International Macroeconomics
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Course Introduction
International Macroeconomics explores the dynamics of the global economy by examining interactions between national economies, including trade, investment, and financial flows. The course covers topics such as exchange rate determination, balance of payments, the role of international organizations, monetary and fiscal policy coordination, and the impact of globalization on economic growth and stability. Students will analyze how macroeconomic policies are shaped in an interconnected world and consider current issues such as crises in international markets, global imbalances, and the influence of emerging economies.
Recommended Textbook
Macroeconomics 9th Edition by Andrew B. Abel
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15 Chapters
1566 Verified Questions
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Page 2
Chapter 1: Introduction to Macroeconomics
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Sample Questions
Q1) Why is macroeconomic forecasting so difficult? Does this difficulty mean economics is a worthless field of study?
Answer: Forecasting is difficult because our understanding of how the economy works is imperfect and because it's impossible to take into account all the factors that might affect future economic trends.This just means the field of economics is difficult and complex,not that it's worthless.
Q2) During the Great Depression,the unemployment rate for the United States peaked at approximately
A)10%.
B)70%.
C)45%.
D)25%.
Answer: D
Q3) From 1800 to 1940,the price level in the United States
A)trended neither upward nor downward.
B)fluctuated wildly.
C)declined slowly.
D)increased slowly.
Answer: A
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Page 3
Chapter 2: The Measurement and Structure of the National Economy
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Sample Questions
Q1) If the price index last year was 1.0 and today it is 1.4,what is the inflation rate over this period?
A)-4%
B)1)4%
C)4%
D)40%
Answer: D
Q2) Capital goods are
A)a type of intermediate good.
B)final goods, because they are not used up during a given year.
C)produced in the same year as the related final good, whereas intermediate goods are produced in different years.
D)produced in one year, whereas final goods are produced over a period of more than one year.
Answer: B
Q3) How are net exports,net factor payments from abroad,and the current account balance related?
Answer: NX + NFP = CA.
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Chapter 3: Productivity, output, and Employment
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Sample Questions
Q1) The city of Hope has a labor force of 1000.Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs.On January 1,May 1,and September 1 of each year,50 people lose their jobs for a period of four months before finding new jobs.What is the average duration of an unemployment spell?
A)2)15 months
B)2)85 months
C)3)14 months
D)3)43 months
Answer: A
Q2) Frictional unemployment arises when
A)unskilled or low-skilled workers find it difficult to obtain desirable, long-term jobs. B)labor must be reallocated from industries that are shrinking to areas that are growing. C)workers must search for suitable jobs and firms must search for suitable workers. D)output and employment are below full-employment levels.
Answer: C
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5
Chapter 4: Consumption, saving, and Investment
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Sample Questions
Q1) Tobin's q is equal to
A)the ratio of capital's market value to its replacement cost.
B)the ratio of capital's replacement cost to its market value.
C)the expected after-tax real interest rate.
D)the stock market value of a firm.
Q2) A curve that connects all the consumption combinations that yield the same level of utility is known as
A)an isoquant.
B)a yield curve.
C)a budget line.
D)an indifference curve.
Q3) An invention that raises the future marginal product of capital (in a closed economy)would cause an increase in desired investment,which would cause the investment curve to shift to the ________ and would cause the real interest rate to
A)right; increase
B)right; decrease
C)left; increase
D)left; decrease
Q4) What is the marginal propensity to consume,and why is it always less than one?
Page 6
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Chapter 5: Saving and Investment in the Open Economy
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Sample Questions
Q1) In a small open economy, S<sup>d</sup> = $5 billion + ($100 billion)r<sup>w</sup>, I<sup>d</sup> = $10 billion - ($50 billion)r<sup>w</sup>, Y = $50 billion, G = $3 billion, r<sup>w</sup> = .06.
(a)Calculate the current account balance.
(b)Calculate net exports.
(c)Calculate desired consumption.
(d)Calculate absorption.
Q2) In a large open economy,the home country's saving and investment equations are: S<sup>d</sup> = 200 + 700r<sup>w</sup> and I<sup>d</sup> = 300200r<sup>w</sup>.The foreign country's saving and investment equations are: S<sup>d</sup> = 50 + 300r<sup>w</sup> and I<sup>d</sup> = 75 - 50r<sup>w</sup>.In equilibrium,the world real interest rate = A)0)10.
