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Principles of Macroeconomics 3e

Self-Check Questions

Principles of Macroeconomics 3eSelf-Check Questions
Table of contents
  1. Preface
  2. 1 Welcome to Economics!
    1. Introduction
    2. 1.1 What Is Economics, and Why Is It Important?
    3. 1.2 Microeconomics and Macroeconomics
    4. 1.3 How Economists Use Theories and Models to Understand Economic Issues
    5. 1.4 How To Organize Economies: An Overview of Economic Systems
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
  3. 2 Choice in a World of Scarcity
    1. Introduction to Choice in a World of Scarcity
    2. 2.1 How Individuals Make Choices Based on Their Budget Constraint
    3. 2.2 The Production Possibilities Frontier and Social Choices
    4. 2.3 Confronting Objections to the Economic Approach
    5. Key Terms
    6. Key Concepts and Summary
    7. Self-Check Questions
    8. Review Questions
    9. Critical Thinking Questions
    10. Problems
  4. 3 Demand and Supply
    1. Introduction to Demand and Supply
    2. 3.1 Demand, Supply, and Equilibrium in Markets for Goods and Services
    3. 3.2 Shifts in Demand and Supply for Goods and Services
    4. 3.3 Changes in Equilibrium Price and Quantity: The Four-Step Process
    5. 3.4 Price Ceilings and Price Floors
    6. 3.5 Demand, Supply, and Efficiency
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  5. 4 Labor and Financial Markets
    1. Introduction to Labor and Financial Markets
    2. 4.1 Demand and Supply at Work in Labor Markets
    3. 4.2 Demand and Supply in Financial Markets
    4. 4.3 The Market System as an Efficient Mechanism for Information
    5. Key Terms
    6. Key Concepts and Summary
    7. Self-Check Questions
    8. Review Questions
    9. Critical Thinking Questions
    10. Problems
  6. 5 Elasticity
    1. Introduction to Elasticity
    2. 5.1 Price Elasticity of Demand and Price Elasticity of Supply
    3. 5.2 Polar Cases of Elasticity and Constant Elasticity
    4. 5.3 Elasticity and Pricing
    5. 5.4 Elasticity in Areas Other Than Price
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  7. 6 The Macroeconomic Perspective
    1. Introduction to the Macroeconomic Perspective
    2. 6.1 Measuring the Size of the Economy: Gross Domestic Product
    3. 6.2 Adjusting Nominal Values to Real Values
    4. 6.3 Tracking Real GDP over Time
    5. 6.4 Comparing GDP among Countries
    6. 6.5 How Well GDP Measures the Well-Being of Society
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  8. 7 Economic Growth
    1. Introduction to Economic Growth
    2. 7.1 The Relatively Recent Arrival of Economic Growth
    3. 7.2 Labor Productivity and Economic Growth
    4. 7.3 Components of Economic Growth
    5. 7.4 Economic Convergence
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  9. 8 Unemployment
    1. Introduction to Unemployment
    2. 8.1 How Economists Define and Compute Unemployment Rate
    3. 8.2 Patterns of Unemployment
    4. 8.3 What Causes Changes in Unemployment over the Short Run
    5. 8.4 What Causes Changes in Unemployment over the Long Run
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  10. 9 Inflation
    1. Introduction to Inflation
    2. 9.1 Tracking Inflation
    3. 9.2 How to Measure Changes in the Cost of Living
    4. 9.3 How the U.S. and Other Countries Experience Inflation
    5. 9.4 The Confusion Over Inflation
    6. 9.5 Indexing and Its Limitations
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  11. 10 The International Trade and Capital Flows
    1. Introduction to the International Trade and Capital Flows
    2. 10.1 Measuring Trade Balances
    3. 10.2 Trade Balances in Historical and International Context
    4. 10.3 Trade Balances and Flows of Financial Capital
    5. 10.4 The National Saving and Investment Identity
    6. 10.5 The Pros and Cons of Trade Deficits and Surpluses
    7. 10.6 The Difference between Level of Trade and the Trade Balance
    8. Key Terms
    9. Key Concepts and Summary
    10. Self-Check Questions
    11. Review Questions
    12. Critical Thinking Questions
    13. Problems
  12. 11 The Aggregate Demand/Aggregate Supply Model
    1. Introduction to the Aggregate Supply–Aggregate Demand Model
    2. 11.1 Macroeconomic Perspectives on Demand and Supply
    3. 11.2 Building a Model of Aggregate Demand and Aggregate Supply
    4. 11.3 Shifts in Aggregate Supply
    5. 11.4 Shifts in Aggregate Demand
    6. 11.5 How the AD/AS Model Incorporates Growth, Unemployment, and Inflation
    7. 11.6 Keynes’ Law and Say’s Law in the AD/AS Model
    8. Key Terms
    9. Key Concepts and Summary
    10. Self-Check Questions
