[S] Fundamentals of Macroeconomics
[S] Fundamentals of Macroeconomics EconS 102
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This 18 page Class Notes was uploaded by Maurine Kuhic on Thursday September 17, 2015. The Class Notes belongs to EconS 102 at Washington State University taught by Staff in Fall. Since its upload, it has received 24 views. For similar materials see /class/205986/econs-102-washington-state-university in Economic Sciences at Washington State University.
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Date Created: 09/17/15
Answer Key 9089959 cwcowgtocwwogtgtwccwwcowoowgtwgtcgto Page 1 Use the following to answer question 1 Figure ADeAS Made 11 Aggregate price level LRAS SRAS P E Am w Real GDP utemra DAN7m 1 Figure ALMS Model II If productva mereases whxch ofthe followmg will take place7 AD curve mu shx to the le AD curve mu shx to the nght SRAS curve will shift tn the right D SRAScurvewxllshx to Lhele 95 PageZ Use the followmg to answer question 2 Figur shiresnnheADeAs Curves Panel lal Panel lnl Price level Price level sRAsl sRAsl P1 7 F p AD P2 7 AD z m AD y vZ v v Real GDP Real GDP panel 4 Panel la Pnce level Prlee level sms was P gt SEAS P smsl l e I P2 7 p1 ADq am v v V1 V2 Real em Real GDP D Panel a 3 A posltlve demand Shockleads to A hlgherpnces andlower oulpu B lower pnces andlower oulpul C e and higherunemployment D higher prices and higher emplaymem Page 5 V39 O 1 9 50 If the planned aggregate spending rises by 25 billion and the MPC is 8 then equilibrium GDP changes by A 125 billion B 200 billion C 250 billion D 25 billion The aggregate consumption function depends on A wealth B disposable income expected future disposable income and wealth C expected future disposable income D disposable income Aggregate spending increases when A there is an increase in planned investment spending there is an increase in unplanned investment spending there is an increase in prices there is a fall in prices B C D If the multiplier is 4 and investment spending falls by 100 billion the change in equilibrium income will be A 725 billion B 400 billion C 400 billion D 25 billion A general increase in wages will result in the A shortrun aggregate supply shifting to the right B aggregate demand shifting to the right C short run aggregate supply shifting to the left D aggregate demand shifting to the left An in ationary gap is automatically closed by A higher SRAS curve rightward B lower SRAS curve rightward C higher SRAS curve leftward D lower SRAS curve leftward wages that shift the Page 4 0 pendmg mcreases by 50 lneonne mcreases by 200 bllllon The value ofthe MPCls 4 A B 075 C 08 D 04 11 another thngs unenanged wlll eause me pnee level to and potential output to A decrease decrease D increase mcrease Use me followmg to answer quesnon 12 Fignr Shift 11me Aggxegzte Demand Curve Pvice level Real GDP 12 Figure 5le othe Aggregate Demand Curve Amovementfrom pomtA on AD to pomt c on AD could have resulted from an e level B slgnlfleanl decrease ln the lneonne level ofconsumers C lower pnee level Every price level PageS 13 In ationary and recessionary gaps are closed by selfcorrecting adjustments that shift A both the SRAS curve and the LRAS curve B the SRAS curve C the AD curve D the LRAS curve 14 As a recessionary gap is eliminated through selfcorrecting adjustment the equilibrium price level and the equilibrium real output decreases decreases B decreases increases C increases increases D increases decreases 15 In an economy without government purchases government transfers or taxes aggregate autonomous consumer spending is 750 billion planned investment spending is 300 billion and the marginal propensity to consume is 075 What is the expression for planned aggregate spending A AEpsz 300 025 X YD 13 AEpsz 750 075 X YD C AEpzmed 500 025 X YD D AEPlanned 1050 075 x YD 16 When David has no income he spends 500 Ifhis income increases to 2000 he spends 1900 Which of the following represents his consumption function A