDP deflator. Given this information, we know with certainty that:a)Real GDP fell during these periods.b)Real GDP did not change during these periods.c)The overall price level in Japan decreased during these periods.d)Both real GDP and the overall price level decreased during these periods.Question 3Suppose that in January 2003 in Australia, 200 million people are working, 20 million are not working but are looking for work, and 40 million are not working and have given up looking for work. The official unemployment rate for that month is:a)7.7%b)9.1%c)10%d)23%e)30%Question 4A country using the Australian system of unemployment statistics has 100 million people, of whom 50 million are working age. Of these 50 million, 20 million have jobs. Of the remainder: 10 million are actively searching for jobs; 10 million would like jobs but are not searching; and 10 million do not want jobs at all.The labour force is:a)10 millionb)20 millionc)30 milliond)40 millione)50 millionQuestion 5Suppose the consumption equation is represented by the following: C=100+ .75Y D. The multiplier in this economy is_______.a)0.25b)0.75c) 1.33d) 2e) 4Question 6The paradox of saving suggests that an increase in the desire to save will cause:a)An incease in equilibrium GDP.b) A reduction in GDP.c)An increase in the desire to invest.d)No change in equilibrium GDP.e) A permanent increase in the level of saving.Note: Please see definition of “ paradox of saving” on page 674 of the text book.( saving S↑→Y↓→S↓(S=Y-T-C) so,saving is unchanged )Question 7When C= C0+C1Y D, an increase in C0 will cause which of the following to increase?a)Equilibrium incomeb)Equilibrium disposable incomec)Equilibrium savingd)All of the abovee)None of the aboveQuestion 8Suppose the central bank wishes to conduct expansionary monetary policy. Given this, we would expect which of the following to occur?a) A central bank purchase of bonds and an increase in the interest rateb) A central bank purchase of bonds and a reduction in the interest ratec) A central bank sale of bonds and an increase in the interest rated) A central bank sale of bonds and a reduction in the interest rateQuestion 9Suppose the money supply decreased. Which of the following events could cause this?a)An increase in the monetary baseb) A decrease in the ratio of reserves to depositsc) A shift in public preferences away from currency toward current account depositsd)All of the abovee)None of the aboveQuestion 10Suppose there is an open market sale of bonds. Such an event will cause:a)An increase in bond prices and an increase in the interest rate(i)b) A reduction in bond prices and an increase in i.c)An increase in bond prices and a reduction in i.d) A reduction in abond prices and a reduction in i.e)None of the aboveQuestion 11After a contractionary fiscal policy:a)The LM curve shifts and we move along the IS curve.b)The IS curve shifts and we move along the LM curve.c)Both the IS and LM curve shift.d)Neither the IS nor the LM curve shifts.e)Output will change causing a chage in money demand and a shift of the LM curve.Quetsion 12Suppose there is a tax cut. Which of the following represents the complete list of variables that must increase in response to this tax cut?a)Consumptionb)Consumption and investmentc)Consumption, investment and outputd)Consumption and outpute)Consumption, output and the interest rateQuestion 13If efficiency wage theory is valid,we would expect a relatively high premium over the reservation wage when:a)The unemployment rate is high.b)The job requires very little training.c)Workers cannot be easily monitored.d)Workers have few other options for employment in the area.e)All of the aboveQuestion 14The natural level of output is the level of output that occurs when:a)The goods market is in equilibrium.b)The economy is operating at the unemployment rate consistent with both the wage-settingand price-setting equations.c)The financial markets are in equilibrium.d)The unemployment rate is zero.e)Both the goods and financial markets are in equilibrium.Question 15Use the following Phillips curve equation to answer this question: πt -πt-1 = (μ+z)-αu t.A permanent reduction in the unemployment rate causes:a)An increase in the markup over labour costs.b) A decrease in the markup over labour costs.c)An increase in the inflation rate over time.d) A decrease in the inflation rate over time.e)None of the aboveQuestion 16If policymakers underestimate the natural rate of unemployment, they may follow policies that cause Australia to have:a)More unemployment than necessary.b)An unemployment rate that is “to high”c) A higher inflation rate than necessary.d) A steadily decreasing inflation rate.e) A dramatically fluctuating unemployment rate.Question 17Based on a dynamic AD relation when the central bank controls nominal money, output growth will equal zero when which of the following conditions is satisfied?a)0% nominal