Macroeconomics

1. GDP is a key concept in .
a. What is the definition of GDP?
i. Write down the definition.
b. List and briefly explain the 3 different approaches to calculating GDP
i. List and explain the approaches and how you would use each to
calculate GDP.
c. List and briefly explain 3 types of transactions that would not be included in
GDP and why they should be omitted.
i. Look in the notes and find 3 types of transactions that are excluded
from the computation of GDP and write them down along with the
explanation of each and why they are not included.
d. Thoroughly explain the components of GDP and relate those components to
the Circular Flow model.
i. List and explain the 4 components of GDP
ii. Relate each of them to the components of the complete circular
flow model that you studied in part 1 of the course.
e. Explain the difference between nominal and real GDP and how to calculate
real GDP
i. Look in the notes to find this – very straight forward.
f. Explain the difference between GDP and Per Capita GDP; explain how to
calculate Per Capita GDP, and how Per Capita GDP can be used.
i. Should be able to get this from the notes and a bit of research.
g. The GDP of China and The U.S. are nearly the same. So why is there such a
large difference between GDP Per Capita for the two countries? How does
this relate to the fact that these two nations are the 2 largest air polluters in the
world?
i. How do you explain this?

2. Two key sources of economic growth have been due to increases in resources and
increases in productivity. What factors will contribute to falling U.S. GDP growth
rates into the future, and how would that impact you?
a. Do a bit of research into our ability to get more resources and the cost
associated with getting the hardest to recover bits of resources.
b. What could prevent us from “Engineering our way out of the problem”?

3. The Business Cycle and Built in stabilizers.
a. What can you learn from the Business Cycle?
i. Discuss what the business cycle represents.
ii. What can it tell you about the status of our economy today and into
the future?
b. List and explain the 4 phases of the business cycle, including the
characteristics of each.
i. You would want to list the 4 phases of the business cycle (in the
order that they typically occur) and explain the characteristics of
each. Please don’t include Depression as one of them.
ii. Include in your discussion how each phase of the business cycle
might impact your life.
c. Explain 2 causes of change in the direction of the business cycle.

d. Explain in detail the built in stabilizer and how it works to reduce the impacts
of inflation and recession.
i. You would want to:
1. Note that this falls under non-discretionary fiscal policy,
2. Explain the difference between discretionary and non-discretionary fiscal policy,
3. Discuss the key relationship that supports the built in
stabilizer,
4. Explain how it works to reduce inflation
5. Explain how it works to reduce recession
6. Explain why the presence of the built-in-stabilizer is
important to managing the macro economy.
7. Draw pictures if necessary

4. Unemployment and how to use Fiscal Policy to address Recession. Background for
this question: The US economy is currently experiencing recession according to the
Federal Government. Using only Fiscal Policy and the AD – AS model, how would
you solve this problem?
a. How is the unemployment rate calculated, how do you define the employed,
the unemployed, and who is in the labor force?
i. This link to the BLS website should help –
http://www.bls.gov/cps/cps_htgm.htm
b. Which of the Alternative measures of labor underutilization (unemployment
rate) do you see used most often and why?
i. This link to the BLS website should help –
http://www.bls.gov/news.release/empsit.t15.htm
c. Why are Black and Hispanic unemployment rates always significantly higher
that the unemployment rate for Whites?
i. Some quick research should provide answers here.
d. List and explain the 3 types of unemployment and explain the importance of
skills to each.
i. You would want to list and explain the 3 types. You will find
everything on the 2 or 3 slides plus the audio provides additional
insight.
e. List and explain 3 examples of significant economic costs of unemployment
and how they might impact you.
i. Again, this is in the slides and audio.
f. Using Fiscal Policy to fight recession. List the 3 Fiscal Policy tools available,
and select the one that you want to use to attack the recession problem?
i. List the 3 choices and state specifically which one you will use.
g. Explain why you selected this tool and why you did not select the alternative.
i. Consider the pros and cons of each of the 3 tools and tell me why
you picked the one you picked and why you did not pick the other
option(s).
h. Explain how your tool would solve the recession problem and what effects
your solution would have on at least five key economic variables. Be specific,
details are important here.
i. Explain how your choice of tools would work to solve the problem
of recession. Start with the implementation of your tool and then
list step by step what happens next, until you arrive at the
appropriate impact on GDP. Be sure you provide the detailed step
by step flow.
ii. Using that approach allows the list the key economic variables and
how each would be affected, to pop right out.

