### Some materials to study (new material)

• Review Midterm 1, questions 1, 5, 8, 10, 15, 17, 18, 19, 20, 21, 24, 27, 28
• Review Midterm 2, questions 2, 4, 6, 7, 8, 10, 12, 13, 22, 25, 29, 30
• Go back through readings & terms for all chapters related to lectures 10, 11 & 12 (we skipped number 9)
• Review CQ10, CQ11 and CQ12 paying close attention to the problems you did poorly on as a group. These numbers are listed below:
• CQ10: #11-15
• CQ11: #3, #10, #12, #15-#18, #22
• CQ12: #1, #3, #4, #5, #9, #14, #18, #19
• Review FW10, FW11, and FW 12 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.
• Understand marginal revenue product and the demand for labor and capital
• Calculating unemployment rates
• Structural, cyclical, frictional, natural
• U-3 v. U-6
• Labor force participation rates
• Understanding Okun’s Law, and what is meant by output gaps and cyclical unemployment
• Production functions and diminishing marginal product of capital & labor
• Also know how to calculate and interpret productivity functions
• Importance of technology v. additions of capital or labor
• Spending Allocation model
• Difference of shares in non-government (sensitive to interest rates) v. government share (not sensitive to interest rates)
• How this model helps us determine “neutral interest rates”
• How things like optimisim, increased/decreased government spending, or increased/decreased taxes will impact interest rates
• How interest rates affect exchange rates
• Aggregate Expenditure model
• Understand mpc and the consumption function (“what is disposable income?”)
• Understand what the fiscal/spending multiplier is, and how to find it
• Know how to sketch the Keynesian Cross diagram
• How do you identify output gaps? Can these persist at equilibrium?
• How could you use government policy (tax or spending) to eliminate any output gaps?
• The Economic Fluctuations model
• How to sketch out the AD line. What are the axes? Why does the line slope downward?
• What is the IA line? Why will it tend to return to the value it should be at in the long-run?
• What is the Fed’s role in pushing the economy back to this long-run inflation rate?
• How does a change in government spending or taxation impact the AD line in the short-run, and what do we expect in the long-run?

### Equations

$\%\Delta=\frac{new-old}{old}\times 100$

$PV=\frac{FV}{(1+i)^n}$ with $i$ in decimal form

$\text{approx time to double}=\frac{70}{g}$

$r=i-\pi$ where $\pi$ is the rate of inflation

$Y=C+I+G+NX$

$S_{public}=T-G-TR$, $S_{private}=Y+TR-T-C$, $S_{national}= S_{public}+S_{private}$

$S_{total}=S_{public}+S_{private}+S_{foreign}$

$S_{foreign}=-NX$

$1= C/Y + I/Y + G/Y + NX/Y$

$\frac{NG}{Y^{*}}=1-\frac{G}{Y^{*}}$

$\frac{Y-Y^{*}}{Y^{*}}=-2(u-u^{*})$ with $u \text{ and } u^{*}$ in decimal form OR

$100 \times \frac{Y-Y^{*}}{Y^{*}}=-2(u-u^{*})$ with $u \text{ and } u^{*}$ in percentage form

$PAE=C+I^p+\bar{G}+\bar{NX}$

$Y=PAE \text{ @ } Y^e$

$\frac{1}{1-mpc}$

$Y=AK^{0.5}L^{0.5}$

$\frac{Y}{L}=A \left(\frac{K}{L}\right)^{0.5}$

$\text{U-3 Unemployment}=100 \times\frac{\text{unemployed}}{\text{unemployed+employed}}$

$\text{Labor Force Participation}=100 \times\frac{\text{unemployed+employed}}{\text{population}}$

$\text{GDP Deflator}=\frac{\text{Nominal GDP}}{\text{Real GDP}} \times 100$

### Old material

• Understand interest rates (real and nominal).
• What is the difference between real, nominal, potential, and actual GDP?
• What growth rates are we usually interested in and how are they measured?
• What are the different types of unemployment (i.e., U-3, U-6, frictional, structural, cyclical, natural, and actual) and how that might relate to measures like the labor force participation rate and the employment to population ratio?
• How are unemployment, inflation, and GDP are related and what role does the government, Fed or FOMC play in managing these relationships?
• What is the difference between a debt and a deficit? What is a stock variable and what is a flow variable?
• Who is the Fed or FOMC? What do they do? When do they do it? Why do they do it?
• How do macroeconomic variables change during recessionary and expansionary periods?
• What is a recessionary or expansionary period?
• The relationship between real and nominal wages or prices and why we do these adjustments?
• What is the difference between production, output, productivity, or GDP?
• What is the difference between an export, an import, a trade deficit, trade surplus?
• What is the difference between a government dollar spent and a dollar of government revenue? What is a budget deficit or budget surplus?
• Stock pricing and returns
• Bond pricing and returns
• 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
• Calculating CPIs
• Adjusting prices/wages to compare “real” values at various points in time (forwards and back)
• Calculate growth of real prices/wages
• Supply and demand, manipulating curves and comparative statics
• Basic understanding of price floors and ceilings
• Understanding of market failure and externalities
• National, foreign, and total savings
• The components of GDP
• Economic v. financial investment