Note for ECON 104 with Professor Pollin at UMass(3)
Note for ECON 104 with Professor Pollin at UMass(3)
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Date Created: 02/06/15
Final Exam Study Guide Introduction to Macroeconomics Econ 104acdefh Spring 2011 Final Exam 0 Thursday May 5th 1030 am Boyden Gymnasium OR 0 Wednesday May 11th 1030 am Totman Gymnasium You can take the test either time Review Sessions for Final 0 Tuesday May 3 600 pm to 730 pm Thompson 104 with Cruz and Klara 0 Monday May 9 600 pm to 730 pm Thompson 104 with Mark Silverman and Mark Stelzner 0 Val will have office hours on Weds May 5th from 1000 am to 230 pm and on Tuesday May 10th from 1000 am to noon and 130400pm I will leave 30 minutes early ifno one is there Iwill be available for appointments on other days I will not be available on May 9th at all The exam will be heavily weighted to cover the material since the midterm but the big themes and concepts from the rst half of the course will also be on the exam Note that material from many of the lectures especially social security comes from sources other than the textbook as listed on the syllabus Ihave also asked you to keep up with the current state of the economy and analysis and asked you to read the columns of Nobel Laureate Paul Krugrnan in the New York Times I would pay extra attention to the material covered in the notes and on the worksheets 510 and on this review sheet You should also know the study questions handed out by TA s on inequality and wage stagnation Be able to brie y de ne terms answer short answers comparecontrast different topics and answer multiple choice questions You should also be able to analyze and use any covered graphs There will be problems on the exam so make sure you can do problems such as those on the worksheets The exam will include a lot of choice There will be less multiple choice than on the midterm There will be a one page essay question New Terms Deregulation De ation Multinational Quota TARP Demand PullIn ation CompaniesMNC s Tariff Monetarism CostPush In ation Protectionism Exchange Rate Social Security Stabilization Policy Free Trade Supply of Dollars Aggregate Demand Newly Industrialized Absolute Advantage Demand for Dollars Aggregate Supply countriesNIC s Comparative Advantage The value of the Dollar SupplySide Policy Trade De cit GATT Depreciation Productivity Balance of Trade NAFTA Appreciation Stagflation WTO Weak and Strong Dollar Old Terms Laissez Faire In ation Balance of Fiscal Policy Federal Funds Rate Classical Consumer Price Index Trade Keynesianism Monetary Policy GDP Marginal Propensity to Investment Federal Reserve Bank Liquidity Trap Growth Consume Banks Money Paradox of Thrift Consumption Government Expenditures Imports Reserve Requirement Investment Aggregate Expenditures Exports Open Market Operations Unemployment Real vs Nominal values Income Discount Rate Questions 1 What is economics What is macroeconomics What are the main goals of macroeconomics What is the relationship between macroeconomics and the Great Depression How do you measure economic growth How big is the US economy today What is the difference between real and nominal GDP Why is this important How do you calculate unemployment in the macroeconomy What is hidden unemployment What is underemployment What is the current unemployment situation 7 What is In ation What is the Consumer Price Index How is it used What is the current situation 9959 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 According to Keynes when a business decides to invest the impact on the macroeconomy is much greater than that business initial investment What is that called and how does it work How is money created What is the money multiplier What are excess and required reserves How does the Fed affect the Money Supply three ways What do they mainly do historically to change the money supply How is the Fed Structured How are decisions made If the Fed has an economic bias what is it Brie y how does expansionary monetary policy affect the economy Explain why Keynes believed that Fiscal Policy was more powerfuleffective than Monetary Policy Describe how Keynesian Monetary Policy Differs from Monetarist Monetary Policy What is the Aggregate Demand Curve what equilibriums are behind it What causes the AD curve to shift and how What could cause shifts in AS Which curve AD or AS is affected by Keynesian Monetary and Fiscal Policy What are the arguments behind SupplySide Policy What incentives are important What do critics of Supplyside policy say What is the relationship between SupplySide Policy and the AD and AS curves How are the Bush Tax cuts examples of SupplySide policy What are the two main theories of in ationde ation What do we have in today s economy In ation and unemployment which is more important to fight Why How does the current social security system work Be specific giving many details What is the role of social security What is social about it How does social security get revenue Pay out benefits Is it in surplus or deficit What is the Social Security Trust Fund Why is this important for your and my future Do social security benefits increase with