AP Macroeconomics Unit 5 & 6 Review Session

Size: px
Start display at page:

Download "AP Macroeconomics Unit 5 & 6 Review Session"

Transcription

1 AP Macroeconomics Unit 5 & 6 Review Session Stabilization Policies 1. Use the AD-AS model to answer this question. The economy of Macroland is initially in long-run equilibrium. Then the central bank of Macroland decides to reduce interest rates through an open-market operation. a. Draw a graph representing the initial situation in Macroland. In your graph, be sure to include the SRAS, LRAS, and AD. Mark the equilibrium aggregate price and aggregate output levels, as well as potential output. b. Draw a graph of the money market depicting Macroland s initial situation before the central bank engages in monetary policy, as well as the effect of the monetary policy actions. Be sure to indicate the equilibrium as well as the new equilibrium after the monetary policy. c. How does this monetary policy action affect the aggregate economy in the short run? Explain you answer verbally while also including a graph of the AD-AS model to illustrate your answer. When the Fed reduces interest rates through an open-market purchase of T-bills, AD increases and shifts to the right. In the short-run, output and price level increases. d. How did this monetary policy action affect the aggregate economy in the long run? The economy must return to producing its potential output. This will occur as SRAS shifts to the left and nominal wages rise. As SRAS shifts back, this will eliminate the inflationary gap, and restore economy back to potential output level, and lead to even higher price level.

2 2. Explain how the Fed s actions can affect the economy. Be sure to include an explanation about how the Fed can affect the economy when it is in recession or when it is producing at an aggregate output level that is greater than the potential output level. The Fed can affect the economy through its open-market operations. When the Fed expands the money supply by purchasing T-bills, the interest rate falls, holding everything else constant. As the interest rate declines, this acts as a a stimulus to investment and consumer spending and, therefore, as a stimulus to AD. Thus, open-market purchases typically are used to stimulate the economy; when the economy is producing below the potential output level (i.e. the economy is in a recession), the Fed has the potential to alter this output level via active monetary policy. Conversely, when the economy is producing at a level greater than the potential output level, the Fed can engage in open-market sales that will effectively lead to higher interest rates and lower investment and consumer spending, thereby causing the level of AD to fall, holding everything else constant. 3. Expansionary monetary policy typically reduces the nominal interest rate, and this in turn acts as a stimulus for aggregate demand. Why does this not work in the case of a liquidity trap? Explain and use a graph to illustrate your answer. In the case of a liquidity trap, the nom interest rate initially is zero and thus cannot fall any lower despite expansionary monetary policy. The following graph illustrates a liquidity trap, in which MS is the nominal money supply, MD is the nominal money demand. Inflation 4. Joe lends Mary $1,000 for the year. They agree that Mary will repay the full $1,000 at the end of the year and in addition, they agree that Mary will pay Joe $50 in interest payments. a. What is the nominal interest rate that Mary and Joe have agreed to in this contract? 5%, since the $50 interest payment represents 5% of the $1,000 loan. b. If Joe and Mary both anticipate that inflation will be 3% for the year, what real interest rate is each of them trying to achieve in their loan contract? Real interest rate = nom interest rate expected inflation. 5% -- 3% = 2% c. Suppose the actual inflation rate for the year is 2%. Who benefits more from this inflation rate? Explain your answer. Lender Joe is gaining more payment than expected; Mary is paying back more dollars in real terms. d. Suppose the actual inflation rate for the year is 4%. Who benefits more from this inflation rate? Explain your answer. Borrower Joe is earning less than expected; Mary is paying back fewer dollars in real terms. e. If the actual inflation rate equals the nominal interest rate, how does this affect the outcome of this loan contract?

3 If actual inflation rate equals nominal interest rate, then the real interest rate equals zero. The lender earns no real return on the money he or she has lent out, while the borrower is paying no real cost for the use of the money. The borrower wins, while the lender is hurt under this scenario. f. Why are lenders more likely to supply loanable funds when the inflation rate is stable? No, if you knew that the actual inflation rate was going to be and it equaled the nominal interest rate for the loan, you would refuse to be a lender since the real return you would earn on the loan would be zero. If you made the loan, you would be giving up use of your funds for the period of the loan without receiving any real compensation for the use of those funds. 5. Suppose that both borrowers and lenders anticipate correctly that the inflation rate will increase 5 percentage points over the next year. a. What do you know will happen to the real interest rate? The real interest rate will be unaffected by the anticipated inflation rate because both consumers and suppliers in the loanable funds market will take this anticipated inflation into account. b. What do you know will happen to the nominal interest rate? The nominal interest rate will increase by 5% points due to the increase in the anticipated rate of inflation of 5% points. c. Describe the effects of this anticipated inflation in the loanable funds market. Both the demand and supply curves in the loanable funds market will shift upward (demand will shift to the right and supply will shift to the left) by the amount of the anticipated inflation rate, leaving the equilibrium quantity of loanable funds unchanged in the market while increasing the nominal interest rate by the amount of the anticipated inflation. This is the Fisher Effect! The Phillips Curve 6. Draw a short-run Phillips curve for an expected rate of inflation of 0, a short-run Phillips curve with an expected rate of inflation of 2%, and the long-run Phillips curve. What does the negative portion of the vertical axis on this graph represent? The graph will show a SRPC with a y-intercept of zero. The graph will show another SRPC with a y-intercept of 2. The negative portion of the vertical axis is measuring negative rates of inflation (deflation). 7. Assume the economy is in long-run equilibrium with an expected inflation rate of 3% and an unemployment rate of 8%. a. Draw the short-run and long-run Phillips curves, and show the long-run equilibrium. The LRPC will be vertical at 8% on the horizontal axis. Make a SRPC with the curve intercepting with the LRPC at 3% inflation. b. Suppose expected inflation rises to 4%. Show on your graph, and explain what will happen to the short-run Phillips curve and the long-run equilibrium. Expected inflation will turn into actual inflation and the SRPC will shift up to 4% inflation. 8. Suppose you are given the following information about the economy of Funland. Unemployment Rate Inflation Rate Expected Inflation Rate 1% 6% 2% a. Draw a graph with the unemployment rate on the horizontal axis and the inflation rate on the vertical axis. On this graph, represent the above short-run Phillips curve (SRPC) based on expected inflation of 2%. Label this SRPC 1. Assume this curve is linear.

