Advanced Macroeconomics
Exam Solutions
Course Introduction
Advanced Macroeconomics delves into the theoretical foundations and empirical analysis of aggregate economic activity. The course covers dynamic macroeconomic models, including economic growth, consumption, investment, monetary and fiscal policy, and fluctuations in output and employment. Students will explore the intertemporal choices of households and firms, expectations formation, and the role of government policy in stabilizing economies. Emphasis is placed on modern analytical tools, such as dynamic stochastic general equilibrium models and calibration techniques, as well as recent research and policy debates in macroeconomics. This course prepares students for advanced research or professional work in economic policy analysis.
Recommended Textbook
Macroeconomics 7th Edition by Andrew Abel
Available Study Resources on Quizplus 15 Chapters
1223 Verified Questions
1223 Flashcards
Source URL: https://quizplus.com/study-set/2791
Page 2
Chapter 1: Introduction to Macroeconomics
Available Study Resources on Quizplus for this Chatper
59 Verified Questions
59 Flashcards
Source URL: https://quizplus.com/quiz/55585
Sample Questions
Q1) What are the major factors affecting the long-term growth of the economy's output?
Answer: The major factors are population growth and average labor productivity.
Q2) Match each of the following jobs to its major area: forecasting,analysis,research,or data development.Explain your answers.
(a)Economist at university,testing theories about the efficient allocation of resources in the foreign exchange market
(b)Economist at Wall Street firm trying to predict the rate of inflation next year using past data
(c)Economist at auto firm looking at demand for new automobiles
(d)Economist at the International Trade Commission trying to determine whether foreign firms are dumping goods in the United States
(e)Economist at the Commerce Department developing new methods for calculating price indexes
(f)Economist consulting in Eastern Europe about how to set up free-market financial systems.
Answer: (a)Research (b)Forecasting (c)Analysis (d)Analysis (e)Data development (f)Analysis
To view all questions and flashcards with answers, click on the resource link above.
Page 3
Chapter 2: The Measurement and Structure of the National Economy
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/55586
Sample Questions
Q1) The CPI may overstate inflation for all the following reasons except
A)problems measuring changes in the quality of goods.
B)substitution by consumers towards cheaper goods.
C)problems measuring the quality of services.
D)changes in Social Security benefits.
Answer: D
Q2) The U.S.inflation rate ________ in the 1960s and 1970s,________ in the 1980s,and ________ in the 1990s and 2000s.
A)was steady; rose sharply; fell
B)was steady; rose sharply; remained high
C)rose; fell sharply; remained low
D)rose; fell sharply; rose again
Answer: C
Q3) Which of the following is included in U.S.GDP?
A)The sale of a new car from a manufacturer's inventory
B)The purchase of a watch from a Swiss company
C)The sale of a used car
D)A newly constructed house
Answer: D
Page 4
To view all questions and flashcards with answers, click on the resource link above.
Chapter 3: Productivity, Output, and Employment
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/55587
Sample Questions
Q1) An invention that speeds up the Internet is an example of A)an income effect.
B)an increase in labor.
C)a substitution effect.
D)a supply shock.
Answer: D
Q2) Suppose the marginal product of labor is MPN = 200 - 0.5N
Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.If a supply shock increases the marginal product of labor by 10 (to MPN = 210 - 0.5 N),by how much does the real wage increase?
A)1
B)2
C)3
D)4
Answer: B
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Consumption, Saving, and Investment
Available Study Resources on Quizplus for this Chatper
83 Verified Questions
83 Flashcards
Source URL: https://quizplus.com/quiz/55588
Sample Questions
Q1) In 1991 the federal government changed the withholding amounts for personal taxes.The change meant that people wouldn't have as much withheld from their paychecks.But there was no change in the tax code itself,so the amount of tax due in April 1992 was not changed.How would consumption and saving respond to this withholding change? (Note: you may assume a real interest rate of 0%.)
