Macroeconomics ECON 2301 Spring 2009 Marilyn Spencer, Ph.D. Professor of Economics Chapters 6-9 Review

Exam 2, March 31 4 Chapters 6-9 ÜStudy PPT slides ÜStudy assigned end-of-chapter questions ÜStudy with a friend 4 Test format: Ü25 multiple choice questions (+ 3 extra credit) ÜQuestions include definitions, theory & applications – Expect graphs and numbers. Ü1 hour ÜScantron answer sheet provided

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Chapter 6 Learning Objectives 1. Distinguish between average tax rates and marginal tax rates 2. Explain the structure of the U.S. income tax system 3. Understand the key factors influencing the relationship between tax rates and the tax revenues governments collect 4. Explain how the taxes governments levy on purchases of goods and services affect market prices and equilibrium quantities 5. Understand how the Social Security system works and explain the nature of the problems it poses for today’s students

Chapter 6 EXAM QUESTION TOPICS  Know about the revenue sources of our federal government.  Know average tax rates v. marginal tax rates.  Know the differences among proportional taxes, progressive taxes & regressive taxes.  Be able to explain our personal income tax system, in terms of the 3 taxes above.  Know the major issues of our social security tax system.  Know how the taxes governments levy on purchases of goods and services affect market prices and equilibrium quantities.

Chapter 7 Learning Objectives 1. Explain how the U.S. government calculates the official unemployment rate 2. Discuss the types of unemployment 3. Describe how price indexes are calculated and define the key types of price indexes 4. Distinguish between nominal and real interest rates 5. Evaluate who looses and who gains from inflation 6. Understand key features of business fluctuations

Chapter 7 EXAM QUESTION TOPICS  Know how the U.S. government calculates the official unemployment rate.  Know who’s in the labor force and who isn’t.  Know what “discouraged worker” means.  Know the 4 types of unemployment.  Know how price indexes are calculated and define the key types of price indexes.  Be able to calculate a price index or use information from a price index.  Understand who looses and who gains from inflation.  Understand key parts of a business cycle.  Know how to calculate the real interest rate.

Chapter 8 Learning Objectives 1. Describe the circular flow of income and output 2. Define gross domestic product (GDP) 3. Understand the limitations of using GDP as a measure of national welfare 4. Explain the expenditure approach to tabulating GDP 5. Explain the income approach to computing GDP 6. Distinguish between nominal GDP and real GDP

Chapter 8 EXAM QUESTION TOPICS  Understand the circular flow model:  Know what is purchased in factor markets v. product markets - by whom and from whom.  Know that income flows one way and resources/goods the other.  Be able to define gross domestic product (GDP).  Know the formula for the expenditure approach to GDP.  Know why intermediate goods aren’t included.  Know why not all production gets counted.  Understand the limitations of using GDP as a measure of national welfare.  Understand the difference between real GDP & nominal GDP.

9-10 Chapter 9 Learning Objectives 1.Define economic growth 2.Recognize the importance of economic growth rates 3.Explain why productivity increases are crucial for maintaining economic growth 4.Describe the fundamental determinants of economic growth 5.Understand the basis of new growth theory 6.Discuss the fundamental factors that contribute to a nation’s economic development

Chapter 9 EXAM QUESTION TOPICS  Know how we define economic growth.  Understand the importance of economic growth rates.  Know why even small differences in growth rates create major differences over time.  Be able to use an interest rate table to calculate how long it takes for a country’s GDP to double or triple or….  Know why productivity increases are crucial for maintaining economic growth.  Understand the fundamental determinants of economic growth (what theory says is important).  Know the fundamental factors that contribute to a nation’s economic development

Assignment to be completed before class April 2: 4 Read Chapter 14 & also read Problems 14-1, 14-2, 14-4, 14-7, 14-9, 14-10, 14-12, & on pp