4 b. Given the SRPC 1, at what rate of unemployment will inflation equal 0% for this economy? If expected inflation is 2%, then how will this economy adjust over time to this expected inflation rate? Illustrate this short-run adjustment on a graph and then explain your answer. Given SRPC₁, inflation is )% when the unemployment rate is 7%. Over time, people will come to expect inflation of 2%, causing the SRPC to shift up by this amount of people s expectations of inflation to rise to 4%. The new SRPC will be SRPC₂, as illustrated in the following graph. Of course, over time this will cause SRPC₂ to shift up reflecting higher inflationary expectations. c. If policy makers could effectively change inflationary expectations such that people expected inflation to be 0%, then what would be this country s NAIRU? Illustrate this on a correctly labeled graph and then explain your answer. This country s NAIRU would be 5%. Effectively, we are looking for the SRPC that has inflationary expectations of 0%, which we can illustrate as a downward shift of SRPC₁ where at any given unemployment rate, the inflation rate is reduced by 2%. We can illustrate this in the following figure as SRPC₀. Remember, that the expected inflation rate for SRPC₂, is 4%, the expected inflation rate for SRPC₁ is 2% and the expected inflation rate for SRPC₀ is 0%. d. For the economy of Funland, what will the long-run Phillips curve (LRPC) look like and where will it be located? Use a graph to explain and illustrate your answer. For Funland the LRPC will be a vertical line at 5% unemployment rate, as illustrated in the following figure.

5 Economic Growth 9. Show economic growth using the PPC and AD-AS graphs. The PPC curve with shift out and the LRAS curve will shift to the right. 10. Complete the following chart to show the effects of the following changes on the PPC and the LRAS (shift left, shift right, or no change). Scenario PPC LRAS The economy s physical capital stock decreases due to depreciation. Government education programs lead to increases in human capital. Research and development spending lead to technological progress. A war reduces a country s political instability. 11. Suppose real GDP per capita in Funland is $10,000 in Economists there predict steady increases in real GDP of 7% per year for the foreseeable future. a. According to the Rule of 70, how many years will it take for Funland s real GDP per capita to double? Ten years because the Rule of 70 syas the number of years it takes for a variable to double is approximately equal to 70 divided by the annual growth rate of the variable. b. Complete a table like the one below in which you compute the values for real GDP to verify your answer in part (a) above. Real GDP per capita 2009 $10, , , , etc. 12,250 c. Is your value for real GDP per capita in the final year equal to $20,000? If not, does this surprise you? Explain your answer. The value of real GDP per capita for 2019 is $19,672, which is less than the estimated $20,000. This is not

6 surprising because the Rule of 70 is an estimation of the number of years it takes a variable to double rather than a numerically precise calculation. 12. How does the classical model of the price level differ from the Keynesian model? Rise in money supply does not equal a rise in Real GDP in the long run, since price level rises as well by the same percentage Classical Model of Price Level Since money supply and price level rise together, the Real Quantity of Money (M/P) stays at the original level (Wages and prices are more responsive to money supply changes in periods of high inflation). With the Keynesian model, we don t live in the long-run, we live in the short-run. 13. You are given the following information about the country of Macronesia. Nominal GDP CPI Real GDP Population 2009 $10 billion 100 $10 billion 1.0 million billion billion 1.05 million billion billion 1.08 million a. What is the base year for the economy represented in the previous table? 2009 How did you identify the base year? The base year is that year with the CPI value of 100. b. Calculate the missing values in the table, and then round to the nearest billion: e.g., 14,829,000,000 would be rounded to 14.8 billion. c. Use the completed table from part (b) to calculate the missing values in the following table. You will find it helpful to define real GDP in millions (for example, 14.8 billion to 14,800 million) because population is expressed in millions. Real GDP per capita 2009 $10, , ,435 d. Let s compare the percentage changes in some of the variables we are working with in this problem. Use the following table to organize your calculations. Percentage change in nominal GDP Percentage change in real GDP Percentage change in population Percentage change in real GDP per capita % 0% 5% -4.8% % 1.90% 2.90% -0.93% e. In order for real GDP per capita to increase over time, what must be true about the relationship between the percentage change in real GDP and the percentage change in population? The percentage change in real GDP must be greater than the percentage change in population for real GDP per capita to increase over time. f. Why do we measure long run growth using real GDP per capita? Real GDP per capita allows us to track the increase in the quantity of goods and services available in our economy rather than just the effects of a rising price level. 14. Why are increases in productivity important? Sustained growth in real GDP per capita occurs only when the amount of output produced by the average worker increases steadily. The term labor productivity, or productivity for short, is used to refer to output per worker. In general, overall real GDP can grow because of population growth, but any large increase in real GDP per capita must be the result of increased output per worker. Therefore, it must be due to higher productivity. 15. What are the three major determinants of productivity? Physical capital Increases in manufactured goods used to produce other goods & services Human capital Improvement in education, knowledge & health Technology Progress in technical means for production 16. What is meant by diminishing returns on physical capital? Increases in amount of physical capital leads to smaller increases in productivity

