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MACROECONOMICS MODULE
ACKNOWLEDGEMENT
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Team of Teaching Assistant of Introduction to Macroeconomics
TABLE OF CONTENT
ACKNOWLEDGEMENT ................................................................ 2
MODULE AND LABORATORY GUIDANCE .............................. 4
THE TEN PRINCIPLES OF ECONOMICS AND THINKING
LIKE ECONOMISTS ....................................................................... 6
MEASURING NATION’S INCOME & COST OF LIVING ........ 15
SAVING, INVESTMENT, AND FINANCIAL MARKET ........... 24
UNEMPLOYMENT ....................................................................... 29
THE MONETARY SYSTEM......................................................... 36
MONEY GROWTH AND INFLATION ....... Error! Bookmark not
defined.
OPEN ECONOMY MACROECONOMICS: BASIC CONCEPT
.......................................................... Error! Bookmark not defined.
A MACROECONOMIC THEORY OF THE OPEN ECONOMY
.......................................................... Error! Bookmark not defined.
AGGREGATE DEMAND AND AGGREGATE SUPPLY .... Error!
Bookmark not defined.
THE INFLUENCE OF MONETARY AND FISCAL POLICY ON
AGGREGATE DEMAND ............... Error! Bookmark not defined.
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13. Here below we kindly inform the general rule during the
laboratory:
The tutorial has 10 (ten) meetings. The Teaching
Assistant will take only 7 (seven) best mark and
one other mark that comes from the Review in the
10th meeting.
The students are not allowed to change their tutorial
schedule without any permission from their Teaching
Assistant.
The students are not allowed to cheat, work
together, and open the book/note while solving the
problems in the tutorial.
Other rules could be made later on by the Teaching
Assistant with the consent of the students in each
tutorial.
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Team of Teaching Assistant of Introduction to Macroeconomics
CHAPTER 1
THE TEN PRINCIPLES OF ECONOMICS AND
THINKING LIKE ECONOMISTS
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Team of Teaching Assistant of Introduction to Macroeconomics
CHAPTER 1
THE TEN PRINCIPLES OF ECONOMICS AND THINKING
LIKE ECONOMISTS
TRUE OR FALSE
MULTIPLE CHOICE
1. Which of the following is an example of an economic model?
a. the production possibilities frontier
b. the concept of opportunity cost
c. the concept of capital
d. All of the above are economic models.
ought to be.
c. Positive statements involve advice on policy matters, whereas
normative statements are supported by scientific theory and
observation.
d. Economists outside of government tend to make normative
statements, whereas government-employed economists tend
to make positive statements.
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10. The ability of a single economic actor (or small group of actors)
to have a substantial influence market prices……
a. market power
b. efficiency market hypothesis
c. asymmetrical information
d. invisible hands
ESSAY
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CHAPTER 2
MEASURING NATION’S INCOME & COST OF LIVING
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Team of Teaching Assistant of Introduction to Macroeconomics
CHAPTER 2
MEASURING NATION’S INCOME & COST OF LIVING
TRUE OR FALSE
1. Both apples that we buy at the grocery store and apples we grow
in our garden are part of GDP.
7. For any given year, the CPI is the price of the basket of goods
and services in the base year divided by the price of the basket in
the given year, then multiplied by 100.
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Team of Teaching Assistant of Introduction to Macroeconomics
10. The real and nominal interest rates always move together,
therefore when the nominal interest rate is high, the real interest
rate must also high.
MULTIPLE CHOICE
7. The CPI in the first year is 125, in the second year is 150, and
in the third year is 200. What is the inflation rate between the
first and second year and between the second and third year?
a. 20 percent between the first and second year, 33 percent
between the second and third year.
b. 50 percent between the first and second year, 100 percent
between the second and third year.
c. 25 percent between the first and second year, 75 percent
between the second and third year.
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Team of Teaching Assistant of Introduction to Macroeconomics
10. Belinda saves money of $ 7000 in a bank. After one year, she
takes all her savings amounting to $ 7840 with an inflation rate
is 3%, what percentage of additional goods and services that can
be purchased?
a. 12%
b. 9%
c. 0.9%
d. 10%
ESSAY
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Team of Teaching Assistant of Introduction to Macroeconomics
3. What is the difference between real and nominal GDP and why
do economists make this distinction?
4. List and discuss various types of goods and services omitted from
measured GDP.
5.
Year Kit Kat Cadbury
P Q P Q
2012 £2 100 £4 50
2013 £4 150 £6 100
2014 £6 200 £8 150
According to table in above, calculate: (2012=100)
a. Nominal GDP every year
b. Real GDP every year
c. Deflator GDP every year
6.
Year Potato Eggs Broccoli
P Q P Q P Q
2011 $1 500 $2 250 $2 300
2012 $2 500 $4 250 $3 300
2013 $3 500 $6 250 $5 300
a. Calculate the CPI every year with 2011 as the base year.
b. What is the level of inflation between 2012 and 2013?
