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® CLEP Principles of Macroeconomics AT A GLANCE Description of the Exam 8%–12% BASIC ECONOMIC CONCEPTS The Principles of Macroeconomics exam covers material § Scarcity, choice, and opportunity costs that is usually taught in a one-semester undergraduate § Production possibilities curve course. This aspect of economics deals with principles § Comparative advantage, specialization, and exchange of economics that apply to an economy as a whole, particularly the general price level, output and income, § Demand, supply, and market equilibrium and interrelations among sectors of the economy. The test places particular emphasis on the determinants of 12%–16% MEASUREMENT OF ECONOMIC aggregate demand and aggregate supply, and on monetary PERFORMANCE and fiscal policy tools that can be used to achieve particular policy objectives. Within this context, test takers § National income accounts: are expected to understand measurement concepts such w Circular flow as gross domestic product, consumption, investment, w Gross domestic product unemployment, and inflation. Test takers are also expected to demonstrate knowledge of the institutional structure of w Components of gross domestic product the Federal Reserve Bank and the monetary policy tools it w Real versus nominal gross domestic product uses to stabilize economic fluctuations and promote long- term economic growth, as well as the tools of fiscal policy § Inflation measurement and adjustment: and their impacts on income, employment, price level, w Price indices deficits, and interest rate. Basic understanding of foreign exchange markets, balance of payments, and effects of w Nominal and real values currency, appreciation, and depreciation on a country’s w Demand-pull versus cost-push inflation imports and exports is also expected. The exam contains approximately 80 questions to w Costs of inflation be answered in 90 minutes. Some of these are pretest § Unemployment: questions that won’t be scored. w Definition and measurement Knowledge and Skills Required w Types of unemployment Questions on the Principles of Macroeconomics exam w Natural rate of unemployment require candidates to demonstrate one or more of the following abilities: 15%–20% NATIONAL INCOME AND PRICE § Understanding of important economic terms and DETERMINATION concepts § Aggregate demand: § Interpretation and manipulation of economic graphs w Determinants of aggregate demand § Interpretation and evaluation of economic data w Multiplier and crowding-out effects § Application of simple economic models § Aggregate supply: The subject matter of the Principles of Macroeconomics exam w Short-run and long-run analyses is drawn from the following topics. The percentages next to w Sticky versus flexible wages and prices the main topics indicate the approximate percentage of exam questions on that topic. w Determinants of aggregate supply § Macroeconomic equilibrium: w Real output and price level w Short and long run 2 w Actual versus full-employment output 9%–13% OPEN ECONOMY: INTERNATIONAL w Business cycle and economic fluctuation TRADE AND FINANCE § Balance of payments accounts: 15%–20% FINANCIAL SECTOR w Balance of trade Money, banking, and financial markets w Current account § Definition of financial assets: money, stocks, bonds w Financial account (formerly called capital account) § Time value of money (present and future value) § Foreign exchange market: § Measures of money supply w Demand for and supply of foreign exchange § Banks and creation of money w Exchange rate determination § Money demand w Currency appreciation and depreciation § Money market w Exchange rate policies § Loanable funds market § Inflows, outflows, and restrictions Central bank and control of the money supply w Net exports and capital flows § Tools of central bank policy w Links to financial and goods markets § Quantity theory of money w Tariffs and quotas § Real versus nominal interest rates Study Resources 20%–25% INFLATION, UNEMPLOYMENT, AND Most textbooks used in college-level introductory STABILIZATION POLICIES macroeconomics courses cover the topics in the outline § Fiscal and monetary policies: above, but the approaches to certain topics and the w Demand-side effects emphases given to them may differ. To prepare for the Principles of Macroeconomics exam, it’s advisable to w Supply-side effects study one or more college textbooks, which can be found w Policy mix in most college bookstores. When selecting a textbook, check the table of contents against the knowledge and w Government deficits and debt skills required for this test. § Inflation and unemployment: There are many introductory economics textbooks that w The Phillips curve: short run versus long run vary greatly in difficulty. Some books are