    11. Review Questions
    12. Critical Thinking Questions
    13. Problems
  13. 12 The Keynesian Perspective
    1. Introduction to the Keynesian Perspective
    2. 12.1 Aggregate Demand in Keynesian Analysis
    3. 12.2 The Building Blocks of Keynesian Analysis
    4. 12.3 The Phillips Curve
    5. 12.4 The Keynesian Perspective on Market Forces
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
  14. 13 The Neoclassical Perspective
    1. Introduction to the Neoclassical Perspective
    2. 13.1 The Building Blocks of Neoclassical Analysis
    3. 13.2 The Policy Implications of the Neoclassical Perspective
    4. 13.3 Balancing Keynesian and Neoclassical Models
    5. Key Terms
    6. Key Concepts and Summary
    7. Self-Check Questions
    8. Review Questions
    9. Critical Thinking Questions
    10. Problems
  15. 14 Money and Banking
    1. Introduction to Money and Banking
    2. 14.1 Defining Money by Its Functions
    3. 14.2 Measuring Money: Currency, M1, and M2
    4. 14.3 The Role of Banks
    5. 14.4 How Banks Create Money
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  16. 15 Monetary Policy and Bank Regulation
    1. Introduction to Monetary Policy and Bank Regulation
    2. 15.1 The Federal Reserve Banking System and Central Banks
    3. 15.2 Bank Regulation
    4. 15.3 How a Central Bank Executes Monetary Policy
    5. 15.4 Monetary Policy and Economic Outcomes
    6. 15.5 Pitfalls for Monetary Policy
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  17. 16 Exchange Rates and International Capital Flows
    1. Introduction to Exchange Rates and International Capital Flows
    2. 16.1 How the Foreign Exchange Market Works
    3. 16.2 Demand and Supply Shifts in Foreign Exchange Markets
    4. 16.3 Macroeconomic Effects of Exchange Rates
    5. 16.4 Exchange Rate Policies
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  18. 17 Government Budgets and Fiscal Policy
    1. Introduction to Government Budgets and Fiscal Policy
    2. 17.1 Government Spending
    3. 17.2 Taxation
    4. 17.3 Federal Deficits and the National Debt
    5. 17.4 Using Fiscal Policy to Fight Recession, Unemployment, and Inflation
    6. 17.5 Automatic Stabilizers
    7. 17.6 Practical Problems with Discretionary Fiscal Policy
    8. 17.7 The Question of a Balanced Budget
    9. Key Terms
    10. Key Concepts and Summary
    11. Self-Check Questions
    12. Review Questions
    13. Critical Thinking Questions
    14. Problems
  19. 18 The Impacts of Government Borrowing
    1. Introduction to the Impacts of Government Borrowing
    2. 18.1 How Government Borrowing Affects Investment and the Trade Balance
    3. 18.2 Fiscal Policy and the Trade Balance
    4. 18.3 How Government Borrowing Affects Private Saving
    5. 18.4 Fiscal Policy, Investment, and Economic Growth
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  20. 19 Macroeconomic Policy Around the World
    1. Introduction to Macroeconomic Policy around the World
    2. 19.1 The Diversity of Countries and Economies across the World
    3. 19.2 Improving Countries’ Standards of Living
    4. 19.3 Causes of Unemployment around the World
    5. 19.4 Causes of Inflation in Various Countries and Regions
    6. 19.5 Balance of Trade Concerns
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  21. 20 International Trade
    1. Introduction to International Trade
    2. 20.1 Absolute and Comparative Advantage
    3. 20.2 What Happens When a Country Has an Absolute Advantage in All Goods
    4. 20.3 Intra-Industry Trade between Similar Economies
    5. 20.4 The Benefits of Reducing Barriers to International Trade
    6. Key Terms
    7. Key Concepts and Summary
    8. Self-Check Questions
    9. Review Questions
    10. Critical Thinking Questions
    11. Problems
  22. 21 Globalization and Protectionism
    1. Introduction to Globalization and Protectionism
    2. 21.1 Protectionism: An Indirect Subsidy from Consumers to Producers
    3. 21.2 International Trade and Its Effects on Jobs, Wages, and Working Conditions
    4. 21.3 Arguments in Support of Restricting Imports
    5. 21.4 How Governments Enact Trade Policy: Globally, Regionally, and Nationally
    6. 21.5 The Tradeoffs of Trade Policy
    7. Key Terms
    8. Key Concepts and Summary
    9. Self-Check Questions
    10. Review Questions
    11. Critical Thinking Questions
    12. Problems
  23. A | The Use of Mathematics in Principles of Economics
  24. B | The Expenditure-Output Model
  25. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
    17. Chapter 17
    18. Chapter 18
    19. Chapter 19
    20. Chapter 20
    21. Chapter 21
  26. References
  27. Index
1.

