Define: Economics, Macroeconomics
What are the factors of production? What is the payment for each?
How is opportunity cost calculated?
What is a production possibilities curve? What does it measure?
What is comparative advantage? How is it measured
What is demand and the law of demand?
What shifts demand and what causes changes in quantities demanded?
What is supply and the law of supply?
What shifts supply and what causes changes in quantities supplied?
How is market equilibrium measured, and what changes it?
What are shortages and surplus?
What are price ceilings and floors? How do they affect a market?
Know: Circular flow model
Define and measure gross domestic product
Inclusions and exclusions
Final and Intermediate goods
Private Domestic investment
What is the expenditure approach to GDP?
What is the income approach to GDP?
What are nominal and real GDP?
What are price indexes and how do you use them?
Consumer Price Index
What does it mean to be unemployed and what are the types of unemployment?
What is the full-employment rate of unemployment?
Describe the four stages of a business cycle.
What is the MPS? How is it calculated?
What is the MPC? How is it calculated?
What is the spending multiplier? How is it calculated?
What is the tax multiplier? How is it calculated?
What is the balanced budget multiplier? When is it used?
How do firms make economic investment decisions?
Graph an investment demand curve.
Why is investment so unstable?
Aggregate Demand and Aggregate Supply
What is aggregate demand?
What are the three reasons why an AD curve is downward sloping? Explain each one.
What are the four determinants of aggregate demand?
What is aggregate supply?
What are the determinants of SRAS?
Explain the difference between LRAS and SRAS. Graph a LRAS curve and an SRAS curve.
A shift to the right of the LRAS curve is analogous to a rightward shift of what other graph?
Graph an AS-AD model in full employment equilibrium.
Graph an AS-AD model with a recessionary gap.
Graph and AS-AD model with an inflationary gap.
Know the impact of changes in SRAS and AD and their impact on real GDP, Price Level, unemployment rate, and inflation rate.
What is Fiscal Policy?
What is expansionary fiscal policy and how is it done? Graph it.
What is contractionary fiscal policy and how is it done? Graph it.
What would these policies do to the foreign exchange market?
When is a government budget surplus or deficit created?
Explain crowding-out and crowding-in. Graph it using an AS-AD model and an investment demand curve.
What are the three functions of money? Explain each one.
Who issues paper money in the United States?
How is the money supply backed?
How is the total demand for money calculated?
Graph a decrease in the money supply. What are its effects?
Graph an increase in the money supply. What are its effects?
Why is the Fed considered both a public and a private institution?
What are the functions of the Fed?
What is the balance sheet of a commercial bank?
What are assets and liabilities?
How do banks create and destroy money?
What is the required reserve ratio?
What happens to a bank’s lending ability when it borrows money from the Fed?
What are required reserves?
What are excess reserves?
How does a bank know how much money it can loan out?
What is the demand expansion multiplier? Be able to use it.
How is the maximum checkable deposit increase calculated?
What are open market operations?
What is the required reserve ratio?
What is the discount rate?
What is the federal funds rate? How does the Fed change it?
What is expansionary monetary policy? When is it used?
Graph the effects of expansionary monetary policy on the AD-AS Model, the Money Market, Forex, and Investment Demand
What three monetary policy actions can the Fed undertake to carry out an Expansionary Monetary Policy?
What is contractionary monetary policy? When is it used?
Graph the effects of contractionary monetary policy on the AD-AS Model, the Money Market, Forex, and Investment Demand.
What three monetary policy actions can the Fed undertake to carry out Contractionary Monetary Policy?
What is the monetary equation of exchange? Quantity theory of money?
Graph a loanable funds market in equilibrium.
What impacts the supply and demand for loanable funds?
What is the result of each type of monetary and fiscal policy on AS/AD, investment demand, the money market? etc.
Explain supply-side economics.
What relationship does the Phillips Curve illustrate? Be able to graph a Phillips Curve in the short run.
What is the shape of the Long-Run Phillips Curve? Why is this the case?
How does a shift in aggregate demand impact the Phillips Curve?
How does a shift in aggregate supply impact the Phillips Curve? Why?
What does long-run economic growth look like in the long-run on both the AS-AD model and the PPC?
What are some factors that are necessary for economic growth?
What factors will limit economic growth?
What is the difference between a debit and a credit in the balance of payments?
Describe the three types of balance of payments accounts.
Be able to classify different transactions into their balance of payment account.
What is the difference between active and passive reserves?
How are exchange rates determined?
What does it mean if a currency appreciates? What does it mean if a currency depreciates?
What are the determinants of exchange rates?
What is the impact of expansionary/easy and contractionary/tight monetary (raising/lower interest rates) policy on exchange rates?
What is the impact of expansionary and contractionary fiscal (raising/lowering taxes and government spending) policy on exchange rates?