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Macroeconomics: Last minute review
This should NOT be all you study!
Introductory Topics
If the first change in a market is the price then this changes
If the first change in a market is supply or demand factors
Points inside a PPF are always
Points on the PPF are
Moving the PPF outward require
Price floors are placed (above/below) equilibrium and “help”
Price ceilings are placed (above/below) equilibrium and “help”
If a currency appreciates, then the country’s exports will
If a currency depreciates, then the country’s exports will
If a country is in recession, the international supply of the money
If a country has an expansion, the intern. supply of the money
GDP Accounting
The expenditure approach of GDP has 4 parts. They are
These 4 things also equal (on the aggregate model)
When calculating GDP, “intermediate” goods are
In order to go from a nominal number to a real number
Business Cycles
The four parts of the cycle are
Cycles are measure from
The downturn in the cycle usually has excessive
The upswing in the cycle usually has excessive
Employment
The officially “unemployed” are
Part time workers are counted as
Discouraged workers are
The Natural Rate of Unemployment for the US is around
CPI and Inflation
In an indexing system, the base year is always equal to
The formula for calculating inflation is
The GDP deflator takes the entire GDP and calculates out
Stagflation is the presence of
Spending Multiplier
For each new dollar received, one can
MPC + MPS always equals
The spending multiplier formula is (2 answers)
Investment Demand Curve
Interest rates on the domestic market are a cost of
High interest rates will affect Ig
Aggregate Models
The determinants of AD are
The determinants of SRAS are
The determinants of LRAS are
Fiscal Policy Options
The part of government that creates fiscal policies is
The 2 main tools are
The policies target
The policies have a flaw and change interest rates for the worse =
On the Aggregate Model, this is changed
On the Money Market, this is changed
On the Loanable Funds Market, this is changed
Answers/Completion of the statements
Monetary Policies
The part of government that conducts Monetary Policies is
The 4 tools are
The tools target this part of GDP
The policy will change this on the Aggregate Model
On the Money Market, this will change
On the Loanable Funds Market, this will change
On the Aggregate Model, this will change
When you see “Open Market Operations” you always assume
If the agency “buys” bonds, they are
If the agency “sells” bonds, they are
Bank T Accounts and Money Creation
For each bank, assets must equal
DD =
RR =
ER =
Loans =
To create new DDs in the banking system multiply ER times
Phillips Curves
During the normal business cycle, one moves points on
If there is a supply shock, then move
Phillips’ initial analysis assumed an inverse relationship between
If you move the LRPC, then a nation must change its
The SRPC and the SRAS line move in
Monetarism MV =PQ
Conservative monetarists believe that this is stable
They also believe that inflation can be controlled by
Comparative Advantages
If one country can make more, or use less effort, it has
If a country is more efficient and has lowest opportunity cost it has
Balances of Payments
For countries, these 2 items must be kept in balance
If money comes to a country, it is counted as a BOP
If money leaves a country, it is counted as a BOP
If a financial event is one time and has no future obligations, it is
If a financial event has long term profit implications, it is
If the two major accounts do not balance a country brings in