### Midterm 2 will be held in our regular classroom at the regular time

• Bring a pencil
• Bring a calculator
• You are not allowed outside paper

### Some materials to study

• Go back through readings & terms for all chapters related to lectures 4, 5, 6, 7 and 8, as well as what was covered in lecture 9
• Review CQ4, CQ5, CQ6, CQ7, and CQ8 paying close attention to the problems you did poorly on as a group. These numbers are listed below:
• CQ4: #1, #8, #9, #13, & #14
• CQ5: #8, #9, #11, #16, #19, #22, #25, #26, #32
• Please note the answer to the second part of #32 should be 40%/5 years = 8%. The correct answer is not there.
• CQ6: #9, #11, #12, #15, #16
• CQ7: #6, #7, #11, #15, #16
• CQ8: #4, #9, #14, #17
• Review FW4, FW5, FW6, FW7, FW8 and FW9 for more help
• Get a good grasp on the big questions. The exam is not limited to this, but these are the major point value questions.
• Firm structure & information issues (principal-agent, asymmetric information)
• Moral hazard & adverse selection
• Stock pricing and returns,
• $\frac{Div_1}{i-g}$ or
• $P=\frac{\text{Future Price}+\text{Dividends}}{(1+i)}$
• $\text{Div Yield}=100\times \frac{\text{Div}}{\text{Price}}$
• Bond pricing and returns
• $\frac{C_1}{(1+i)^1}+\frac{C_2}{(1+i)^2}+\ldots+\frac{C_n}{(1+i)^n}+\frac{F}{(1+i)^n}$
• Relationship between interest rates and bond/stock prices
• GDP calculation (nominal and real)
• Growth rates of real GDP (finding annual averages)
• Calculating inflation with GDP deflators and CPIs, $\text{GDP Deflator}=\frac{NGDP}{RGDP}\times 100$
• Calculating CPIs
• Adjusting prices/wages to compare “real” values at various points in time (forwards and back) $$\text{Nominal wage}_\text{YR1} \times \frac{CPI_\text{YR2}}{CPI_\text{YR1}}=\text{Real wage}_\text{YR2}$$
• Anticipated v. Unanticipated inflation
• Calculate growth of real prices/wages
• Supply and demand, manipulating curves and comparative statics
• Surplus v. shortage
• Basic understanding of price floors and ceilings
• Understanding of market failure and externalities
• Total savings, $(S_\text{total}=Y-C-G-NX)$
• OR $(S_\text{total}=S_\text{public}+S_\text{private}+S_\text{foreign}=I)$
• Components of savings
• National savings, $(S_\text{national}=Y-C-G)$
• Foreign savings, $(S_\text{foreign}=-NX)$
• Public savings, $(S_\text{public}=T-G-TR)$
• Private savings, $(S_\text{private}=Y+TR-T-C)$
• The components of GDP, $Y=C+I+G+NX$
• Economic v. financial investment
• Fisher equation, $r=i-\pi$