C 500 1000 X YD B C 12 X YD C C 095 X YD D C 500 07 x YD 17 A decrease in aggregate demand will generate in real GDP and in the price level in the short run A no change an increase B a decrease a decrease C an increase no change D a decrease no change Page 6 Use the following to answer quesnon18 Figur Planned aggregale spending EPlanna I Aggregate V price leve The Mlltiplier a Change in Income Expendnure Equilibrium GDP Em E almem Real sop billions ul dollars Real GDP 18 Figure The Multiplier Innis economy is currently at Y andlnvestment spending increases than A c D Every pricelevel pnee level pnee level pnee level Page7 Use the fouowtng to answet questaon19 Figure Aggxegzte Expenditures and Real GDP efgf t t39t is S W r quote e um meantee In P y a x the AE Inns n1 dollars tannn WEDDL t t t mun 5mm 9mm 12mm tsuao Real ens my per year um tuus M dollars 19 mt ur a bt11ton andlf thete are no ehanges tn the eonsunnptton funetaon ot tn p1anneo1 mvestment then we expeetthat tn the next penod t a1 GDP wtu all A B nse C fall but only 1there ts an offsemng ehange tn autonomous eonsunnptaon D tennatn unehange 20 The nnatgtna1 ptopenstty to consume ts A the tnteteept othe eonsunnptton funetaon B autononnous C the slnpe nrthe cnnsllmptinn runeu39nn D the tnvetse ofthe eonsunnptton funetaon Use the fouowtng to answet questaon 21 Scenarin CnnsIImptinn Spending Pagez 2l Seenano Consumpnon Spendmg Ifmcome lncreases by 2000 eonsunnpnon wlll mcrease by A 2 000 B 1500 C 3400 D 3500 22 W curves A occurs athlgh levels of cycllcal unemploymenl B mm amne ecnnnmy39spnten al nutput C deter mlnes lls equlllbnunn real GDP ln both llne long run andthe snon run D deter mlnes lls equlllbnunn pnee level ln both llne long run andthe snon run Use llne followmg to answer quesnon 23 Figure Pnlicy Alternatives Panel lal Panel lnl Pnce level WAS vl v Va Real GDP 23 Flgune Polley Allemauves In Panel b llne eeonomy ls lnlllally m slnomun equlllbnunn atreal GDP level Yl and pnee level P Alneal GDPlevel Y llnene ls A longrmn equlllbnunn no gap c an ln allonary gap D a recessinnary gap Pagea 24 Planned investment spending is A negatively related to the interest rate and expected future GDP B positively related to existing productive capacity and the interest rate C negatively related to existing productive capacity and the interest rate D positively related to the interest rate and expected future GDP Use the following to answer questions 2526 Use this scenario to answer questions 1557163 Scenario Income Expenditure Equilibrium GDP is 8000 autonomous consumption is 500 and planned investment spending is 200 The marginal propensity to consume is 08 25 Scenario IncomeExpenditure Equilibrium Incomeexpenditure equilibrium is achieved when GDP is A 3500 B 8000 C 700 D 7000 26 Scenario IncomeExpenditure Equilibrium The multiplier is A B 5 C 08 D 02 Page 10 Use the followlng to answer questaou 27 Flgut Aggxegzte Supply Aggregate price level LRAS was E s El Formula GDP Real GDP Ft Hr L L L L desenbes the llkely adjustment process7 A 28 poteutaal output ts less than aetual output B mal Wages aetual and poteutaal output are equal C uuu39l actual and pnteuu39al nutput are equal D mal poteutaal output ts gteatetthau aetual output Stag auou may result from A a decrease m the supply of y B a decrease m the puee oftmpotted 011 C the ease m the su 1y o D an increzs e in the price or imparted nil Page n 29 n n x Whenever GDP falls short of planned aggregate expendwure unplanned mves ant A zer0negauve B pn39uvenegztive c D zero posmve Use the fouovnng to answer quesnon 30 Table The Ecnnnmy nr Alhemia GDP 0 pomhle innum l l ml Immunequot in bill 0n Ilium bil m s 0 0 400 000 500 700 000 LDDU 1000 00 1500 1 300 600 2000 1 500 000 e500 1900 600 3000 2200 000 30 Table The Economy ofAlbemxaIfrea1 GDP is 3000 b11110nLhen unplanned x enthll be 100 billion 300 billion zero 200 billinn 6951 V vg Page 12 Answer Key 9089959 cwcowgtocwwogtgtwccwwcowoowgtwgtcgto Page 13 EconS 102 Fundamentals of