MACROECONOMICS
Q&A
QUESTION 1: There are two governments: one cares about keeping output stable and the
other cares about keeping prices stable. What could be their reactions to:
A. An increase in consumer confidence
B. An increase in the price of oil
QUESTION 2: How would the following affect the level of output in the short run and the
long run?
A. An increase in the proportion of skilled labour in the workforce
B. Globalization
C. Increased immigration
QUESTION 3: The government is concerned about the current level of unemployment. It
decides that an immediate reduction in interest rates is required to boost aggregate
demand. What factors will determine the success of this policy?
QUESTION 4: Explain how the following will affect the equilibrium level of interest rates.
A. a large increase in the cost of using ATM’s
B. A requirement for all banks to deposit a proportion of their reserves in a noninterest bearing account
at the central bank.
C. the government run a substantial budget surplus and repurchases bonds from
the private sector
D. a fall in consumer confidence
, MARCOECONOMICS Q&A
CASE STUDY 2, SEPTEMBER 2020
QUESTION 1: There are two governments: one cares about keeping output stable and the
other cares about keeping prices stable. What could be their reactions to:
A. An increase in consumer confidence
ANSWER: The government that is concerned with maintaining stable output will be
concerned with increasing consumer confidence. Increasing consumer confidence means
that more money will be spent on the market by people. The demand for goods will increase
as people spend more. The company must produce more to meet the high consumer
demand. This will affect production reliability as the output level significantly increases.
The government concerned with maintaining stable prices will also be concerned
with rising consumer confidence. The high demand for the goods would allow the company
to sell the item at a higher price in order to make more money as people consumption
increases. Prices of the goods will rise dramatically and impact price stability on the market.
B. An increase in the price of oil
ANSWER: The government concerned with maintaining stable prices will be afraid of rising
oil prices. The increase in oil prices will increase transportation costs. The business that
charge higher transport costs for the price of the product can cause a dramatic increase in
the price of the product. The product price stability can be affected.
In addition, the increase in the price of the goods would reduce the demand for the
products. People are going to buy less and save more money in the bank. The production
output for the products decreases as the demand for the products decreases. Output
stability may be affected which make the government that cares about the stable output
afraid.
Q&A
QUESTION 1: There are two governments: one cares about keeping output stable and the
other cares about keeping prices stable. What could be their reactions to:
A. An increase in consumer confidence
B. An increase in the price of oil
QUESTION 2: How would the following affect the level of output in the short run and the
long run?
A. An increase in the proportion of skilled labour in the workforce
B. Globalization
C. Increased immigration
QUESTION 3: The government is concerned about the current level of unemployment. It
decides that an immediate reduction in interest rates is required to boost aggregate
demand. What factors will determine the success of this policy?
QUESTION 4: Explain how the following will affect the equilibrium level of interest rates.
A. a large increase in the cost of using ATM’s
B. A requirement for all banks to deposit a proportion of their reserves in a noninterest bearing account
at the central bank.
C. the government run a substantial budget surplus and repurchases bonds from
the private sector
D. a fall in consumer confidence
, MARCOECONOMICS Q&A
CASE STUDY 2, SEPTEMBER 2020
QUESTION 1: There are two governments: one cares about keeping output stable and the
other cares about keeping prices stable. What could be their reactions to:
A. An increase in consumer confidence
ANSWER: The government that is concerned with maintaining stable output will be
concerned with increasing consumer confidence. Increasing consumer confidence means
that more money will be spent on the market by people. The demand for goods will increase
as people spend more. The company must produce more to meet the high consumer
demand. This will affect production reliability as the output level significantly increases.
The government concerned with maintaining stable prices will also be concerned
with rising consumer confidence. The high demand for the goods would allow the company
to sell the item at a higher price in order to make more money as people consumption
increases. Prices of the goods will rise dramatically and impact price stability on the market.
B. An increase in the price of oil
ANSWER: The government concerned with maintaining stable prices will be afraid of rising
oil prices. The increase in oil prices will increase transportation costs. The business that
charge higher transport costs for the price of the product can cause a dramatic increase in
the price of the product. The product price stability can be affected.
In addition, the increase in the price of the goods would reduce the demand for the
products. People are going to buy less and save more money in the bank. The production
output for the products decreases as the demand for the products decreases. Output
stability may be affected which make the government that cares about the stable output
afraid.