Q2) If the substitution effect of the real interest rate on saving is larger than the income effect of the real interest rate on saving,then a rise in the real interest rate leads to a ________ in consumption and a ________ in saving,for someone who's a lender.
A)fall; fall
B)fall; rise
C)rise; rise
D)rise; fall
Q3) Three factors that cause interest rates among different financial instruments to vary are
A)default risk,expected inflation,and taxability.
B)default risk,current inflation,and taxability.
C)default risk,maturity,and taxability.
D)default risk,expected inflation,and maturity.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: Saving and Investment in the Open Economy
Available Study Resources on Quizplus for this Chatper
93 Verified Questions
93 Flashcards
Source URL: https://quizplus.com/quiz/55589
Sample Questions
Q1) If all international factor payment flows are investment income,then net investment income from abroad equals
A)net exports.
B)the current account balance.
C)the trade balance.
D)net factor payments from abroad.
Q2) If a French company exports $2 million of machinery to Italy and French tourists spend $2 million at Italian beaches,the Italian current account balance ________,and the Italian capital and financial account balance ________.
A)rises; rises
B)rises; is unchanged
C)is unchanged; is unchanged
D)is unchanged; rises
Q3) If there are no net factor payments from abroad and no unilateral transfers,net exports of $10 billion is the same as
A)a current account deficit of $10 billion.
B)a capital and financial account surplus of $10 billion.
C)net acquisition of foreign assets of $10 billion.
D)net foreign borrowing of $10 billion.
To view all questions and flashcards with answers, click on the resource link above.
Page 7
Chapter 6: Long-Run Economic Growth
Available Study Resources on Quizplus for this Chatper
69 Verified Questions
69 Flashcards
Source URL: https://quizplus.com/quiz/55590
Sample Questions
Q1) An increase in the growth rate of population in a steady-state economy would cause
A)a parallel shift upward in the investment line.
B)a pivot up and to the left in the investment line.
C)a pivot down and to the right in the investment line.
D)a parallel shift downward in the investment line.
Q2) (a)In the model of endogenous growth,if s = 0.1,A = 2,and d = 0.15,calculate the economy's growth rate.Show your work.
(b)If the depreciation rate declines to d = 0.10,calculate the economy's growth rate.Show your work.
(c)Is the impact on the growth rate arising from a change in the depreciation rate in the endogenous growth model the same as in the Solow model?
Q3) Greenwood and Yorukoglu view the post-1973 productivity slowdown as resulting from
A)the information technology revolution.
B)high oil prices.
C)measurement errors.
D)technological depletion.
Q4) What types of government policies can increase long-run living standards?
To view all questions and flashcards with answers, click on the resource link above.
Page 8
Chapter 7: The Asset Market, Money, and Prices
Available Study Resources on Quizplus for this Chatper
87 Verified Questions
87 Flashcards
Source URL: https://quizplus.com/quiz/55591
Sample Questions
Q1) Suppose the real money demand function is M<sup>d</sup>/P = 2400 + 0.2 Y10,000 (r + <sup>e</sup>).
Assume M = 5000,P = 2.0,and <sup>e</sup> = .03.If Y were to increase from 4000 to 5000,then the real interest rate would increase by how many percentage points?
A)2
B)4
C)5
D)7
Q2) The least liquid asset on this list is A)money. B)bonds. C)houses. D)stocks.
Q3) We shouldn't be concerned about U.S.currency held abroad because A)the currency will never return to the United States. B)foreigners use it to buy U.S.bonds. C)it represents an interest-free loan to the United States. D)foreigners can't spend it in their own countries.
Q4) Give five examples of factors that could reduce the demand for money.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Business Cycles
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/55592
Sample Questions
Q1) Stock and Watson found that ________ was responsible for about 20-30 % of the reduction in output volatility that occurred in the mid-1980s.
A)reduced shocks to productivity
B)reduced shocks to food and commodity prices
C)better monetary policy
D)better inventory control
Q2) Real interest rates are
A)procyclical,just like nominal interest rates.
