CLEP® Principles of Macroeconomics
Everything you need to pass the exam and get the college credits you deserve.
CLEP® is the most popular credit-by-examination program in the country, accepted by more than 2,900 colleges and universities. For over 15 years, REA has helped students pass CLEP® exams and earn college credit while reducing their tuition costs. Our CLEP® test preps are perfect for adults returning to college (or attending for the first time), military service members, high-school graduates looking to earn college credit, or home-schooled students with knowledge that can translate into college credit.
The CLEP® Principles of Macroeconomics test prep assesses the skills tested on the official CLEP® exam. Our comprehensive review chapters cover: aggregate demand and aggregate supply and monetary and fiscal policy tools, such as gross domestic product, consumption, investment, unemployment, inflation, inflationary gap, recessionary gap, and more.
The book includes two full-length practice tests. Each exam comes with detailed feedback on every question. We don't just say which answers are right-we explain why the other answer choices are wrong-so you can identify your strengths and weaknesses while building your skills.
REA is the acknowledged leader in CLEP® preparation, with the most extensive library of CLEP® titles available. Our test preps for CLEP® exams help you earn college credit, save on tuition, and get a college degree.
About the Author
Richard Sattora is a nationally recognized Economics teacher at Excelsior Award-winning Pittsford Mendon High School, Pittsford, N.Y., where he has taught for more than three decades. Designated a "Blue Ribbon Teacher of Economics" by the Federal Reserve Bank of Dallas, Mr. Sattora's varied background gives him a broad perspective on the subject. In 2005, under Mr. Sattora's direction, Pittsford Mendon's Federal Reserve Challenge Team won the prestigious Fed Challenge national championship.
Read an Excerpt
IntroductionPASSING THE CLEP PRINCIPLESOF MACROECONOMICS EXAM ABOUT THIS BOOKThis book provides you with complete preparation for the CLEP Principles of Macroeconomics exam. Inside you will find a targeted review of the subject matter, as well as tips and strategies for test taking. We also give you two true-to-format practice tests, based on the official CLEP Principles of Macroeconomics exam. Our practice tests contain every type of question that you can expect to encounter on the actual exam. Following each practice test you will find an answer key with detailed explanations designed to help you more completely understand the test material. All CLEP exams are computer-based. As you can see, the practice tests in our book are presented as paper-and-pencil exams. The content and format of the actual CLEP subject exams are faithfully mirrored. Later in this chapter you’ll find a detailed outline of the format and content of the CLEP Principles of Macroeconomics exam. ABOUT THE EXAMWho takes CLEP exams and what are they used for?CLEP (College-Level Examination Program) examinations are typically taken by people who have acquired knowledge outside the classroom and wish to bypass certain college courses and earn college credit. The CLEP is designed to reward students for learning—no matter where or how that knowledge was acquired. The CLEP is the most widely accepted credit-by-examination program in the country, with more than 2,900 colleges and universities granting credit for satisfactory scores on CLEP exams. Although most CLEP examinees are adults returning to college, many graduating high school seniors, enrolled college students, military personnel, and international students also take the exams to earn college credit or to demonstrate their ability to perform at the college level. There are no prerequisites, such as age or educational status, for taking CLEP examinations. However, because policies on granting credits vary among colleges, you should contact the particular institution from which you wish to receive CLEP credit.There are two categories of CLEP examinations:1. CLEP General Examinations, which are five separate tests that cover material usually taken as requirements during the first two years of college. CLEP General Examinations are available for English Composition (with or without essay), Humanities, Mathematics, Natural Sciences, and Social Sciences and History.2. CLEP Subject Examinations include material usually covered in an undergraduate course with a similar title. For a complete list of the subject examinations offered, visit the College Board website. Who administers the exam?The CLEP exams are developed by the College Board, administered by Educational Testing Service (ETS), and involve the assistance of educators throughout the United States. The test development process is designed and implemented to ensure that the content and difficulty level of the test are appropriate. When and where is the exam given?CLEP exams are administered each month throughout the year at more than 1,300 test centers in the United States and can be arranged for candidates abroad on request. To find the test center nearest you and to register for the exam, you should obtain a copy of the free booklets CLEP Colleges and CLEP Information for Candidates and Registration Form. They are available at most colleges where CLEP credit is granted, or by contacting:CLEP ServicesP.O. Box 6600Princeton, NJ 08541-6600Phone: (800) 