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EC201: Macroeconomics II Semester 1, 2018 Tutorial 5 Questions

This document contains 8 questions for a macroeconomics tutorial covering key macroeconomic concepts. The questions cover: (1) what the aggregate supply curve represents and why it slopes upward; (2) how changes to expected price levels, employment, markups, and unemployment benefits affect the aggregate price level; (3) what the aggregate demand curve represents and why it slopes downward under different monetary policy assumptions; and (4) the effects of output exceeding natural output on price levels, labor market adjustments, and the neutrality of fiscal policy. It concludes with questions about efficiency wage theories and how increases in the unemployment rate affect bargaining power and nominal wages.

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39 views1 page

EC201: Macroeconomics II Semester 1, 2018 Tutorial 5 Questions

This document contains 8 questions for a macroeconomics tutorial covering key macroeconomic concepts. The questions cover: (1) what the aggregate supply curve represents and why it slopes upward; (2) how changes to expected price levels, employment, markups, and unemployment benefits affect the aggregate price level; (3) what the aggregate demand curve represents and why it slopes downward under different monetary policy assumptions; and (4) the effects of output exceeding natural output on price levels, labor market adjustments, and the neutrality of fiscal policy. It concludes with questions about efficiency wage theories and how increases in the unemployment rate affect bargaining power and nominal wages.

Uploaded by

natasha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

EC201: Macroeconomics II

Semester 1 , 2018
Tutorial 5 Questions

1. Explain what the aggregate supply curve represents and why it is upward sloping.

2. Explain how an increase in each of the following variables affects the aggregate price level: (i)
the expected price level; (ii) employment; (iii) the markup; and (iv) unemployment benefits.

3. Explain what the aggregate demand curve represents and why it is downward sloping. Give
explanations about the aggregate demand curve under each of the two possible assumptions
about the central bank's conduct of monetary policy: (1) that the central bank controls the
nominal money supply; (2) that the central bank controls the interest rate and has a price target.

4. Suppose the economy is operating at a point where output is greater than the natural level of
output. Given this information, is the actual price level equal to the expected price level at the
current level of output?

5. When output exceeds the natural level of output, explain what adjustments will occur in the
labour market and discuss what effect they will have on output and the price level.

6. Analysis of the macroeconomic effects of changes in the money supply indicates that money is
"neutral" in the medium run. Suppose there is an increase in government spending. Will this
fiscal policy action also be neutral in the medium run? Explain.

7. Explain several implications and characteristics of efficiency wage theories.

8. Explain how an increase in the unemployment rate will affect bargaining power and nominal
wages.

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