money growth; 4% inflationb)4% nonminal money growth; 0% inflationc)-4% nominal money growth; 3% inflationd)4% nominal money growth; 4% inflatione)None of the aboveNote: dynamic AD relation: g y = g m - π. So, if g m = π = 4%, g y = 0.Question 18In the medium run, a reduction in the rate of inflation target will cause:a)An increase in the size of the sacrifice ratio.b) A reduction in the size of the sacrifice ratio.c) A reduction in adjusted money growth.d) A reduction in the rate of inflation.e)Both C and DNote: Please see figure 9.3 on page 217 of the text book.Question 19Which of the following will increase the steady-state growth rate of capital?a)An increase in the saving rateb)An increase in the population growth ratec) A temporary increase in technological progressd)All of the abovee)None of the aboveNote: Please see figure 12.3 on page 282 of the text book.Question 20Which of the following has been proposed as an explanation for the slowdown in technological progress since the mid-1970s?a)Measurement errorb) A dicline in manufacturing’s share in GDPc) A decline in spending on research and developmentd)All of the abovee)None of the aboveNote: Please see page 272- 274 of the text book of the last year.Question 21Which of the following is true whenever the inflation rate is positve?a)The real interest rate must be greater than the nominal interest rate.b)The real interest rate must be negative.c)The real interest rate must be positive.d)The nominal interest rate must be negative.e)None of the aboveQuestion 22If the nominal interest rate in 20% per year, how much money can an individual borrow today if she wants to repay $200 in one year?a)$240.00b)$150.00c)$160.00d)$166.67e)$180.00Note: 200/(1+20%) = $166.67Question 23Assume that the yield curve is downward-sloping yield curve. This suggests that financial market participants expect short-term interest rates to:a)Increase in the future.b)Decrease in the future.c)Be unstable in the future.d)Not change in the future.e)Rise in the near future, and fall in the more distant future.Question 24In general, when the short-term interest rates decrease, long-term rates will:a)Increaseb)Remain the same.c)Decrease by more than the short-term rate.d)Decrease by the same amount as the short-term rate.e)Decrease, but by less than the short-term rate.Question 25Which of following represents non-human wealth?a)Total wealth minus the present discounted value of expected future after-tax labour incomeb)Total wealth minus financial wealthc)Wealth that cannot be taken from a person, by lawd)Financial wealth minus housing wealthe)Total wealth minuse housing wealthQuestion 26Suppose individuals expect that interest rates will rise in the future. Also assume that the RBA wants to prevent any change in current output. Given this goal of the RBA, the RBA should implement a plocy in the current period that:a)Shifts the IS cruve rightward.b)Shifts the IS curve leftward.c)Shifts the IS curve leftward and the LM curve upward.d)Shifts the LM curve upward.e)Shifts the LM curve downward.Question 27Suppose there is a real appreciation of the Australian dollar. Which of the following may have occurred?a)Foreign currency has become less expensive in the Australian dollars.b)Foreign goods have become more expensive to Americans.c)The foreign price level has increased relative to the Australian price level.d)All of the abovee)None of the aboveNote: ε = EP/ P*Question 28An increase in the real exchange rate indicates that:a)Foreign goods are now relatively cheaper.b)Foreign goods are now relatively more expensive.c)Domestic goods are now relatively more expensive.d)Both A and CNote: ε = EP/ P*. so P↑ or P*↓→ ε↑Question 29Suppose there is a reduction in foreign output(Y*). This reduction in Y* will cause which of the following in the domestic country?a) A reduction in outputb) A reduction in consumptionc) A reduction in net exportsd)All of the abovee)None of the aboveNote : (1) Y*↓→ X↓→NX↓→Z↓→Y↓(2) C↓ = c0 + c1(Y↓ -T)Question 30Suppose net exports are postive(NX>0) for a country. Given this information, we know that:a)Demand for domestic goods will be equal to the domestic demand for goods.b)Demand for domestic goods will be greater than the domestic demand for goods.c)Demand for domestic goods will be less than the domestic demand for goods.d) A budget surplus exists.Note : domestic demand for goods: DD = C+I+Gdemand for domestic goods: ZZ = C+I+G+NX = DD + NXQuestion 31In an open economy under flexible exchange rates, a reduction in the interest rate will cause an increase in which of the follwing?a)Investmentb)Exportsc)Net exportsd)All of the abovee)None of the aboveQuestion 32Suppose a country inplements simultaneously a fiscal expansion and monetary contraction. In a flexible exchangerate regime, we know with certainty that:a)The exchange rate and output would both increase.b)The exchange rate would increase