Intro

Question 1

Define Macroeconomics

Answer 1

It is the branch of economics that focuses on national totals. It studies the structure and performance of national economics and government policies that affect economic performance.

Question 2

Issues addressed by Macroeconomics

Answer 2

1. Long run economic growth
2. Business cycles
3. Unemployment
4. Inflation
5. The international economy
6. Macroeconomic policy

Question 3

What Macroeconomics is about?

Answer 3

1. National Totals
2. Ignores minor diffrences

Question 4

Define aggregation

Answer 4

Summing individual economic variables to obtain economy-wide totals

Question 5

Examples of aggregates

Answer 5

• Aggregate consumption
• Aggregate investment
• Aggregate output

Question 6

Growth rate of GDP formula

Answer 6

[(GDP(new) - GDP(old)) / GDP(old) ] * 100

Question 7

Why does economic growth differ from one nation to another

Answer 7

1. Population size
2. Technological change
3. Availability of factors of production
4. Allocation of resources
5. Macroeconomic policies
6. Rate of saving and Investment
7. Average labour productivity

Question 8

Business cycle

Answer 8

Short-run contractions and expansions in economic activity
(Not regular seasonal fluctuations)

Question 9

A complete business cycle is measured from

Answer 9

Peak to peak

Question 10

Define recession

Answer 10

Decline in Aggregate economic activity

Question 11

A peak involves

Answer 11

High output, low unemployment, high inflation

Question 12

A trough involves

Answer 12

Low output, high unemployment, low inflation

Question 13

Define Unemployment

Answer 13

It refers to the number of people who are available for work and actively seeking work but can’t find jobs

Question 14

How to calculate unemployment rate

Answer 14

Number of people unemployed/ total labour force

Question 15

Inflation

Answer 15

A continuous increase in the overall level of prices over time

Question 16

Deflation

Answer 16

When the overall level of prices of goods and services decline

Question 17

Stagflation

Answer 17

High inflation + high unemployment
(Stagnation)

Question 18

Hyper inflation

Answer 18

Extreme inflation. when the inflation rate reaches an extremely high level with prices changes daily .

Question 19

What is the consequence of hyper inflation

Answer 19

Purchasing power of money erodes quickly and the economy tends to function poorly

Question 20

The formula of inflation rate

Answer 20

( PRICES(new) - PRICES(old)/ PRICES(old))*100

Question 21

Define an open economy

Answer 21

An economy with extensive trading and financial relationships with other national economies

Question 22

Define closed economy

Answer 22

An economy that does not interact economically with the rest of the world

Question 23

Types of macroeconomic policies

Answer 23

1. Fiscal policy
2. Monetary policy

Question 24

Fiscal policy

Answer 24

Concerned with government spending and taxation

Question 25

Monetary policy

Answer 25

Determines the rate of growth of the nation’s money supply

Question 26

Who controls the monetary policy

Answer 26

The central bank

Question 27

Twin deficit refer to

Answer 27

Budget deficit + Trade deficit

Question 28

Budget Balance equal

Answer 28

Government revenues - Government expense

Question 29

The range of the Working age population

Answer 29

15 years to 65 years old

Question 30

Formula of the Average labour productivity

Answer 30

Output / # of workers