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
  • Exam is just on units 4-7

Some materials to study

  • Go back through readings & terms for all chapters related to lectures 4, 5, 6, and 7
  • Review CQ4, CQ5, CQ6, and CQ7 paying close attention to the problems you did poorly on as a group. These numbers are listed below:
    • CQ4: #8, 11, 13, 14 and closely review #4, 5, 6, 7
    • CQ5: #8, #9, #11, #16, #19, #22, #25, #26, #32
    • CQ6: #9, #11, #12, #15, #16
    • CQ7: #6, #7, #11, #15, #16
  • Review FW4, FW5, FW6, and FW7 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.
    • Fisher Equation: $r=i-\pi$
    • Rate of change equation $\frac{\text{New}-\text{Old}}{\text{Old}} \times 100 = \frac{\text{New}}{\text{Old}}-1 \times 100 = \%\Delta$
    • Stock pricing and returns,
      • $\frac{Div_1}{i-g}$ or
      • $P=\frac{\text{Future Price}+\text{Dividends}}{(1+i)}$
    • $\text{Div Yield}=100\times \frac{\text{Div}}{\text{Price}}$
    • Compound growth (a.k.a. present value or future value) equation: $PV=\frac{FV}{(1+i)^n}$
    • Bond pricing and returns
      • Really just a repeated application of compound growth equation from above
      • For an “n” period bond
        • $\frac{C_1}{(1+i)^1}+\frac{C_2}{(1+i)^2}+\ldots+\frac{C_n}{(1+i)^n}+\frac{F}{(1+i)^n}$
    • Relationship between interest rates and bond/stock prices
    • Rule of 70 (or 72)
    • Price level, inflation, deflation, disinflation, accelerating inflation (and how to calculate given data)
    • GDP calculation (nominal and real)
    • The components of GDP, $Y=C+I+G+NX$
    • Definition of net exports $NX = X-M$
    • Trade deficit v. Trade surplus v. Balanced Trade
    • Budget deficit v. Budget surplus v. Balanced budget
    • 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, $(S_\text{public}=T-G-TR)$ (similar to budget situation)
      • Private savings, $(S_\text{private}=Y+TR-T-C)$
    • Economic v. financial investment
    • 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) SEE BELOW
    • Anticipated v. Unanticipated inflation
    • Calculate growth of real prices/wages
    • Supply and demand, understanding diagrams manipulating curves and comparative statics
    • Surplus v. shortage
    • Basic understanding of price floors and ceilings
    • Knowing how to solve a system of two equations (supply and demand)
\[\text{Nominal wage}_\text{YR1} \times \frac{\text{CPI}_\text{YR2}}{\text{CPI}_\text{YR1}}=\text{Real wage}_\text{YR2}\]