The Final Exam will be held in your regular classroom

First, look at midterm 1 and midterm 2 study guides. All that material is fair game for the exam.

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?


$ \%\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 $

Help on Lectures 9-12

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

Find previous exam review under Blog or use the tag below for 200