and output would decrease.c)The exchange rate would increase.d)The exchange rate would decrease output would increase.Question 33Which of the following explains why the Great Depression did not end sooner?a)An increase in the nominal money stockb)An increase in the price levelc)The presence of a liquidity trapd)All of the abovee)None of the aboveQuestion 34In the IS-LM model, an increase in the expected rate of deflation will cause:a)An increase in demand.b)An increase in the nominal interest rate.c)An increase in the real interest rate.d)An increase in the nominal money supply.e) A decrease in the nominal money supply.Note: r ≈ i - eQuestion 35A dangerous sign for hyperinflation is when the government finances a growing proportion of its budget deficit through:a)Monetisationb)Tax collections.c)Bonds sold to foreigners.d)Bonds sold to domestic citizens.e)Voluntary contributions.Question 36Seignorage, the revenue from money creation, equals which of the following?a)The rate of inflationb)The rate of inflation times real money balancesc)Real money balancesd)The percentage growth rate of real moneye)The percentage growth rate of nominal money times real money balancesNote : Seignorage =△M/P = (△M/M)(M/P)Question 37Due to uncertainty about the impact of monetary policy, it would be best for the central bank to increase money growth:a) 3 months after the start of a recession.b)By more than the increase that will get the desired response.c)By less than the increase that will get the desired response.d)Only when it can be certain about the value of Okun’s coefficient and the timing of itsimpacts.e)Only after it is centain that the economy has entered a recession.Question 38The problem of time inconsistency in macro policy suggests that a nation might be better off:a)Using fiscal and monetary policy to fine tune the economy.b)Reducing the independence of the central bank.c)Appointing someone who is more conservative than the rest of the government to head thecentral bank.d)Intervening frequently in the foreign exchange market.e)Eliminating rational expectations from econometric models used for forecasting.Question 39According to Keynes:a)The Great Depression was caused by ill-considered expansionary fiscal policy.b)Balancing the budget in the midst of a depression would be a serious mistake.c)Inflation is always and everywhere a monetary phenomenon.d)The Phillips curve is stable.e)None of the aboveQuestion 40Which of the following events led to the crisis in macroeconomics and to the development of rational expectations theory?a)The Great Depressionb)The stock market crash of 1987c)The stock market speculative bubble of the late 1990sd)Stagflation in the 1970se)Large budget deficits in the 1980s.Question 41Explain the concept of neutrality of money.( please see p673 of the text book and the slides of module 3(cont.). )Question 42Explain the concept of time inconsistency.( please see the slides of module 6 (cont.) )Question 43Define each of the following terms:a)Okun’s Lawb)Sacrifice ratioc)Financial wealthQuestion 44Suppose some countries have been experiencing a slow-down in economic growth for last 2years. The slow-down was associated with a downturn in consumer confidence. The governments of these countries are thinking to implement expansionary fiscal and monetary policies (by increasing government expenditure and reducing interest rates) to overcome the situation. Using an IS-LM model, analyse the slow-down in growth and the short run effects of expansionary fiscal and monetary policies.Answer: ( please draw the Is and LM curve )Question 45a)Consider an economy with output below the natural level and the nominal interest rateequal to zero. Illustrate this economy in an IS-LM diagram.b)Under normal circumstances, how does the economy return to the naural level of output?Does this adjustment mechanism work when the nominal interest rate equals zero?c)Suppose the central bank wants to use monetary policy to return the economy to its naturallevel of output. Can it do so when the nominal interest rate is equal to zero? What happens if the central bank tries to use expansionary monetary policy? Illustrate your answer in an IS-LM diagram.d)In principle, can fiscal policy be used to restore the economy to its natural level of outputwhen the nominal interest rate equals zero? If so, explain how the appropriate policy affects output. If not, explain why not.e)Consider the following policy advice: ‘Since the central bank can act to keep the economy atthe natural level of output, the government should never use fiscal policy to stimulate the economy.’Do your answers to this question support this advice?Answer: ( please see slides 13-31 of module 6 )- 11 -。

