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ECON2012: MACROECONOMICS Review #2 Chapter 5 Definitions Price Ceiling Price floor Minimum wage Excise tax Tariff Quota Be Able To: Describe and show graphically the effects of price ceilings and price floors. Describe and show graphically the effect of an excise tax on a product. Explain some of the negative side effects of a price ceiling Discuss some of the issues of price ceilings in Venezuela Rent Control Chapter 6 Definitions: Recession Economic Growth Leading Economics Indicators Target Unemployment Rate Discouraged Workers Labor Force Participation Rate Frictional Unemployment Structural Unemployment Inflation Price Index PPI Hyperinflation Nominal income Real GDP Business Cycles Unemployment Rate Underemployment Potential Output Cyclical Unemployment CPI Real income Nominal GDP Be Able To: 1. Explain the differences and relationship between Economic Growth and Business cycles. 2. Explain and differentiate between cases of Frictional, Structural and Cyclical unemployment. What policies might be used to reduce each type of unemployment. 3. Calculate an unemployment rate from appropriate data and explain what it means. Be able to also calculate a labor force participation rate and explain what it means. 4. What are the shortcomings with the unemployment rate? What things may not be accounted for correctly? 5. Calculate a price index. Explain its meaning, and use it to compare values across years. 6. What are the shortcomings (biases) of using a price index to measure price changes? Chapter 7 Definitions: Gross Domestic Product Nominal GDP Gross National Product Final Products Real GDP Intermediate Products Be Able To: 1. Explain the difference between GDP and GNP. Identify whether a specific type of production is included in GDP and/or GNP. 2. Explain how GDP is calculated using the expenditure approach and the income approach. Explain the equation GDP = C + I + G + X - M 3. Discuss the limitations of GDP as a measure of welfare and to compare standard of living across countries. Chapter 8 Definitions: Economic Growth Human Capital Entrepreneurship Specialization Malthus’ positive checks Per Capita Growth Physical Capital Production Function Division of Labor Technology Productivity Social Capital Diminishing Marginal Productivity Say’s Law Be Able To: 1. Explain factors that lead to economic growth. 2. Give examples of policies that would increase economic growth 3. Compare the standard (classical) growth theory with the new growth theory. Chapter 9 " WE PROBABLY WON’T GET TO THIS UNTIL AFTER EXAM # 2 Definitions: Classical economists Keynesian economists Short-run Aggregate Supply Long-run Aggregate Supply potential income inflationary gap Fiscal Policy Aggregate Demand equilibrium income recessionary gap Be Able To: 1. Explain what a classical economist would say is the correct policy if the economy is temporarily experiencing unemployment. 2. Discuss why classical economics was not favored during the depression and why Keynesian economics gained popularity. 3. Draw an Aggregate Demand Curve. Discuss what will cause the AD curve to shift. (i.e. Remember AD = C + I + G + (X - M). 4. Explain why the Short-run Aggregate Supply (SAS) curve is shaped as it is and what will cause it to shift. 5. Explain why the Long-run Aggregate Supply (LAS) curve is shaped as it is and what will cause it to shift. 6. Explain how fiscal policy works. What problems emerge when trying to implement fiscal policy?