Download Additions to study guide on material since the second exam:

Additions to study guide on material since the second exam:
Related to #59: Assume that the slope of the consumption is 0.9 and that G increases by $20 billion. According to
the Keynesian cross model, what will be the change in GDP? Illustrate with the Keynesian cross. According to this
model, what will be the change in the price level?
Related to #60, page 360, exhibit 5: Who is included in the “public”? Besides the public, who holds the debt? What
would the ratio (in the exhibit) be if all of the debt was reflected?
Page 361: In what way is the debt NOT a burden on future generations?
Page 362: In what way is the debt a burden on future generations?
Related to fiscal and monetary policy: See page 330 to learn about the “lags” that hamper the effectiveness of
stabilization policy. Provide an explanation and/or illustrations of each.
Add to #66: Explain the assumptions upon which the law of comparative advantage is based. What happens if those
assumptions are not met? What are the main forms that protectionism has traditionally taken? What new types of
"protectionism" are being debated today?
Macroeconomics Final Exam Study Guide
Seventy-five percent of your exam will come directly off the list below. Stay tuned for any edits. The remainder of the
exam will come from the material since the second exam. Let your study question, including those above, be your
guide for that.
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Explain the trade-off in the Keynesian model and relate it to the NAIRU.
Illustrate with a Keynesian cross an economy operating at its potential.
a. Use a Keynesian cross to illustrate an economy with a level of GDP below potential output.
b. In Keynesian terms, list and explain what may have caused this performance, other than fiscal or monetary
policies.
c. Explain the appropriate fiscal policy responses according to the Keynesians.
d. Name and define the three tools of the Fed and explain how each will be used in response to output being
below the potential level.
e. Explain the impact of the monetary policy that you just recommended.
Repeat the previous question for an economy operating above potential output.
Explain how the multiplier works using numbers and either the circular flow or the chart.
Distinguish between the government deficit and the government debt. Provide the three circumstances under
which many economists find deficits desirable. Explain the major problem with deficits. Explain the major
arguments against the debt.
Based on Affluenza, critique the macroeconomic goal of increasing GDP. (Include chapter themes from Part I of
the book, and the discussion in chapter 29; prepare a two-paragraph answer.)