Question 1In Australia ,using 2000-01 as the base year, we would find that:a)Nominal GDP is always larger than real GDP.b)Real GDP is always larger than nominal GDP for the period 1960 to 2000.c)Real GDP is larger than nominal GDP from 1998 to 2002.d)Real GDP is smaller than nominal GDP from 1988 to 1995.e)Real GDP and nominal GDP would be equal for the entire period.Note: please see figure 2.1 on page 31 of the text book.Question 2During the date 1990s, Japan experienced reductions in the GDP deflator. Given this information, we know with certainty that:a)Real GDP fell during these periods.b)Real GDP did not change during these periods.c)The overall price level in Japan decreased during these periods.d)Both real GDP and the overall price level decreased during these periods.Suppose that in January 2003 in Australia, 200 million people are working, 20 million are not working but are looking for work, and 40 million are not working and have given up looking for work. The official unemployment rate for that month is:a)7.7%b)9.1%c)10%d)23%e)30%Question 4A country using the Australian system of unemployment statistics has 100 million people, of whom 50 million are working age. Of these 50 million, 20 million have jobs. Of the remainder: 10 million are actively searching for jobs; 10 million would like jobs but are not searching; and 10 million do not want jobs at all.The labour force is:a)10 millionc)30 milliond)40 millione)50 millionQuestion 5Suppose the consumption equation is represented by the following: C=100+ .75Y D. The multiplier in this economy is_______.a)0.25b)0.75c) 1.33d) 2e) 4Question 6The paradox of saving suggests that an increase in the desire to save will cause:a)An incease in equilibrium GDP.b) A reduction in GDP.c)An increase in the desire to invest.d)No change in equilibrium GDP.e) A permanent increase in the level of saving.Note: Please see definition of “paradox of saving”on page 674 of the text book. ( saving S↑→Y↓→S↓(S=Y-T-C) so,saving is unchanged )Question 7When C= C0+C1Y D, an increase in C0 will cause which of the following to increase?a)Equilibrium incomeb)Equilibrium disposable incomec)Equilibrium savingd)All of the abovee)None of the aboveQuestion 8Suppose the central bank wishes to conduct expansionary monetary policy. Given this, we would expect which of the following to occur?a) A central bank purchase of bonds and an increase in the interest rateb) A central bank purchase of bonds and a reduction in the interest ratec) A central bank sale of bonds and an increase in the interest rated) A central bank sale of bonds and a reduction in the interest rateQuestion 9Suppose the money supply decreased. Which of the following events could cause this?a)An increase in the monetary baseb) A decrease in the ratio of reserves to depositsc) A shift in public preferences away from currency toward current accountdepositsd)All of the abovee)None of the aboveQuestion 10Suppose there is an open market sale of bonds. Such an event will cause:a)An increase in bond prices and an increase in the interest rate(i)b) A reduction in bond prices and an increase in i.c)An increase in bond prices and a reduction in i.d) A reduction in abond prices and a reduction in i.e)None of the aboveQuestion 11After a contractionary fiscal policy:a)The LM curve shifts and we move along the IS curve.b)The IS curve shifts and we move along the LM curve.c)Both the IS and LM curve shift.d)Neither the IS nor the LM curve shifts.e)Output will change causing a chage in money demand and a shift of the LMcurve.Quetsion 12Suppose there is a tax cut. Which of the following represents the complete list of variables that must increase in response to this tax cut?a)Consumptionb)Consumption and investmentc)Consumption, investment and outputd)Consumption and outpute)Consumption, output and the interest rateQuestion 13If efficiency wage theory is valid,we would expect a relatively high premium over the reservation wage when:a)The unemployment rate is high.b)The job requires very little training.c)Workers cannot be easily monitored.d)Workers have few other options for employment in the area.e)All of the aboveQuestion 14The natural level of output is the level of output that occurs when:a)The goods market is in equilibrium.b)The economy is operating at the unemployment rate consistent with both thewage-setting and price-setting equations.c)The financial markets are in equilibrium.d)The unemployment rate is zero.e)Both the goods and financial markets are in equilibrium.Question 15Use the following Phillips curve equation to answer this question: πt -πt-1 = (μ+z)-αu t.A permanent reduction in the unemployment rate causes:a)An increase in the markup over labour costs.b) A decrease in the markup over labour costs.c)An increase in the inflation rate over time.d) A decrease in the inflation rate over time.e)None of the aboveQuestion 16If policymakers underestimate the natural rate of unemployment, they may follow policies that cause Australia to have:a)More unemployment than necessary.b)An unemployment rate that is “to high”c) A higher inflation rate than