B)0)20.
C)0)25.
D)0)40.
Q3) What determines the interest rate in a small open economy?
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Chapter 6: Long-Run Economic Growth
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Sample Questions
Q1) An increase in population growth will lead to a ________ in the steady-state capital-labor ratio and a ________ in output per worker.
A)fall; fall
B)fall; rise
C)rise; rise
D)rise; fall
Q2) Which of the following changes would lead,according to the Solow model,to a higher level of long-run output per worker?
A)A lower level of capital per worker
B)An increase in the saving rate
C)A rise in the rate of population growth
D)A decrease in productivity
Q3) Which of the following would be a useful way to increase the saving rate?
A)Tax breaks to increase the real return that savers receive
B)Increasing taxes if Ricardian equivalence holds
C)Increasing government spending
D)Increasing taxes on capital goods
Q4) What types of government policies can increase long-run living standards?
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8
Chapter 7: The Asset Market, money, and Prices
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Sample Questions
Q1) Why did some of the formerly Communist countries of Eastern Europe have inflation rates over 100%,while others didn't? Which factor was more important in explaining the differing inflation rates,real money demand or nominal money supply? Why did the countries with high inflation rates allow inflation to get so high?
Q2) A good that is used as a medium of exchange as well as being a consumption good is called
A)a barter money.
B)a commodity money.
C)a legal tender.
D)a debased money.
Q3) moneys primary role in the economy comes from the benefits of lowering transactions costs and allowing specialization.This function of money is called A)store of value.
B)medium of exchange.
C)standard of deferred payment.
D)unit of account.
Q4) What are the major components of M1? What are the major components of M2? Describe each component.
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Chapter 8: Business Cycles
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Sample Questions
Q1) Stock and Watson found that monetary policy was responsible for about ________% of the reduction in output volatility that occurred in the mid-1980s.
A)0 to 10
B)10 to 20
C)20 to 30
D)30 to 40
Q2) The recession of 2001 began in ________ and ended in ________.
A)March; November
B)February; December
C)April; October
D)February; October
Q3) An economic variable that doesn't move in a consistent pattern with aggregate economic activity is called
A)procyclical.
B)countercyclical.
C)acyclical.
D)a leading variable.
Q4) What are some of the problems with using the leading indicators to forecast recessions? If you were a policymaker,would you rely on them?
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Chapter 9: The Is-Lmad-As Model
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Sample Questions
Q1) A change that increases the real money supply relative to real money demand causes
A)the LM curve to shift down and to the right.
B)the LM curve to shift up and to the left.
C)the IS curve to shift down and to the left.
D)the IS curve to shift up and to the right.
Q2) For each outcome below,tell what type of shift must have taken place in either the aggregate demand curve or the long-run aggregate supply curve.
(a)In the short run,the price level is unchanged and output rises.
(b)In the long run,the price level declines and output is unchanged.
(c)In the long run,the price level rises and output declines.
Q3) 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?
Q4) Describe what happens to the FE line if government purchases increase.
Q5) An increase in labor supply would cause the IS curve to A)shift up and to the right.
B)shift down and to the left.
C)remain unchanged.
D)shift up and to the right only if people face borrowing constraints.
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Chapter 10: Classical Business Cycle Analysis
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Sample Questions
Q1) Critics of the RBC approach argue that it's hard to find productivity shocks large enough to cause business cycles.What is the RBC counterargument to this criticism?
A)Business cycles are always and everywhere a monetary phenomenon.
B)Wars and military buildups could be considered productivity shocks.
C)Business cycles could be caused by the accumulation of small productivity shocks.
D)Business cycles are often caused by unobservable productivity shocks, which aren't apparent at the time they occur.
Q2) According to the misperceptions theory,an unanticipated decrease in the money supply shifts the AD curve ________,causing output to ________ in the short run.
A)up and to the right; rise
B)up and to the right; fall
C)down and to the left; rise
D)down and to the left; fall
Q3) Use the classical IS-LM model to show the effects of a temporary decrease in government purchases on the equilibrium levels of output,the real interest rate,employment,the real wage,and the price level.
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Page 12
Chapter 11: Keynesianism: the Macroeconomics of Wage and Price Rigidity
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Sample Questions
Q1) According to the Keynesian IS-LM model,what is the effect of each of the following on output,the real interest rate,employment,and the price level? Distinguish between the short run and the long run.