7 17. Suppose there are two countries, Macroland and Pacifica, that currently have real GDP per capita of $10,000 and $15,000, respectively. Furthermore, suppose Macroland s economy has an average annual growth rate of 2%, while Pacifica s has an average annual growth rate of 1.4% a. Compute real GDP per capita for both Macroland and Pacifica 50 years from now. = ($10,000)( )⁵⁰ or $26,916. b. Compute real GDP per capita for both Macroland and Pacifica 100 years from now. = ($15,000)( )⁵⁰ or $30,060. c. Initially, Macroland s real GDP per capita is 67% of Pacifica s real GDP per capita. = ($10,000)( )ⁱ⁰⁰ or $72,446. After 50 years, what is the relationship of Macroland s real GDP per capita to Pacifica s real GDP per capita in percentage terms? = ($15,000)( ) ⁱ⁰⁰ or $60,240. What is the relationship after 100 years? In 50 years, the ratio of Macroland s real GDP per capita to Pacifica s real GDP per capita in percentage terms will be 89.5%, while in 100 years, it will be 120.3%. 18. Many people fear that the world may run out of important resources, such as oil, and that this depletion of a vital resource will bring an end to economic growth. Why do many economists disagree with this particular perspective? Economists argue that vital resources, as they grow scarce, will command increasingly higher prices. These higher prices will cause people to conserve resources, and their scarcity will spur the development of alternatives to replace the scarce, but vital, resources. 19. Economists argue that the problems presented by widespread environmental degradation can be resolved only through governmental intervention, as well as intergovernmental cooperation. Why do they hold this view? Climate destruction arises from widespread economic growth, and this destruction is an example of a negative externality. Negative externalities arise when a market fails to include all the costs of producing a good in the calculation of the good s price. Many goods produced today also produce significant pollution, and the market does not internalize these costs of pollution. Without government intervention, firms and individuals do not have any incentive to reduce negative externalities. Reducing pollution and the climate destruction that accompanies it will require the cooperation of governments in the imposition of some form of market-based incentives: for example, both a carbon tax and a cap and trade system would reduce the amount of carbon emitted into the air. Debt-GDP Ratio 20. Uplandia is concerned about its debt-gdp ratio and the projections about this ratio over the next five years. The following table gives data about Uplandia s real GDP for this year (year 1) and its projected real GDP for the next five years. Real GDP is projected to grow 3% per year over the next five years as is the government deficit. a. Fill in the missing cells in the table. Real GDP (millions of Debt (millions of (millions of Debt (percentage of real GDP) (percentage of real GDP) 1 $800 $200 $20 25% 2.5% b. Describe in words what is happening to the government s debt-gdp ratio and deficit-gdp ratio when real GDP and the government deficit grow at the same rate. When the real GDP and the government deficit grow at the same rate, the deficit-gdp ratio stays constant at 2.5%, while the debt-gdp ratio increases from 25% to 33.36% in five years. Suppose Uplandia decides to reduce government spending over the next five years. This results in government deficit growing 1% per year over the next five years while real GDP continues to grow 3% per year. c. Fill in the table below based on these projections. Real GDP (millions of Debt (millions of (millions of Debt (percentage of real GDP) (percentage of

8 real GDP) 1 $800 $200 $20 25% 2.5% d. Describe in words what is happening to the government s debt-gdp ratio and deficit-gdp ratio when real GDP grows at a faster rate than the deficit. When the real GDP grows at 3% per year and the government deficit grows at 1% per year, the deficit-gdp ratio falls from 2.5% to 2.26% in five years, while the debt-gdp ratio increases from 25% to 32.67% in five years. Suppose Uplandia passes legislation reducing its taxes while simultaneously deciding to go to war. Its economists project real GDP will continue to grow at 3% per year bur now, due to these policy decisions, the government deficit is projected to grow at 10% per year. The results of these changes are shown in the following table. Real GDP (millions of Debt (millions of (millions of Debt (percentage of real GDP) (percentage of real GDP) 1 $800 $200 $20 25% 2.5% e. Describe in words what is happening to the government s debt-gdp ratio and deficit-gdp ratio when real GDP grows at a slower rate than the deficit. When real GDP grows at 3% per year and the deficit grows at 10% per year, the deficit-gdp ratio increases from 2.5% to 3.47% over five years while the debt-gdp ratio increases from 25% to 36.05% over five years. Adapted from Strive for a 5: Preparing for the Macroeconomics AP Examination (Margaret Ray and David Mayer)

Archimedean Upper Conservatory Economics, November 2016 Quiz, Unit VI, Stabilization Policies

Archimedean Upper Conservatory Economics, November 2016 Quiz, Unit VI, Stabilization Policies Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The federal budget tends to move toward _ as the economy. A. deficit; contracts B. deficit; expands C.

More information

Archimedean Upper Conservatory Economics, October 2016

Archimedean Upper Conservatory Economics, October 2016 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to: A. the proportion of consumer spending as a function of

More information

EC202 Macroeconomics

EC202 Macroeconomics EC202 Macroeconomics Koç University, Summer 2014 by Arhan Ertan Study Questions - 3 1. Suppose a government is able to permanently reduce its budget deficit. Use the Solow growth model of Chapter 9 to

More information

Economics 102 Summer 2014 Answers to Homework #5 Due June 21, 2017

Economics 102 Summer 2014 Answers to Homework #5 Due June 21, 2017 Economics 102 Summer 2014 Answers to Homework #5 Due June 21, 2017 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the

More information

Questions and Answers. Intermediate Macroeconomics. Second Year

Questions and Answers. Intermediate Macroeconomics. Second Year Questions and Answers Intermediate Macroeconomics Second Year Chapter2 Q1: MCQ 1) If the quantity of money increases, the A) price level rises and the AD curve does not shift. B) AD curve shifts leftward

More information

Economics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary

Economics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level

More information

Economics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary

Economics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level

More information

FINAL EXAM STUDY GUIDE

FINAL EXAM STUDY GUIDE AP MACROECONOMICS-2017 Name: FINAL EXAM STUDY GUIDE Instructions: DUE: Day of FINAL EXAM => Friday 12/22 nd (1 st & 2 nd Periods) Thursday 12/21 st (4 th period) Section 1: PRODUCTION POSSIBLITIES FRONTIER

More information

ophillips Curve Multiple Choice Identify the choice that best completes the statement or answers the question.

ophillips Curve Multiple Choice Identify the choice that best completes the statement or answers the question. ophillips Curve Multiple Choice Identify the choice that best completes the statement or answers the question. 1. If the natural rate of unemployment is 5%, and the actual rate of unemployment is 4%: A.