necessary.d) A steadily decreasing inflation rate.e) A dramatically fluctuating unemployment rate.Question 17Based on a dynamic AD relation when the central bank controls nominal money, output growth will equal zero when which of the following conditions is satisfied?a)0% nominal money growth; 4% inflationb)4% nonminal money growth; 0% inflationc)-4% nominal money growth; 3% inflationd)4% nominal money growth; 4% inflatione)None of the aboveNote: dynamic AD relation: g y = g m - π. So, if g m = π = 4%, g y = 0.Question 18In the medium run, a reduction in the rate of inflation target will cause:a)An increase in the size of the sacrifice ratio.b) A reduction in the size of the sacrifice ratio.c) A reduction in adjusted money growth.d) A reduction in the rate of inflation.e)Both C and DNote: Please see figure 9.3 on page 217 of the text book.Question 19Which of the following will increase the steady-state growth rate of capital?a)An increase in the saving rateb)An increase in the population growth ratec) A temporary increase in technological progressd)All of the abovee)None of the aboveNote: Please see figure 12.3 on page 282 of the text book.Question 20Which of the following has been proposed as an explanation for the slowdown in technological progress since the mid-1970s?a)Measurement errorb) A dicline in manufacturing’s share in GDPc) A decline in spending on research and developmentd)All of the abovee)None of the aboveNote: Please see page 272- 274 of the text book of the last year.Question 21Which of the following is true whenever the inflation rate is positve?a)The real interest rate must be greater than the nominal interest rate.b)The real interest rate must be negative.c)The real interest rate must be positive.d)The nominal interest rate must be negative.e)None of the aboveQuestion 22If the nominal interest rate in 20% per year, how much money can an individual borrow today if she wants to repay $200 in one year?a)$240.00b)$150.00c)$160.00d)$166.67e)$180.00Note: 200/(1+20%) = $166.67Question 23Assume that the yield curve is downward-sloping yield curve. This suggests that financial market participants expect short-term interest rates to:a)Increase in the future.b)Decrease in the future.c)Be unstable in the future.d)Not change in the future.e)Rise in the near future, and fall in the more distant future.Question 24In general, when the short-term interest rates decrease, long-term rates will:a)Increaseb)Remain the same.c)Decrease by more than the short-term rate.d)Decrease by the same amount as the short-term rate.e)Decrease, but by less than the short-term rate.Question 25Which of following represents non-human wealth?a)Total wealth minus the present discounted value of expected future after-taxlabour incomeb)Total wealth minus financial wealthc)Wealth that cannot be taken from a person, by lawd)Financial wealth minus housing wealthe)Total wealth minuse housing wealthQuestion 26Suppose individuals expect that interest rates will rise in the future. Also assume that the RBA wants to prevent any change in current output. Given this goal of the RBA, the RBA should implement a plocy in the current period that:a)Shifts the IS cruve rightward.b)Shifts the IS curve leftward.c)Shifts the IS curve leftward and the LM curve upward.d)Shifts the LM curve upward.e)Shifts the LM curve downward.Question 27Suppose there is a real appreciation of the Australian dollar. Which of the following may have occurred?a)Foreign currency has become less expensive in the Australian dollars.b)Foreign goods have become more expensive to Americans.c)The foreign price level has increased relative to the Australian price level.d)All of the abovee)None of the aboveNote: = EP/ P*Question 28An increase in the real exchange rate indicates that:a)Foreign goods are now relatively cheaper.b)Foreign goods are now relatively more expensive.c)Domestic goods are now relatively more expensive.d)Both A and CNote: ε = EP/ P*. so P↑or P*↓→ε↑Question 29Suppose there is a reduction in foreign output(Y*). This reduction in Y* will cause which of the following in the domestic country?a) A reduction in outputb) A reduction in consumptionc) A reduction in net exportsd)All of the abovee)None of the aboveNote : (1) Y*↓→X↓→NX↓→Z↓→Y↓(2) C↓= c0 + c1(Y↓-T)Question 30Suppose net exports are postive(NX>0) for a country. Given this information, we know that:a)Demand for domestic goods will be equal to the domestic demand for goods.b)Demand for domestic goods will be greater than the domestic demand forgoods.c)Demand for domestic goods will be less than the domestic demand for goods.d) A budget surplus exists.Note : domestic demand for goods: DD = C+I+Gdemand for domestic goods: ZZ = C+I+G+NX = DD + NXQuestion 31In an open economy under flexible exchange rates, a reduction in the interest rate will cause an increase in which of the follwing?a)Investmentb)Exportsc)Net exportsd)All of the