257-9558 (8 a.m. to 6 p.m. ET)Fax: (609) 771-7088Website: www.collegeboard.com/clep CLEP exams are available free of charge to eligible military personnel and eligible civilian employees. All the CLEP exams are available at test centers on college campuses and military bases. In addition, the College Board has developed a paper-based version of 14 high-volume/high-pass rate CLEP tests for DANTES Test Centers. Contact the Educational Services Officer or Navy College Education Specialist for more information.Visit the College Board website for details about CLEP opportunities for military personnel. Eligible U.S. veterans can claim reimbursement for CLEP exams and administration fees pursuant to provisions of the Veterans Benefits Improvement Act of 2004. For details on eligibility and submitting a claim for reimbursement, visit the U.S. Department of Veterans Affairs website at www.gibill.va.gov/pamphlets/testing.htm. SSD Accommodations for Students with DisabilitiesMany students qualify for extra time to take the CLEP Principles of Macroeconomics exam, but you must make these arrangements in advance. For information, contact:College Board Services for Students with DisabilitiesP.O. Box 6226Princeton, NJ 08541-6226Phone: (609) 771-7137 (Monday through Friday, 8 a.m. to 6 p.m. ET)TTY: (609) 882-4118Fax: (609) 771-7944E-mail: firstname.lastname@example.org HOW TO USE THIS BOOKWhat do I study first?Read over the course review and the suggestions for test-taking, take the first practice test to determine your area(s) of weakness, and then go back and focus your study on those specific problems. Studying the reviews thoroughly will reinforce the basic skills you will need to do well on the exam. Make sure to take the practice tests to become familiar with the format and procedures involved with taking the actual exam. To best utilize your study time, follow our Independent Study Schedule, which you’ll find in the front of this book. The schedule is based on a four-week program, but can be condensed to two weeks if necessary by collapsing each two-week period into one. When should I start studying?It is never too early to start studying for the CLEP Principles of Macroeconomics exam. The earlier you begin, the more time you will have to sharpen your skills. Do not procrastinate! Cramming is not an effective way to study, since it does not allow you the time needed to learn the test material. The sooner you learn the format of the exam, the more time you will have to familiarize yourself with it. FORMAT AND CONTENT OF THE EXAMThe CLEP Principles of Macroeconomics exam covers the material one would find in a college-level introductory macroeconomics class. The exam requires the test taker to understand concepts such as gross domestic product, consumption, and investment, and terms such as unemployment, inflation, inflationary gap and recessionary gap. Test takers should also understand the structure of the Federal Reserve Bank and the policies it uses to stabilize the economy. In addition, a basic understanding of foreign exchange markets, balance of payments, appreciation and depreciation of currencies is also expected. The exam consists of 80 multiple-choice questions, each with five possible answer choices, to be answered in 90 minutes. The approximate breakdown of topics is as follows:8–12% Basic economic concepts10–18% Measurement of economic performance60–70% National income and price determination10–15% International economics and growth ABOUT OUR COURSE REVIEWThe review in this book provides you with a complete background of all the important basic economic concepts and macroeconomic principles and theories relevant to the exam. It will help reinforce the facts you have already learned while better shaping your understanding of the discipline as a whole. By using the review in conjunction with the practice tests, you should be well prepared to take the CLEP Principles of Macroeconomics exam. SCORING YOUR PRACTICE TESTSHow do I score my practice tests?The CLEP Principles of Macroeconomics exam is scored on a scale of 20 to 80. To score your practice tests, count up the number of correct answers. This is your total raw score. Convert your raw score to a scaled score using the conversion table in the book. When will I receive my score report?The test administrator will print out a full Candidate Score Report for you immediately upon your completion of the exam (except for CLEP English Composition with Essay). Your scores are reported only to you, unless you ask to have them sent elsewhere. If you want your scores reported to a college or other institution, you must say so when you take the examination. Since your scores are kept on file for 20 years, you can also request transcripts from Educational Testing Service at a later date. STUDYING FOR THE CLEPIt is very important for you to choose the time and place for studying that works best for you. Some students may set aside a certain number of hours every morning, while others may choose to study at night before going to sleep. Other students may study during the day, while waiting on a line, or even while eating lunch. Only you can determine when and where your study time will be most effective. But be consistent and use your timewisely. Work out a study routine and stick to it! When you take the practice tests, try to make your testing conditions as much like the actual test as possible. Turn your television and radio off, and sit