Final Exam Study Guide - Introduction to Macroeconomics, Econ 104A, C, D, H - Srin!

"01"
Final Exam:
Thursday, May 3rd, 10:30 am, Totman Gym (for A Sections)
Thursday, May 3
rd
, 8:00am 10:00am, Totman Gym (For , ! and " Sections)
Review Sessions for Final will be posted on moodle
Ofer !o"rs:
#a$ %i$$ ha&e o'ce hours on Tuesday May 1
st
and (ednesday May )
nd
from 11:00am*
3:00+m, -n Tuesday they %i$$ .e in Thom+son /08, -n (eds a $ar0er room has .een
re1uested and %i$$ .e +osted on mood$e (and +osted on my o'ce door) (2 may $ea&e
30 minutes ear$y if no one is there,)
TA3s %i$$ announce their o'ce hours for 4na$s %ee5 in discussion sections,
The e6am %i$$ .e hea&i$y %ei0hted to co&er the materia$ since the midterm, .ut the .i0
themes and conce+ts from the 4rst ha$f of the course %i$$ a$so .e on the e6am, 7ote that
materia$ from many of the $ectures, es+ecia$$y socia$ security, comes from sources other
than the te6t.oo5 as $isted on the sy$$a.us, 2 ha&e a$so as5ed you to 5ee+ u+ %ith the
current state of the economy and ana$ysis, and as5ed you to read the co$umns of 7o.e$
8aureate 9au$ :ru0man in the 7e% ;or5 Times, 2 %ou$d +ay e6tra attention to the materia$
co&ered in the notes, and on the %or5sheets (<*/), and on this re&ie% sheet, =e a.$e to
.rie>y de4ne terms, ans%er short ans%ers, com+are?contrast di@erent to+ics, and ans%er
mu$ti+$e choice 1uestions, ;ou shou$d a$so .e a.$e to ana$yAe and use any co&ered 0ra+hs,
There %i$$ .e +ro.$ems on the e6am so ma5e sure you can do +ro.$ems such as those on
the %or5sheets, The e6am %i$$ inc$ude a $ot of choice, There %i$$ .e $ess mu$ti+$e choice
than on the midterm, There %i$$ .e a one*+a0e essay 1uestion (e6am+$es .e$o%),
#e$ %erms&
Monetary Policy
Liquidity Trap
Paradox of Thrift
Deregulation
TARP
Monetarism
Social Security
Aggregate Demand
Aggregate Supply
Supply-Side Policy
Productivity
Stagflation
Deflation
Demand Pull-nflation
!ost-Push nflation
Sta"ili#ation Policy
Trade Deficit
$alance of Trade
Protectionism
%ree Trade
A"solute Advantage
!omparative Advantage
&ATT
'A%TA
(T)
*uota
Tariff
+xchange Rate
Supply of Dollars
Demand for Dollars
The value of the Dollar
Depreciation
Appreciation
(ea, and Strong Dollar
Social Security Trust %und
Social Security !ap
Multinational !ompanies - .M'!/s0 'e1ly ndustriali#ed !ountries - .'!/s0
'ld %erms&
Laisse# %aire
!lassical
&DP
&ro1th
!onsumption
nvestment
2nemployment
nflation
!onsumer Price ndex
Marginal Propensity to !onsume
&overnment +xpenditures
Aggregate +xpenditures
Real vs3 'ominal values
$alance of Trade
nvestment $an,s
mports
+xports
ncome
%iscal Policy
4eynesianism
%ederal Reserve $an,
Money
Reserve Requirement
)pen Mar,et )perations
Discount Rate
%ederal %unds Rate
(uestions&
53 (hat is economics6 (hat is macroeconomics6
73 (hat are the main goals of macroeconomics6
83 (hat is the relationship "et1een macroeconomics and the &reat Depression6
5
93 :o1 do you measure economic gro1th6 :o1 "ig is the 2S economy today6
;3 (hat is the difference "et1een real and nominal measurments< such as &DP and 1ages6 (hy is this
important6
=3 :o1 do you calculate unemployment in the macroeconomy6 (hat is >hidden? unemployment6 (hat is
underemployment6 (hat is the current unemployment situation6
@3 (hat is nflation6 (hat is the !onsumer Price ndex6 (hat is the current situation6
A3 According to 4eynes 1hen a "usiness decides to invest the impact on the macroeconomy is much greater than
that "usiness/ initial investment3 (hat is that called and ho1 does it 1or,6
B3 :o1 is money created6
5C3 (hat is the money multiplier6 (hat are excess and required reserves6