Macroeconomics Section 1 Spring 2009 Professor Inaba Of ce Hours TuTh 12 1 pm Wed 2 3 pm Ph 335 1940 and by appointment inabawsuedu Hulbert Hall 301A httpses wsu edupeoplefacultyinaba OBJECTIVE This course will introduce you to the basic economic principles that explain the behavior of the macro economy as described by economic variables such as the price level national income and output unemployment interest rates exchange rates and the money supply The successful student will gain a rm grasp of the analytical tools taught in the course and will be well equipped with the basic economic literacy to be an educated citizen in today39s complex world READING MATERIALS Krugman and Wells Macroeconomics Worth Publishers 2006 Aplia Online Problem Sets at httpwwwa2liacom Online Aplia registration and the KrugmanWells online textbook can be purchased together for 70 at the Aplia website You ll need the Course Key KAPFEFJC4QVR Print copies of KrugmanWells together with Aplia registration can be purchased from the Bookstore for 157 You can also purchase print copies from Aplia for a charge in addition to the 70 registration Lecture Notes at Cougar Copies CUB G oor or my webpage PROBLEMS SETS Weekly problem sets are to be completed on the Aplia website by 11 pm on the day the assignment is due Check the syllabus and Aplia for problem set assignments Your Homework grade will be the percent of the problems correctly answered out of 180 total points Points earned in excess of 180 will be counted as extra credit In the lectures I will explain how to answer the questions on the problem sets It is your responsibility to have studied the problem sets before class to see if your have any questions you might want to ask The answers to the problem sets will be available on the Aplia website after they are due Practice problems with solutions are also available on the Aplia webpage for this course I have found that students who are not conscientious in doing the problems have a difficult time with the course You can probably afford to miss turning in two or three of the problem sets without affecting your grade Therefore late or makeup problem sets will not be accepted After 11 pm on on the due date your problem set is late and Aplia will not grant access for you to complete the assignment POINTS Midterm Exam 1 100 points Midterm Exam 2 100 points Midterm Exam 3 100 points Homework 100 points Final Exam 200 points Total Points 500 points The lowest homework or midterm score will be dropped GRADING SCALE AA 85 100 percent BBB 7084 percent CCC 5069 percent D 4049 percent F 0 39 percent While the exam format will be multiplechoice often the correct answer will have to be worked out by applying the analytical tools developed in the class This is where the problem sets become very important because they provide examples of how to apply these analytical tools Hence doing the problems prepares you for the material covered on the exams The nal exam will consist of 30 questions covering the new material plus 30 assessment questions designed to test what you have learned over the entire course T h e following is the exam sch ednle Midterm Exam 1 Wed Feb 4 night exam 6pm Todd 116 Midterm Exam 2 Wed Feb 25 night exam 6pm Todd 116 Midterm Exam 3 Wed April 1 night exam 6 pm Todd 116 Final Exam T ne May 5 1010 am12 am this room MAKEUP POLICY Makeup exams will be given in case of bona de emergencies Other tests or out of town for a quotbreakquot are not good excuses You must speak with me in person before the scheduled exam to arrange a makeup Only sending me an email or voicemail won t do Makeups for con icting nal exams will not normally be given If you are enrolled in two or more classes with the same nal exam time or if you have three nals in one day you need to change classes I will not give early nals to students who want to leave early ETHICS AND CHEATING Examples of what I consider cheating include the following copying crib notes exchanging unauthorized information