the economy How are they indexed How is this an issue What is the crisis of social security Is there a crisis What time horizon is and should be used to determine the existence of a crisis What are the projections for social security how are they arrived at What would the main effects of social security privatization be Who argues for against privatization why How has the globalization and trade changed in your lifetime What role does technology play in globalization Multinational Corporations and international production Who are the biggest trading partners of the US Imports versus Exports What is the trade deficit How is it changing Why is it an item of concern What are concerns about energy consumption and the developing world such as China Where does most energy consumption take place both per capita and in total How does energy factor into international trade What is the theory of comparative advantage Discuss with detail Be able to discuss protectionism and reasons for and against it Be able to discuss free trade and the positive and negative aspects of it Be able to discuss the basics of major free trade agreements such as NAFTA and GATT Be able to analyze the demand and supply of the dollar relative to other currencies including being able to draw and manipulate graphs see sample question Be able to discuss the connection between the value of the dollar imports exports Aggregate Demand and Equilibrium Income in the economy What can cause the dollar to appreciate or depreciate What affect does this have on the economy What would happen to the value of the dollar if the Chinese sold their dollars which they have held from the huge trade deficit and wanted yuan Chinese currency instead You should be able to draw graphs for this question as well as discuss see sample question Be able to discuss the Wall Street 700 billion bailout in terms of the Keynesian Model Be able to discuss bank deregulation and the prospects and proposals for new bank regulation Be able to discuss the Obama stimulus package of 2009 with details and in terms of the Keynesian Model What is its goal and why is it happening now 48 In the real world sometimes scal policy takes time to have an impact in the economy Give an example of a timing problem with scal policy 49 Where does the federal government get its revenue Where does it spend its money 50 What happens if government revenues are less than its expenditures What are the problems with the government having debt Any big picture type of question from the whole semester is fair game as an essay question for the final Here are some examples of these themes 0 Analyze the nancial market 700 billion dollar bailout TARP in terms of effectiveness using one or more of the following policies Keynesian scal policy the Keynesian view of Investment Supply Side Policy 0 Be able to discuss the Stimulus of 2009 in terms of its effectiveness using one or more of these same policies 0 What is a Recession and what does it mean What are different policy options in general What policy options do we have for the current recession What are the strengths and weaknesses of these policy options 0 Should the government do more or less in the economy Currently Generally Support with arguments about theory and policy 0 Free market Capitalism or Regulated Keynesianstyle capitalism which makes sense to you support 0 We had to make decisions about the role of government in capitalism during the Great Depression We are having these same debates today during this recession Discuss Sample Question on Comparative Advantage Consider the following production possibilities of two countries Cigars Autos Cuba 100 cases 2 cars United States 100 cases 2000 cars Which country has an absolute advantage Explain Each country has a comparative advantage Which good should each country specialize in How could trading these goods bene t both countries Sample Model Question Don t forget to know the Keynesian Model Consider questions from the worksheets Sample Question on International Finance There has been a disaster in Michigan a tornado has destroyed the international headquarters of GM Ford and Chrysler as well as their development testing and a signi cant amount of their production facilities The same week an earthquake and a volcano has hit the island of Japan that houses the international headquarters of Toyota Honda Nissan Mitsubishi and Isuzu which are destroyed along with their development testing and signi cant amount of production facilities Before this crisis Volkswagen was the world s 8Lh largest producer of autos Overnight it has become 1 And Peugeot Audi BMW and other European auto companies are number 2 3 etc Ignore the fact that Daimler owns Chrysler etc Last week the dollar was worth 5 Euros Using Graphs and words consider the market for the Euro in terms of dollars and the dollar in terms of Euros Then show how the world s auto crisis affects the markets for the Euro and the dollar show the initial relationship then the change Be sure to label all the graphs Does the dollar appreciate or depreciate What affect does this have on the US economy
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