Macroeconomic Assignment | Custom Assignment Help

Midterm 1 Review
The midterm exam 1 will cover materials of Chapters 1-2, and part of Chapter 3 (before the
supply of labor, see the Chapter 3 (midterm) under the lecture notes folder). The Chapter 3
materials correspond book (8th edition) 3.1-3.2.
The midterm is on 2/19 (Wednesday) in class
Review Session: 2/17 (Monday) in class
The midterm consists of 20 multiple choices questions. Please bring your own writing supplies,
including a pencil and an eraser to fill the Scantron. You are allowed to bring a calculator to the
exam. If you did not prepare a calculator for the exam, no back-up calculator will be provided.
You are NOT allowed to use any study material or electronic device (except for your calculator)
in the exam. I will have two versions of the exam, please correctly mark your version on the
back of the Scantron. Otherwise it will not be graded.
Extended office hours are available before the exam:
Instructor office hour (Hudson building 241): 2/18 (W) 10:00-12:00 PM
TA office hour (Hudson building 25 240) : 2/18 (W) 12:30-2:30pm
To prepare for the midterm, it would be beneficial to review the class notes and assignments,
and the practice questions included in this review. I will discuss the solutions to these practice
questions in the review session. If you want to know how to solve these questions, you must
come to that class. Solutions will not be provided otherwise. I made the practice questions as
non-graded problems, rather than graded homework assignments, because I want you to try
your best to complete these questions independently to test whether you understand the class
materials. Please try to solve the questions with the book and the notes closed (after you
review the materials).
Below I summarize the key concepts of the covered chapters, but the exam questions may NOT
be limited to the mentioned concepts. A good way of using this review material is to close the
book, and read it item by item think about whether you understand and know the meaning of
each item and whether you can recall the formula correctly. If you did not know well one item,

please check the class notes and the book.
All below notations are required for exam.
Chapter 1
· Definition of unemployment, unemployment rate, inflation rate
· Definition and characteristics of business cycle
· Definition of fiscal and monetary policy
· Difference between positive and normative analysis
· Difference between Classicals and Keynesians: the underlying assumption about prices,
and the views on government intervention
Chapter 2
· The definition of GDP and GNP
· GDP=GNP-NFP
· Product approach for calculating GDP:
Way 1: sum of market value of newly produced final goods and services
Way 2: add up value added of all production firms. Note that you should know how to
calculate value added.
· Expenditure approach for calculating GDP:
Y=C+I+G+NX, note that GDP is also denoted by Y.
· Income approach for calculating GDP:
Way 1: GNP=net national product + depreciation; GDP=GNP-NFP
Way 2: Private disposable income=Y+NFP+TR+INT-T; Government’s net income=T-TRINT;
Private disposable income + government’s net income=GDP+NFP=GNP
Note that you should know how to calculate profit
· The equivalence of three approaches
· Definition of savings and saving rate
· Private saving: Spvt=(Y+NFP-T+TR+INT)-C.
· Government saving: Sgovt=T-TR-INT-G, definition of deficit and surplus
· National saving: S=Spvt+Sgovt=GNP-C-G
· Uses-of-saving identity: S=I+CA for an open economy, and S=I for a close economy
· Uses-of-private-saving identity: Spvt = I+(- Sgovt)+CA
· The definition of flow and stock variables
· Definition of national wealth
· Calculation of nominal and real GDP
· Definition of GDP deflator and CPI (both have a base year P=100)
· Inflation = ( − )/
· How to calculate nominal interest rate for bonds, and how to calculate inflation rates
using CPI

Difference between nominal and real interest rate:
Real interest rate=i-π;
Expected real interest rate r=i-, where i denotes the nominal interest rate
· How will lenders and borrowers be affected if expected inflation is different from actual
inflation
Chapter 3
· Production function Y=AF(K,N)
· Properties of the production function
· What is a supply shock, and how it affects the economy
· How a firm determines the number of workers hired.
· The labor demand curve w=MPN (W=MRPN). The difference between the shift along the
curve and the movement of the curve.
Practice Exam
Question 1: Which of the following statements below is primarily positive in nature?
A. The US government should not increase tariffs on Chinese goods, because the Chinese
government will retaliate by increasing tariffs on US goods.
B. The US government should increase tariffs on Chinese goods to make US produced goods
more attractive to domestic consumers
C. Increasing tariffs on Chinese goods reduces the import from China when holding other things
unchanged
D. None of the above.
Question 2: Which of the following statement correctly describes the view of Classical
Economics?
A. Prices are rigid and it takes a long time for prices to adjust to the equilibrium level.
B. The government should combat recessions using expansionary monetary policies.
C. People pursue their own economic self-interests and prices adjust reasonably quickly to
achieve equilibrium in all markets.
D. None of the above.
Please use the information below to answer Question 3~5: