Question 1

Briefly explain why the decline in housing prices led to a major financial crisis.

Accepted Answer

Many of the mortgage loans that had been given out during earlier expansion were of poor quality.Many of the borrowers had taken too large a loan and were increasingly unable to make mortgage payments.mortgage backed securities were so complex that their value was nearly impossible to assess.Not knowing the quality of the assets that other banks had on their balance sheet,banks became very reluctant to lend to each other for fear that the bank to which they lent might not be able to repay.The credit market froze up.Unable to borrow,and with assets if uncertain value,many banks found them in trouble.The bankruptcy of Lehman Brothers put other banks at risk of going bankrupt as well.The whole financial system was in trouble.

Question 2

Discuss some of the potential benefits and costs of the adoption of the Euro.

Accepted Answer

One of the benefits of the Euro is largely symbolic.Countries that have in the past century been in wars against each other are now using the same currency.There are economic benefits as well.The use of the same currency will eliminate the need to convert currencies when,for example,buying foreign goods from a country that has also adopted the Euro.One of the possible costs of the Euro is that it will force countries to pursue the same monetary policy.No longer will policy makers in these countries pursue independent monetary policy.

Question 3

Explain why the U.S.crisis became a world crisis.

Accepted Answer

Other countries were affected through two channels.The first channel was trade.As U.S.consumers and firms cut spending,part of the de crease fell on imports f foreign goods.The second channel was financial.U.S.banks,badly needing funds in the United States,repatriated from other countries,creating problems for banks in those countries.The result was not just a U.S.,but a world recession.

Question 4

Inflation represents

Accepted Answer

A) an increase in output. 
B) an increase in the aggregate price level. 
C) an increase in the unemployment rate. 
D) a recession. 
A) an increase in output. 
B) an increase in the aggregate price level. 
C) an increase in the unemployment rate. 
D) a recession.

Question 5

The standard of living typically refers to

Accepted Answer

A) the rate of unemployment. 
B) output per capita. 
C) wealth per capita. 
D) all of the above 
A) the rate of unemployment. 
B) output per capita. 
C) wealth per capita. 
D) all of the above

Question 6

Briefly explain the disagreement among economists about how and when to reduce U.S.budget deficit.

Accepted Answer

Some economists argue that deficit reduc

Question 7

How many countries are in the Euro area?

Accepted Answer

A) 17 
B) 27 
C) 21 
D) 11 
A) 17 
B) 27 
C) 21 
D) 11

Question 8

Discuss the types of policies that could be implemented to reduce European unemployment.

Accepted Answer

There are basically two sets of policies

Question 9

Which of the following explains the relatively high growth rate of output in China since 1980?

Accepted Answer

A) accumulation of capital 
B) technological progress 
C) a transition from central planning to a market economy 
D) all of the above 
A) accumulation of capital 
B) technological progress 
C) a transition from central planning to a market economy 
D) all of the above

Question 10

In 2010,output per capita in China was approximately equal to

Accepted Answer

A) $2,100. 
B) $4,300. 
C) $22,100. 
D) $32,100. 
A) $2,100. 
B) $4,300. 
C) $22,100. 
D) $32,100.

Question 11

Most economists believe that the source of European high unemployment in the past two decades is

Accepted Answer

A) labor market institutions. 
B) tight monetary policy. 
C) tight fiscal policy. 
D) financial crisis. 
A) labor market institutions. 
B) tight monetary policy. 
C) tight fiscal policy. 
D) financial crisis.

Question 12

In 2010,output per capita in the United States was approximately equal to

Accepted Answer

A) $15,500. 
B) $25,800. 
C) $43,800. 
D) $47,300. 
A) $15,500. 
B) $25,800. 
C) $43,800. 
D) $47,300.

Question 13

What are the two primary sources of economic growth in China since 1980?