More information

Y C T

Y C T Economics 102 Fall 2017 Homework #5 Due 12/12/2017 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

More information

FINAL EXAM STUDY GUIDE

FINAL EXAM STUDY GUIDE AP MACROECONOMICS-2018 Name: FINAL EXAM STUDY GUIDE Instructions: DUE: Day of FINAL EXAM => Friday 12/21 st (1 st & 2 nd Periods) Thursday 12/20 th (4 th period) Section 1: PRODUCTION POSSIBLITIES FRONTIER

More information

a) Calculate the value of government savings (Sg). Is the government running a budget deficit or a budget surplus? Show how you got your answer.

a) Calculate the value of government savings (Sg). Is the government running a budget deficit or a budget surplus? Show how you got your answer. Economics 102 Spring 2018 Answers to Homework #5 Due 5/3/2018 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework

More information

1) List the 3 functions of money: 4) The Federal Reserve is the bank of the USA. It is considered from the Government and has 2 primary goals:

1) List the 3 functions of money: 4) The Federal Reserve is the bank of the USA. It is considered from the Government and has 2 primary goals: AP ECONOMICS---Ippolito 2017 Study Guide for Monetary Policy (unit #4) Name: Due Friday December 8 th Multiple Choice Test (25 questions, 100 pts) 1) List the 3 functions of money: 2) What is liquidity?

More information

chapter: Solution Fiscal Policy

chapter: Solution Fiscal Policy S169-S182_Krug2e_Macro_PS_Ch13.qxp 2/25/09 8:02 PM Page S-169 Fiscal Policy chapter: 29 13 ECONOMICS MACROECONOMICS 1. The accompanying diagram shows the current macroeconomic situation for the economy

More information

GO ON TO THE NEXT PAGE. -8- Unauthorized copying or reuse of any part of this page is illegal.

GO ON TO THE NEXT PAGE. -8- Unauthorized copying or reuse of any part of this page is illegal. 30. Which of the following is most likely to be caused by an adverse supply shock? (A) Structural unemployment (B) Frictional unemployment (C) Demand-pull inflation (D) Cost-push inflation (E) Deflation

More information

EXAM PREP WORKSHOP # 5 > COMBINED MONETARY AND FISCAL POLICY

EXAM PREP WORKSHOP # 5 > COMBINED MONETARY AND FISCAL POLICY LIGHTHOUSE CPA SOCIAL SCIENCES DEPARTMENT AP ECONOMICS EXAM PREP WORKSHOP # 5 > COMBINED MONETARY AND FISCAL POLICY NAME : DATE : Review Of Tools Of Monetary And Fiscal Policy : 1. Both monetary and fiscal

More information

a. Fill in the following table (you will need to expand it from the truncated form provided here). Round all your answers to the nearest hundredth.

a. Fill in the following table (you will need to expand it from the truncated form provided here). Round all your answers to the nearest hundredth. Economics 102 Summer 2015 Answers to Homework #4 Due Monday, July 13, 2015 Directions: The homework will be collected in a box before the lecture. Please place your name on top of the homework (legibly).

More information

Practice Problems 30-32

Practice Problems 30-32 Practice Problems 30-32 1. The budget balance is calculated as: A. T G TR B. T + G TR C. T G + TR D. T + G + TR E. TR T G 2. The government budget balance equals: A. Taxes + Government purchases + Government

More information

Intermediate Macroeconomic Theory / Macroeconomic Analysis (ECON 3560/5040) Midterm Exam (Answers)

Intermediate Macroeconomic Theory / Macroeconomic Analysis (ECON 3560/5040) Midterm Exam (Answers) Intermediate Macroeconomic Theory / Macroeconomic Analysis (ECON 3560/5040) Midterm Exam (Answers) Part A (15 points) State whether you think each of the following questions is true (T), false (F), or

More information

ECON Drexel University Summer 2008 Assignment 2. Due date: July 29, 2008

ECON Drexel University Summer 2008 Assignment 2. Due date: July 29, 2008 ECON 202-001 Drexel University Summer 2008 Assignment 2 Due date: July 29, 2008 Instructor: Yuan Yuan Name This homework has up to 10 points bonus. Question 1 (40 points, 2 points each): MULTIPLE CHOICE.

More information

AP Macroeconomics review. By: Maria Villasmil. Economis: The study of how people, firms, and government make decisions when faced with scarcity.

AP Macroeconomics review. By: Maria Villasmil. Economis: The study of how people, firms, and government make decisions when faced with scarcity. AP Macroeconomics review By: Maria Villasmil Economis: The study of how people, firms, and government make decisions when faced with scarcity. Factors of Production: 1)Land: natural resources 2) Labor:

More information

Disposable income (in billions)

Disposable income (in billions) Section 4 version 2 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. An increase in the MPC: A. increases the multiplier. B. shifts the autonomous investment

More information

AP Econ Practice Test Unit 5

AP Econ Practice Test Unit 5 DO NOT WRITE ON THIS TEST! AP Econ Practice Test Unit 5 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to:

More information

Economics 102 Fall 2015 Answers to Homework #4 Due Monday, November 9, 2015

Economics 102 Fall 2015 Answers to Homework #4 Due Monday, November 9, 2015 Economics 12 Fall 215 Answers to Homework #4 Due Monday, November 9, 215 Directions: The homework will be collected in a box before the large lecture. Please place your name, TA name and section number

More information

2. Why is it important for the Fed to know the size and the rate of growth of the money supply?

2. Why is it important for the Fed to know the size and the rate of growth of the money supply? KOFA HIGH SCHOOL SOCIAL SCIENCES DEPARTMENT AP ECONOMICS EXAM PREP WORKSHOP # 4 > MONEY, MONETARY POLICY, AND ECONOMIC STABILITY NAME : DATE : All About The Ms : 1. What are the three basic functions of

