Macroeconomics

LIVE Stream Review Session #2

Part 1: Big Picture Practice​-​ Macro is all about relationships!
1. ↑Interest Rates → Investment ___
2. ↑Taxes → Disposable Income ___
3. ↑Government Spending → National Income ___
4. ↑Marginal Propensity Consume→ Multiplier ___
5. ↑Capital Stock → Growth ___
6. ↑Inflation → REAL Wages ___
7. ↑Inflation → REAL Interest Rates ___
8. ↑Deficit Spending → Interest Rates ___
9. ↑Money Supply→ Interest Rates ___
10. ↑Reserve Requirement → Money Supply ___
11. ↑Discount Rate → Money Supply ___
12. ↑Central Bank Buys Bonds → Money Supply ___
13. ↑International Value of Dollar → US Net Exports ___
14. ↑Interest Rates → Net Capital Inflow ___
15. ↑Interest Rates → Bond Prices ___

Part 2: Multiplier Practice​- ​Use the graph below to answer the questions.
16. If an increase in consumer spending of $20
billion would increase real GDP to $300 billion,
what is the marginal propensity to ​consume​?

17. Assume the MPC was 0.9 instead. What is the

least amount the government could spend to
get the real GDP from $200 to $400 billion?

18. Assume the MPS was 0.2. What is the least

amount the government could cut taxes to get
the real GDP from $200 to $400 billion?

19. What happens to inflation and unemployment

as a result of expansionary fiscal policy?

More practice: ​http://bit.ly/2PYeC2t

 Macroeconomics
LIVE Stream Review Session #2
Part 3: Nominal v. Real Practice​- ​Fill out the chart.

Answer
20. Assume the real GDP is $240 billion and the GDP deflator is 150. What was
the nominal GDP?
21. Assume the nominal GDP is $240 billion and the GDP deflator is 150. What
was the real GDP?
22. Assume the nominal interest rate was 5% and inflation was 3%. What was the
real interest rate?
23. Assume the real interest rate was -2% and the inflation rate was 8%. What was
the nominal interest rate?
24. Assume the real interest rate was 4% and the nominal interest rate was 7%.
What was the expected rate of inflation?

​6 Key Graphs of Macro

PPC AD/AS/LRAS Phillips Curve

Money Market Loanable Funds Foreign Exchange

More practice: ​http://bit.ly/2PYeC2t

 Macroeconomics
LIVE Stream Review Session #2
Part 1: Big Picture Practice​-​ Macro is all about relationships!
1. ↑Interest Rates → Investment ​↓
2. ↑Taxes → Disposable Income ​↓
3. ↑Government Spending → National Income ​↑
4. ↑Marginal Propensity Consume→ Multiplier ​↑
5. ↑Capital Stock → Growth ​↑
6. ↑Inflation → REAL Wages ​↓
7. ↑Inflation → REAL Interest Rates ​↓
8. ↑Deficit Spending → Interest Rates ​↑
9. ↑Money Supply→ Interest Rates ​↓
10. ↑Reserve Requirement → Money Supply ​↓
11. ↑Discount Rate → Money Supply ​↓
12. ↑Central Bank Buys Bonds → Money Supply ​↑
13. ↑International Value of Dollar → US Net Exports​↓
14. ↑Interest Rates → Net Capital Inflow ​↑
15. ↑Interest Rates → Bond Prices ​↓

Part 2: Multiplier Practice​- ​Use the graph below to answer the questions.
16. If an increase in consumer spending of $20
billion would increase real GDP to $300 billion,
what is the marginal propensity to ​consume​?
MPC = .8
17. Assume the MPC was 0.9 instead. What is the
least amount the government could spend to
get the real GDP from $200 to $400 billion?
$20 billion
18. Assume the MPS was 0.2. What is the least
amount the government could cut taxes to get
the real GDP from $200 to $400 billion?
$50 billion
19. What happens to inflation and unemployment
as a result of expansionary fiscal policy?
Inflation increases, unemployment decreases
More practice: ​http://bit.ly/2PYeC2t
 Macroeconomics
LIVE Stream Review Session #2
​Part 3: Nominal v. Real Practice​- ​Fill out the chart.

Answer
20. Assume the real GDP is $240 billion and the GDP deflator is 150. What was $360
the nominal GDP?
21. Assume the nominal GDP is $240 billion and the GDP deflator is 150. What $160
was the real GDP?
22. Assume the nominal interest rate was 5% and inflation was 3%. What was the 2%
real interest rate?
23. Assume the real interest rate was -2% and the inflation rate was 8%. What was 6%
the nominal interest rate?
24. Assume the real interest rate was 4% and the nominal interest rate was 7%. 3%
What was the expected rate of inflation?

6 Key Graphs of Macro

PPC AD/AS/LRAS Phillips Curve

Money Market Loanable Funds Foreign Exchange

More practice: ​http://bit.ly/2PYeC2t