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Macroeconomics Topics & Concepts Covered

TOPICS	CONCEPTS
Gross Domestic Product (GDP)	Calculation and components of GDP
Inflation	Measuring inflation (CPI and PPI)
Unemployment	Phillips Curve and unemployment rates
Economic Growth	Solow Growth Model
Fiscal Policy	Keynesian vs. Classical views on fiscal policy
Monetary Policy	Role of central banks
Exchange Rates	Fixed vs. floating exchange rate systems
International Trade	Trade deficits and surpluses

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Recently Asked Macroeconomics Questions

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Q1:1. TRUE/FALSE/MAYBE and EXPLAIN: (2 MARKS). (Maximum length: half-page) "The Aggregate Expenditure (A) model is a short-run model. The Solow-Swan model is a long-run model. Yet both assume that there are no "idle funds", i.e. any funds not consumed are saved and automatically funneled into investment. How can this be possible given that there can be output gaps in the short run?"See Answer
Q2:2. TRUE/FALSE/MAYBE and EXPLAIN: (2 MARKS). "It is impossible for the total number of people employed and the unemployment rate both to fall at the same time.See Answer
Q3:Students should post a short, relevant essay related to that week's material: it should open with a thesis, briefly defend that thesis, and have a useful title. You may write an essay about anything related to this week's material, so you do not need to respond one of my prompts. If your post does originate as an answer to one of my questions, write it as a standalone essay (i.e. leave out the question that motivated it). You are encouraged to link to relevant articles or videos from outside of class. Please respond to your peers' posts by either agreeing or disagreeing with them while presenting a new idea, anecdote, or data point. Disagreement is fine, but please do so respectfully and remember we're discussing ideas not people.See Answer
Q4:• How do these concepts and the assigned reading relate to our principles (such as demand and supply, optimization, etc.)? Be specific. You must explain how the concept(s) and readings introduced directly apply to the principles.See Answer
Q5:3. In the simplest version of the multiplier, the multiplier is calculated based only on the marginal propensity to consume (written as mpc or c). In other words, we assume all household income is either saved or spent on consumption goods produced in the same economy. a. Calculate the GDP: C = $2000+ 0.7YD T = $50 I = $400 G = $500 b. Suppose the mpc is 0.7. Assuming no trade or taxes in this simple case, calculate the multiplier. c. Imagine there is a fall in "consumer confidence" - maybe people believe some world event is going to cause the economy to contract so they spend less. This means a fall in autonomous consumption spending of -50. Using the multiplier you just found in (a), calculate roughly how this fall in consumer confidence will ripple out into the macroeconomy. d. Imagine there is a rise in "investor confidence" - investors believe the economy is ripe for expansion. This means a rise in autonomous investment of 100. Using the same multiplier, calculate roughly how this translates into a rise in aggregate income. e. Suppose that GDP is currently $20 trillion dollars and the government believes it can grow to $22 trillion dollars. Given the same multiplier you calculated in (a), how much would the government have to increase its spending to raise GDP to this amount? (Hint: it does not have to increase its spending by the difference in these two GDPs!)See Answer
Q6:1. Multiple Choice Question 1.A Assume that a Peruvian company, DMB LLC, just reported its earnings this year (year 0). The reported revenue was $9 million and the reported cost was $10 million. Its revenue is expected to grow 6% annually, while its cost is expected to grow 2% annually. Mark ALL the CORRECT statements. For this question, profit revenue - cost. First, apply the Gordon Formula to calculate the present value of all future revenues and the present value of all future costs separately. Then, calculate the present value of all future profits, which equals the present value of all future revenues minus the present value of all future costs. a) The first year that the profit of the company becomes positive is year 3. b) If the discount rate is 12%, the present value of all future profits of the company is $50 million. c) If the discount rate is 10%, the present value of all future profits of the company is $111 million. d) If the discount rate is 5%, the present value of all future profits of the company is infinite. e) The present value of all