DEFINICIJE:

1. RESERVE REQUIREMENTS is the amount of funds that banks

must hold in reserves against deposits made by their
customers.
2. CPI is an index of prices used to measure the change in the
cost of basic goods and services in comparison with a fixed
base period.
3. REAL GDP is calculated by taking out the effect of inflation
from nominal GDP.
4. AUTOMATIC ECONOMIC POLICY INSTRUMENTS are built-in
instruments that automatically respond to changes in the
economy.
5. MARGINAL TENDENCY TO IMPORT is the fractional change
in import expenditure that occurs with a change in disposable
income.
6. TRANSFER PAYMENTS are government payments to
individuals that are not made in exchange for goods or
services supplied.
7. VALUE ADDED is the difference between the value of goods
produced and the cost of materials and supplies used in
producing them.
8. DEVALUATION is a decrease in the official foreign exchange
rate of a currency (by C.B.)
9. GDP GAP is the difference between potential and actual GDP.
10.
FRICTIONAL UNEMPLOYMENT arises because of the
incessant movement of people between regions and jobs or
through different stages of the life cycle.
11.
BUDGET SURPLUS occurs when all taxes and other
revenues exceed government expenditures.
12.
MARGINAL PROPENSITY TO CONSUME is the extra
money that people consume when they receive an extra dollar
of income.
13.

NET EXPORT is export minus import.

14.
GDP is the most comprehensive measure of total output
in an economy.
15.
GALLOPING INFLATION is inflation at a rate of 50, 100
or 200.
16.
DEPRECIATION is a decrease of the price of currency
relative to other currencies at the market.
17.
GNI is the difference between income from nonresidents and income paid to non-residents net foreign
income.
18.
SNA is a set of accounts which economists use to
measure economic activity in one national economy.
19.
ABSORPTION is the total demand for all final marketed
goods and services by all economic agents resident in an
economy.
20.
MARGINAL PROPENSITY TO SAVE is the extra money
that people save when they receive an extra dollar of income.
21.
PERMANENT INCOME is the expected long-run
average income.
22.
MONETARY MULTIPLIER is the amount of money that
banks generate with each dollar of reserves.
23.
INDEXATION is a technique to adjust income payments
by means of a price index in order to maintain the purchasing
power after inflation.
24.
NET INVESTMENTS is the amount of money spent by a
company or an economy on capital assets or gross investment
less depreciation.
25.
ECONOMIC GROWTH is an increase in the capacity of
an economy to produce goods and services compared from
one period of time to another.
26.
STAGFLATION is a condition of slow economic growth
and relatively high unemployment.
27.
"COLA INDEX" is an index that adjusts wages and
contract changes in the general price level.
28.
ECONOMIC POLICY is a set of measures and activities
of the state with a view to ensuring the realization of the

general (public) interest in the company and directing the

economy in that direction.
29.

LATENT UNEMPLOYMENT is hidden unemployment

30.
BROAD MONEY includes transaction money (M1) +
savings accounts in banks, cash substitutes (deposits up to 6
months
31.
NARROW MONEY is used for everyday transactions,
and includes wrought iron, paper money, demand deposits
32.
THE PARADOX OF SAVINGS is increase in savings
without a corresponding increase in investment
33.
OKUNS LAW for every 2% decrease in real GDP
relative to potential leads to an increase in the unemployment
rate by 1%.

DOPUNE:
1. List the 4 macroeconomic goals and their sub goals
PRODUCTION (rapid growth rate and high level od production)
EMPOYMENT (high level of employment and low involuntary
unemployment) BALANCE OF PAYMENT (balance of payment without
high deficits, stability of foreign exchange rates)
PRICE STABILITY (free market and price stability without inflation or
deflation)
2. List 4 price indices
Consumer Price Index
Producer Price Index
GDP Deflator
Wholesale Price Index

3. Explain the meaning of devaluation and revaluation

Devaluation is decrease in official foreign exchange rate of a
currency and revaluation is an increase in official foreign exchange
rate of a currency (by C.B.)
4. List the 3 main approaches used to measure GDP
We can calculate GDP by measuring PRODUCTION, CONSUMPTION
or INCOME.