More information

AP Macroeconomics. Scoring Guidelines

AP Macroeconomics. Scoring Guidelines 2018 AP Macroeconomics Scoring Guidelines College Board, Advanced Placement Program, AP, AP Central, and the acorn logo are registered trademarks of the College Board. AP Central is the official online

More information

EXAM PREP WORKSHOP # 5 > COMBINED MONETARY AND FISCAL POLICY

EXAM PREP WORKSHOP # 5 > COMBINED MONETARY AND FISCAL POLICY LIGHTHOUSE CPA SOCIAL SCIENCES DEPARTMENT AP ECONOMICS EXAM PREP WORKSHOP # 5 > COMBINED MONETARY AND FISCAL POLICY NAME : DATE : Review Of Tools Of Monetary And Fiscal Policy : 1. Both monetary and fiscal

More information

Economic Policy. Sherif Khalifa. Sherif Khalifa () Economic Policy 1 / 23

Economic Policy. Sherif Khalifa. Sherif Khalifa () Economic Policy 1 / 23 Sherif Khalifa Sherif Khalifa () Economic Policy 1 / 23 Monetary Policy Definition Monetary policy is the setting of the money supply by policy makers in the central bank. Money supply is determined by

More information

Discussion Handout 7 7/12/2016 TA: Anton Babkin

Discussion Handout 7 7/12/2016 TA: Anton Babkin Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level and the quantity of aggregate output demanded by

More information

Practice Problems

Practice Problems Practice Problems 33-34-36 1. The inflation tax is: A. the higher tax paid by individuals whose incomes are indexed to inflation. B. the taxes paid during periods of inflation. C. the reduction in the

More information

a. What is your interpretation of the slope of the consumption function?

a. What is your interpretation of the slope of the consumption function? Economics 102 Spring 2017 Homework #5 Due May 4, 2017 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

More information

L K Y Marginal Product of Labor (MPl) Labor Productivity (Y/L)

L K Y Marginal Product of Labor (MPl) Labor Productivity (Y/L) Economics 102 Summer 2017 Answers to Homework #4 Due 6/19/17 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework

More information

A. What is the value of the tax increase multiplier if the MPC is.80? B. Consumption changes by 400 and disposable income by 100. What is the MPC?

A. What is the value of the tax increase multiplier if the MPC is.80? B. Consumption changes by 400 and disposable income by 100. What is the MPC? KOFA HIGH SCHOOL SOCIAL SCIENCES DEPARTMENT AP ECONOMICS EXAM PREP WORKSHOP # 3 > AGGREGATE DEMAND AND SUPY NAME : DATE : 1. Figure out the following multiplier questions : A. What is the value of the

More information

Econ 102 Exam 2 Name ID Section Number

Econ 102 Exam 2 Name ID Section Number Econ 102 Exam 2 Name ID Section Number 1. In a closed economy government spending was $30 billion, consumption was $70 billion, taxes were $20 billion, and GDP was $110 billion this year. Investment spending

More information

Inflation and the Phillips Curve

Inflation and the Phillips Curve CHAPTER 33 Inflation and the Phillips Curve The first few months or years of inflation, like the first few drinks, seem just fine. Everyone has more money to spend and prices aren t rising quite as fast

More information

Unit 3: Aggregate Demand and Supply and Fiscal Policy

Unit 3: Aggregate Demand and Supply and Fiscal Policy Unit 3: Aggregate Demand and Supply and Fiscal Policy 1 Aggregate Demand 2 What is Aggregate Demand? Aggregate means added all together. When we use aggregates we combine all prices and all quantities.

More information

A. unchanged decrease B. surplus decrease C. unchanged no change D. surplus increase E. unchanged increase A. A B. B C. C D. D E. E.

A. unchanged decrease B. surplus decrease C. unchanged no change D. surplus increase E. unchanged increase A. A B. B C. C D. D E. E. AP Macroeconomics Test (Answers on last Page) 1. Which of the following correctly describes the components of Aggregate Demand? A. Consumption expenditures + Investment expenditures + Government expenditures

More information

download instant at

download instant at Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The aggregate supply curve 1) A) shows what each producer is willing and able to produce

More information

1. Consider the aggregate production functions for Wisconsin and Minnesota: Production Function for Wisconsin

1. Consider the aggregate production functions for Wisconsin and Minnesota: Production Function for Wisconsin Economics 102 Fall 2017 Homework #4 Due 11/14/2017 Directions: The homework will be collected in a box before the lecture Please place your name, TA name and section number on top of the homework (legibly)

More information

All the graphs (and some other stuff) you need to know for Macro

All the graphs (and some other stuff) you need to know for Macro All the graphs (and some other stuff) you need to know for Macro IGNORE THE LAFFER CURVE! Correctly drawing and labeling graphs is critical in answering the free response questions (FRQs). For an interactive

More information

Suggested Answers Problem Set # 5 Economics 501 Daniel

Suggested Answers Problem Set # 5 Economics 501 Daniel 1. Use graphs of IS-LM-FE and AS-AD models to explain why RBC models with productivity shocks and money-supply shocks fail to explain the pro-cyclicality of money growth and inflation. Inflation falls

More information

a. What is your interpretation of the slope of the consumption function?

a. What is your interpretation of the slope of the consumption function? Economics 102 Spring 2017 Homework #5 Due May 4, 2017 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

More information

Introduction to Economic Fluctuations

Introduction to Economic Fluctuations Chapter 9 Introduction to Economic Fluctuations slide 0 In this chapter, you will learn facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECON 3312 Mcroeconomics Exam 2 Fall 2016 Prof. Crowder Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If output is currently 1000 below full

More information

Butter Produced Price of Butter $5 40 $

Butter Produced Price of Butter $5 40 $ 1) Gross domestic product is calculated by summing up A) the total quantity of goods and services in the economy. B) the total quantity of goods and services produced in the economy during a period of

More information

Consider the aggregate production function for Dane County:

Consider the aggregate production function for Dane County: Economics 0 Spring 08 Homework #4 Due 4/5/7 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on top of the homework (legibly).