on exams turning in someone else s work as if it were your own altering grades having someone else take an exam for you will result in an F for the course You may work together on the problem sets but the solutions you turn in must be your own work not copied verbatim from someone else Cheating is simply revolting Would you want to employ a cheater in your business Would you want to marry a cheater Do you want cheaters in your sorority or fraternity More to the case at hand is it fair if someone cheats and gets a higher grade than you do Don 39t put up with any ch eating don t do it and don t let anyone else get away with it I BOMB THREATS Exams classes assignments that are interrupted by bomb threats will be made up usually at a very inconvenient time eg late at night early in the morning or even on weekends One way to stop these nuisance pranks is to report the perpetrators Special Needs Students Reasonable accommodations are available for students with documented special needs If you have special needs and may need accommodations to fully participate in this class please Visit the Disability Resource Center DRC Admin Annex Bldg Room 205 or call 5093353417 All accommodations must be approved through the DRC TOPICS AND ASSIGNMENTS Problems Date Tue 113 Lecture 1 Class policies Macroeconomics models scarcity choice opportunity costs Ch 12 Date Thu 115 Lecture 2 Marginal analysis PPC comparative advantage circular flow Ch 12 amp appendix Aplia Problems Due Sun 118 Ch1 PS 11 9 Ch2 PS 119 Tue 120 Lecture 3 Demand amp supply demand amp supply equilibrium Ch 3 Thu 122 Lecture 4 Demand amp supply price ceilings and floors excise taxes quotas Ch 3 4 Aplia Problems Due Sun 125 Ch3 PS 1112 Ch4 PS 11 14 Tue 127 Lecture 5 Measuring total output amp income GDP valueadded Real GDP Ch 67 Thu 129 Lecture 6 Price indicies CPI GDP price index inflation real vs nomimal values indexation Ch 7 Aplia Problems Due Sun 21 Ch7 PS 1120 Tue 22 Lecture 7 Potential GDP Long run growth ca ital accumulation labor productivity technology Ch 8 Wed 23 Midterm 1 Night exam 6pm Todd 116 Lectures 16 Chs 14 6 7 Aplia problems Aplia Problems Due Sun 28 Ch8 PS 1110 Tue 210 Lecture 8 Savings and investment planned investment private saving Ch 9 Thu 212 Lecture 9 Government saving foreign saving loanable funds market interest rates crowding out Ch 9 Aplia Problems Due Sun 215 Ch9 PS 1116 Tue 217 Lecture 10 Incomeexpenditure model AE function lE equilibrium amp spending balance lE multiplier Ch 11 Thu 219 Lecture 11 lE model consumption function planned investment exports amp imports govt spending Ch 11 Aplia Problems Due Sun 222 Ch11 PS 1111 Tue 224 Lecture 12 LE model with transfer payments lumpsum taxes income taxes fiscal Wed 225 Midterm 2 Night exam 6pm Todd 116 Lectures 712 Chs 8 911 Aplia Problems Due Tue 224 Ch 11 PS 1114 policy Ch 11 Aplia problems Tue 33 Lecture 13 Thu 35 Lecture 14 Aplia Problems Aggregate demand and supply in the AD amp AS long run adjustment Due Sun 38 Ch 10 PS 1117 short run ADampAS equilibrium long run AS adjustments Ch 10 mechanism Potential GDP LR equilibrium demand and supply shocks Ch 10 Tue 310 Lecture 15 Money money supply banks balance sheets reserves money creation Ch 13 Thu 312 Lecture 16 Money multiplier monetary base Federal Reserve and monetary policy Ch 13 Aplia Problems Due Sun 315 Ch 13 PS 1123 Tue 317 Spring Break Thu 319 Spring Break Aplia Problems Due Sun 315 Ch 13 PS 1123 Thu 326 Lecture 18 Aplia Problems Tue 324 Lecture 17 Bonds interest rates money demand mone market amp equilibrium interest rate Ch 14 lE with a money market interest rate transmission mechanism monetary policy money market vs loanable funds interest rates neutrality of money Ch 14 Due Sun 329 Ch 14 PS 1113 Tue 331 Lecture 19 Fiscal Policy Budget Social Security Ch 12 Deficits Wed 4 Midterm 3 Night exam 6pm Todd 116 Lectures 1319 Chs 10 1213141 Aplia problems Aplia Problems Due Tue 331 Ch 12 PS 11 14
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