5. Explain the problem of double accounting in measuring GDP by

production approach
Double accounting is when the intermediate products are taken into
account more then once. For example, we have a certain amount of
sugar and we take that sugar into account. Then we use that same
sugar to make cookies and it is once again taken into account.
6. Explain the difference between automatic and discretionary
measures
The difference between automatic and discretionary measures is
that discretionary measures are adjusted according to the situation
and the automatic ones immediately respond to changes in
economy and advantages of that are speed of interventions and
elimination of administrative delays.
7. List macroeconomic policies and their instruments
Fiscal policy(taxes, government consumption)
Monteary policy (reserved requirements, interest rate, open market
operations, discount rate)
8. What determines aggregate supply and demand
AS (level of prices and costs, potential output, labour, capital and
tehnology)
AD (taxes, consumption and money)
9. Define macroeconomic stabilization (price stability, low deficit)
Main goal of macroeconomic stabilization is low and predictable
inflation, stable and sustainable balance of payment without deficit,
real interest rate and stable fiscal policy and in return to get
economic growth.
10. List the main determinants of national consumption (spending)
Current disposable income, permanent income, lifecycle model of
consumption, wealth
11. Explain a dual role of investment in economics
Investment has dual role: first, in short run it affects aggregate
demant, and second, in the long run it affects the potential output
and aggregate supply.
12. List the main determinants of investment(consumption)
Revenues, Costs, Expectations
13. What are the main assumptions of the multiplier model
- there has to be existence of unused capacities
-the multiplyer model shows that increase in investment will
increase GDP by multiplied amount

14. List components of the main monetary aggregates (m1 and m2)
M1 (transaction money): coins, paper currency, check deposits
M2 (broad money): savings accounts, transaction money, deposit
accounts..
14.Provide monetary policy instruments!
to) open market operations (buying and selling securities)
b) the discount rate - the interest rate
c) the reserve requirement ratio (the amount of reserves that
commercial banks are required to deposit in an account with the
central bank on each received deposit).
15. Explain speculative demand for money and portfolio theory
Speculative demand for demanded money that is being spent on
speculations and its determinated by income and profit.
Portfolio theory is the quantitative analysis of how investors can
diversify their portfolio in order to minimize risk and maximize
returns
16. List determinants of interest rate
Term of maturity, risk, liquidity and administrative costs
17. Define frictional, structural, and cyclical unemployment
Frictional unemployment rises from movement of people between
regions or jobs or movements caused by stages of life cycle.
Structural is unemployment caused by mismatch in supply and
demand for workers (while demand for one kind of work is rising,
demand for other is falling and suppliers cant adjust fast enough).
Cycal unemployment occurs when overall demand for labout is low
and its often related to recession.
18. Define the Ocuns slope
Ocuns slope shows that every 2 percent that GDP falls relative to
potential GDP, the unemployment rate rises by 1 percent.
19. Define actual, structural and cyclical budget
Actual budget records actual expenditures, revenues and deficits in
a given period. Structural budget calculates what government
revenues, expenditures and deficits would be if economy was
operating at potential output.
Cyclical budget shows difference between the actual and structural
budget and it measured the impact of the business cycle on the
budget.
20. Explain short run and long run effect of public debt
Short-run effect is called crowding out effect when effectiveness of
fiscal policy is reduced by money market reactions.

Long-run effect is called debt burden on younger generations.

21. Explain and list the automatic and discretionary instruments of

fiscal policy.
Automatic fiscal policy has automatic stabilizing properties, they act
to reduce business cycle fluctuations in part but can not resolve all
disturbances. It has following stabilizers: automatic changes in tax
receipts and transfer programs such as: unemployment insurance,
welfare, silimar.
Discretionary fiscal policy is an active macroeconomic tool which
include following instruments: public works projects, public
employment projects, temporary changes in income taxes
22. Explain shortly the classical model of growth
Growth is determined by supply-side of economy, in other words by
population growth, investments and land. GDP increases with
population up to a point where the existing land comes as a limit for
economic growth.
23. Explain Harrod Domars model of growth
It shows that GDP growth rate is determined by the ratio of national
savings and capital coefficient. In the absence of intervention, GDP
growth rate is determined by savings.
24. List the main 3 approaches to economic development
Production growth, equality model, sustained development
25. Main instruments of central banks
Open market operations, discount rate, legal reserve requirements
26. Define business cycle (income, output, employment)
It is a change in total output, income and employment and usually
lasts between 2 and 10 years.
27. List some endogenous and exogenous theories of business
cycles
Endogenous theories the causes for crisis can be found within the
economy, cycles are self-generating
Exogenous theories the main causes for crisis are wars,
revolutions, political events, gold digging, migrations etc
28. List 4 phases of the traditional approach to business cycles
Starting position equilibrium state
Changes ruining the equilibrium state