8. Suppose that Kezia borrows some money from a bank and agree
on the nominal interest rate to be paid on a loan. Then inflation
turns out to be lower than they both expected.
a. Is the real interest rate on this loan higher or lower than
expected?
b. Does the lender gain or lose from this unexpectedly low
inflation? Does the borrower gain or lose?
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10. Are the gross domestic product and the consumer price index
perfect measure of the nation’s income and the cost of living?
Briefly explain why or why not.
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CHAPTER 3
SAVING, INVESTMENT, AND FINANCIAL MARKET
Financial System
Financial market (direct)
1. Stock market
2. Bond market
Financial intermediary (indirect)
1. Bank
2. Mutual fund
Economy is divided by 2:
1. Closed economy
2. Open economy
GDP for closed economy:
Y=C+I+G
GDP for open economy:
Y = C + I + G + NX
Private saving
S = (Y – C – T)
Public saving
S = (T – G)
When (T>G) budget surplus
(T<G) budget deficit
National Saving
I=Y–C–G ;I=S
S=Y–C–G
S = (Y – C – T) + (T – G)
Nasional saving = Private Saving + Public Saving
Loanable Fund
The relationship between demand for loanable funds and interest rate
is negative, and relationship between supply for loanable funds and
interest rate is positive.
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Team of Teaching Assistant of Introduction to Macroeconomics
CHAPTER 3
SAVING, INVESTMENT, AND FINANCIAL MARKET
TRUE OR FALSE
1. If tax revenue exceeds goverment spending, the goverment runs
budget surplus.
2. Date of maturity is the date at which the principal amount of the
bond becomes due and is repaid to investor.
3. Increasing in national saving will shift supply curve for loanable
fund to right .
4. M2 consist of savings + time deposits + money market funds.
5. The financial intermediary that has the primary job to take in
deposit from people who want to save and use these deposits to
make loans to people who want to borrow are bank.
6. A higher budget deficit will shift the supply curve for loanable
funds to the right.
7. Capital gain is a payment made by a corporation to its shareholder.
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MULTIPLE CHOICE
1. Equation for public saving is..............
a. C + I + G +NX c. T – G
b. T + G d. C + I +G
2. Financial institutions through which savers can directly provide
funds to borrowers are called:
a. Financial markets c.Saving and loan associations
b. Mutual funds d. Bank
3. Which of the following are true, regarding bonds?
a. Open economy c. Closed economy
b. International trade d. Financial system
4. There are three components of GDP in closed economy
except ........
a. Consumption c. Invesment
b. Goverment spending d. Net export
5. .......... is a letter of the debt.
a. Bond c. Stock
b. Check d. Mutual fund
6. Supply for loananble fund comes from.........
a. Goverment spending c. Invesment
b. Consumption d. Saving
7. Which one alter the demand for loananble fund?
a. Goverment budged deficit c. Taxes and investment
b. Goverment budged surplus d. Taxes and saving
8. Increasing interest rate will be followed by ............ in supply of
loanable fund.
a. Decreasing c. Constant
b. Increasing d. Stagnant
9. Assuming a closed economy, which of the following is FALSE
in the market for loanable funds?
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ESSAY
1. What is a financial system?
2. What is the different between financial market and financial
intermediary? Give the example of them and explain it!
3. Explain the factor of market loanable fund?
4. Explain the difference between bond market and stock market!
5. Explain which one are more risk, stock or bond!
6. What is the meaning of national saving, public saving, and private
saving?
7. When one country use a close economy system with :
C = $ 450 G = $ 600
I = $ 1100 T = $ 700
Calculate :
a. GDP
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Team of Teaching Assistant of Introduction to Macroeconomics
b. National saving
c. Public saving
d. Private saving
8. Calculate its goverment budget. Does it has budget deficit or
budget surplus?
9. Now, consider the country is open economy, and it has import =
300 and export = 350. Do the calculation as in number 7!
10. Explain the relationship between financial market with economic
activity!
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CHAPTER 4
UNEMPLOYMENT
1. Identifying Unemployment
2. Types of Unemployment
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Team of Teaching Assistant of Introduction to Macroeconomics
Worker Health
Worker Turnover
Worker Effort
Worker Quality
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CHAPTER 4
UNEMPLOYMENT
TRUE OR FALSE
1. It is possible to have 0 percent unemployment rate.
2. Unemployment rate has nothing to do with business cycle.
3. Full employment is the condition when the unemployment rate
reached 0 percent.
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4. The purpose of the theory of efficient wages that the firm pay
more wages to the workers in order to increase the workers’
income.
5. If the labour force is 50 million and employment rate is 40%, so
the number of unemployed is 25 million.
6. Children under 15 years old who were not in school are
considered unemployed.
7. Structural unemployment happens because it takes time for
workers to search for the jobs that best suit their tastes and skills.
8. Recession will reduce cyclical unemployment.
9. Frictional unemployment happens because there are changes in
technology or international competition that change the skills
needed to perform jobs or change the location of jobs.
10. Collective bargaining is the organised withdrawal of labour from
a firm by union.
