Format of final examination: 2 parts
Part 1: 15 multiple choice questions (3p)
Part 2: answer question
A. True/False, fill the blank; Matching (2 p)
B. Open question: case study in practice (1p)
C. Exercise
a. Exercise 1 (2p)
b. Exercise 2 (2p)
Review for final exam
CHAPTER 1: GENERAL INTRODUCTION OF MACROECONOMICS
1.1. Macroeconomics goals and tools
1.2. Aggregate supply and aggregate demand
CHAPTER 2. MEASURING NATIONAL OUTPUT
2.1. Gross Domestic Product (GDP) and GNI (Gross National Income)
2.2. Methods of calculating GDP:
2.3. Types of prices to calculate GDP:
2.4. Measures of SNA (System of National Accounts)
CHAPTER 3: AGGREGATE DEMAND AND NATIONAL EQUILIBRIUM OUTPUT IN
AN OPEN ECONOMY
3.1. Consumption and Saving
3.2. Investment
3.3. Government Budget:
3.4. Net Export and Balance of Trade
3.5. Aggregate Demand (AD) function: AD=C+ I +G+ X−M
3.6. Equilibrium National Income- Keynes model
3.7. Multiplier
3.8. Multipliers of the other components
CHAPTER 4. FISCAL POLICY AND FOREIGN TRADE POLICY
4.1. Fiscal policy: Expansionary Fiscal Policy & Contractionary Fiscal Policy
4.2. Quantitative Fiscal policy
Goal 1: Changing G & T in order that Ye = Yp
Goal 2: Changing G and T to keep AD unchanged
4.2. Fiscal Policy and Aggregate Demand
o Multiplier effect
o Crowding – out effect
4.4. Automatic fiscal policy (automatic stabilizers)
CHAPTER 5: MONETARY POLICY
5.1. Overview of money and banking
5.2. Money supply & Money demand
5.4. Equilibrium in the money market
5.5. Monetary policy: 3 Tools of Monetary Policy: To increase money supply? To reduce money
supply?
5.5.The Quantity Theory of Money:
5.6. Quantifying monetary policy
CHAPTER 7: INFLATION AND UNEMPLOYMENT
7.1 Money and inflation: Fisher effect i = r +
7.2. Measuring the Cost of Living (CPI)
7.3 Unemployment
7.4The relationship between inflation and unemployment in the short and long run: Philip curve
CHAPTER 8. FOREIGN TRADE POLICY
8.1. Trade deficit, trade surplus, trade balance
8.2. Policy of increasing exports and restricting imports
8.3. The Market for Foreign-Currency Exchange
1
EXERCISE 1.
Given the following equations DM = 650 – 100i; SM = 500; G = 300; X = 150; S = -100 + 0.25Yd;
Yp = 1040 ; I = 170 + 0.05Y – 20i; T = 40 + 0.2Y; M = 70 + 0.15Y
1. Determine equilibrium output and interest rate
2. What monetary policy would the government implement to achieve the potential output.
Quantify this policy.
3. If the government purchase 100 units of securities, what would be the change on eqm’
output (given mM = 2)
EXERCISE 2.
Consider an economy with the following:C = 100 + 0.7Yd; I = 240 + 0.2Y – 175i; G = 1850; T =
100 + 0.2Y; X = 400; M = 70 + 0.11Y; H (Mo; B) = 750; DM (LM) = 1000 + 0.2Y – 100i; cr = 0.8;
rr = 0.1; Yp = 5000.
a. Calculate the equilibrium national output and the equilibrium interest rate.
b. Determine what monetary policy must be implemented to reach the potential output level.
Given the equations: 𝐶 = 400 + 0.75𝑌𝑑; 𝐼 = 700 + 0.15𝑌 – (250/3)𝑖; 𝐺 = 800; 𝑇 = 200 + 0.2𝑌;
EXERCISE 3.
𝑌𝑝 = 5700; 𝐷𝑀=700−100𝑖; 𝐻 = 100; 𝑐 = 20%; 𝑟𝑟𝑒 = 5%; 𝑟𝑒𝑥 = 5%
a. Calculate money supply and eqm’ interest rate. Calculate eqm’ output
b. How should the central bank conduct monetary policy to get Yt = Yp? Quantify that policy.
c. Calculate new eqm’ interest rate.
EXERCISE 4.
The functions of economy’s components are given as below:
C=70+0.75 Yd I =100+0.2 Y G=320
X =500 M =350+ 0.25Y T = 200 + 0,1Y
a. Compute the equilibrium output
b. Supposed that export rises by 20, investment rises by 10 and consumption rises by 50.
Compute the new equilibrium output.
EXERCISE 5.
The functions of economy’s components are given as below :
C = 0.8Yd + 1,000 T = 0.25Y + 500 G = 1,500
M = 0.1Y + 1,000 X = 400 I = 500
a. Compute the eq’m output. How is the govt budget?
b. Use the multiplier to compute the new eq’m output when the govt rises by 100. Do you have
any comments on the govt budget?
c. If the govt doesn’t change G, how much T will be decreased to achieve the same level
output in question (b).
d. From the question (a), If the govt increases T and G each by 100 how much will the eq’m
output change?
e. Which kind of the above fiscal policies you support most? Why?
EXERCISE 6.
The functions of economy’s components are given as below : (Unit: billion USD)
C = 100 + 0.8Yd I = 300 G = 250
X = 300 M = 50 + 0.12Y T = 0.1Y Yp = 2500
a. Compute the eq’m output
b. Give comments on the govt budget and trade surplus at the eq’m output.
c. Supposed that export rises by 20, will the trade balanced?
d. In order that Yt = Yp, which kind of fiscal policy will be used? Quantify the fiscal policy in
this situation (3 cases).
EXERSCISE 7.
The information of an economy is given as below:
C = 0.8Yd + 1000; T = 0.25Y + 500 M = 0.1Y + 1000
I =3000 X = 2000 G = 4400
2
a. Define the AD function.
b. Compute the equilibrium output. Is trade deficit or surplus?
c. Define the multiplier of this economy. Make assumption that G rise by 600, compute the
new equilibrium