Describe the mechanism by which supply creates its own demand.

2.

Describe the mechanism by which demand creates its own supply.

3.

The short run aggregate supply curve was constructed assuming that as the price of outputs increases, the price of inputs stays the same. How would an increase in the prices of important inputs, like energy, affect aggregate supply?

4.

In the AD/AS model, what prevents the economy from achieving equilibrium at potential output?

5.

Suppose the U.S. Congress passes significant immigration reform that makes it more difficult for foreigners to come to the United States to work. Use the AD/AS model to explain how this would affect the equilibrium level of GDP and the price level.

6.

Suppose concerns about the size of the federal budget deficit lead the U.S. Congress to cut all funding for research and development for ten years. Assuming this has an impact on technology growth, what does the AD/AS model predict would be the likely effect on equilibrium GDP and the price level?

7.

How would a dramatic increase in the value of the stock market shift the AD curve? What effect would the shift have on the equilibrium level of GDP and the price level?

8.

Suppose Mexico, one of our largest trading partners and purchaser of a large quantity of our exports, goes into a recession. Use the AD/AS model to determine the likely impact on our equilibrium GDP and price level.

9.

A policymaker claims that tax cuts led the economy out of a recession. Can we use the AD/AS diagram to show this?

10.

Many financial analysts and economists eagerly await the press releases for the reports on the home price index and consumer confidence index. What would be the effects of a negative report on both of these? What about a positive report?

11.

What impact would a decrease in the size of the labor force have on GDP and the price level according to the AD/AS model?

12.

Suppose, after five years of sluggish growth, the European Union's economy picks up speed. What would be the likely impact on the U.S. trade balance, GDP, and employment?

13.

Suppose the Federal Reserve begins to increase the supply of money at an increasing rate. What impact would that have on GDP, unemployment, and inflation?

14.

If the economy is operating in the neoclassical zone of the SRAS curve and aggregate demand falls, what is likely to happen to real GDP?

15.

If the economy is operating in the Keynesian zone of the SRAS curve and aggregate demand falls, what is likely to happen to real GDP?

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