down at a quiet table free from distraction. Make sure to time yourself. Start off by setting a timer for the time that is allotted for each section, and be sure to reset the timer for the appropriate amount of time when you start a new section. As you complete each practice test, score your test and thoroughly review the explanations to the questions you answered incorrectly; however, do not review too much at one time. Concentrate on one problem area at a time by reviewing the question and explanation, and by studying our review until you are confident that you completely understand the material. Test-Taking TipsAlthough you may not be familiar with computer-based standardized tests such as the CLEP Principles of Macroeconomics, there are many ways to acquaint yourself with this type of examination and to help alleviate your test-taking anxieties. Listed below are ways to help you become accustomed to the CLEP, some of which may be applied to other standardized tests as well. Read all of the possible answers. Just because you think you have found the correct response, do not automatically assume that it is the best answer. Read through each choice to be sure that you are not making a mistake by jumping to conclusions. Use the process of elimination. Go through each answer to a question and eliminate as many of the answer choices as possible. By eliminating just two answer choices, you give yourself a better chance of getting the item correct, since there will only be three choices left from which to make your guess. Remember, your score is based only on the number of questions you answer correctly. Work quickly and steadily. You will have only 90 minutes to work on 80 questions, so work quickly and steadily to avoid focusing on any one question too long. Taking the practice tests in this book will help you learn to budget your time. Acquaint yourself with the computer screen. Familiarize yourself with the CLEP computer screen beforehand by logging on to the College Board website. Waiting until test day to see what it looks like in the pretest tutorial risks injecting needless anxiety into your testing experience. Also, familiarizing yourself with the directions and format of the exam will save you valuable time on the day of the actual test. Be sure that your answer registers before you go to the next item. Look at the screen to see that your mouse-click causes the pointer to darken the proper oval. This takes less effort than darkening an oval on paper, but don’t lull yourself into taking less care! THE DAY OF THE EXAMOn the day of the test, you should wake up early (hopefully after a decent night’s rest) and have a good breakfast. Make sure to dress comfortably, so that you are not distracted by being too hot or too cold while taking the test. Also plan to arrive at the test center early. This will allow you to collect your thoughts and relax before the test, and will also spare you the anxiety that comes with being late. As an added incentive to make sure you arrive early, keep in mind that no one will be allowed into the test session after the test has begun. Before you leave for the test center, make sure that you have your admission form and another form of identification, which must contain a recent photograph, your name, and signature (i.e., driver’s license, student identification card, or current alien registration card). You will not be admitted to the test center if you do not have proper identification. If you would like, you may wear a watch to the test center. However,you may not wear one that makes noise, because it may disturb the other test-takers. No dictionaries, textbooks, notebooks, briefcases, or packages will be permitted and drinking, smoking, and eating are prohibited. Good luck on the CLEP Principles of Macroeconomics exam!
Table of Contents
CONTENTS Independent Study Schedule Introduction: Passing the CLEP Principlesof Macroeconomics Exam About This Book About the Exam How to Use This Book Format and Content of the Exam About Our Course ReviewScoring Your Practice Tests Studying for the CLEP The Day of the Exam Basic Economic Concepts Review Key Terms Economic Foundations Economic Methodology Origins of Supply Origins of Demand Markets Circular Flow Model CLEP Macroeconomics Course Review Key Terms Measuring Economic Performance Economic Performance Over Time Philips Curve Consumer Price Index GDP Price Index Personal Consumption Expenditure Index Why Does the Inflation Indicator Type Matter? Effects of Inflation Types of Inflation Building the Aggregate Expenditure Model The Great Debate Operating Beyond the LRAS Economic Growth and Productivity Focus on Consumer Expenditure Business Investment, Including Government,and Net Exports to the AE Model Focus on Ig and Disequilibrium GDP and the Multiplier IDM, Nominal and Real Interest Rates, and Loanable Funds Aggregate Demand/Aggregate Supply Model AD/AS and Fiscal Policy Fiscal Policy Issues Crowding Out AD/AS and Monetary Policy Money Bonds Stock Equities The Federal Reserve and the Banking System Types of Banks Banks, Loans, and the Money Multiplier The Fed and Monetary Policy FOMC Impact of the Global Economy NAFTA and GATT Comparative Advantage Financing International Trade Balance of Payments The 2003 US Balance of Payments Currency Exchange Rates Practice Test 1 Answer Key Detailed Explanations of Answers Practice Test 2 Answer Key Detailed Explanations of Answers Glossary Answer Sheets Index