This midterm will be held partially online using Respondus LockDown Browser and Respondus Monitor, and also have a take-home component

• Online - you are allowed a pencil and sheet of paper
• A calculator will be embedded
• You should include this in your “environment check” at the start of the quiz recording
• The take home exam will require you to scan and upload a single PDF. Apps are listed here - Scanning Apps

Some materials to study

• Go back through readings & terms for all chapters related to modules and video lectures 1-7 (lecture 0 is not specifically on exam)
• Review CQ1, CQ2, CQ3, CQ4, CQ5, CQ6, CQ7, paying close attention to the problems listed below:
  • CQ1: #5, 13
  • CQ2: #8, 24, 27, 28, 29, 30, 31, 32, 33, 34
  • CQ3: #5, 10, 11, 15, 16, 17
  • CQ4: #9, #13, & #14, and while you did OK on these other questions, please review (#1, #4, #5, #6, #7, #8, #11)
  • CQ5: #5, #8, #9, #11, #15, #16, #19, #22, #25, #26, #28, #29, #30, #31, #32
  • CQ6: #6, #8, #9, #11, #12, #15, #16
  • CQ7: #6, #7, #11, #12, #15, #16
  • Review FW0-7 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.
  • Opportunity cost, comparative and absolute advantage
  • Cost benefit & decisionmaking
  • Factors of production
  • Production function & difference between total product, marginal product, and average product $Y=AK^{0.5}L^{0.5}$
  • Efficiency v. Equity
  • Positive v. Normative
  • GDP (nominal, real, potential, and per capita measures)
  • Growth v. cycle
  • Rate of change equation: $\%\Delta=\frac{New-Old}{Old}\times 100$
  • Compound growth equation: $PV=\frac{FV}{(1+i)^n}$
  • Rule of 70
  • The economic takeoff-role of technology & institutions
  • Inequality within & between countries over time
  • Phases of business cycle
  • Fiscal v. Monetary policy
  • Labor market statistics: unemployment rate (U-3 or official): $\frac{\text{unemployed}}{\text{unemployed+employed}}$
  • Labor market statistics: unemployment rate (U-6): $\frac{\text{unemployed+involuntary part time+discouraged & marginally attached}}{\text{unemployed+employed+discouraged & marginally attached}}$
  • Labor market statistics: labor force participation rate: $\frac{\text{unemployed+employed}}{\text{working-age population}}$
  • Labor market statistics: employment to population ratio: $\frac{\text{employed}}{\text{working-age population}}$
  • Types of unemployment: frictional, structural, & cyclical
  • Natural rate of unemployment
  • Okun’s Law: $\frac{Y-Y^*}{Y^*}=-2(u-u^*)$
  • Price level, inflation, deflation, disinflation, accelerating inflation (and how to calculate given data)
  • Budget deficit/surplus v. debt
  • Trade deficit/surplus/balanced
  • Fisher equation: $r=i-\pi$
  • Money’s functions
  • Assets & wealth v. income, net income, & savings: which are stocks & flows?
  • Monetary aggregates: $\text{M0}=\text{Reserves}+\text{Currency & coins in circulation}$
  • Monetary aggregates: $\text{M1}=\text{Currency & coins in circulation}+\text{Deposits}+\text{Travelers Checks}$
  • Monetary aggregates: $\text{M2}=\text{M1}+\text{Savings (MMDA)}+\text{MMMF}+\text{Small-denominated time deposits (CDs)}$
  • Balance sheets: $\text{assets}=\text{liabilities}+\text{net worth}$
  • Importance of capital requirements & reserve requirements
  • Leverage ratio
  • Fed & its structure (who is chair?) and the FOMC structure
  • Central bank tools, targets, & goals
  • Review and practice problems calculating unemployment rates, inflation rates, interest rates and GDP growth rates
  • New Chapter for banking please read!!!
    • Firm structure & information issues (principal-agent, asymmetric information)
  • Taxation - progressive, regressive, proportional (flat) and how they relate to effective average tax rate
    • Effective average tax rate = $\frac{\text{total tax}}{\text{total income}}\times 100$
  • Moral hazard & adverse selection
  • Gini coefficients & Lorenz curves - can you draw and solve???
  • 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

HELP on Compound Growth Equations (i.e., the Present Value Formula) and Gini Coefficients

• Excel Doc: Single investment
• Excel Doc: Multiple investments
• Google Sheets: Gini Coefficient and Excel version
• Camtasia: Gini Calculation or if that doesn’t work, try this link. There is no link embedded in the second link here, but the file you need is from the previous bullet point.

HELP on Capital & Labor Markets and Unemployment

• ShowMe: Working with labor force statistics equations.
• Sheets: Creating and solving labor force statistics equations
• Camtasia: How do you work with Okun’s Law?

HELP on Banks and Lending

• Camtasia: Deposits, withdrawals, and capital Note: see this image for an important correction at 11 minute mark
• ShowMe: Multiple Deposit Creation.
• Educreations: Long Run and Short Run Balance Sheets
• ShowMe: Capital Constrained Banking.
• PDF Doc: Balance Sheet Practice Sheet

HELP on Bonds & Present Value

• $PV=\frac{FV}{(1+i)^n}$
• $\text{Price}=\frac{\text{Div}_n}{i-g}$
• $\text{Div Yield}=100\times \frac{\text{Div}}{\text{Price}}$
• Excel Spreadsheet: Present Value Worksheet: Microsoft Excel.
• Google Doc: Present Value Worksheet: Google Doc, (Login to Google to “Save a copy” or Download to Excel)
• Educreations: Bond Pricing and Returns. (Must be logged in as a JMU student)
• Camtasia: Bond Pricing and Returns

HELP on GDP, Savings & Inflation (also for Unit 6)

• Educreations: Real GDP, Nominal GDP, and Inflation (CPI).
• Google Docs: Real GDP, Nominal GDP, Inflation (CPI), Unemployment, Indexing, and Adjustment. (Login to Google to “Save a copy” or Download to Excel)
• Educreations: Inflation indexing.
• Table of data from class
• Nominal v. Real practice from class
• The link for Canvas questions (associated slides) (link for answers)