future profits of the company is always positive no matter what the discount rate is. 1.B Suppose the capital share in Canada is a = 2/5. Mark ALL the CORRECT statements. For this question, use the growth accounting formula given in class. a) If capital increases by 10%, labor hours increase by 5%, and total output increases by 10% relative to last year, then TFP should decrease by 1%. b) If capital increases by 15%, labor hours decrease by 5%, and TFP increases by 5% relative to last year, then total output should increase by 5%. c) If capital increases by 10%, TFP increases by 10%, and total output increases by 10% relative to last year, then labor hours should increase by 10%. d) If labor hours increase by 10%, TFP increases by 5%, and total output increases by 15% relative to last year, then capital should increase by 1%. e) None of the above. 1.C Suppose the Federal Reserve sells Treasury Bills and Treasury Bonds in the open market. Compared to a scenario in which no such open market operations took place, which of the following answers are CORRECT? a) Banks short of reserves end up with more loans. b) Banks short of reserves end up with the same amount of deposits. c) Banks short of reserves end up with more equities. d) The federal funds rate is lower. e) The money supply is lower.See Answer
Q7:3. Analytic Question on Consumption and Labor decisions during the Pandemic In this question we will study how workers change their labor supply. Imagine there is a consumer/worker with preference over consumption C and leisure & given by the equation below: U(C,) = log(C) + log(l) 1. Assume the consumer faces a wage rate of w and consumption price P. She also has one unit of available time to spend working or resting. Solve for the consumer's optimal choice of consumption and hours worked. 2. Now assume a pandemic hits the economy and the consumer receives more utility from leisure. We model this by changing the preferences to: U(C,) -log(C) + 0 log(l) 0 with > 1. Solve for the hours worked and consumption under these new preferences. Compute the elasticity of labor supply and consumption with respect to real wages. Compare your answer with the previous part (when 0-1). Does the consumer wants to work more or less? 3. The government wants to increase hours worked, and so it enacts a law that includes a subsidy on wages. This subsidy is proportional to labor income. Explain why the new budget constraint can be expressed as: PC = (1+7)w(1-0), where is the subsidy (with 7 > 0). Solve for the optimal hours worked and consumption and compare your answer with that of the previous question. What is the effect of this subsidy on hours worked? 4. Now the government wants to try a different fiscal policy. Instead, it creates a new lump-sum tax that the consumer has to pay regardless of income or consumption. Explain why the new budget constraint can be written as: PC w(1)-T, where T is the new lump-sum tax. Assume 0 <T<w and w is sufficient, large to have a positive consumption. Solve for hours worked and consumption. Compare with part 2. - 5. Imagine the government wants to choose the tax amount T such that the worker supplies exactly the same number of hours worked as in part 1. Find this tax amount. Assume < 1+0. Is the consumer better off? Relate your answer to the First Welfare Theorem, assuming the given prices clear markets in a competitive equilibrium.See Answer
Q8:write a script for a radio/television show as if you were interviewing an expert concerning topics discussed in this unit. Include input from both the interviewer and interviewee standpoint. What questions would you ask as the interviewer? What answers would you give to those questions as the interviewee? When writing your questions and answers, keep in mind that you have already learned a lot about your industry through earlier assignments in this course. It is suggested that you review your responses to those assignments before beginning this one. In your interview script, address the following topics:  the structure of the Federal Reserve,  the functions of money,  six qualities of ideal money,  the tools of monetary policy used by the Federal Reserve to manipulate the money supply in the United States,  the current status of monetary policy regarding a contractionary or expansionary stance in the United States, and  the potential impacts on your selected industry over the next 2 years of this monetary policy stance. See Answer
Q9:Which countries developed first—100–200 years ago? Who is developing (growing faster) more recently?See Answer
Q10: How much has real median household income increased over the last year?  Real wages? Over the past 30 years? Do you find this surprising? See Answer