B)acyclical,while nominal interest rates are procyclical.
C)acyclical,just like nominal interest rates.
D)countercyclical,while nominal interest rates are procyclical.
Q3) The worst recessions after World War II occurred
A)during 1945-1946 and 1973-1975.
B)during 1957-1958 and 1973-1975.
C)during 1973-1975 and 1981-1982.
D)during 1945-1946 and 1981-1982.
Q4) When a recession occurs,do economists expect it to be a temporary phenomenon? Or is there some degree of permanence? What is the empirical evidence?
To view all questions and flashcards with answers, click on the resource link above.
Page 10
Chapter 9: The Is-Lmad-As Model
Available Study Resources on Quizplus for this Chatper
86 Verified Questions
86 Flashcards
Source URL: https://quizplus.com/quiz/55593
Sample Questions
Q1) A decline in the price of a bond causes the yield of the bond to A)rise.
B)fall.
C)remain unchanged.
D)rise if it's a short-term bond,fall if it's a long-term bond.
Q2) A temporary supply shock,such as a bumper crop,would
A)shift the FE line to the right and leave the IS curve unchanged. B)shift the FE line to the left and shift the IS curve up and to the right.
C)shift the FE line to the left and leave the IS curve unchanged.
D)have no effect on the FE line.
Q3) Draw a saving-investment diagram to show how each of the following changes shifts the IS curve.
(a)Future income rises.
(b)The future marginal productivity of capital increases.
(c)Government purchases decrease temporarily.
(d)The effective corporate tax rate increases.
Q4) If the money supply is increased,which curve shifts in the IS-LM model? What direction does it shift? What is the intuition behind this shift?
Q5) Describe what happens to the FE line if government purchases increase.
To view all questions and flashcards with answers, click on the resource link above. Page 11
Chapter 10: Classical Business Cycle Analysis
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/55594
Sample Questions
Q1) How is the Solow residual measured? What problems arise in its measurement when resource utilization varies over the business cycle? What implications do these measurement issues have for evidence supporting the RBC model?
Q2) Models that are similar to RBC models but allow for shocks other than productivity shocks are known as
A)DSGE models.
B)Keynesian models.
C)Solow models.
D)Friedman models.
Q3) When RBC economists compare the correlations in their models to the data,what are they looking at?
A)The degree to which variables lead output over the business cycle
B)The strength of procyclicality of different variables
C)The amount of random variation in economic variables
D)The degree to which different economic variables move together
Q4) Why do many economists believe that money affects output? What is the empirical evidence in support of that belief?
Q5) Why doesn't stabilization policy work,according to economists using the misperceptions theory?
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Keynesianism: The Macroeconomics of Wage and Price Rigidity
Available Study Resources on Quizplus for this Chatper
77 Verified Questions
77 Flashcards
Source URL: https://quizplus.com/quiz/55595
Sample Questions
Q1) The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called
A)transactions cost theory.
B)cost-benefit theory.
C)menu cost theory.
D)gift exchange theory.
Q2) A situation in which expansionary monetary policy has no effect on the economy is known as
A)macroeconomic stabilization.
B)a liquidity trap.
C)a depression.
D)capital flight.
Q3) Keynesians are skeptical of the classical theory that recessions are periods of increased mismatch between workers and jobs because
A)help-wanted advertising falls during recessions.
B)help-wanted advertising rises during recessions.
C)workers spend a lot of time searching for work in recessions.
D)people are indifferent between being employed or not.
To view all questions and flashcards with answers, click on the resource link above. Page 13
Chapter 12: Unemployment and Inflation
Available Study Resources on Quizplus for this Chatper
79 Verified Questions
79 Flashcards
Source URL: https://quizplus.com/quiz/55596
Sample Questions
Q1) The fact that the long-run Phillips curve is vertical implies that A)monetary policy can't affect unemployment.