abovee)None of the aboveQuestion 32Suppose a country inplements simultaneously a fiscal expansion and monetary contraction. In a flexible exchangerate regime, we know with certainty that:a)The exchange rate and output would both increase.b)The exchange rate would increase and output would decrease.c)The exchange rate would increase.d)The exchange rate would decrease output would increase.Question 33Which of the following explains why the Great Depression did not end sooner?a)An increase in the nominal money stockb)An increase in the price levelc)The presence of a liquidity trapd)All of the abovee)None of the aboveQuestion 34In the IS-LM model, an increase in the expected rate of deflation will cause:a)An increase in demand.b)An increase in the nominal interest rate.c)An increase in the real interest rate.d)An increase in the nominal money supply.e) A decrease in the nominal money supply.Note: r ≈i - eQuestion 35A dangerous sign for hyperinflation is when the government finances a growing proportion of its budget deficit through:a)Monetisationb)Tax collections.c)Bonds sold to foreigners.d)Bonds sold to domestic citizens.e)Voluntary contributions.Question 36Seignorage, the revenue from money creation, equals which of the following?a)The rate of inflationb)The rate of inflation times real money balancesc)Real money balancesd)The percentage growth rate of real moneye)The percentage growth rate of nominal money times real money balancesNote : Seignorage =△M/P = (△M/M)(M/P)Question 37Due to uncertainty about the impact of monetary policy, it would be best for the central bank to increase money growth:a) 3 months after the start of a recession.b)By more than the increase that will get the desired response.c)By less than the increase that will get the desired response.d)Only when it can be certain about the value of Okun’s coefficient and thetiming of its impacts.e)Only after it is centain that the economy has entered a recession.Question 38The problem of time inconsistency in macro policy suggests that a nation might bebetter off:a)Using fiscal and monetary policy to fine tune the economy.b)Reducing the independence of the central bank.c)Appointing someone who is more conservative than the rest of the governmentto head the central bank.d)Intervening frequently in the foreign exchange market.e)Eliminating rational expectations from econometric models used forforecasting.Question 39According to Keynes:a)The Great Depression was caused by ill-considered expansionary fiscal policy.b)Balancing the budget in the midst of a depression would be a serious mistake.c)Inflation is always and everywhere a monetary phenomenon.d)The Phillips curve is stable.e)None of the aboveQuestion 40Which of the following events led to the crisis in macroeconomics and to the development of rational expectations theory?a)The Great Depressionb)The stock market crash of 1987c)The stock market speculative bubble of the late 1990sd)Stagflation in the 1970se)Large budget deficits in the 1980s.Question 41Explain the concept of neutrality of money.( please see p673 of the text book and the slides of module 3(cont.). )Question 42Explain the concept of time inconsistency.( please see the slides of module 6 (cont.) )Question 43Define each of the following terms:a)Okun’s Lawb)Sacrifice ratioc)Financial wealthQuestion 44Suppose some countries have been experiencing a slow-down in economic growth for last 2years. The slow-down was associated with a downturn in consumer confidence. The governments of these countries are thinking to implement expansionary fiscal and monetary policies (by increasing government expenditure and reducing interest rates) to overcome the situation. Using an IS-LM model, analyse the slow-down in growth and the short run effects of expansionary fiscal and monetary policies.Answer: ( please draw the Is and LM curve ) Question 45a)Consider an economy with output below the natural level and the nominalinterest rate equal to zero. Illustrate this economy in an IS-LM diagram.b)Under normal circumstances, how does the economy return to the naural levelof output? Does this adjustment mechanism work when the nominal interest rate equals zero?c)Suppose the central bank wants to use monetary policy to return the economyto its natural level of output. Can it do so when the nominal interest rate is equal to zero? What happens if the central bank tries to use expansionary monetary policy? Illustrate your answer in an IS-LM diagram.d)In principle, can fiscal policy be used to restore the economy to its natural levelof output when the nominal interest rate equals zero? If so, explain how the appropriate policy affects output. If not, explain why not.e)Consider the following policy advice: ‘Since the central bank can act to keepthe economy at the natural level of output, the government should never use fiscal policy to stimulate the economy.’Do your answers to this question support this advice?Answer: ( please see slides 13-31 of module 6 )。