(a)Expected inflation rises.
(b)Wealth increases.
(c)Labor supply decreases due to a change in demographics.
(d)The future marginal product of capital decreases.
Q2) You are the liaison between the Federal Reserve Board and the U.S.Treasury Department.Your goal is to coordinate policy efforts to achieve full-employment output in the economy while keeping a fixed real interest rate.You must recommend tightening or easing both monetary and fiscal policies to do this.What would your recommendation be in each of the following situations?
(a)People decide to increase saving.
(b)Expected inflation declines.
(c)The future marginal productivity of capital declines.
(d)There's an adverse oil price shock in which the LM curve moves farther to the left than does the FE line.
Q3) Why might firms pay an efficiency wage rather than a market-clearing wage?
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Chapter 12: Unemployment and Inflation
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Sample Questions
Q1) One reason for the rise in the natural rate of unemployment from 1960 to 1980 is A)changes in the demographic composition of the work force.
B)the decline in inflation.
C)increased competition from foreign workers.
D)the depreciation of the dollar relative to foreign currencies.
Q2) The natural rate of unemployment in the United States generally ________ from 1960 to 1980 and ________ from 1980 to 2000.
A)fell; rose B)fell; fell C)rose; fell D)rose; rose
Q3) In the expectations-augmented Phillips curve, = <sup>e</sup> - 3(u - 0.05).When = 0.06 and <sup>e</sup> = 0.03,the unemployment rate is
A)0)04.
B)0)05.
C)0)06.
D)0)07.
Q4) Describe the principal costs of unemployment.Are there any benefits to unemployment?
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Chapter 13: Exchange Rates, business Cycles, and
Macroeconomic Policy in the Open Economy
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Sample Questions
Q1) In a Keynesian model,what are the short-run effects on output,the real interest rate,and the real exchange rate,for both the domestic economy and a foreign economy,of a decline in investment?
Q2) To encourage more investment,Mexico has lowered its tax rates to reduce the user cost of capital.Argentina is unable to pay back its foreign debts,causing its expected future marginal product of capital to fall.Mexico's real exchange rate will ________ and its net exports will ________.
A)depreciate; fall
B)appreciate; rise
C)depreciate; rise
D)appreciate; fall
Q3) Suppose Japan is currently running a current account surplus.The most effective way of eliminating this current account surplus would be to temporarily ________ government purchases and ________ the domestic money supply.
A)increase; increase B)increase; decrease C)decrease; increase D)decrease; decrease
Q4) What is purchasing power parity? Why might it not hold?
Page 15
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Chapter 14: Monetary Policy and the Federal Reserve System
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Sample Questions
Q1) What types of rules for monetary policy may be sensible for policymakers to consider? What is the advantage of using rules over discretion? What problems might there be with rules?
Q2) Intermediate targets are
A)identical to instruments.
B)macroeconomic variables that the Fed can influence that are related to the Fed's goals.
C)also known as the Fed's tools.
D)macroeconomic variables that never get revised.
Q3) Which of the following is an instrument of monetary policy?
A)The interest rate on three-month Treasury bills
B)The mortgage interest rate
C)The discount rate
D)The budget deficit
Q4) In response to an unanticipated tightening of monetary policy,output ________ at first,then ________ after about four months.
A)rises; returns most of the way to its original value
B)falls; returns most of the way to its original value
C)remains roughly unchanged; rises significantly
D)remains roughly unchanged; falls significantly
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Chapter 15: Government Spending and Its Financing
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Sample Questions
Q1) The political process by which fiscal policy is made
A)is relatively rapid, contributing to the effectiveness of fiscal policy.
B)requires only that the president approve changes to the budget, a decision that takes several months.
C)is efficient in reaching a decision within a year.
D)is slow and results in a long time lag for fiscal policy.
Q2) Taxes distort economic behavior because they
A)change the composition of income and spending.
B)cause deviations in economic behavior from the efficient, free-market outcome.
C)change the balance between private and public expenditures.
D)change the composition of consumption, investment, government spending, and net exports.
Q3) State governments in the United States can raise revenue by all the following means except
A)increasing income taxes.
B)increasing taxes on corporate profits.
C)increasing sales taxes.
D)increasing the money supply.
Q4) What are the main reasons (give at least three)that Ricardian equivalence might not hold?
Page 17
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