Process of adjustment
Final position new equilibrium
29. List methods of forecasting of business cycles
Qualitative, quantitative, combined methods
30. Explain how we can use monetary policy in case of recession
Monetary policy would lead to the desired expansion of output (and
employment), but, because it entails an increase in the money
supply, would also result in an increase in prices. As an economy
gets closer to producing at full capacity, increasing demand will put
pressure on input costs, including wages.
31. Display a systematic approach to the analysis of the balance of
the conjunctural cycle
Equilibrium has to be considered as dynamic and is concentrated on
4 elements: the necessity of system to pass through the equilibrium
state, equilibrium occurs periodically, new eq. point is on the higher
lever of system development, the distance between two eq. points
varies because of structurl changes and capabilities of the system to
adapt to these changes.

32. Specify the type of inflation according to the intensity of

expression
Moderate inflation is a price-level rise that does not distort relative
prices or income severely.
Hyperinflation is inflation at extremely high rates.
Galloping inflation is inflation at a rate of 50, 100 or 200 percent.

TRUE/FALSE:
The CPI differs from the GDP deflator for the fact that its weights are fixed,
and weights of GDP deflator are variable.
Inflation costs are accompanied by an increase in production in the national
economy.
Increasing reserve requirements reduces the ability to create deposits.
The main determinant of transaction demand for money is level of
equilibrium of interest rates.
If the slope of the Phillips curve is very laid, the reduction in the inflation
rate can be achieved at the cost of significant increase in the
unemployment rate
Size of investment multiplier is inversely proportional to the marginal
propensity to consume

D
NE
A
DA N
E
D
NE
A
DA N
E
D
NE
A
D
A

NE

SNA includes the total value of manufactured goods for their own use, but
excludes the total production of services for own final consumption.
Growth of nominal income leads to increased speculative demand for
money.
During inflation, nominal GDP is equal to real GDP.
According to the classical model of growth, the main factors that stimulate
the growth are capital and technological innovation.
Change in production (GDP) can affect the total investment spending in the
economy.
Okun's law explains the relationship deviations of output and price level in
the economy.
Value added is the difference between output and intermediate
consumption.
Shock of supply is best described by increasing cost of production in the
economy.
If the current prices are higher than constant prices real GDP is less than
nominal GDP.
Over the business cycle, real GDP, as a rule, does not deviate from the
potential.
As the aggregate demand approach potential output, the growth of output
is stronger.
With rise of income, savings absolutely increase and relatively decrease.
Tight monetary policy leads to declining market interest rates.
Structural budget is active by effect because it is determined by measures
of discretionary fiscal policy.
The inflation rate over 10% stimulates the economic growth of the national
economy.
If the net invoiced income from abroad is positive, then the gross national
income is less than the gross domestic product.
Faster growth in labor productivity compared to the world average is
referred to as appreciation.
Neoclassical growth model implies that savings conditions the investment.
Okun's Law shows the influence of changes in the level of prices at the
level of (un) employment in the country.
Reducing the discount rate influence the decrease in economic activity in
the country.
Multiplier money supply is directly proportional to the amount of required
reserves rate.
Measurement of economic activity in the SNA is based on the concept of
residence.
Schumpeter growth theory emphasizes the influence of capital and savings
to the level of economic growth.
Phillips curve indicates that wages decrease when unemployment is low

D
NE
A
DA NE
DA N
E
DA N
E
D
NE
A
DA N
E
D
NE
A
D
NE
A
D
NE
A
DA N
E
DA NE
DA N
E
DA N
E
DA NE
DA N
E
DA NE
DA N
E
D
NE
A
D
NE
A
DA N
E
DA NE
DA NE
DA NE
DA N
E

Increasing income increases MPC and MPS decreases.