一、名词解释1、Gross Domestic Product2、Real interest rate3、Financial intermediaries4、Crowding out5、Multiplier effect二、简答题1、What is Potential GDP? Does potential GDP remain constant over time?2、How do banks create Money?三、图形题1、用图形表示通货膨胀的产生2、解释298页图16.7四、计算题1、23页1.10[Related to Solved Problem8.1 on page 240]Suppose thata simple economy produces only four goods:shoes, hamburgers, shirts,and cotton.Assume that all the cotton is used in the production of e the information in2、25页3.9Use the data in the following table to calculate the GDP deflator for each year(values are in billions of dollars):Which year from 2009to 2012 saw the largest percentage increase in the price level, as measured by changes in the GDP deflator ?Briefly explain.3、59页4.8Consider a simple economy that produces only three products:haircuts, hamburgers, and e the information in the following table to calculate the inflation4、283页4.4[Related to Solved Problem15.4 on page 506]Use the graph to answer the following questions.a.If the Fed does not take any policy action,what will be the level of real GDP and the price level in 2017?b.If the Fed wants to keep real GDP at its potential level in 2017, should it use an expansionary policy or a contractionary policy?Should the trading desk be buying Treasury bills or selling them?c.If the Fed takes no policy action ,what will be the inflation rate in 2017?If the Fed uses monetary policy to keep real GDP at its full-employment level, what will be the inflation rate in 2017?。

英⽂版宏观经济典型例题附带答案15页Macroeconomics 1、2、3、4、Abby consumes only apples. In year 1, red apples cost 1 dollar each, green apples cost 2 dollar each, and Abby buys 10 red apples. In year 2, red apples cost 2 dollar, green apples cost 1 dollar, and Abby buys 10 green apples./doc/bbf2dd6ea100a6c30c22590102020740bf1ecd5c.html pute a consumer price index for apples for each year. Assume that year 1isthe base year in which the consumer basket is fixed. How does your index change from year 1 to year 2/doc/bbf2dd6ea100a6c30c22590102020740bf1ecd5c.html pute Abby’s nominal spending on apples in each year. How does it change fromyear 1 to year 2/doc/bbf2dd6ea100a6c30c22590102020740bf1ecd5c.html ing year 1 as the base year, compute Abby’s real spending on apples in eachyear. How does it change from year 1 to year 2d.Defining the implicit price deflator as nominal spending divided by real spending,compute the deflator for each year. How does the deflator change from year 1 to year 2Suppose that Abby is equally happy eating red or green apples. How much has the true cost of living increased for Abby Compare this answer to your answers to parts (a)and (d). What does this example tell you about Laspeyres and Paasche price indexesa.According to the CPI(消費物價指數), prices have doubled.b. N-spending is the total value of output produced in each year. In Y1 and Y2, Abbybuys 10 apples for $1 each, so her N-spending remains constant at $10.c. R-spending is the total value of output produced in each year valued at the pricesprevailing in Y1,the base year,her R-spending equals her N-spending of $10. In year 2, she consumes 10 green apples that are each valued at their Y1 price of $2, so her real spending is $20.Hence, Abby’s real spending rises from $10 to $20.d.Thus, the implicit price deflator suggests that prices have fallen by half.e. If Abby thinks of red apples and green apples as perfect substitutes, then the cost of living in this economy has not changed.According to the CPI, however, the cost of living has doubled. In contrast to the CPI, the implicit price deflator estimates the cost of living has halved.Thus, the CPI, a Laspeyres index, overstates the increase in the cost of living and the deflator, a Paasche index, understates it.This chapter of the text discusses the difference between Laspeyres and Paasche indices in more detail.5、6、Suppose that an economy’s production function is Cobb-Douglas with parameter α=.0.3a. What fractions of income do capital and labor receiveb. Suppose that immigration increases the labor force by 10 percent. What happen to total output The rental price of capital The real wagec. Suppose that a gift of capita form abroad raises the capital stock by 10 percent. What happens to total output(in percent). The rental price of capital The real waged. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output The rental price of capital The real wage7、Suppose that the money demand function takes the form(/)(,)/(5)d M P L i Y Y i ==a. If output grows at rate g, at what rate will the demand for real balances grow(assuming constant nominal interest rates)b. What is the velocity of money in this economyc. If inflation and nominal interest rates are constant, at what rate, if any, will velocity growd.How will a permanent increase in the level of interest rates affect the level of velocity How will it affect the subsequent growth rate of velocity8、Consider an economy with the following Cobb-Douglas production function:123Y K LThe economy has 1000 units of capital and a labor force of 1000 workers.a.Derive the equation describing labor demand in this economy as a function of the real wage and the capital stock.b.If the real wage can adjust to equilibrate labor supply and labor demand,what is the real wage In this equilibrium, what are employment, output, and the total amount earned by workersc.Now suppose that Congress, concerned about the welfare of the workingclass, passes a law requiring firms to pay workers a real wage of 1 unit of output. How does this wage compare to the equilibrium wage d.Congress cannot dictate how many workers firm hire at the mandated wage.Given this fact, what are the effects of this law Specifically, what happens to employment, output and the total amount earned by workerse.Will Congress succeed in its goal of helping the working class Explain.f.Do you think that this analysis provides a good way of thinking abouta minimum-wage law Why or why not9、One country , A, the capital share of GDP is 30 percent, the average growth in output is 3 percent per year, the depreciation rate is about 4 percent per year, and the capital-output rate is about . Suppose that the production function is Cobb-Douglas, so the capital share is constant, and that country A has been in a steady state ;.a. What must the saving rate be in the initialb. Compare the capital-output ratio at the Golden Rule steady state to thecapital-output ratio in the initial state.c. What must the saving rate be to reach the Golden Rule steady state Doses it needto be increased or decreased What policies might country A purse10、Two countries, Richland and Poorland, are described by the Solow growth model.They have the same Cobb-Douglas production function , 1(,)F K L AK L αα-=, but withdifferent quantities of capital and labor,. Richland save 32 percent of its income, while Poorland saves 10 percent. Richland has population growth of 1 percent per year, while Poorland has population growth of 3 percent.(The numbers in this problem are chosen to be approximately realistic descriptions of rich and poor nations.) Both nations have technological progress at rate of 2 percent per year and depreciation at a rate of 5 percent per year.a. What is the per-worker production function f(k)b. Solve for the ratio of Richland’s steady -state income per worker to Poorland’s.(Hint: The parameter αwill play a role in your answer.)c. If the Cobb-Douglas parameter α takes the conventional value of about 1/3, how much higher should income per worker in Richland compared to Poorlandd.Income per worker in Richland is actually 16 times income per worker in Poorland.Can you explain this fact by changing the value of parameter What must it be Can you think of any way of justifying such avalue for this parameter How else might you explain the larger difference in income between Richland and Poorland8、Suppose that consumption depends on the level of real money balance ( on the grounds that real money balances are part of wealth). Show that if real money balances depend on the nominal interest rate, then an increase in the rate of money growth affects consumption, investment, and the real interest rate. Does the nominal interest rate adjust more than one-for-one or less than one-for-one to expected inflationThis deviation from the classical dichotomy and the Fisher effect is called the Mundell-Tobin effect. How might you decide whether the Mundell-Tobin effect is important in practi概率⼩：3、Consider how each of the following events is likely to affect real GDP. Do you think the change in real GDP reflects a similar change in economic well-beinga. A hurricane in Florida forces Disney World to shut down for a month.b. Increased hostility between unions and management sparks a rash of strikesc. Firms throughout the economy experience falling demand, causing them to lay offworkers.d. More high-school students drop out of school to take jobs mowing lawns.4、When the government subsidizes investment, such as with an investment tax credit,the subsidy often applies to only some types of investment. This question asks you to consider the effect of such a change. Suppose there are two types of investment in the economy: business investment and residential investment. And suppose that the government institutes an investment tax credit only for business investment.a. How does this policy affect the demand curve for business investment The demandcurve for residential investmentb. Draw the economy’s supply and demand for loanable funds. How does this policyaffect the supply and demand for loanable funds What happens to the equilibrium interest ratec. Compare the old and the new equilibria. How does this policy affect the totalquantity of investment The quantity of residential investment。