published in w Role of expectations one-volume editions that cover both microeconomics and macroeconomics; some are published in two-volume editions, with one volume covering macroeconomics and 5%–10% ECONOMIC GROWTH AND the other microeconomics. A companion study guide/ PRODUCTIVITY workbook is available for most textbooks. § Investment in human capital The study guides typically include brief reviews, § Investment in physical capital definitions of key concepts, problem sets, and multiple- choice test questions with answers. Many publishers also § Research and development, and technological make available computer-assisted learning packages. progress To broaden your knowledge of economic issues, you § Growth policy may read relevant articles published in the economics periodicals that are available in most college libraries. The Economist, The Wall Street Journal and The New York Times, along with local papers, may also enhance your 3 understanding of economic issues. Free online CLEP Macroeconomics course offered by A survey conducted by CLEP found that the following Modern States Education Alliance (modernstates.org/ textbooks are among those used by college faculty who course/principles-of-macroeconomics) ® teach the equivalent course. You might purchase one or AP Macroeconomics: Challenging Concepts: Most of more of these online or at your local college bookstore. the concepts covered in this AP course are covered in Arnold, Macroeconomics and Microeconomics, Concise Edition the CLEP Principles of Macroeconomics exam. (South-Western) (edx.org/course/apr-macroeconomics-challenging- Bade and Parkin, Foundations of Macroeconomics and concepts-davidson-next-macapccx-1) Foundations of Microeconomics (Addison Wesley) Khan Academy®: Macroeconomics (khanacademy.org Case and Fair, Principles of Macroeconomics and Principles of /economics-finance-domain/macroeconomics) Microeconomics (Prentice-Hall) Visit www.collegeboard.com/clepprep for additional Colander, Macroeconomics and Microeconomics (McGraw-Hill) economics resources. You can also find suggestions for Frank and Bernanke, Principles of Macroeconomics and Principles exam preparation in Chapter IV of the CLEP Official Study of Microeconomics, Brief Edition (McGraw-Hill) Guide. In addition, many college faculty post their course Gottheil, Principles of Macroeconomics (Thomson/Cengage) materials on their schools’ websites. Krugman and Wells, Macroeconomics and Microeconomics (Worth) Lipsey, Ragan and Storer, Macroeconomics and Microeconomics Sample Test Questions (Addison Wesley) Mankiw, Brief Principles of Macroeconomics and Brief Principles of The following sample questions do not appear on an actual Microeconomics (South-Western) CLEP exam. They’re intended to give potential test takers an McConnell and Brue, Macroeconomics and Microeconomics indication of the format and difficulty level of the exam and (McGraw-Hill) to provide content for practice and review. For more sample McEachern, ECON for Macroeconomics and ECON for questions and information about the test, see the CLEP Microeconomics (South-Western) Official Study Guide. Samuelson and Nordhaus, Macroeconomics and Microeconomics (McGraw-Hill) Schiller, The Macro Economy Today and The Micro Economy Today Country X Country Y (McGraw-Hill) Stiglitz and Walsh, Principles of Macroeconomics (W. W. Norton) Cotton Wheat Cotton Wheat Taylor and Weerapana, Principles of Macroeconomics and 800 1600 1600 800 Principles of Microeconomics (South-Western) These resources, compiled by the CLEP test development committee and staff members, may help you study for 1. The table above shows the production possibilities for your exam. However, none of these sources are designed Country X and Country Y. Assume both countries specifically to provide preparation for a CLEP exam. The can either produce cotton or wheat using the same College Board has no control over their content and cannot quantity of resources. Would trade be beneficial to both vouch for accuracy. countries, and if so, which good would each country Economics Department at SUNY Oswego: Online produce domestically and which good would each Economics Textbooks (oswego.edu/~economic/ country import? newbooks.htm) A. Yes; Country X will produce cotton and import wheat. Two differing viewpoints on contemporary economics: B. Yes; Country Y will produce wheat and import ”Free to Choose” TV Series by Milton Friedman cotton. (miltonfriedman.blogspot.com) and Dollars and Sense C. Yes; Country Y will produce cotton and import (dollarsandsense.org) wheat. D. Yes; Country X will produce some cotton and Free Macroeconomics Textbook (en.wikibooks.org/wiki/ import some wheat. Macroeconomics) E. No, trade will not be beneficial for the two countries. 4
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