Disinflation is a policy of stimulating economic activity in the country
Multiplier effect can be observed only if the economy has unemployed
capacities
Keynesian model of growth means that savings conditions the investment.
Gross domestic product in its composition includes net investment.
The outflow of deposits outside the banking system, causing an increase in
the monetary multiplier.
Latent unemployment arises from the mismatch of supply and demand for
specific skills of the workforce.
If the savings rate of the state is bigger, the tax multiplier is greater.
Malthus believed that population growth can be a limiting factor for
economic growth.
Net domestic product is gross domestic product minus inflation
ZAOKRUIVANJE:
1.Payments of income from abroad are recorded in:
a.
b.
c.
d.

GNP
GDP
GNI
GNDI
2.Which of the following events would shift the aggregate
demand curve to the left:
a. The increase in government spending
b. The increase in the number of employees at the current level of
installed capacity
c. reduction in investment spending
d application of new technology at the same rate of employment
3. Long term unemployment refers to:
a. unemployment due to conjunctural cycle
b. unemployment due to changes in the structure of work
c. unemployment is related to technological improvements that
reduce the demand
for labor
d. unemployment because of the inability to adapt to new
needs in production

DA
D
A
D
A
DA

NE
NE
NE

N
E
DA N
E
DA NE
DA NE
DA N
E
D
NE
A
DA N
E

4. The central bank is concerned about the reduction in

production. It would be logical to do the next move:
a. purchase of securities
b. sale of securities
c. increase in the reserve requirement
d. reduction in reserve requirements
e. reduction in the discount rate
5. According to the neoclassical growth model, an increase
in capital equipment is accompanied by:
a. increase in output per worker, wage growth, rising real interest
b. the reduction in output per worker, reducing real interest rates
and a decrease in earnings of equity
c. increase in output per worker, rising wages, reduction in
real interest rates and a reduction in earnings of equity
6. Deflation is in favor of:
a. debtor
b. creditors
c. entrepreneurs
d. Speculators
7. Which of the following is a feature of the expansion:
a. the increase in gross domestic product
b. increasing unemployment
c. increase in production
d. the price increase
e. increase in investments
8. Cyclical unemployment occurs:
a. due to conjunctural developments in the economy
b. as a result of structural imbalances in labor demand
c. as a result of voluntary population movements
d. in cases of insufficient aggregate demand for labor
e. all of the above
9. If part of the deposit money is flowing into cash outside
the banking system, then:
a. It will not affect the amount of new deposits

b. Reduces the amount of deposits created

c. Increases the amount of deposits created
10. Slope of long-term Phillips curve shows the following:
a. there is a choice between inflation and unemployment
b. there is no possibility of compromise due to the natural
rate of unemployment
c. steeper curve indicates the rising price of the fight against
inflation
d. the increase in the inflation rate is inversely proportional to the
growth of wages
11. Which of the following is a feature of the recession:
a. the increase in gross domestic product
b. increasing unemployment
c. increase in production
d. the price increase
e. increase in investments
12. Gross domestic savings are calculated as gross national
savings:
a. Enlarged for transfer payments from abroad
b. decreased by net invoiced income from abroad
c. decreased by transfer payments from abroad
d. enlarged invoiced income to abroad
13.Indexation of the economy is usually defined as:
a. freezing price on determined index level for decreasing inflation
b. a set of voluntary, optional guidelines governing the movement of
prices and wages
c. legal control of prices and wages
d. automatic adjustment of wages to inflation in order to
preserve the standard of living
e. one of the policy measures of income
14. Inertial inflation is caused by:
a. increase in government expenditure
b. increase in oil prices
c. the expected rate of inflation, which have adapted to
economic subjects
d. increased productivity
15. Cyclical unemployment is related to:

a. unemployment due to conjunctural cycle

b. unemployment due to changes in the structure of work
c. unemployment is related to technological improvements that
reduce the demand for labor
d. unemployment because of the inability to adapt to new needs in
production
16. Which of the following is a characteristic of stagflation:
a. the increase in gross domestic product
b. increasing unemployment
c. increase in production
d. The price increase
e. increase in investments
17. In the presence of inflationary pressure, appropriate
discretionary fiscal policy include:
a. increasing tax rates
b. the increase in government spending
c. the increase in transfer payments
d. public works programs
e. all of the above
18. The accumulated national debt, in the short term, it will
cause:
a. reducing the growth potential of the product
b. the increase in prices and increase in interest rates
c. increasing inefficiency due to tax increases to service the internal
debt
d. reduction in private investment
19. The measure of discretionary stabilization policies
include:
a. public works
b. employment in the public sector
c. the introduction of progressive tax
d. changing the discount rate
e. revaluation of the national currency
20. The main sources of economic growth in the neoclassical
model are:
a. work
b. capital
c. natural Resources
d. technological innovation

