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Study Guide for Second Exam
Econ. 2133, Spring 2010
Exam Format: Exam will include 33 multiple choice questions @ 3 points each = 100 points
total. Questions will be in the style of the review questions and problems in your study guide.

You must bring a “bubble sheet” (opscan form) and 1 or more #2 pencils for recording
your answers.
 You must also have a calculator.
Subject Emphasis and Study Suggestions:
Chap.7 (9 quests.) What short run phenomenon does the classical model not explain?
Why does the classical model not explain short run economic fluctuations? If labor
demand = labor supply, what four economic equilibrium conditions are satisfied? Refer
to Fig. 2, pg. 170 (text): What is equilibrium full employment, output, and the real wage
rate? Refer to Fig.s 7 & 8, pg. 181: What are the implications for the loanable funds
market if “leakages” = “injections?” Graphic analysis of loanable funds market
equilibrium/disequilibrium. Total spending = total output if S + ____ = Ip + ____.
Study/review recommendations: Text and class outline. Aplia – The Classical Long Run
Model (I & II).
Chap. 9 (6 quests.) What happens to output, employment, and unemployment during an
expansion; during a recession? What is the key macroeconomic statistic that indicates an
expansion; a recession?
Study/review recommendations: Text and class outline. Aplia – Economic Fluctuations
(I & II).
Chap. 10 (11 quests.) What two variables are related in the consumption function
model? Besides income, what other variables determine consumption spending (i.e.,
cause the consumption function or consumption-income line to shift? What explains a
situation in which planned and actual investment are not equal? AE = ____ + ____ +
____ + ____. Identify equilibrium GDP using the graphic AE model. If AE > Y, then
business inventories will ______ and output will ________. If Ip increases by a given
amount, then output will increase by _____________ (a lesser / the same / a greater)
amount. Calculate the change in total output, given a change in Ip and the value of the
expenditures multiplier. Calculate the expenditures multiplier, given the value of the
MPC. What effect do “automatic stabilizers” have on the expenditures multiplier? What
are the general types of automatic stabilizers?
Study/review recommendations: Text and class outline. Aplia – The Short-Run Macro
Model (I & II).
Chap. 11 (7 quests.) What is money (functional definition)? What are the components
of M1? Calculate the required reserve ratio (with given info.). What type of open market
operation would increase the money supply? Who “controls” the U.S. money supply?
Calculate the total change in the money supply, given a specific size of open market
operation and other relevant info.
Study/review recommendations: Text and class outline. Aplia – The Banking System
and the Money Supply (I & II).