More information

1. Consider the aggregate production functions for Wisconsin and Minnesota: Production Function for Wisconsin

1. Consider the aggregate production functions for Wisconsin and Minnesota: Production Function for Wisconsin Economics 102 Fall 2017 Answers to Homework #4 Due 11/14/2017 Directions: The homework will be collected in a box before the lecture Please place your name, TA name and section number on top of the homework

More information

Boğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS FINAL , Saturday 10:00 TYPE A

Boğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS FINAL , Saturday 10:00 TYPE A NAME: NO: SECTION: Boğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS FINAL 21.05.2016, Saturday 10:00 TYPE A Turn off your cell phone and put it away. During

More information

INFLATION, JOBS, AND THE BUSINESS CYCLE*

INFLATION, JOBS, AND THE BUSINESS CYCLE* Chapt er 12 INFLATION, JOBS, AND THE BUSINESS CYCLE* Key Concepts Inflation Cycles1 In the long run inflation occurs because the quantity of money grows faster than potential GDP. Inflation can start as

More information

Objectives for Chapter 24: Monetarism (Continued) Chapter 24: The Basic Theory of Monetarism (Continued) (latest revision October 2004)

Objectives for Chapter 24: Monetarism (Continued) Chapter 24: The Basic Theory of Monetarism (Continued) (latest revision October 2004) 1 Objectives for Chapter 24: Monetarism (Continued) At the end of Chapter 24, you will be able to answer the following: 1. What is the short-run? 2. Use the theory of job searching in a period of unanticipated

More information

Midsummer Examinations 2011

Midsummer Examinations 2011 Midsummer Examinations 2011 No. of Pages: 7 No. of Questions: 37 Subject ECONOMICS Title of Paper MACROECONOMICS Time Allowed Two Hours (2 Hours) Instructions to candidates This paper is in two sections.

More information

Unit 3: Aggregate Demand and Supply and Fiscal Policy

Unit 3: Aggregate Demand and Supply and Fiscal Policy Unit 3: Aggregate Demand and Supply and Fiscal Policy 1 Demand and Supply Review 1. Define Demand and the Law of Demand. 2. Identify the three concepts that explain why demand is downward sloping. 3. Identify

More information

Tradeoff Between Inflation and Unemployment

Tradeoff Between Inflation and Unemployment CHAPTER 13 Aggregate Supply and the Short-Run Tradeoff Between Inflation and Unemployment Questions for Review 1. In this chapter we looked at two models of the short-run aggregate supply curve. Both models

More information

ECON 1010 Principles of Macroeconomics Solutions to Exam #3. Section A: Multiple Choice Questions. (30 points; 2 pts each)

ECON 1010 Principles of Macroeconomics Solutions to Exam #3. Section A: Multiple Choice Questions. (30 points; 2 pts each) ECON 1010 Principles of Macroeconomics Solutions to Exam #3 Section A: Multiple Choice Questions. (30 points; 2 pts each) #1. In an open economy where government spending was $30 billion, consumption was

More information

Monetary Policy Tools?

Monetary Policy Tools? EQ: What is the Federal Reserve System? In the U.S., the Federal Reserve System was established in 1913 to discharge the function of a central bank and provide a strengthened framework of regulatory control

More information

3. Explain what the APS tells us about people s spending and saving habits.

3. Explain what the APS tells us about people s spending and saving habits. National Income and Price Determination Reading Guide Chapters 9, 10 and 11 Chapter 9: Building the Aggregate Expenditures Model Objective... 1. Explain how the consumption schedule helps us find equilibrium

More information

AP Macroeconomics - Mega Macro Review Sheet Answers

AP Macroeconomics - Mega Macro Review Sheet Answers AP Macroeconomics - Mega Macro Review Sheet Answers 1. The business cycle. 2. Aggregate supply curve (with breakdown of sections). 3. Expansionary ( easy ) monetary policy (Buy bonds, discount rate, reserve

More information

1 of 15 12/1/2013 1:28 PM

1 of 15 12/1/2013 1:28 PM 1 of 15 12/1/2013 1:28 PM Policy tools include Population growth, spending behavior, and invention. Wars, natural disasters, and trade disruptions. Tax policy, government spending, and the availability

More information

EC2105, Professor Laury EXAM 3, FORM A (4/10/02)

EC2105, Professor Laury EXAM 3, FORM A (4/10/02) EC2105, Professor Laury EXAM 3, FORM A (4/10/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each

More information

The Aggregate Demand/Aggregate Supply Model

The Aggregate Demand/Aggregate Supply Model CHAPTER 27 The Aggregate Demand/Aggregate Supply Model The Theory of Economics... is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor to draw

More information

Free Response Answers

Free Response Answers Free Response Answers 1. (1998 #1) The increase in government spending leads to an outward shift in aggregate demand. Given that the economy is at full employment, the price level increases. The effect

More information

Lecture 22. Aggregate demand and aggregate supply

Lecture 22. Aggregate demand and aggregate supply Lecture 22 Aggregate demand and aggregate supply By the end of this lecture, you should understand: three key facts about short-run economic fluctuations how the economy in the short run differs from the

More information

The Influence of Monetary and Fiscal Policy on Aggregate Demand. Lecture

The Influence of Monetary and Fiscal Policy on Aggregate Demand. Lecture The Influence of Monetary and Fiscal Policy on Aggregate Demand Lecture 10 28.4.2015 Previous Lecture Short Run Economic Fluctuations Short Run vs. Long Run The classical dichotomy and monetary neutrality

More information

Archimedean Upper Conservatory Economics, October 2016

Archimedean Upper Conservatory Economics, October 2016 Multiple Choice Identify the choice that best completes the statement or answers the question. Figure 6-2: DVD Market 1. Use the DVD Market Figure 6-2. The figure shows the weekend rental market for DVDs

More information

Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices.

Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices. Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices. Historical background: The Keynesian Theory was proposed to show what could be done to shorten

More information

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Influence of Monetary and Fiscal Policy on Aggregate Demand Chapter 32 The Influence of Monetary and Fiscal Policy on Aggregate Demand Test B 1. Of the effects that help explain why the U.S. aggregate demand curve slopes downward the a. wealth effect is most important

More information

ECON 201: Introduction to Macroeconomics Professor Robert Gordon Final Exam: March 18, 2016

ECON 201: Introduction to Macroeconomics Professor Robert Gordon Final Exam: March 18, 2016 ECON 201: Introduction to Macroeconomics Professor Robert Gordon Final Exam: March 18, 2016 NAME Directions: This test is in two parts, a multiple choice question part and a short-answer part. Use this

More information

AP Macroeconomics Graphical Overview

AP Macroeconomics Graphical Overview AP Macroeconomics Graphical Overview 1. The business cycle. 2. Aggregate supply curve (with breakdown of sections). 3. Expansionary ( easy ) monetary policy (Buy bonds, discount rate, reserve requirement).

More information

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts

7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),

More information

Use the following to answer question 15: AE0 AE1. Real expenditures. Real income. Page 3

Use the following to answer question 15: AE0 AE1. Real expenditures. Real income. Page 3 Chapter 10 1. An example of an autonomous consumption policy is a policy that A) lowers tax rates to stimulate additional consumer spending. B) makes credit more widely available to consumers in order

More information

Econ 102 Final Exam Name ID Section Number

Econ 102 Final Exam Name ID Section Number Econ 102 Final Exam Name ID Section Number 1. Assume that the economy is contracting and unemployment is rising. Which of the following would be a logical explanation for a sudden fall in the unemployment

More information

Figure 3-3: Consumer and Capital Goods

Figure 3-3: Consumer and Capital Goods AP Economics 2018-2019 Final Exam Krugman Text Study Sheet Module/Question# 1/1 Microeconomics deals with: 1/2 Macroeconomics deals with: 1/3 Scarcity in economics means: 2/4 Too little spending in an

More information

THE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND. Chapter 34

THE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND. Chapter 34 1 THE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND Chapter 34 Importance of economic policy Economic policy refers to the actions of the government that have a direct impact on the macroeconomic

More information

I. A. B. C. D. E. F I. A. B. C. I. A B. C.

I. A. B. C. D. E. F I. A. B. C. I. A B. C. AP EXAM FRQS I. Assume that the United States economy is in long-run equilibrium with an expected inflation rate of 6 percent and an unemployment rate of 5 percent. The nominal interest rate is 8 percent.

More information

Midterm Exam 3 Econ Spring 2010 Instructor: Soojae Moon. Version B

Midterm Exam 3 Econ Spring 2010 Instructor: Soojae Moon. Version B Midterm Exam 3 Econ 2020-010 Spring 2010 Instructor: Soojae Moon Version B Instruction: On the scantron, fill out your name (both the bubbles and the write-in portion) and place your recitation section

More information

Midterm Exam 3 Econ Spring 2010 Instructor: Soojae Moon. Version A

Midterm Exam 3 Econ Spring 2010 Instructor: Soojae Moon. Version A Midterm Exam 3 Econ 2020-010 Spring 2010 Instructor: Soojae Moon Version A Instruction: On the scantron, fill out your name (both the bubbles and the write-in portion) and place your recitation section

More information

Principles of Macroeconomics December 15th, 2005 name: Final Exam (100 points)

Principles of Macroeconomics December 15th, 2005 name: Final Exam (100 points) EC132.01 Serge Kasyanenko Principles of Macroeconomics December 15th, 2005 name: Final Exam (100 points) This is a closed-book exam - you may not use your notes and textbooks. Calculators are not allowed.

More information

ECO 209Y MACROECONOMIC THEORY AND POLICY

ECO 209Y MACROECONOMIC THEORY AND POLICY Department of Economics Prof. Gustavo Indart University of Toronto March 14, 2007 ECO 209Y MACROECONOMIC THEORY AND POLICY SOLUTION Term Test #3 LAST NAME FIRST NAME STUDENT NUMBER Circle the section of

More information

Chapter 9 Chapter 10

Chapter 9 Chapter 10 Assignment 4 Last Name First Name Chapter 9 Chapter 10 1 a b c d 1 a b c d 2 a b c d 2 a b c d 3 a b c d 3 a b c d 4 a b c d 4 a b c d 5 a b c d 5 a b c d 6 a b c d 6 a b c d 7 a b c d 7 a b c d 8 a b

More information

EC202 Macroeconomics

EC202 Macroeconomics EC202 Macroeconomics Koç University, Summer 2014 by Arhan Ertan Study Questions 4 1. Assume that the LM curve for a small open economy with a floating exchange rate is given by Y = 200r 200 + 2(M/P), while

More information

Dunbar s Big Review Sheet AP Macroeconomics Exam Content Area [Hubbard Textbook pages] (percentage coverage on AP Macroeconomics Exam) I.