21. Money Transaction includes the following:

a. paper money
b. coins
c. savings accounts in banks
d. checking money
e. monetary surrogates
22. Slope of short-term Phillips curve shows the following:
a. there is a choice between inflation and unemployment
b. the growing trend of wages in line with a higher unemployment
rate
c. steeper curve indicates the rising price of the fight against
inflation
d. increase in the inflation rate is inversely proportional to the
growth of wages
23. Ako bi dolo do usporavanja privredne aktivnosti,
centralna banka bi uradila slijedee:
a.
b.
c.
d.

kupovina vrijednosnih papira

prodaja vrijednosnih papira
poveanje stope obavezne rezerve
smanjenje stope obavezne rezerve
24. Inflation Demand includes the following changes in the
national economy:
a. reduction in overall demand due to the growing level of prices in
the country
b. increase in the general price level for stimulating overall demand
in the country
c. rising unemployment in the country
d. increase in production in the country that operates under
a potential product
25. The current weighted price indexes are characterized by
the following:
a. measuring price changes only foreign goods
b. measuring price changes only domestic goods
c. measuring changes in prices and domestic and foreign goods
d. measuring price changes only consumer product
e. measuring the change in prices of all kinds of products

26. The automatic stabilization policy measures include:

a. unemployment insurance
b. employment in the public sector
c. the introduction of progressive tax
d. changing the discount rate
e. the depreciation of the national currency
26. Dividends paid by the population of a country received
from investing in foreign stocks are included in:
a. gross Domestic Product
b. gross National Income
c. gross national disposable income
d. gross domestic savings
27. Latent unemployment is due to:
a. inability to perform certain tasks because of their links with
certain period
b. technological development that reduce the demand for labor
c. inability to adapt to new needs of the production
d. changes in the structure of the work (especially
qualification structure)
28. The main sources of economic growth, according to
Schumpeter are:
a. work
b. capital
c. natural Resources
d. entrepreneurial innovation
29. Demand for money that is due to money - goods trade
and payment of debts, is
called:
a. interaction demand for money
b. transactional demand for money
c. speculative demand for money
d. solvent demand for money
30. Gross national income is gross national disposable
income:
a. plus net transfer payments
b. minus net invoiced income
c. minus net transfer payments
d. increased by the amortization of capital

31. Seasonal unemployment is due to:

a. inability to perform certain tasks because of their links
with certain period
b. technological development that reduce the demand for labor
c. inability to adapt to new needs of the production
d. changes in the structure of the work (especially qualification
structure)
32. The main sources of economic growth in the neoclassical
R. Solow are:
a. work
b. capital
c. natural Resources
d. technological innovation
33. Broad money (M2) includes:
a. paper money
b. coins
c. savings accounts in banks
d. checking money
e. monetary surrogates
34. Gross domestic product (at market prices) to the
production approach include the following:
a. sum of added value in the economy
b. salaries and employee benefits
c. net exports of goods and non-financial services
d. operating surpluses of enterprises
35. Instruments of foreign policy are:
a. foreign exchange rate
b. quantitative restrictions
c. foreign exchange restrictions
d. contingents
e. exchange controls
36. Frictional unemployment is due to:
a. inability to perform certain tasks because of their links with
certain period
b. technological development that reduce the demand for labor
c. inability to adapt to new needs of the production

d. changes in the structure of the work (especially qualification

structure)
e. natural movement of the population and / or passing
through the stages of the life cycle
37. The main sources of economic growth, according to the
classical model of Adam Smith are:
a.
b.
c.
d.

work
capital
natural Resources
innovation

38. Quantitative instruments of economic policy Tinbergen

include:
a. changes to existing instruments
b. the introduction of new or elimination of existing instruments
c. The introduction of new instruments that change the economic
system
d. Increasing the number of economic instruments
39. Money that population of BiH receives from relatives
abroad, is included in:
a) Gross Domestic Product
b) Gross National Income
c) Gross national disposable income
d) Gross domestic savings
40. The main sources of economic growth, according to the
classical model are:
a. work
b. capital
c. natural Resources
d. technological innovation