Review Midterm 1

Gottheil - Principles of Economics, 4e Outline Frequency of Chapter from which questions asked in the previous exams. Chapter 2 1 Chapter 3 2 Chapter 4 5 Chapter 5 2 Chapter 6 1 Chapter 7 3 Chapter 8 10 Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Outline Note that Chapter 10, 11 is not covered by the previous exams But will be covered this year Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch2 What is production possibility (frontier)? Absolute advantage and comparative advantage. Vicious circle of poverty (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch3 Difference in Change in demand and Change in quantity demanded. Excess demand and Excess supply . What can cause the change in demand and change in supply? Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch3 Draw a graph depicting a shoe market in equilibrium. Explain what happens if price were not at equilibrium. In other words, what forces come into play when price is either above or below its equilibrium level? (Q6, Midterm 2010 Spring) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch3 Consider the market for hot dogs. Suppose the equilibrium price fell from $2 to $1 per package. Explain, in as many ways as you can, what could have caused that fall. (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch4 (a) Show the relationship between real and nominal GDP. (Q1, Midterm 2010 Spring) Look at p90, Ch4. Using the AD/AS model, (i) explain what could shift the aggregate demand outward and (ii) explain how demand-pull inflation can occur.(Q4, Midterm 2010 Spring) Look at p96 and p100, Ch4. Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch4 What are Business cycles? (Midterm 2011 Fall) Look at p85, Ch4. Business Cycle: Alternating periods of growth and decline in an economy’s GDP. Write short notes (a paragraph or two) on each of the following: (b) why and how economists use the GDP deflator (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch4 Using either the AD/ AS model or the C+I=C+S model of real GDP or national income determination, show an economy can end up in equilibrium at less than full employment. Explain why the curves you use are shaped the way they are. Describe (or define) the key terms in your answer as precisely as you can. (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch5 List the component parts of national income. Using the expenditure approach, list the component parts of GDP. (Q12, Midterm 2010 Spring) Look at p112 (Ch5) for national income definition. Look at p116 for expenditure approach. Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch5 Write short notes (a paragraph or two) on each of the following: (a) the expenditure approach to GDP accounting. (Midterm 2011 Fall) In one or two sentences, explain the following key terms: (b) the underground economy (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch6 In one or two sentences, explain the following key terms: (a) autonomous consumption, (c) Keynes's absolute income hypothesis, (Midterm 2011 Fall) All income hypotheses are important, and you also need to know the consumption equation and concept of MPC in this Chapter. Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch7 Explain why is saving always equal to actual investment? (Q2, Midterm 2010 Spring) C+S=C+I model Write short notes (a paragraph or two) on each of the following: The paradox of thrift. (Midterm 2011 Fall) Look at p174, Ch7. Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch7 Using either the AD/ AS model or the C+I=C+S model of real GDP or national income determination, show an economy can end up in equilibrium at less than full employment. Explain why the curves you use are shaped the way they are. Describe (or define) the key terms in your answer as precisely as you can. (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 The idea of unemployment is more complex than simply "people out of work." Explain how economists identify unemployment by cause, and explain why some unemployment is described as natural and perhaps even desirable, while other people who may or may not be working do not end up in the BLS's classification of unemployment (Midterm 2011 Fall) Look at Discouraged workers at p184, Ch8; look at Natural rate of employment at p187. Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 Define and explain: structural unemployment, underemployment. p183, Ch8 Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 How does the government close a recessionary gap? (Q3, Midterm 2010 Spring) Make sure you understand what recessionary and inflationary gaps are! Explain the difference between an income multiplier and a tax multiplier. (Q4, Midterm 2010 Spring) Connect to the potential money multiplier too. Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 Suppose equilibrium Y = $1.0 trillion, full-employment Y = $1.4 trillion, and MPC = 0.8. If you want to achieve a full employment level of Y and don’t worry about running deficit budgets, what would you do and why. If you want to keep the budget balanced and still get to full employment Y, what must you do and why. (Q5, Midterm 2010 Spring) Use the concept of tax multiplier and balanced budget multiplier. (p198, Ch8) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 Look at the C+S=C+I model of income determination, from question 2. Suppose there is a $400 billion recessionary gap that President Obama wants to close and looks to you for advice. What kind of fiscal policy would you suggest? What kinds of information would you need to get the economy moving toward full employment without inflation? Is there only one budget option open to you? Explain. [hint: make sure you answer every part of this question] (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 Look at the AS/ AD model of real GDP determination, from question 2. Suppose there is a $400 billion inflationary gap that President Obama wants to close and looks to you for advice. What kind of fiscal policy would you suggest? What kinds of information would you need to get the economy moving toward full employment without inflation? Is there only one budget option open to you? Explain. [hint: make sure you answer every part of this question]. (Midterm 2011 Fall) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 What is the accelerator and what role does it play in explaining business cycles? (Q9, Midterm 2010 Spring) p204, Ch8 Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch8 what arguments do real cycle theorists offer to explain why “business cycles” are not really cycles at all. (Q1, Midterm 2010 Spring) What are Business cycles? Differentiate between cycles induced externally from those induced internally. Why do some economists believe that the "cycles" we look at are not really cycles at all. (Midterm 2011) Gottheil - Principles of Economics, 4e

Gottheil - Principles of Economics, 4e Ch10 and Ch11 You should read everything based on the pattern of previous exam questions. Gottheil - Principles of Economics, 4e