Dunbar s Big Review Sheet AP Macroeconomics Exam Content Area [Hubbard Textbook pages] (percentage coverage on AP Macroeconomics Exam) I. Dunbar s Big Review Sheet AP Macroeconomics Exam Content Area [Hubbard Textbook pages] (percentage coverage on AP Macroeconomics Exam) I. Basic Economic Concepts (8-12%) Three Fundamental Questions [8]:

More information

READ CAREFULLY Failure to read has been a problem on the exams

READ CAREFULLY Failure to read has been a problem on the exams Introduction to Agricultural Economics Agricultural Economics 105 Fall 2009 Third Hour Exam Version 1 READ CAREFULLY Failure to read has been a problem on the exams Name Section -3 points for wrong section

More information

ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder

ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose the economy is currently

More information

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis

Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Chapter 9: The IS-LM/AD-AS Model: A General Framework for Macroeconomic Analysis Cheng Chen SEF of HKU November 2, 2017 Chen, C. (SEF of HKU) ECON2102/2220: Intermediate Macroeconomics November 2, 2017

More information

Aggregate Supply and Aggregate Demand

Aggregate Supply and Aggregate Demand Aggregate Supply and Aggregate Demand ECO 301: Money and Banking 1 1.1 Goals Goals Specific Goals Be able to explain GDP fluctuations when the price level is also flexible. Explain how real GDP and the

More information

Economics 102 Discussion Handout Week 13 Fall Introduction to Keynesian Model: Income and Expenditure. The Consumption Function

Economics 102 Discussion Handout Week 13 Fall Introduction to Keynesian Model: Income and Expenditure. The Consumption Function Economics 102 Discussion Handout Week 13 Fall 2017 Introduction to Keynesian Model: Income and Expenditure The Consumption Function The consumption function is an equation which describes how a household

More information

Instructions and Rules:

Instructions and Rules: Name: Honor Pledge Signature: Section: Due Date: 5 pm on Monday, 11/23 (Place inside box outside my office door) Instructions and Rules: This is a timed (1 hour no breaks), closed book, takehome exam.

More information

Practice Problems 37-40

Practice Problems 37-40 Practice Problems 37-40 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. When measuring a nation's standard of living, of the following, the best measure

More information

EQ: What happens to equilibrium price and quantity when there is a change in supply or demand?

EQ: What happens to equilibrium price and quantity when there is a change in supply or demand? EQ: What happens to equilibrium price and quantity when there is a change in supply or demand? The main thing that affects Supply is production costs. Costs of factors of production affect supply: Employee

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Econ 330 Spring 2015: FINAL EXAM Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose a report was released today that

More information

AGGREGATE SUPPLY, AGGREGATE DEMAND, AND INFLATION: PUTTING IT ALL TOGETHER Macroeconomics in Context (Goodwin, et al.)

AGGREGATE SUPPLY, AGGREGATE DEMAND, AND INFLATION: PUTTING IT ALL TOGETHER Macroeconomics in Context (Goodwin, et al.) Chapter 13 AGGREGATE SUPPLY, AGGREGATE DEMAND, AND INFLATION: PUTTING IT ALL TOGETHER Macroeconomics in Context (Goodwin, et al.) Chapter Overview This chapter introduces you to the "Aggregate Supply /Aggregate

More information

KOÇ UNIVERSITY ECON 202 Macroeconomics Fall Problem Set VI C = (Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G.

KOÇ UNIVERSITY ECON 202 Macroeconomics Fall Problem Set VI C = (Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G. KOÇ UNIVERSITY ECON 202 Macroeconomics Fall 2007 Problem Set VI 1. Consider the following model of an economy: C = 20 + 0.75(Y T) I = 380 G = 400 T = 0.20Y Y = C + I + G. (a) What is the value of the MPC

More information

Macro Problem Set 3 Fall 2015

Macro Problem Set 3 Fall 2015 Macro Problem Set 3 Fall 2015 Directions: The True/False and Multiple Choice questions do not have to be turned in for credit. It would be foolish, however, not to spend a great deal of time working on

More information

Inflation and Unemployment: The Phillips Curve

Inflation and Unemployment: The Phillips Curve Printed Page 331 [Notes/Highlighting] Inflation and Unemployment: The Phillips Curve What the Phillips curve is and the nature of the short-run trade-off between inflation and unemployment Why there is

More information

Econ 102 Final Exam Name ID Section Number

Econ 102 Final Exam Name ID Section Number Econ 102 Final Exam Name ID Section Number 1. Which of the following is not an accurate statement of core capital goods? A) proxy for business investments B) does not include transportation equipment C)

More information

Textbook Media Press. CH 27 Taylor: Principles of Economics 3e 1

Textbook Media Press. CH 27 Taylor: Principles of Economics 3e 1 CH 27 Taylor: Principles of Economics 3e 1 The Building Blocks of Keynesian Analysis Keynesian economics is based on two main ideas: a) aggregate demand is more likely than aggregate supply to be the primary

More information

UGBA 101B Macroeconomic Analysis Professor Steven Wood. Exam #2 ANSWERS

UGBA 101B Macroeconomic Analysis Professor Steven Wood. Exam #2 ANSWERS Name: SID : UGBA 101B Macroeconomic Analysis Professor Steven Wood Summer 2008 Exam #2 ANSWERS Please sign the following oath: The answers on this test are entirely my own work. I neither gave nor received

More information

MACROECONOMICS - CLUTCH CH REVISITING INFLATION, UNEMPLOYMENT, AND POLICY

MACROECONOMICS - CLUTCH CH REVISITING INFLATION, UNEMPLOYMENT, AND POLICY !! www.clutchprep.com CONCEPT: SHORT-RUN PHILLIPS CURVE Two of the main macroeconomic concerns for policy makers are unemployment and inflation However, it is hard to control both at the same time! > If

More information

Principles of Macroeconomics December 17th, 2005 name: Final Exam (100 points)

Principles of Macroeconomics December 17th, 2005 name: Final Exam (100 points) EC132.02 Serge Kasyanenko Principles of Macroeconomics December 17th, 2005 name: Final Exam (100 points) This is a closed-book exam - you may not use your notes and textbooks. Calculators are not allowed.

More information

ECO 209Y L0101 MACROECONOMIC THEORY. Term Test #2

ECO 209Y L0101 MACROECONOMIC THEORY. Term Test #2 Department of Economics Prof. Gustavo Indart University of Toronto June 25, 2012 ECO 209Y L0101 MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER INSTRUCTIONS: 1. The total time for

More information