Spring 2013 Macroeconomics Final
Useful websites: http://www.reffonomics.com OR google AP Macro review, lots of sites
1. How does the supply/demand in the money market work? Pay attention to interest rates and quantity
2. What does SRAS/SRAD model work? Where is full employment, price level and output (GDP)
3. What monetary changes could the Fed conduct to increase employment and decrease interest rates?
4. Who gains from unanticipated inflation?
5. Definition of MPC
6. What is the biggest part of GDP?
7. How do you calculate real interest rates?
8. How does the LRAS curve shift to the right?
9. What does it mean if the Fed is engaged in open market operations? How could they use those to reduce inflation?
10. What is opportunity cost? What is scarcity?
11. What causes currencies to appreciate and depreciate on the international market?
12. What changes currency exchange rates? Who likes stronger/weaker $$? What does depreciate/appreciate mean?
13. What does the LRAS curve look like and what does it represent?
14. What would shift SRAD to the left?
15. What is contractionary monetary policy? Contractionary fiscal policy?
16. What is the MPC? If income increases how do you use that number to figure out consumption increases?
17. What are the 3 theories of inflation? How do they change prices?
18. What is the theory of rational expectations? What happens when people expect inflation?
19. What happens to price and real GDP if AD decreases?
20. How does the money multiplier work? Say the reserve rate was 20 percent and someone deposits $1000, what is the change to
the money supply?
21. How does labor productivity affect output and real wages? Its supply/demand on the labor market.
22. How does inflation affect real GDP?
23. What is a real interest rate? How would a change in it affect the capital flow in or out of a country?
24. What are fiscal and monetary changes?
25. Who is counted by the government when calculating unemployment?
26. How does the money multiplier work? Say the Fed buys $100 billion in bonds and the reserve ratio is 200% what happens to the
27. What does full employment look like on the AS/AD model? It’s a graph.
28. How do taxes affect AD and AS?
29. What are the four types of unemployment and their definitions?
30. What happens in the LR if an economy is below full employment and the government does nothing and wages are flexible?
31. What does a SR Phillips curve show?
32. What is a fixed rate of exchange? What happens if one country experiences inflation, what will happen to its net exports?
33. What are new houses counted as in GDP formula?
34. What does an increase in AD do on the SR Phillips curve?
35. What should the Fed do if an economy is below full employment?
36. What is investment in the GDP formula? How do interest rates affect that?
37. What does it mean if C+I+G is 150 % of GDP? (what about net exports?)
38. If a currency appreciates because of increasing interest rates, what happens to a country’s trade deficit?
39. What happens if firms lower costs to AS, Price level and output?
40. What does a change in the expected price level do to SRAS?
41. What would happen to AD and AS if business taxes were decreased?
42. How do you read a PPF, and how do you figure out opportunity cost?
43. What is the theory of comparative advantage? How does it affect trade?
44. How could a country produce past its PPF?
45. What is the “crowding out” affect? How does it work?
46. What is a flexible exchange rate? What happens if a country increases MS to its
47. How does the Fed reduce the federal funds rate?
48. How do you calculate unemployment rate?
49. What is the fiscal spending multiplier? The question requires you to use it for
an economy with say .8 MPC on a $50 billion government spending program.
50. What is fiat currency? How is it different than representative currency? What
does the word “intrinsic mean?”
51. How would an increase in taxes and government spending affect GDP?
52. What is a budget deficit affect interest rates? What if they reduce the deficit?
53. What is stagflation? What does it look like on a graph
60 multiple choice