MULTIPLE CHOICE
1. Unemployment that happened because of the movement is
business cycle is called…
a. Cyclical
b. Seasonal
c. Frictional
d. Structural
2. Full employment is the situation when unemployment is in its…..
a. Natural rate
b. Highest
c. Lowest
d. Equilibrium
3. Which of the following is NOT included in labour force?
a. 23-years-old that pursuing postgraduate courses in
university
b. Housewife that works part-time in Burger King
c. 70-years-old that works as university professor
d. Unemployed that has looking for a job for 5 years and
still looking for a job
4. These are the reasons of why firm pays an efficiency wages,
EXCEPT….
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a. Worker demand
b. Worker health
c. Worker turnover
d. Worker effort
5. Workers that are giving up looking for jobs but are willing to get
a job is called …..
a. Discouraged workers
b. Seasonal unemployed
c. Frictional unemployed
d. Cynical unemployed
6. After graduated with economic degree, John Keynes was looking
for a job. Several firms offer him a job. He takes an offer and it
will decrease …
a. Frictional unemployment
b. Cyclical unemployment
c. Structural unemployment
d. Seasonal unemployment
7. Government in DPR Korea gives their citizen a social security to
people who unemployed as much as 50000 won for each. Kim
Jong-Nam, a citizen and a jobseeker has been offered a clerk
position in local administration office with salary 100000 won a
month. Given this condition Kim choose to takes a job because…
a. The amount of salary is higher than the amount of
social security
b. C
c. The incentives to remain as an unemployed is higher
than to be employed
d. Kim Jong-Nam is not in labor force
8. Which of the following is an example of seasonal unemployment?
a. A retired police officer
b. A full time student who cannot take a part time job
regarding his rapid schedule at campus
c. A teacher who has been offer a job as politician and
decide not to take that
d. A farmer who waiting harvest time
9. Minimum wage laws is government policy to….
a. Increase labor participation rate in the country
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Team of Teaching Assistant of Introduction to Macroeconomics
ESSAY
1. Why is the unemployment rate never zero, even at full
employment?
2. The CIA World Factbook give data regarding the population of
DPR Korea:
Labour-force participation rate = 90%
Employment = 11 million
Adult population = 12.6 million
Natural rate of unemployment = 5%
Calculate the number of:
a. Labour force!
b. Employment rate
c. Unemployment
d. Unemployment rate
3. What is the natural unemployment rate?
4. Explain briefly about the theory of efficiency wages and the
reasons why the firm uses this.
5. How does the unemployment rate fluctuate over the business
cycle?
6. Study these following case:
a. Megan graduate from University of Canterbury and
continue to master degree in the same institution. Her
study time increase from 6 hours per day to 8 hours
per day. What will happen to the labor force?
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Team of Teaching Assistant of Introduction to Macroeconomics
CHAPTER 5
THE MONETARY SYSTEM
The FED is the central bank which regulates the US’s monetary
system. The Federal Reserve serves as the nation’s central bank.
Three Primary Functions of the Fed:
• Regulates banks to ensure they follow federal laws intended to
promote safe and sound banking practices.
• Acts as a banker’s bank, making loans to banks and as a lender
of last resort.
• Conducts monetary policy by controlling the money supply.
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Team of Teaching Assistant of Introduction to Macroeconomics
CHAPTER 5
THE MONETARY SYSTEM
TRUE OR FALSE
1. A medium of exchange is an item that people can use to transfer
purchasing power from the present to the future.
2. Commodity money is money that has intrinsic value.
3. Savings deposits, small time deposits, money market mutual
funds, and everything in M1 are various kind of M2.
4. Monetary policy is setting of money demand by policy makers in
the government.
5. To decrease the money supply, the Fed sells government bonds to
the public.
6. Open market operation is the only way to change the quantity of
money supply.
7. The higher reserve ratio, bank can’t create much money.
8. Bank Indonesia can not to conduct monetary policy by controlling
the money supply.
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Team of Teaching Assistant of Introduction to Macroeconomics
MULTIPLE CHOICE
1. The main function of money are .....
a. Unit of account, means of transactions, paying debt
b. Store of value, unit of account, reserves
c. Medium of exchange, reserves, store of value
d. Medium of exchange, unit of account, store of value
2. Three Primary Functions of the Central Bank are, except .....
a. Conducts fiscal policy by controlling tax and subsidies
b. Designed to oversee the banking system.
c. Acts as a banker’s bank, making loans to banks and as a
lender of last resort.
d. Conducts monetary policy by controlling the money
supply
3. Money supply is .....
a. The stock of money which available in the central bank
b. The stock of money which available in the economy
c. The stock of money which demanded by people in the
economy
d. The stock of money which demanded in the large scale
economy
4. Money multiplier is the reciprocal of .....
a. Discount rate
b. Open market operation
c. Reserve ratio
d. Fiscal policy
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ESSAY
1. Explain about money and its main function!
2. Explain briefly about money supply, fiat money, and comodity
money! (give the example)
3. Mention and explain three tools of monetary policy from central
bank!
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