Macroeconomics

LIVE Stream Review Session #1

Unit 1: Definitions and Practice - Use the graphs below for the countries of Econland and Cliffordia to show the difference between constant and increasing opportunity cost then answer the questions.

Econland Cliffordia 1. What is scarcity? Cars Cars

2. What is opportunity cost? 3. All economic systems must

answer what three questions? Trucks Corn

4. Which country has an absolute advantage in producing cars? 5. Which country has a comparative advantage in producing cars?

Unit 2: Unemployment Practice - Below if information about the fictitious country of Macrostan.

The nation of Macrostan has a population of 500 million people age 16 and above. Currently, 350 million people have full time jobs and another 30 million people have part time jobs. Of the 35 million people that would like a job but are not currently employed, 20 million are actively engaged in searching for a job while 20 million have given up looking for a job.

6. How many people are currently in the labor force of Macrostan?

7. Calculate the labor force participation rate. Show your work. 8. What is the total number of people counted as unemployed? 9. Calculate the unemployment rate. Show your work. 10. Suppose that the 20 million people who have given up looking for a job suddenly all decide to start

looking for a job. Calculate the new unemployment rate.

Bonus Round

11. If an economy is experiencing a recession, which type(s) of unemployment will exist?

12. What is the natural rate of unemployment (NRU)?

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Macroeconomics

LIVE Stream Review Session #1

Unit 3- AD-AS and the Phillips Curve - Draw an economy experiencing a recessionary gap. Label price level PL 1, the output Y1, and the full-employment output YF. Also draw the short run and long-run Phillips curve. Label a point on your graph “A” that represents the same economy.

13. Aggregate Demand and Supply 14. The Phillips Curve

Unit 4- Monetary Policy Practice - Use the three graphs to show expansionary monetary policy.

15. Money Market 16. Investment Demand 17. AD-AS

Unit 4- Money Multiplier Practice - Assume the reserve requirement is 10% and banks hold no excess reserves.

$100 of bonds bought by the Fed

$100 of cash deposited in a bank

18. Initial change in money supply 19. Initial change in demand deposits 20. Initial change in required reserves 21. Initial change in excess reserves 22. Maximum change in money supply

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Macroeconomics

LIVE Stream Review Session #1

Unit 5- Foreign Exchange Practice - Draw foreign exchange graphs for the U.S. Dollar (USD) and the Kenyan Shilling (KES) and complete the following. 23. Show what happens on

both graphs if Americans demand more Kenyan products.

24. What happens to the

value of the US dollar?

25. What happens to the value of the Kenyan Shilling?

NOTES

More practice: https://acdcecon.thinkific.com

Macroeconomics

LIVE Stream Review Session #1

Unit 1: Definitions and Practice - Use the graphs below for the countries of Econland and Cliffordia to show the difference between constant and increasing opportunity cost then answer the questions.

Econland Cliffordia 1. What is scarcity? Cars Cars We have unlimited wants, but limited resources 2. What is opportunity cost? The next best alternative given up 3. All economic systems must

answer what three questions? What to produce, How to produce it, Trucks Corn Who gets it.

4. Which country has an absolute advantage in producing cars? Econland because they can produce more cars than Scarcityville. 5. Which country has a comparative advantage in producing cars? Econland because they have a lower opportunity cost in producing cars.

Unit 2: Unemployment Practice - Below if information about the fictitious country of Macrostan.

The nation of Macrostan has a population of 500 million people age 16 and above. Currently, 350 million people have full time jobs and another 30 million people have part time jobs. Of the 35 million people that would like a job but are not currently employed, 20 million are actively engaged in searching for a job while 20 million have given up looking for a job.

6. How many people are currently in the labor force of Macrostan? 400 million people = 350 million full time jobs + 30 million part time + 20 million actively looking

7. Calculate the labor force participation rate. Show your work. 80% = 400 million / 500 million x 100 8. What is the total number of people counted as unemployed? 20 million 9. Calculate the unemployment rate. Show your work. 5% = 20 million /400 million x 100 10. Suppose that the 20 million people who have given up looking for a job suddenly all decide to start

looking for a job. Calculate the new unemployment rate. 9.5% = 40 million /420 million x 100

Bonus Round

11. If an economy is experiencing a recession, which type(s) of unemployment will exist? All three. Frictional, structural, and cyclical.

12. What is the natural rate of unemployment (NRU)? The unemployment rate when there is full

employment. No cyclical unemployment.

More practice: https://acdcecon.thinkific.com

Macroeconomics

LIVE Stream Review Session #1

Unit 3- AD-AS and the Phillips Curve - Draw an economy experiencing a recessionary gap. Label price level PL 1, the output Y1, and the full-employment output YF. Also draw the short run and long-run Phillips curve. Label a point on your graph “A” that represents the same economy.

13. Aggregate Demand and Supply 14. The Phillips Curve

Unit 4- Monetary Policy Practice - Use the three graphs to show expansionary monetary policy.

15. Money Market 16. Investment Demand 17. AD-AS

Unit 4- Money Multiplier Practice - Assume the reserve requirement is 10% and banks hold no excess reserves.

$100 of bonds bought by the Fed

$100 of cash deposited in a bank

18. Initial change in money supply No Change No Change 19. Initial change in demand deposits No Change +$100 20. Initial change in required reserves No Change +$10 21. Initial change in excess reserves +$100 +$90 22. Maximum change in money supply +$1,000 +$900

More practice: https://acdcecon.thinkific.com

Macroeconomics

LIVE Stream Review Session #1

Unit 5- Foreign Exchange Practice - Draw foreign exchange graphs for the U.S. Dollar (USD) and the Kenyan Shilling (KES) and complete the following. 23. Show what happens on

both graphs if Americans demand more Kenyan products.

24. What happens to the

value of the US dollar? Depreciates

25. What happens to the value of the Kenyan Shilling? Appreciates

NOTES 6 Key Graphs of Macro

More practice: https://acdcecon.thinkific.com