553 :o1 does the %ed affect the Money Supply .three 1ays06 (hat do they mainly do< historically< to change the
money supply6
573 :o1 is the %ed Structured6 :o1 are decisions made6 f the %ed has an economic "ias< 1hat is it6
583 $riefly< ho1 does expansionary monetary policy affect the economy6
593 +xplain 1hy 4eynes "elieved that %iscal Policy 1as more po1erfulDeffective than Monetary Policy3
5;3 Descri"e ho1 4eynesian Monetary Policy Differs from Monetarist Monetary Policy3
5=3 (hat is the Aggregate Demand !urve6 .1hat equili"riums are "ehind it60
5@3 (hat causes the AD curve to shift< and ho16
5A3 (hat could cause shifts in AS6
5B3 (hich curve .AD or AS0 is affected "y 4eynesian Monetary and %iscal Policy6
7C3 (hat are the arguments "ehind Supply-Side Policy6 (hat incentives are important6
753 (hat do critics of Supply-side policy say6
773 (hat is the relationship "et1een Supply-Side Policy and the AD and AS curves6
783 :o1 are the $ush Tax cuts examples of Supply-Side policy6
793 (hat are the t1o main theories of inflationDdeflation6 (hat do 1e have in today/s economy6
7;3 nflation and unemploymentE1hich is more important to fight6 (hy6
7=3 :o1 does the current social security system 1or,6 $e specific< giving many details3
7@3 (hat is the role of social security6 (hat is social a"out it6
7A3 :o1 does social security get revenue6 Pay out "enefits6 s it in surplus or deficit6 (hat is the Social Security
Trust %und6 (hy is this important for your .and my0 future6
7B3 Do social security "enefits increase 1ith the economy6 :o1 are they indexed6 :o1 is this an issue6
8C3 (hat is the >crisis? of social security6 s there a crisis6 (hat time hori#on is and should "e used to determine
the existence of a crisis6 (hat are the proFections for social security< ho1 are they arrived at6
853 :o1 has the glo"ali#ation< and trade< changed in your lifetime6 :o1 has it stayed the same6
873 (hat role does technology play in glo"ali#ation< Multinational !orporations< and international production6
883 (ho are the "iggest trading partners of the 23S36 mports versus +xports6
893 (hat is the trade deficit6 :o1 is it changing6 (hy is it an item of concern6
8;3 (hat are concerns a"out energy consumption and the developing 1orld< such as !hina6 (here does most
energy consumption ta,e place< "oth per capita and in total6 :o1 does energy factor into international trade6
8=3 (hat is the theory of comparative advantage6 Discuss 1ith detail3
8@3 $e a"le to discuss protectionism and reasons for and against it3
8A3 $e a"le to discuss free trade and the positive and negative aspects of it3
8B3 $e a"le to discuss the "asics of maFor free trade agreements such as 'A%TA and &ATT3
9C3 $e a"le to analy#e the demand and supply of the dollar relative to other currencies< including "eing a"le to
dra1 and manipulate graphs3 .see sample question03
953 $e a"le to discuss the connection "et1een the value of the dollar< imports< exports< Aggregate Demand and
+quili"rium ncome in the economy3
973 (hat can cause the dollar to appreciate or depreciate6 (hat affect does this have on the economy6
983 (hat 1ould happen to the value of the dollar if the !hinese sold their dollars .1hich they have held from the
huge trade deficit0 and 1anted yuan .!hinese currency0 instead6 Gou should "e a"le to dra1 graphs for this
question< as 1ell as discuss .see sample question03
7
993 $e a"le to discuss the (all Street @CC "illion "ailout in terms of the 4eynesian Model3
9;3 $e a"le to discuss "an, deregulation and the prospects and proposals for ne1 "an, regulation3