Q11:What is CPI ? • The CPI is a weighted basket of consumer prices, where the weights depend on their relative importance for the average consumer. • The CPI measures price changes for businesses, particularly wholesale prices. • The CPI measures all prices in the United States. • The CPI measures price changes very well.See Answer
Q12:What are the four components of GDP, and which is the biggest and which is the smallest?See Answer
Q13:Create a final report for the industry you selected detailing the impacts of the United States/China trade war. This report should address the following topics: ▪ major issues of the trade war; ▪ the tactics and measures taken by the United States and China during the trade war; ▪ the impacts of the trade war on ▪ the central economic problem of allocating scarce resources, ▪ unemployment and inflation rates in the United States, ▪ fiscal and/or monetary policy decisions, ▪ the determination of foreign exchange rates based on supply and demand, ▪ international trade between the United States and nations other than China, and ▪ the long-range (5-year) potential impacts of the trade war on your selected industry.See Answer
Q14:Question A15 If a firm is making normal profit, it means that A the firm is efficient. B C average revenue is higher than average cost. enough profit is being made to keep factors of production in their present use. D the industry overall is profitable. [1]See Answer
Q15:Question A16 Which one of the following does not tend to produce greater equality in the distribution of income? A Increase in the minimum wage Making taxation less progressive B C Increased investment in education D Increased benefits to those on low incomes [1]See Answer
Q16:Question A17 A government decides to reduce its budget deficit. The most likely short-run impact of this policy would be to A reduce the current account deficit. increase the rate of inflation. B C reduce unemployment. D increase the rate of economic growth. [1]See Answer
Q17:Question A18 The following table shows the rate of inflation in a country over a four-year period. Year Year 1 Year 2 Year 3 Year 4 Rate of inflation (%) 4.3 3.9 3.2 2.7 From the data, it can be concluded that over the four-year period A the country experienced deflation. B wages have increased. с D the price level was rising. the value of money was increasing. [1]See Answer
Q18:Question A19 The following diagram shows the costs and revenues faced by a profit maximising monopolist. Costs/ Revenue ABCD 0 B C C MR A B C D MC LRAC Output What will be the level of output in the market if the monopolist faced little or no competition? AR [1]See Answer
Q19:Question A20 The table below shows the relationship between a firm's output and its production costs. Output (Units) 100 200 300 ABCD Average Variable Average Total Costs Costs ($) ($) 800 550 450 500 400 350 When the firm increases its output from A 100 to 200 units, average fixed costs rise by $300. 100 to 200 units, average fixed costs fall by $250. 200 to 300 units, average fixed costs fall by $100. 100 to 300 units, average fixed costs fall by $200 [1]See Answer
Q20:Question A21 Market dominance in computer chip manufacturing will mean higher prices One of the most hard fought anti-monopoly cases of 2019, The Federal Trade Commission (FTC) v. Qualcomm, is taking place in California, USA. It's been two years since the FTC investigated Qualcomm alleging that the computer chip manufacturer is engaged in illegal activity that allows it to overcharge for its patents. In 2016, South Korea's monopoly regulator fined Qualcomm $854 million for breaking competition laws, the largest fine ever given in South Korea. Taiwan's Fair Trade Commission also fined Qualcomm with $778 million. There are concerns that if a major competitor, Intel, were eliminated from the computer chip market Qualcomm would likely regain its monopoly over the market. As a result, Qualcomm would be able to impose monopoly pricing on the market, leading to increased costs for consumers. Not only would consumers pay more for their smartphones and computers, but the ban would reduce consumer choice and likely preserve Qualcomm's monopoly over the long term. Source: Insidesources.com (Adapted Extract) a) Define the term 'monopoly' b) With the aid of a diagram, explain the long run equilibrium position of a monopolist such as Qualcomm. c) Analyse ONE reason why monopoly power may be damaging for consumer welfare. d) Analyse ONE barrier to entry that a firm might face when trying to enter the market for computer chips. [1] [3] [3] [3]See Answer

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