Note for ECON 104 with Professor Pollin at UMass(1)
Note for ECON 104 with Professor Pollin at UMass(1)
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Date Created: 02/06/15
Economics 104 Introduction to Macroeconomics Prof Robert Pollin STUDY GUIDE FOR MIDTERM EXAM 102313 What follows below are the topics that you will need to be familiar with in order to be well prepared for the midterm Just one more reminder The midterm will be held in class next Monday October 28 You will have the full class period to complete the exam In preparing for the exam you should start with the lecture notes and powerpoints then work through the readings Just to be clear you will not be adequately prepared just by going though the lecture materials without haVing kept up with the reading I will hold a reView session for the midterm on Wednesday October 237ie TODAYiat 6 pm in our regular classroom Bartlett 65 The exam will consist of a combination of truefalse questions multiple choice questions and short essay questions requiring about three paragraphs to answer You will have some choice in deciding which questions to answer There will also be some extra credit questions You will also be asked to describe your term paper for the course Intro on Economic Crisis 1 To what extent might we say that the most recent economic crisis was a unique set of circumstances To what extent could we say it is part of a larger pattern 2 What does it mean to securitize a mortgage What if anything does mortgage securitization have to do with the crisis 3 Based on what you have read and heard in class be prepared to comment on the following quote from the 2001 Economic Report of the President the last one issued by the Clinton Administration Given the massive nancial instability of the 1930s narrowing the range of banks activities was arguably important for that day and age But those rules are not needed today 2 What happened to total household wealth both during the financial bubble years and after the bubble burst Try to be as specific as possible Pollin Economics 1 04 Study Guide for Midterm Exam Page 2 The Economy and You 1 What is your assessment of the evidence as to how the economic crisis has affected members of this class Be familiar with speci c relevant pieces of evidence But also be prepared to present some general perspectives based on your reading of the evidence That is in general very bad not so bad after gt7 4 would you say the impact on members of the class was severe all or something else The point will be not your conclusion per se but your reasoning in getting to that conclusion Economics as a Moral Science 1 What does it mean to say that economics is a moral science Can science have any moral values attached to it while still being based on research and not just on unsubstantiated viewpoints 2 It is fair to call the US economy a mixed capitalist economy as opposed to a free market economy Two key areas of market regulation are labor markets and financial markets What are major reasons to either 1 support and 2 oppose regulations of labor and financial markets 3 What is a minimum wage law Is it the same thing as a living wage law 4 Minimum wage laws are often cited as an excellent example of the law of unintended consequences in action What is meant by such a reference Is it an accurate description of how minimum wage laws work National IncomeNational WealthGDP 1 What is the difference between national income and as Adam Smith put it the wealth of nations Be able to work out numerical examples with both national income and national wealth 2 Be familiar with the meaning of the equation for GDP ie GDP C I G XM 3 What are some possible problems with GDP as a measure of national wellbeing broadly and possibly even more narrowly total national product Pollin Economics 1 04 Study Guide for Midterm Exam Page 3 Dividing Up GDP Income Equality 1 What has happened to income inequality in the United States over the past 30 years In answering this question be prepared to consider whether the overall picture changes when we compare different measures of income inequality 2 Capitalist economies are not designed to create equality But there are laws norms and institutions that encourage either greater equality or greater inequality What are examples of such institutions considering both those that promote equality and inequality Poverty 1 What is the official de nition of poverty in the Us context Is this an adequate measure in your View 2 What are some possible ways in which poverty statistics may be less accurate than they were in the 1960s 3 Assuming the poverty statistics are broadly accurate in portraying trends describe the trend in overall poverty over the past 30 years RacialGender Inequality 1 Based on statistical evidence on income unemployment poverty and wealth is it fair to say there are persistent differences in economic status by race 2 Evaluate this statement Businesses operate to generate profits Therefore they would only want to hire the most productive employees regardless of race or gender 3 GDP doesn t measure the extent of product getting generated in the economy that is unpaid How significant is unpaid labor in various countries Pollin Economics 1 04 Study Guide for Midterm Exam Page 4 GDP and the Environment 1 Evaluate this statement You can certainly protect the environment But the only way to do so is to make signi cant sacri ces in job opportunities and GDP growt 2 What does it mean to say that policies for controlling climate change are like buying an insurance policy GDP Growth 1 Be familiar with the simple growth accounting formula Economic growth E working age population growth total working time for working age population productivity growth 1 Be familiar with the ve factors that Colander lists as key determinants of economic growth What is the difference between the determinants of growth and the accounting identity above that identi es the factors contributing growth 2 What is the law of 72 Why is it relevant for understanding the prospects for signi cant improvements in average living standards in a country over the course of a generation ie around 20 years 3 Consider two hypothetical countries one with low taxes and strong democratic institutions and the other with relatively high taxes and very weak if any democratic institutions Which country would we expect to be more likely to grow faster 4 Consider two hypothetical countries one in which the richest5 percent of the population receives 40 percent of the country s overall income and the other in which the richest 5 percent receives 20 percent of overall income Based on the evidence available which country is likely to have experienced more rapid economic growth over the past 20 years Be able to refer to evidence in providing your answer 4 The late Professor Vernon Ruttan in the title of his last book before his death asks the question Is war necessary for economic growth His answer was Yes What speci cally did he mean by this Pollin Economics 1 04 Study Guide for Midterm Exam Page 5 Unemployment l The US Labor Department provides statistics on a monthly basis of what it terms labor underutilization Be aware of the differences in their alternative de nitions of labor underutilization and unemployment The most important difference is between U3 and U6 Be clear on the differences there especially 2 The distinctions in the Labor Department statistics are different than the broader categorical differences between frictional structural and cyclical unemployment Be sure to understand the differences between these categories 3 Karl Marx argued that mass unemploymentithe reserve army of labor iwas necessary to the ongoing operations of a capitalist economy What was the basis for Marx s argument 4 John Maynard Keynes in contrast with Marx held that full employment could be attained under capitalism but only if the government intervened to stabilize the inherent instability of private investment According to Keynes how could the government serve this function as source of employment creation 5 Michal Kalecki held that both Marx and Keynes provided important insights on the problem of mass unemployment Why did Kalecki think that fascism could help solve the contradictions between Marx and Keynes on unemployment 6 Milton Friedman is the originator of the term natural rate of unemployment But Friedman says that the natural rate isn t really about nature but rather about market characteristics that re manmade and policymade These include according to Friedman minimum wage laws and the strength of labor unions Be clear on how these policies and institutions could in uence the tradeoff between unemployment and in ation Extra Credit on Alan Blinder Lecture Professor Blinder s public lecture focused on the distinction between short and longrun determinants of economic growth Be clear on what he considered to be the main factors driving economic growth in both the short and longruns What did he mean when he argued that government scal de cits were generally supportive of growth in the short run but detrimental to growth in the long run
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