Intermediate Macro
Things to Know
Tracking the Economy’s Moves in the Aggregate
· What GDP measures and what it doesn’t (big picture)
· The differences between various price measures
· How employment relates to unemployment
· An appreciation of unemployment: who, how long, why.
· If I give you stats for an economy over a few years, can you describe what has been going on.
What Determines GDP:
· The components of aggregate demand
· What determines consumption
· The marginal propensity to consume.
· The multiplier
· Circular flow of income in the economy: leakages and additions
IS/MP
· What is on the axes in IS/MP?
· What explains the slope of the IS curve?
· How come every point on the IS curve is an equilibrium point in IS/MP?
· How do exogenous shocks shift the IS line?
· How banks work; fractional reserve system
· What is an interest rate?
· What does the MP curve describe?
· Know how shifts in the IS/MP come about
AD/AS Model
· What is on the axes in AD/AS?
· What explains the slope of the SRAS curve? The LRAS curve
· How do exogenous shocks shift the AD line?
· How does the short-run merge into the long run?
Fiscal Policy:
· What are the two forms of fiscal policy?
· Why is fiscal policy used?
· How does a change in taxes or government spending show up in the two models we have studied in class?
· What is the result of an expansionary fiscal policy on GDP and prices? Short run and long run.
· What is the result of a contractionary fiscal policy on GDP and prices? Short run and long run.
· What is the downside to expansionary fiscal policy?
· Crowding out
· Ricardian equivalence
Monetary Policy:
· Basic info on the Fed
· Define money and the various definitions of money
· The FOMC: How is policy made?
· Policy lags and the problems they cause
· Open market operations
· How do changes in interest rates affect GDP and prices?
· The neutrality of money
· The quantity theory of money
Determinants of Economic Growth:
· Trends in US labor productivity
· The effect of technological change on an economy’s growth rate short run and long run
· Do technological advances lead to higher unemployment?
· Romer’s new growth theory
· Solow model
Open Economy Model
· Exchange rate quotations
· Purchasing power parity as a viable long-run model of exchange rate determination
· Interest rate parity as the determinant of spot exchange rates in the short run.
· The impact of increased inflation on a country’s exchange rate.
· Arbitrage and international capital flows in the int’l capital markets
· Real exchange rates, the Big Mac Index