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  • Assignment 1, Macroeconomics 2016-2017

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    Laurenţiu-Cristian Ciobotaru
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    This document provides sample questions from chapters 1-4 of the macroeconomics textbook "Blanchard, Amighini and Giavazzi (2nd ed, 2013)". Chapter 1 questions ask about concerns over large budget deficits in the US and definitions of "labour market rigidities" in Europe. Chapter 2 questions involve calculations of nominal GDP, real GDP, price deflators and consumer price indexes for an economy producing bread and cars. Other questions ask about inflation/deflation and central bank policy based on GDP/CPI graphs and the effects of seasonal adjustments. Chapter 3 questions involve calculations of equilibrium output and the multiplier effect in simple aggregate demand-aggregate supply models.

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    Macroeconomics

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    Macroeconomics

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    This document provides sample questions from chapters 1-4 of the macroeconomics textbook "Blanchard, Amighini and Giavazzi (2nd ed, 2013)". Chapter 1 questions ask about concerns over large budget deficits in the US and definitions of "labour market rigidities" in Europe. Chapter 2 questions involve calculations of nominal GDP, real GDP, price deflators and consumer price indexes for an economy producing bread and cars. Other questions ask about inflation/deflation and central bank policy based on GDP/CPI graphs and the effects of seasonal adjustments. Chapter 3 questions involve calculations of equilibrium output and the multiplier effect in simple aggregate demand-aggregate supply models.

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    48 views3 pages

    Assignment 1, Macroeconomics 2016-2017

    Uploaded by

    Laurenţiu-Cristian Ciobotaru
    This document provides sample questions from chapters 1-4 of the macroeconomics textbook "Blanchard, Amighini and Giavazzi (2nd ed, 2013)". Chapter 1 questions ask about concerns over large budget deficits in the US and definitions of "labour market rigidities" in Europe. Chapter 2 questions involve calculations of nominal GDP, real GDP, price deflators and consumer price indexes for an economy producing bread and cars. Other questions ask about inflation/deflation and central bank policy based on GDP/CPI graphs and the effects of seasonal adjustments. Chapter 3 questions involve calculations of equilibrium output and the multiplier effect in simple aggregate demand-aggregate supply models.

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    Assignment 1, Macroeconomics 2016-2017

    Blanchard, Amighini and Giavazzi (2nd ed, 2013), Chapters 1-4

    CHAPTER 1

    Question 1
    Why are economists concerned about a (too) big budget deficit in the United States?

    CHAPTER 2

    Question 2
    An economy produces and consumes merely bread and cars. The table below shows
    the information for this economy for two different years.

    2000 2010
    Price of a car € 50,000 € 60,000
    Price of bread € 10 € 20
    Number of cars produced 100 120
    Number of breads produced 500,000 400,000

    Can you calculate the...


    a) nominal output;
    b) real output;
    c) implicit price deflator;
    d) consumer price index
    ... for this economy for both years with the year 2000 as base year.
    Make the calculation and critically discuss.

    Question 3
    The figure below shows the GDP-deflator and the CPI-index of a small, open
    economy.

    a) Did this country face inflation or deflation from May 2009 to January 2011?
    Explain clearly.
    b) How would your answer at ‘a’ be relevant for the policy of the central bank of
    this country, given the green grow path of 2%.
    Question 4
    What do economists mean by "labour market rigidities”? How can this rigidities
    explain the relatively high unemployment in Europe?

    Question 5
    Is it possible that in a certain period the nominal GDP increases, while real GDP
    drops? Why, why not?

    Question 6
    Sometimes economic statistics are corrected to reduce seasonally distortions. Why do
    you think that it is important that the figures are being adapted in this way? How and
    to what extent will not-adapted statistics lead to incorrect analysis? Clarify with one
    or more examples.

    CHAPTER 3

    Question 7
    See the model below:

    C = 400 + 0,8(Y – T)
    T = 250
    I = 200
    G = 300

    a) Calculate equilibrium output.


    b) Calculate the multiplier of government purchases.

    Question 8
    See the model below:

    Z=C+I+G
    C = 0,5YD + 600
    T = 300
    I = 500
    YD = Y – T
    G = 2200

    a) Calculate the output equilibrium.


    b) Use a graph to illustrate a)
    c) Calculate the equilibrium when autonomous consumption decreases from
    600 to 500. Calculate the multiplier for this model. Use a graph to illustrate.
    d) Explain why the drop in output is larger (in absolute terms) than the original
    decline of autonomous consumption.

    CHAPTER 4

    Question 9
    Why is de demand curve for money downward sloping? Which factor(s) can cause the
    demand curve to shift? Explain your answer.

    Question 10
    Give numerical examples of money creation by commercial banks when:
    (a) c = 0, θ = 0.2
    (b) c = 0, θ = 0.05

    Hint: Check lecture slide #35

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