BMAL-590 Macroeconomics Exam With Complete Solutions Pass Assured.

BMAL-590 Macroeconomics Exam With Complete
Solutions Pass Assured.




Macroeconomics - CORRECT ANSWER✔✔examines the economy as a whole. When all the individuals,
jj jj jj jj jj jj jj jj jj jj jj jj




households, firms, governments and foreign countries act together and make decisions, the entire economy is
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




affected.
jj jj




Thus, Macroeconomics explores the determinants of aggregate income, investment, consumption, growth,
jj jj jj jj jj jj jj jj jj jj




interest rates, and overall level of prices.
jj jj jj jj jj jj jj




Macroeconomics posits that the notion of perfect markets and equilibrium do not hold for all goods and
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




services, and certainly not at all times.
jj jj jj jj jj jj jj




In fact, the impetus for the growth of Macroeconomics was the great depression as classical macroeconomic
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




theories could not explain why high levels of unemployment persisted.
jj jj jj jj jj jj jj jj jj jj




Keynesian economics - CORRECT ANSWER✔✔The central theme is the role of government in the economy.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj

,Keynes argued that government intervention could be an effective toolin addressing the problems of
jj jj jj jj jj jj jj jj jj jj jj jj jj




unemployment and sluggishness output. Thus, government becomes a facilitator in stimulating aggregate
jj jj jj jj jj jj jj jj jj jj jj jj




demand and lifting the economy out of a recession. The definition of people not working according to Keynes
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




are those not able to find a job at the current wage rate.
jj jj jj jj jj jj jj jj jj jj jj jj jj




Keynesian economics was deemed to be the answer until the events of the 1970s and 1980s demonstrated the
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




limitations of government intervention and led to considerable disillusionment.
jj jj jj jj jj jj jj jj jj




Walter Heller - CORRECT ANSWER✔✔used the term "Fine-tuning" to explain the role of government in
jj jj jj jj jj jj jj jj jj jj jj jj jj jj




regulating unemployment and inflation.
jj jj jj jj




The law of demand states that - CORRECT ANSWER✔✔price and quantity demanded are inversely related
jj jj jj jj jj jj jj jj jj jj jj jj jj jj




The law of demand states that the quantity demanded of goods falls when the price of the goods rises, and vice
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




versa, provided all other factors that affect buyers' decisions are unchanged.
jj jj jj jj jj jj jj jj jj jj jj jj




The quantity demanded of a consumer good such as ice cream depends on:
jj jj jj jj jj jj jj jj jj jj jj jj




- The price of ice cream
jj jj jj jj jj




- The prices of related goods
jj jj jj jj jj




- Consumers' incomes
jj jj




- Consumers' tastes
jj jj




- Consumers' expectations about future prices and incomes
jj jj jj jj jj jj jj




- Number of buyers, etc.
jj jj jj jj




The law of demand says that the quantity demanded of a good is inversely related to its price, provided all other
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




factors are unchanged.
jj jj jj




Shifts in demand are caused by changes in the factors of demand:
jj jj jj jj jj jj jj jj jj jj jj

,- Economics (the economy, consumer income, GDP, xfc etc.)
jj jj jj jj jj jj jj jj




- Prices of related goods
jj jj jj jj




- Consumer tastes and preferences
jj jj jj jj




- Legal/Government
jj




- Expectations about future prices and prospects
jj jj jj jj jj jj




- Technology
jj




- Number of buyers
jj jj jj




examples of how factors can shift an entire demand curve include: - CORRECT ANSWER✔✔Consumer
jj jj jj jj jj jj jj jj jj jj jj jj jj




Income:
jj jj




- As income increases, the demand for a normal good will increase.
jj jj jj jj jj jj jj jj jj jj jj




- As income increases, the demand for an inferior good will decrease.
jj jj jj jj jj jj jj jj jj jj jj




Prices of Related Goods:
jj jj jj jj




- When a fall in the price of one good reduces the demand for another good, the two goods are called
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




substitutes.
jj




- When a fall in the price of one good increases the demand for another good, the two goods are called
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




complements.
jj




When considering the factors involved one should be able to understand how changes in the factors cause
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




changes in demand, with an entire shift not a movement along the demand curve.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj




Quantity supplied - CORRECT ANSWER✔✔the amount of a good that sellers are willing and able to sell.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




Supply - CORRECT ANSWER✔✔a full description of how the quantity supplied of a commodity responds to
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




changes in its price.
jj jj jj jj

, The law of supply states: - CORRECT ANSWER✔✔the quantity supplied of a good rises when the price of the
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




good rises, as long as all other factors that affect suppliers' decisions are unchanged
jj jj jj jj jj jj jj jj jj jj jj jj jj jj




Market Supply - CORRECT ANSWER✔✔the combined supply of everyone willing and able to sell a good in a
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




market. Market supply is graphically represented by a positively-sloped market supply curve (remember
jj jj jj jj jj jj jj jj jj jj jj jj jj




previous slide), which can be derived by combining, or adding, the individual supplies of every seller in the
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




market.
jj




Stagflation - CORRECT ANSWER✔✔a period of slow economic growth and high unemployment (stagnation)
jj jj jj jj jj jj jj jj jj jj jj jj




while prices rise (inflation)
jj jj jj jj




a phenomenon that has baffled economists. Stagflation is often caused by a supply side shock. For example,
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




rising commodity prices, such as oil prices, will cause a rise in business costs (transport more expensive) and
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




short run aggregate supply will shift to the left. This causes a higher inflation rate and lower GDP output.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




An economy is said to be in stagflation when overall price levels increase rapidly (inflation) even as the
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




economy itself is in a recession or high levels of unemployment (stagnation).
jj jj jj jj jj jj jj jj jj jj jj jj




This is precisely what happened in the U.S. during the 1970s. Oil prices increased dramatically. The production
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




costs of goods spiraled leading to an increase in unemployment. The stagnation that followed inflamed the
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




inflationary effects on the economy.
jj jj jj jj jj




Scholars have tried to explain this phenomenon in terms of an economy's productive capacity itself declining
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




or the failure of government policies. However there is no consensus on the solution, if any, to the problem.
jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj jj




Macroeconomics attempts to address three major concerns: - CORRECT ANSWER✔✔Inflation jj jj jj jj jj jj jj jj jj




Growth

Unemployment