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STUDY GUIDE MACROECONOMICS TEST 1 Circular Flow of Income National Income National Expenditure National Output Gross Domestic Product (GDP) Consumption (C) Government Expenditure (G) Investment ((I) Net Exports (X-IM) GDP-Expenditure Method GDP-Income Method GDP-Output Method Inflation Nominal GDP Real GDP Gross National Product (GNP) GNP per capita Depreciation Growth Rate Rule of 72 Aggregate demand (AD) Short-run aggregate supply (SRAS) Long-run aggregate supply (LRAS) Keynesian economics Monetarist (neo-classical) economics Marginal Propensity to Consume (MPC) Marginal Propensity to Save (MPS) Multiplier Government spending multiplier Tax multiplier Full employment level of national income Equilibrium level of national income Inflationary gap Deflationary gap Business (trade) cycle Full employment Underemployment Unemployment rate Structural unemployment Frictional unemployment Seasonal unemployment Cyclical (demand-deficient) unemployment Real wage unemployment Deflation Demand-pull inflation Cost-push inflation Excess monetary growth Phillips Curve Long-run Phillips Curve (LRPC) Natural Rate of Unemployment (NRU) Price index You must be able to: ☭ ☭ ☭ ☭ ☭ ☭ ☭ ☭ ☭ ☭ ☭ Calculate GDP using the expenditure method Explain the business cycle and its various stages Illustrate and explain recessionary (deflationary) and inflationary gaps Differentiate between SRAS and LRAS and graph both to show long-run equilibrium Compare and contrast the various philosophies of Keynesian and Monetarist Economics (i.e. macroeconomic equilibrium, fiscal and monetary policy, flexibility of prices and wages, etc.) Discuss the difference between the Keynesian and Monetarist LRAS curves and why and how their assumptions guide their respective shapes Calculate the multiplier given either MPC, MPS, or other relevant data Explain the various types of unemployment and methods for dealing with each Explain the various types of inflation and methods for dealing with each Discuss the difference between the short and long-run Phillips Curve and account for the difference between the two Calculate price indexes and be able to manipulate the base years to find percentage change in inflation from year to year