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Basic Economic Concepts
Measurement of Economic Performance
National Income and Price Determination
Financial Sector
Inflation, Unemployment, and Stabilization Policies
Economic Growth and Productivity
Open Economy: International Trade and Finance

HSS-008 – Principles of Macroeconomics

About the Course
The Principles of Macroeconomics examination covers material that is usually taught in a one-semester undergraduate course in this subject, including 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, youre expected to understand measurement concepts such as gross domestic product, consumption, investment, unemployment, inflation, inflationary gap and recessionary gap. Youre also expected to demonstrate knowledge of the institutional structure of the Federal Reserve Bank and the monetary policy tools it uses to stabilize economic fluctuations and promote long-term economic growth, as well as the tools of fiscal policy and their impacts on income, employment, price level, deficits, and interest rates. Basic understanding of foreign exchange markets, balance of payments, effects of currency, and appreciation and depreciation on a countrys imports and exports are also expected.

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Flash Cards Quiz Forums Crib Sheet
Flash Cards Practice Exam Course Forums Crib Sheet

Credit by Exam Program
College Level Examination Program (CLEP)

Exam Bank Questions = 266
FlashCard Phrases = 356
Media Web Links = 5

Recommended Prerequisits

Section 1 - Basic Economic Concepts
The following are among the topics covered in this section:
  • Scarcity, choice, and opportunity costs
  • Production possibilities curve
  • Comparative advantage, specialization, and exchange
  • Demand, supply, and market equilibrium
Section 2 - Measurement of Economic Performance
The following are among the topics covered in this section:
  • 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
Section 3 - National Income and Price Determination
The following are among the topics covered in this section:
  • 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
Section 4 - Financial Sector
The following are among the topics covered in this section:
  • Money, banking, and financial markets
    • Definition of financial assets: money, stocks, 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
Section 5 - Inflation, Unemployment, and Stabilization Policies
The following are among the topics covered in this section:
  • 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
Section 6 - Economic Growth and Productivity
The following are among the topics covered in this section:
  • Investment in human capital
  • Investment in physical capital
  • Research and development, and technological progress
  • Growth policy
Section 7 - Open Economy: International Trade and Finance
The following are among the topics covered in this section:
  • Balance of payments accounts
    • Balance of trade
    • Current account
    • Policy mix
    • 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
    • Tariffs and quotas

Available Resources
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