Economics 2307

Final Exam Topics for Study

 

The final will include 20 questions from the department (including 5 that I have provided) and 35 additional questions only for our class.  The exam is scheduled for Saturday, May 8, at 11:30 a.m.

 

DEPARTMENTAL  PORTION OF THE FINAL EXAM:  20 MULTIPLE CHOICE QUESTIONS THAT WILL CONCENTRATE IN FOUR CORE AREAS AS FOLLOWS:  Specific chapters emphasized are 7, 8, 9, 10, 12, 14, 15, and 18

 

  1. Measuring economic aggregates—questions on topics such as the circular flow, GDP, aggregate income, unemployment, inflation, and equilibrium/disequilibrium.
  2. Fiscal policy—questions on topics such as discretionary fiscal policy, the simple spending multiplier and simple tax multiplier, budget deficits/surpluses, and closing expansionary and contractionary gaps with fiscal policy.
  3. Monetary policy—questions on topics such as the Fed, the money supply, money creation, and the simple money multipliers, and closing expansionary and contractionary gaps with monetary policy.
  4. The open economy—questions on topics such as exchange rates, the trade balance, the balance of payments, and net foreign investment.

 

REVIEW FOR CLASS PORTION OF THE FINAL EXAM:  35 MULTIPLE CHOICE QUESTIONS BASED ON THE FOLLOWING TOPICS:

 

  1. Reasons for government intervention in the economy
  2. Meaning of recession, depression, and stagflation
  3. Definition of GDP
  4. John Maynard Keynes response to Great Depression by increasing Aggregate Demand (as opposed to Classical School)
  5. The definition and calculation of the population, labor force, labor force participation rate, and unemployment rate
  6. The components of the unemployment rate and the natural rate of unemployment
  7. Demand pull versus cost push inflation (show on AD – AS diagram)
  8. Real versus nominal GDP
  9.  Components of the CPI compared versus the GDP price index
  10.  Expenditure components of GDP
  11.  Items omitted in measurement of GDP
  12.  Meaning and calculation of MPC
  13.  Effect of interest rate and profit expectations on planned investment spending
  14.  Components of leakages from and injections into the circular flow of income
  15.  The determinants of equilibrium income based upon (a) actual versus desired  spending and (b) injections equal leakages
  16.  Calculation of the simple income multiplier based on the MPS (or MPC)
  17.  How more (or less) autonomous spending has a multiplier effect on income and also induces more (or less) leakage until a new equilibrium income is reached
  18.  How an economy can only produce more than its potential income in the short run
  19.  How to recognize from a graph an expansionary gap and an contractionary gap
  20.  How an expansionary gap and a contractionary gap are removed by the economy’s natural mechanisms
  21.  How an expansionary gap and a contractionary gap are removed by fiscal policy
  22.  The role of discretionary fiscal policy versus the automatic stabilizers
  23.  The opportunity cost of money
  24.  Effect of Fed purchase or sale of securities on the money supply and interest rates
  25.  How an expansionary gap and a contractionary gap are removed by indirect monetary policy
  26.  The meaning of “crowding out” by fiscal policy
  27.  Why expansionary fiscal policy has a greater impact if financed by new money (selling securities to the Fed)
  28.  What monetary tools does the Fed have and which of these is it most likely to use
  29.  Why the Fed can target the federal funds rate or the money supply, but not both
  30.  The difference between active versus passive public policy to eliminate a contractionary gap or expansionary gap
  31.  Why the short run AS curve depends on differences between the actual price level and the expected price level
  32.  The role of credibility in monetary policy
  33.  Why the use of a monetary rule depends upon stability and predictability of the velocity of money in the equation of exchange
  34.  The recognition lag, implementation lag, and effectiveness lag in stabilization policy
  35.  Why federal budget deficits increase during recession and decrease during expansion.
  36.  The disadvantage of an annually balanced federal budget versus a budget that is balanced over the business cycle
  37.  The trade off between profitability and liquidity of commercial banks
  38.  The value of the simple money and the effect of an increase in cash in circulation of its value
  39.  What assets (liabilities of intermediaries) are included in M1 and  M2
  40.  The forms of legal reserves and the determination of excess reserves based on the reserve requirement
  41.  Why a bank can only lend out its excess reserves while the banking system as a whole can lend out a multiple of excess reserves, thereby creating money
  42.  Why do people demand money
  43.  How does an increase in the money supply for a given demand for money effect interest rates
  44.  Why can a change in interest rates affect aggregate demand according to the indirect effect.
  45.  Why do monetarist recommend a money supply rule to stabilize the economy
  46. Why the effect of stabilization policy depend upon what the public expects   the government or Federal Reserve to do
  47.  Conditions that favor an active approach to policy
  48.  Conditions that favor a passive approach to policy
  49.  Definition of the international balance of payments
  50.  The components of the current account and capital account of the balance of payments
  51.  Effect of exchange rate appreciation or depreciation on U.S. exports and imports
  52.  Why with flexible exchange rates the sum of the current account deficit or surplus plus the capital account deficit or surplus must equal zero
  53.  Why international reserves must be used to support a fixed exchange rate when there is a current account plus capital account deficit or surplus
  54.  Why the current exchange rate system is called managed float