RMIT UNIVERSITY
FACULTY OF BUSINESS
SCHOOL OF ECONOMICS AND FINANCE
SIM SEMESTER 1: 2012
ECON-1045 MACROECONOMICS 2
TEST 2 (MOCK)
Instructions:
1.
Fill in your name and other details on page 2 before beginning the test. DO NOT
DETACH PAGE 2 FROM THE QUEST

Question 1
For this question you can choose to answer either (A), or (B), but NOT
BOTH.
A.
Assume that the Asset Demand for money is relatively elastic or flat, and that the
Investment Demand Curve, is relatively inelastic or steep.
Compare and contrast t

SIM
ECON-1045
Macroeconomics 2
Semester 1 2015
Lecturer: Greg Maynes
Subject Information
OVERVIEW
Aim of this course:
To build upon your introductory macroeconomic
studies and construct a more detailed model of
output determination that also shows the fo

TOPIC 8
MONETARISM, THE FOOLING
MODEL, AND NEW OR POSTKEYNESIAN ECONOMICS
Summary - the characteristics of a Monetarist
(1)
(2)
(3)
(4)
(5)
(6)
The M variable or Money Supply is the dominant influence
on PY.
There is in fact a stable, causal, direct and p

Topic 12: External Balance
We have been looking at internal balance
and adjustment
We can now look at external balance and
adjustment
We know the Balance of Payments (bop)
summarises the external sector of the
economy
We can derive the forex market fr

Topic 11: Supply Side Inflation
.
Concerned with
and
pU
Looked at the Monetarist explanation
It focussed on the D side of the economy
Briefly recap the expectations augmented Phillips Curve
The policy prescription that flows from this model
focuses on a m

Topic 6: The Wage - Price
Flexibility Debate
We have so far constructed a general model
of output determination that can
accommodate a wide range of influences
and be used for both explanatory and
predictive purposes.
We can now turn our attention to th

Topic 4: Aggregate Demand
DERIVATION FROM THE IS-LM
MODEL
THE AE MODEL V IS-LM MODEL
The AE model shows the determination of
Y
The IS-LM model shows the determination
of Y and i
Both were constructed assuming a fixed P
Of course, P is not constant
We

Topic 10: The Expectations
Augmented Phillips Curve
Now put all this together to explain rising p in
the face of high U and/or rising inflation and
unemployment simultaneously.
Remember the simple Phillips Curve could not
do this.
Friedman argues:
UN grew

Topic 5: Aggregate Supply
DERIVING THE SRAS CURVE
USING ALTERNATIVE PRODUCTION
FUNCTION APPROACHES
The determination of P and Y depends ultimately
on AD and AS.
Eg. AD leads to a Y and P and we need to know
how much Y and how much P
The shape and posit

Topic 7: Monetarism
Our concern is to explain the determinants
of Y and why it fluctuates over time.
We have built a general model in which we
can accommodate various points of view.
We have looked at the Classical and early
Keynesian models.
The majo

Topic 9: Internal Balance
We have developed a model of the economy
using the AD-AS framework.
We have used it to look at the various theories
of output determination and to look at why
output fluctuates over time.
We can now extend our analysis to focu

SIM
ECON-1045
Macroeconomics 2
Semester 1 2015
Lecturer: Greg Maynes
Subject Information
OVERVIEW
Aim of this course:
To build upon your introductory macroeconomic
studies and construct a more detailed model of
output determination that also shows the fo

Topic 3: Equilibrium Adjustment
and Policy Effectiveness
THE APPROPRIATENESS &
RELEVANCE OF FISCAL/BUDGETARY
POLICY AND/OR MONETARY POLICY
We are now in a position to put the IS and
LM curves together and to focus on the
range of forces that jointly dete

Topic 2: IS-LM Model
Introduction and Derivation
THE RATIONALE BEHIND IS-LM
The IS-LM Model allows us to focus on the
forces that simultaneously determine Y and
i.
Note that prices are still assumed to be
constant .e., they are assumed to be
EXOGENOUS.