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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:
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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