Macro 1010 Exam 2 StudyGuide
Macro 1010 Exam 2 StudyGuide Econ 1010
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This 8 page Study Guide was uploaded by Caroline meacham on Friday October 2, 2015. The Study Guide belongs to Econ 1010 at University of Tennessee - Chattanooga taught by John Barnes in Summer 2015. Since its upload, it has received 275 views. For similar materials see Principles of Economics: Macroeconomics in Economcs at University of Tennessee - Chattanooga.
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Date Created: 10/02/15
Macroeconomics Exam 2 Study guide As a disclaimer this is not meant to provide you with the exact material terms or ideas that will be on the test Your own notes and the textbook should also be reviewed Terms to know business cycle scalpoHcy federal funds rate monetary policy reserve ratio discount rate GDP unemployment rate participation rate recession recovery bubble inflation deflation disinflation hyperinflation Okun s Law PGDP wage cash non cash Average Propensity to Save Consume Marginal Propensity to Save Consume net exports Income Approach Expenditure Approach CPI GDP Deflator Say s Law dis non discretionary recessionary and GDP gap inflationary gap economic rounds Who are the major holders of US public debt China amp Japan What are 3 major economic goals economic growth full employment price stability What is full employment operating at the natural rate of unemployment accounting for frictional structural and cyclical unemployment What is the order the markets are hit in a recession durables nondurables services What the impact order of the household during a recession employment and race What is the business cycle characterized by the duration intensity percent change in GDP What are the areas of pricing general consumer interest rates stocks and bonds real estate What are the 3 definitions of GDP PxQ WRP CGlgXn How is the the income approach defined W laborwork income l interest income R rental income P profit income amount after payments made How is the expenditure approach defined 0 personal consumption G government purchasesspending lg Gross Business Investment Xn net exports exportsimports What does GDP exclude secondhand sales allocative efficiency transfer payments black marketsunderground markets wholesale sales environment impact society s condition financial transactions buysell of stocks and bonds quality nonmarket activities What are the gross investments of a business inventory new construction research amp development creation of art filmads machinery What are the drivers of growth demand side sufficient demand supply side advances in technology change in productivity due to human capital improvement What are the characteristics of demand pull inflation fixed supply curve prices increase quantity increases employment increases demand curve shifts right What are the characteristics of cost push inflation decrease in employment quantity demanded decreases prices increase supply curve shifts left Whats the CPI base year 198284 What is Q and how often is it reset The most recent consumer basket that is reset every 2 years Who benefits from inflationdisinflation debtors people living with cost of living adjustments VVholoses creditors people with fixed income What is the slope of the consumption function marginal propensity to consume positive direct relationship to GDP What is the slope of the savings function marginal propensity to save positive direct relationship to GDP What are the non income determinants that shift consumption wealth effect borrowing interest rates low rates encourage debt expectations What are the determinants of the net exports tariffs the exchange rate and foreign income What are the determinants of the impact a business s gross investments have changesin taxsubsidy technology expectations inventory existing capital base Average Propensity to Consume Consumption lncome Average Propensity to Save Savings lncome Marginal Propensity to Consume change in Consumption change in GDP Marginal Propensity to Save change in Savings change in GDP Graphing Q postive slope consumption increase with GDP direct relationship Consumption C GDP income G at point GT balanced T budget belowdeficit Spending tax G beyond surplus slope 0 because it s dependent on Congress s GDP decision not GDP expons net Xn expons imports GDP 1 0 2 P interest rates amp expected return GDP exports are injections Xn exportsimports slope 0 lg and GDP aren t related slope 0 most volatile inverse relationship between inters rate and expected rate of return Q investment dollars Is the expected rate of return greater than or equal to the interest rate Equal business is indifferent with investment Yes businesses invest No they don t 39 39 quotVUI39 Calculation of Simple GDP multiplier 11MPC ex 1175 125 4 AE Model a Wu 035m95 do 1 m393 quot PM bubble MP0 Veal Gov 7 x39 a w i s r 391 H H gt 7 IL39 7 I V g k V arrquot 3 39 39 m3 1 5 C 2quot I Vk i I I s I y 7 Leaquot J 095 5 W a 60rd 0F crowds H13 94 l f 39 l 7 quot 7 I IQV39 LRAS Long Run Aggregate Supply Curve vertical supply function W Smith in the long run the market will self correct AS AS 39 gt AD AS Prices are flexible includes wages and interest pr39ce follows Adam Smith way of thinking AD AD real GDP AD Short Run Supply Curve Horizontal Supply curve Prices are sticky Follow Keynes way of thinking When is the multiplier mostsomewhatleast effective Recessionary period recovery when full employment is reached What keeps wages from decreasing union standards minimum wage contracts Why do businesses not decrease their prices menu costs and it would decrease overall profits
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