Accepted Answer

The relatively high output gro

Question 14

In addition to capital accumulation and technological progress,what are some of the other possible explanations for recent output growth in China?

Accepted Answer

There are several additional potential c

Question 15

In 2010 ,the U.S.budget deficit as a percentage of U.S.output was approximately equal to

Accepted Answer

A) 1.7%. 
B) 9%. 
C) 6%. 
D) 16.2%. 
A) 1.7%. 
B) 9%. 
C) 6%. 
D) 16.2%.

Question 16

Economists have suggested that the relatively higher unemployment in Europe has been caused by which of the following?

Accepted Answer

A) relatively high unemployment benefits 
B) relatively high level of worker protection 
C) inadequate macroeconomic policies 
D) increased labor costs 
E) all of the above 
A) relatively high unemployment benefits 
B) relatively high level of worker protection 
C) inadequate macroeconomic policies 
D) increased labor costs 
E) all of the above

Question 17

How many countries are in the European Union?

Accepted Answer

A) 27 
B) 6 
C) 21 
D) 17 
A) 27 
B) 6 
C) 21 
D) 17

Question 18

The most recent financial crisis started in

Accepted Answer

A) stock market. 
B) bond market. 
C) foreign exchange market. 
D) housing market. 
A) stock market. 
B) bond market. 
C) foreign exchange market. 
D) housing market.

Question 19

Between 2000 and 2010,the annual rate of output growth in China was approximately equal to

Accepted Answer

A) 2%. 
B) 5%. 
C) 10%. 
D) 20%. 
A) 2%. 
B) 5%. 
C) 10%. 
D) 20%.

Question 20

Discuss what is meant by labor market rigidities and explain how they might cause the relatively high unemployment in Europe.

Accepted Answer

Examples of labor market rigidities are:

Exam 1: A Tour of the World

Briefly explain why the decline in housing prices led to a major financial crisis.

Discuss some of the potential benefits and costs of the adoption of the Euro.

Explain why the U.S.crisis became a world crisis.

Inflation represents

The standard of living typically refers to

Briefly explain the disagreement among economists about how and when to reduce U.S.budget deficit.

How many countries are in the Euro area?

Discuss the types of policies that could be implemented to reduce European unemployment.

Which of the following explains the relatively high growth rate of output in China since 1980?

In 2010,output per capita in China was approximately equal to

Most economists believe that the source of European high unemployment in the past two decades is

In 2010,output per capita in the United States was approximately equal to

What are the two primary sources of economic growth in China since 1980?

In addition to capital accumulation and technological progress,what are some of the other possible explanations for recent output growth in China?

In 2010 ,the U.S.budget deficit as a percentage of U.S.output was approximately equal to

Economists have suggested that the relatively higher unemployment in Europe has been caused by which of the following?

How many countries are in the European Union?

The most recent financial crisis started in

Between 2000 and 2010,the annual rate of output growth in China was approximately equal to

Discuss what is meant by labor market rigidities and explain how they might cause the relatively high unemployment in Europe.

A Tour of the Book

The Goods Market

Financial Markets

Goods and Financial Marketsthe Is-Lm Model

The Labor Market

Putting All Markets Togetherthe As-Ad Model

The Phillips Curve,the Natural Rate of Unemployment,and Inflation

The Crisis

The Facts of Growth

Saving,capital Accumulation,and Output

Technological Progress and Growth

Technological Progress: the Short,the Medium,and the Long Run

Expectations: the Basic Tools

Financial Markets and Expectations

Expectations,consumption,and Investment

Expectations,output,and Policy

Openness in Goods and Financial Markets

The Goods Market in an Open Economy

Output,the Interest Rate,and the Exchange Rate

Exchange Rate Regimes

Should Policy Makers Be Restrained

Fiscal Policy: a Summing up

Monetary Policy: a Summing up

Epilogue: the Story of Macroeconomics

an Introduction to National Income and Product Accounts

an Introduction to Econometrics

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