B)money is neutral in the long run.
C)there is a natural rate of inflation.
D)money can't affect inflation in the long run.
Q2) Ball found that an important factor affecting the sacrifice ratio is
A)the flexibility of the labor market.
B)the shape of the yield curve.
C)the real interest rate.
D)the tightness of fiscal policy.
Q3) In the extended classical model,an anticipated decrease in the money supply would cause output to ________ and the price level to ________ in the short run.
A)increase; decrease
B)increase; remain unchanged
C)remain unchanged; increase
D)remain unchanged; decrease
Q4) How is the sacrifice ratio measured? How big is the sacrifice ratio in the United States? In other countries? What problems are there in measuring the sacrifice ratio?
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Exchange Rates,business Cycles,and
Macroeconomic Policy in the Open Economy
Available Study Resources on Quizplus for this Chatper
85 Verified Questions
85 Flashcards
Source URL: https://quizplus.com/quiz/55597
Sample Questions
Q1) Which of the following changes would cause American net exports to increase?
A)An increase in the real value of the dollar
B)An increase in American income
C)An increase in foreign income
D)A shift in demand by American consumers away from domestically produced goods
Q2) If the real exchange rate rises 4%,domestic inflation is 2%,and foreign inflation is 0%,what is the percent change in the nominal exchange rate?
A)6%
B)4%
C)2%
D)0%
Q3) The nominal exchange rate is 15 crowns per florin,the domestic price level is 6 florins/bottle,and the foreign price level is 2 crowns/bushel.
(a)What is the real exchange rate?
(b)What is the real exchange rate in the foreign country?
(c)If the domestic price level rises to 8 florins/bottle,what must the nominal exchange rate become if the real exchange rate remains unchanged?
Q4) What is purchasing power parity? Why might it not hold?
Page 15
To view all questions and flashcards with answers, click on the resource link above.
Chapter 14: Monetary Policy and the Federal Reserve System
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/55598
Sample Questions
Q1) Describe how the real interest rate changes in a Keynesian model if a shock shifts the IS curve down and to the right and the Fed changes its policy to keep output unchanged.
Q2) The Federal funds market is a market for trading funds between
A)a bank and a multinational corporation.
B)a bank and the government.
C)a bank and another bank.
D)a bank and the Federal Reserve Bank.
Q3) The primary purpose of the discount window is to
A)influence the nation's money supply.
B)fulfill the bank's lender of last resort role.
C)control banks' excess reserves.
D)influence the amount of loans that banks provide to the public.
Q4) Most Keynesians suggest that the Fed
A)use discretion in setting monetary policy.
B)use fiscal policy to combat unemployment in the short run.
C)follow a rule,such as keeping the money growth rate at 3%,regardless of the state of the economy.
D)use fiscal policy to combat inflation in the long run.
Page 16
To view all questions and flashcards with answers, click on the resource link above.
Chapter 15: Government Spending and Its Financing
Available Study Resources on Quizplus for this Chatper
78 Verified Questions
78 Flashcards
Source URL: https://quizplus.com/quiz/55599
Sample Questions
Q1) Deficits are a burden on future generations if they
A)cause higher rates of inflation to occur.
B)are not used for government capital formation.
C)cause national saving to fall.
D)are always a primary government deficit.
Q2) What are the main reasons (give at least three)that Ricardian equivalence might not hold?
Q3) Suppose that all workers place a value on their leisure of 40 goods per day.The production function relating output per day Y to the number of people working per day N is Y = 200N - N<sup>2</sup>
And the marginal product of labor is MPN = 200 - 2N.
A 20% tax is levied on wages.Output per day would be A)5,625.
B)7,250.
C)9,375.
D)11,250.
Q4) How is real seignorage revenue related to inflation? How does the quantity of real seignorage revenue change as inflation rises from zero to a positive level,to still higher levels?
Page 17
To view all questions and flashcards with answers, click on the resource link above.