TEST BANK
Macroeconomics, Global Edition, 8th edition
By Olivier Blanchard
SC
O
R
EG
U
ID
ES
, Table of Content
PART I: INTRODUCTION
1. A Tour of the World
2. A Tour of the Book
PART II: THE SHORT RUN
3. The Goods Market
4. Financial Markets I
SC
5. Goods and Financial Markets; The IS-LM Model
6. Financial Markets II
PART III: THE MEDIUM RUN
7. The Labor Market
8. The Phillips Curve, the Natural Rate of Unemployment, and Inflation
9. Putting All Markets Together: From the Short to the Medium Run
O
PART IV: THE LONG RUN
10. The Facts of Growth
11. Saving, Capital Accumulation, and Output
R
12. Technological Progress and Growth
13. The Challenges of Growth
EXTENSIONS
EG
PART V: EXPECTATIONS
14. Financial Markets and Expectations
15. Expectations, Consumption, and Investment
16. Expectations, Output, and Policy
PART VI: THE OPEN ECONOMY
U
17. Openness in Goods and Financial Markets
18. The Goods Market in an Open Economy
19. Output, the Interest Rate, and the Exchange Rate
ID
20. Exchange Rate Regimes
PART VII: BACK TO POLICY
21. Should Policy Makers Be Restrained?
22. Fiscal Policy: A Summing Up
ES
23. Monetary Policy: A Summing Up
24. Epilogue: The Story of Macroeconomics
,Macroeconomics, 8e (Blanchard)
Chapter 1: A Tour of the World
1.1 The Crisis
1) The most recent financial crisis started in
A) stock market.
B) bond market.
SC
C) foreign exchange market.
D) housing market.
Answer: D
Diff: 2
2) Briefly explain why the decline in housing prices led to a major financial crisis.
Answer: Many of the mortgage loans that had been given out during earlier expansion were of
O
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
R
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.
EG
Diff: 2
3) Explain how the financial crisis turned into a major economic crisis.
Answer: Hit by the decrease in housing prices and the collapse in stock prices, and worried that
this might be the beginning of another Great Depression, people sharply cut back consumption.
Worried about sales and uncertain about the future, firms sharply cut back investment.
Decreases in consumption and investment led to decrease in demand, which in turn, led to
U
decrease in output.
Diff: 2
4) Explain why the U.S. crisis became a world crisis.
ID
Answer: Other countries were affected through two channels. The first channel was trade. As
U.S. consumers and firms cut spending, part of the decrease fell on imports of 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.
ES
Diff: 2
, ..
5) What problems remain in advanced countries after the crisis?
Answer: Both in the United States and the Euro area, unemployment remains very high. What
is behind this persistently high unemployment is low output growth, and behind this low growth
are many factors like declining housing prices and low housing investment. Banks are still not in
good shape, and bank lending is still tight. Consumers are cutting consumption. And the crisis
has led to a large increase in budget deficits, which have in turn led to a large increase in public
debt over time. Countries must now reduce their deficits, and this is proving difficult. In some
European countries, governments may not be able to adjust and may default on their debt.
SC
Diff: 2
1.2 The United States
1) In 2018, output per capita in the United States was approximately equal to
A) $15,500.
O
B) $25,800.
C) $43,800.
D) $62,500.
Answer: D
R
Diff: 2
2) The standard of living typically refers to
A) the rate of unemployment.
EG
B) output per capita.
C) wealth per capita.
D) all of these
Answer: B
Diff: 1
3) In 2018 , the U.S. GDP accounts for of world output.
U
A) 20%
B) 24%
C) 45%
ID
D) 50%
Answer: B
Diff: 1
4) In 2018, the unemployment in the U.S. was
ES
A) 5%.
B) 11%.
C) 3.7%.
D) 4.6%.
Answer: C
Diff: 2
Macroeconomics, Global Edition, 8th edition
By Olivier Blanchard
SC
O
R
EG
U
ID
ES
, Table of Content
PART I: INTRODUCTION
1. A Tour of the World
2. A Tour of the Book
PART II: THE SHORT RUN
3. The Goods Market
4. Financial Markets I
SC
5. Goods and Financial Markets; The IS-LM Model
6. Financial Markets II
PART III: THE MEDIUM RUN
7. The Labor Market
8. The Phillips Curve, the Natural Rate of Unemployment, and Inflation
9. Putting All Markets Together: From the Short to the Medium Run
O
PART IV: THE LONG RUN
10. The Facts of Growth
11. Saving, Capital Accumulation, and Output
R
12. Technological Progress and Growth
13. The Challenges of Growth
EXTENSIONS
EG
PART V: EXPECTATIONS
14. Financial Markets and Expectations
15. Expectations, Consumption, and Investment
16. Expectations, Output, and Policy
PART VI: THE OPEN ECONOMY
U
17. Openness in Goods and Financial Markets
18. The Goods Market in an Open Economy
19. Output, the Interest Rate, and the Exchange Rate
ID
20. Exchange Rate Regimes
PART VII: BACK TO POLICY
21. Should Policy Makers Be Restrained?
22. Fiscal Policy: A Summing Up
ES
23. Monetary Policy: A Summing Up
24. Epilogue: The Story of Macroeconomics
,Macroeconomics, 8e (Blanchard)
Chapter 1: A Tour of the World
1.1 The Crisis
1) The most recent financial crisis started in
A) stock market.
B) bond market.
SC
C) foreign exchange market.
D) housing market.
Answer: D
Diff: 2
2) Briefly explain why the decline in housing prices led to a major financial crisis.
Answer: Many of the mortgage loans that had been given out during earlier expansion were of
O
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
R
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.
EG
Diff: 2
3) Explain how the financial crisis turned into a major economic crisis.
Answer: Hit by the decrease in housing prices and the collapse in stock prices, and worried that
this might be the beginning of another Great Depression, people sharply cut back consumption.
Worried about sales and uncertain about the future, firms sharply cut back investment.
Decreases in consumption and investment led to decrease in demand, which in turn, led to
U
decrease in output.
Diff: 2
4) Explain why the U.S. crisis became a world crisis.
ID
Answer: Other countries were affected through two channels. The first channel was trade. As
U.S. consumers and firms cut spending, part of the decrease fell on imports of 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.
ES
Diff: 2
, ..
5) What problems remain in advanced countries after the crisis?
Answer: Both in the United States and the Euro area, unemployment remains very high. What
is behind this persistently high unemployment is low output growth, and behind this low growth
are many factors like declining housing prices and low housing investment. Banks are still not in
good shape, and bank lending is still tight. Consumers are cutting consumption. And the crisis
has led to a large increase in budget deficits, which have in turn led to a large increase in public
debt over time. Countries must now reduce their deficits, and this is proving difficult. In some
European countries, governments may not be able to adjust and may default on their debt.
SC
Diff: 2
1.2 The United States
1) In 2018, output per capita in the United States was approximately equal to
A) $15,500.
O
B) $25,800.
C) $43,800.
D) $62,500.
Answer: D
R
Diff: 2
2) The standard of living typically refers to
A) the rate of unemployment.
EG
B) output per capita.
C) wealth per capita.
D) all of these
Answer: B
Diff: 1
3) In 2018 , the U.S. GDP accounts for of world output.
U
A) 20%
B) 24%
C) 45%
ID
D) 50%
Answer: B
Diff: 1
4) In 2018, the unemployment in the U.S. was
ES
A) 5%.
B) 11%.
C) 3.7%.
D) 4.6%.
Answer: C
Diff: 2
