Topics to study for Economics 2307, Exam I

Chapters 4, 5, 7, 8

Chapter 4: Economic Decision Makers

1. What is meant by utility?

2. What influences the role of households as resource suppliers?

3. What influences the role of households as demanders of goods and services?

4. What motivates business spending?

5. What has influenced the evolution of production from the home to business firms?

6. Why does household production still exist?

7. What are the advantages and disadvantages of a sole proprietorship, partnership, and corporation?

8. What are the roles of government?

9. What is a public good versus a private good; what is a quasi-public good?

10. What determines tax incidence? Why is it different based upon benefits received versus ability to pay?

11. What is the primary motivation for international trade?

12. What is an exchange rate? How does it affect the price of foreign goods and services?

13. How do tariffs and quotas affect domestic producers and consumers?

Chapter 5: Introduction to Macroeconomics

1. Why are different countries treated as a separate entity in macroeconomics?

2. Compare the economy with the human body with respect to the roles of money, stocks versus flows, the role of expectations, and conflicting diagnoses by economist.

3. How do macroeconomists test new theories?

4. What is the difference between economic fluctuations and long-term growth?

5. What is the difference between a recession and a depression?

6. What is the AD curve and why is it downward sloping to the right?

7. What is the AS curve and why is its slope subject to much debate among economists?

8. What are some of the causes cited for the Great Depression?

9. What was the role of AD policy during the Age of Keynes?

10. What was the role of AS influences during the Great Stagflation?

11. What is the role of productivity in explaining the recent reduction in the “misery index?”

Chapter 7:

1. What are the two ways of measuring GDP?

2. What are the components of aggregate spending making up GDP?

3. What are the three primary categories of consumer spending? Which one is most affected by the business cycle?

4. What are the three primary categories of investment spending?

5. Why are transfer payments not included in government spending?

6. Why do exports increase domestic GDP and imports reduce domestic GDP?

7. What are the three “leakages” from the income stream?

8. What are the three “injections” into the income stream?

9. How do financial markets link savers and borrowers?

10. What are the limits of GDP as a measure of aggregate economic welfare?

11. What is a price index? Why does its value depend upon the base year?

12. What is meant by the “fixed market basket” used to calculate the CPI? What does this do to its accuracy in measuring changes in the cost of living?

13. How is the GDP price index (often called the GDP deflator) used to determine real GDP?

14. What are the five components of national income? Which of these is the largest component?

Chapter 8:

1. What are the components of the population omitted when determining the labor force?

2. What determines the labor force participation rate?

3. How is the unemployment rate measured?

4. What is meant by “disguised unemployment?”

5. Why is the duration of unemployment likely to increase with the level of unemployment?

6. What are the four types of unemployment?

7. What are the components of the full-employment unemployment rate?

8. How do unemployment benefits affect incentives to work versus efficiency of new jobs?

9. What are the major problems in using the official unemployment rate to measure the true rate of unemployment?

10. What is the difference between inflation, hyperinflation, disinflation, and deflation?

11. What is the difference between demand pull inflation and cost push inflation?

12. Why does unanticipated inflation cause more problems for the economy than anticipated inflation in the economy? Explain the effects in the labor market on real wages and the loanable funds market on real interest rates.

13. How does variable inflation affect transaction cost?

14. Why does inflation obscure relative price changes?

15. How does different inflation rates among countries affect international transactions costs?

16. Why is inflation a form of taxation that affects everyone? Who suffers the most from higher rates of inflation?