9=3 $e a"le to discuss the )"ama stimulus pac,age of 7CCB 1ith details and in terms of the 4eynesian Model3
(hat is its goal< and 1hy is it happening no16
9@3 n the real 1orld sometimes fiscal policy ta,es time to have an impact in the economy3 &ive an example of a
timing pro"lem 1ith fiscal policy3
9A3 (here does the federal government get its revenue6 (here does it spend its money6
9B3 (hat happens if government revenues are less than its expenditures6 (hat are the pro"lems 1ith the
government having de"t6
Any )i! icture tye o* +uestion *rom t,e $,ole semester is *air !ame as an essay +uestion
*or t,e *inal- Here are some examles o* t,ese t,emes
Analy#e the financial mar,et @CC "illion dollar "ailout .TARP0 in terms of effectiveness using one or more of
the follo1ing policiesH 4eynesian fiscal policy< the 4eynesian vie1 of nvestment< Supply Side PolicyE
$e a"le to discuss the Stimulus of 7CCB in terms of its effectiveness< using one or more of these same policies3
(hat is a Recession and 1hat does it mean6 (hat are different policy options in general6 (hat policy
options do 1e have for the current recession6 (hat are the strengths and 1ea,nesses of these policy options6
Should the government do more or less in the economy6 !urrently6 &enerally6 Support 1ith arguments
a"out theory and policy3
%ree mar,et !apitalism or Regulated< 4eynesian-style capitalismE1hich ma,es sense to you6Esupport3
(e had to ma,e decisions a"out the role of government in capitalism during the &reat Depression3 (e are
having these same de"ates today< during this recession3 Discuss3
.ro)lems&
There are several types of pro"lems that could sho1 up< as sho1n in the 1or,sheets3 These could "e the expanded
4eynesian model .1ith interest rates0< Aggregate Demand and Aggregate Supply< .1ith or 1ithout Supply side
analysis< such as the Laffer !urve0< nternational Trade .either the graphs or the charts0 and nternational %inance
.also either the graphs or the charts03 There are some sample questions "elo1H
Samle (uestion on International Finance
There has "een a disaster in MichiganI a tornado has destroyed the international headquarters of &M< %ord and
!hrysler< as 1ell as their development< testing< and a significant amount of their production facilities3 The same
1ee,< an earthqua,e and a volcano has hit the island of Japan that houses the international headquarters of Toyota<
:onda< 'issan< Mitsu"ishi and su#u< 1hich are destroyed< along 1ith their development< testing and significant
amount of production facilities3 $efore this crisis< Kol,s1agen 1as the 1orld/s A
th
largest producer of autosI
)vernight< it has "ecome L53 And Peugeot< Audi< $M(< and other +uropean auto companies are num"er 7< 8<
etc3 .gnore the fact that Daimler o1ns !hrysler< etc03 /ast $ee0, t,e dollar $as $ort, -1 Euros- 2sing
&raphs and 1ords< consider the mar,et for the +uro in terms of dollars< and the dollar in terms of +uros3 Then
sho1 ho1 the 1orld/s auto crisis affects the mar,ets for the +uro and the dollar3 .sho1 the initial relationship< then
the change03 $e sure to la"el all the graphs3
8
Does the dollar appreciate or depreciate6 (hat affect does this have on the 23S3 economy6
Samle (uestion on Comarati2e Ad2anta!e
!onsider the follo1ing production possi"ilities of t1o countriesH
!igars Autos
!u"a 5CC cases 7 cars
2nited States 5CC cases 7CCC cars
(hich country has an a"solute advantage6 +xplain3
+ach country has a comparative advantage3 (hich good should each country speciali#e in3 :o1 could trading
these goods "enefit "oth countries6
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