5. Inflation and how to use Fiscal Policy to address the problem of Inflation.
Background for this question: Assume the US economy is currently experiencing
high rates of inflation according to the Federal Reserve. Using only Fiscal Policy and
the AD – AS model, how would you solve this problem?
a. What is inflation and how is it calculated?
i. See slides
b. List and explain the two types of inflation
i. Refer to the slides and audio
c. Give two examples of who might be hurt by inflation and why.
i. Refer to the slides and audio
d. Give two examples of who might be helped by inflation and why.
i. Refer to the slides and audio
e. List the 3 Fiscal Policy tools available and specifically state the tool you will
use to attack the inflation problem?
i. List the 3 possible choices and then just tell me which of the tools
you would select. Just write it down.
f. Explain why you selected this particular tool, and why you did not select the
anternative.
i. Consider the pros and cons of each of the 3 tools and tell me why
you picked the one you picked and why you did not pick the other
option(s).
g. Explain how your solution would work to solve the problem of inflation and
what effects your solution would have on at least five key economic
variables? Be specific here.
i. Explain how your choice of tools would work to solve the problem
of recession. Start with the implementation of your tool and then
list step by step what happens next, until you arrive at the
appropriate impact on GDP. Be sure you provide the detailed step
by step flow.
ii. Using that approach allows the list the key economic variables and
how each would be affected, to pop right out.

6. The Aggregate Demand curve shows the level of real output that the economy will
purchase at each price level.
a. List and thoroughly explain the three reasons the Aggregate Demand curve is
downward sloping.
i. In your explanation, please start with an increase in prices and work
through to a decrease in AD.
b. List and explain the components of Aggregate Demand along with their
determinants
i. You studied the 4 components. List and briefly explain them and
under each list and explain the determinants of each.

7. Explain how the Aggregate Demand – Aggregate Supply Model differs from the
Aggregate Expenditures model
a. Put the two models side by side, look for the differences and explain them.
b. Here is just 1 example:
i. The AE model shows aggregate spending at every level of output.
The AD/AS model shows the amount of real output at various price
levels. The AD/AS model allows us to explain what happens to real
output and price levels as AD and AS change.

8. The basic macroeconomic relationships introduced a number of key concepts.
a. Please explain the relationship between income, consumption, savings, and
GDP.
i. Define each
ii. Explain the relationship between these items.
b. Please explain the relationship between interest rates, expected rates of return,
investment, and GDP
i. Talk about the list of projects that a typical business would have and
how those projects are ranked by expected return.
ii. Talk about the decision about which projects to do – what info is
needed to make the decision.
iii. Discuss how investment spending results from the decision.
iv. What factors will affect interest rates, what factors will affect
expected rate of return, and what will be the impact on investment
spending, and therefore gdp.
c. Please explain the concept of the multiplier, including:
i. What information is required to calculate the spending multiplier
1. Refer to the slides, the info is there. Look closely – don’t
miss this!
ii. List and explain the 3 different multipliers that we discussed.
1. Again, refer to the slides, it’s all there.
iii. Explain how the multiplier works to impact GDP?
1. Use the chart from the slide set as the basis of your
explanation. Start with the injection of money into the
economy and then how that affects household income and
then spending via the mpc. Go on to discuss the rounds of
spending, etc. and how the ultimate impact on gdp is
amplified by the multiplier effect.

9. The aggregate Supply curve shows the level of real output that the business sector
will produce at various possible price levels.
a. Explain the Long Run Aggregate Supply curve and the assumptions that
support its shape at full employment.
i. List the assumptions, discuss the shape of the LR AS curve and why
it takes that shape.
b. Explain the Short Run Aggregate Supply curve and the assumptions that
support its shape.
i. List the assumptions, discuss the shape of the SR AS curve and why
it takes that shape. Discuss the difference in the shape of the curve
at levels below full employment GDP and what you see at levels
above full employment GDP.

10. Fiscal policy can be called on to correct conditions of recession and inflation.
a. List the 3 tools of Fiscal Policy that would be appropriate for addressing
recession and explain in detail how each would ultimately impact aggregate
demand and equilibrium GDP.
i. You would want to list and explain the 3 tools and how each (step
by step) would affect AD and equilibrium gdp.
b. List the 3 tools of Fiscal Policy that would be appropriate for addressing
inflation and explain in detail how each would ultimately impact aggregate
demand and equilibrium GDP.
i. You would want to list and explain the 3 tools and how each (step
by step) would affect AD and equilibrium gdp.

11. We discussed four problems that complicate the application of fiscal policy.
a. List and thoroughly explain these problems, including how each would likely
impact the overall effectiveness of fiscal policy.
i. You should list the 4 problems associated with Fiscal Policy and
explain the factors associated with each. And as you address each
problem, discuss how each would impact the effectiveness of fiscal
policy.

Place this order with us and get 18% discount now! to earn your discount enter this code: summer17 If you need assistance chat with us now by clicking the live chat button.