Principles of Macroeconomics Exam Info
The Principles of Macroeconomics exam covers material that is usually taught in a one-semester undergraduate course in this subject. This aspect of economics deals with principles of economics that apply to an economy as a whole, particularly the general price level, output and income, and interrelations among sectors of the economy. The test places particular emphasis on the determinants of aggregate demand and aggregate supply, and on monetary and fiscal policy tools that can be used to achieve particular policy objectives. Within this context, candidates are expected to understand basic economic concepts such as scarcity and comparative advantage and measurement concepts such as gross domestic product, consumption, investment, unemployment, and inflation.
Knowledge and Skills Required
Basic Economic Concepts12%
- Scarcity, choice, and opportunity costs
- Production possibilities curve
- Absolute advantage, comparative advantage, specialization, and trade
- Demand, supply, and market equilibrium
- Determinants of supply and demand
- Price controls (price ceilings, price floors, and tariffs)
Measurement of Economic Performance12%
- National income accounts
- Circular flow
- Gross domestic product
- Components of gross domestic product
- Real versus nominal gross domestic product
- Inflation measurement and adjustment
- Price indices
- Nominal and real values
- Demand-pull versus cost-push inflation
- Costs of inflation
- Unemployment
- Definition and measurement
- Types of unemployment
- Natural rate of unemployment
National Income and Price Determination15%
- Aggregate demand
- Determinants of aggregate demand
- Multiplier and crowding-out effects
- Aggregate supply
- Short-run and long-run analyses
- Sticky versus flexible wages and prices
- Determinants of aggregate supply
- Macroeconomic equilibrium
- Real output and price level
- Short and long run
- Actual versus full-employment output
- Business cycle and economic fluctuations
Financial Sector15%
- Money, banking, and financial markets
- Definition of financial assets: money, stocks, and bonds
- Time value of money (present and future value)
- Measures of money supply
- Banks and creation of money
- Money demand
- Money market
- Loanable funds market
- Central bank and control of the money supply
- Tools of central bank policy
- Quantity theory of money
- Real versus nominal interest rates
Inflation, Unemployment, and Stabilization Policies20%
- Fiscal and monetary policies
- Demand-side effects
- Supply-side effects
- Policy mix
- Government deficits and debt
- Inflation and unemployment
- The Phillips curve: short run versus long run
- Role of expectations
Economic Growth and Productivity5%
- Definition and measurement of economic growth
- Investment in human capital
- Investment in physical capital
- Research and development and technological progress
- Growth policy
Open Economy: International Finance5%
- Balance of payments accounts
- Balance of trade
- Current account
- Financial account (formerly called capital account)
- Foreign exchange market
- Demand for and supply of foreign exchange
- Exchange rate determination
- Currency appreciation and depreciation
- Exchange rate policies
- Inflows, outflows and restrictions
- Net exports and capital flows
- Links to financial and goods markets