Macroeconomics Exam Review

Introduction

• Instructor: Jacob Clifford
• Focus on reviewing key concepts for macroeconomics before the big exam
• Plan to cover major concepts and answer specific questions

Key Concepts for the Exam

1. Definitions

   • Understanding key terms like investment, GDP, types of unemployment (frictional, structural, cyclical), sticky wages, stagflation, cost-push and demand-pull inflation
   • Differentiate between fiscal and monetary policy
   • Velocity of money: how often money is spent in a given time period
   • Real vs. nominal interest rates
   • Crowding out: government borrowing leading to higher interest rates
   • Balance of Trade: current account vs. capital and financial account

2. Graphs

   • Six essential graphs: Production Possibility Curve, Aggregate Demand/Supply, Phillips Curve, Money Market, Loanable Funds Market, Foreign Exchange
   • Understand what each graph represents and how shifts affect the economy
   • Possible need to understand the reserve market (less likely for drawing)

3. Relationships

   • Macroeconomics is about relationships (cause and effect)
   • Key relationships include interest rate effects, impact of taxes, government spending on GDP
   • Understand the impact of inflation on money demand

4. Equations

   • Spending multiplier: 1 / (1 - MPC)
   • Money multiplier: 1 / reserve requirement
   • Real interest rate: nominal interest rate - inflation
   • GDP deflator, CPI, unemployment rate calculations

Strategies for Exam Preparation

• Focus on understanding key definitions, graphs, relationships, and equations
• Practice drawing graphs and understanding shifts
• Review practice questions to identify areas for improvement

Specific Topics Covered

Unit 1: Basic Concepts

• Comparative Advantage: Output vs. Input questions
• Terms of Trade

Unit 2: Measuring Economic Performance

• GDP calculation, what's counted and not counted
• Types of Unemployment
• CPI and GDP Deflator

Unit 3: Aggregate Models

• Aggregate Demand/Supply
• Long-run adjustments
• Fiscal and monetary policy impacts

Unit 4: Financial Sector

• Money Market and Monetary Policy
• Loanable Funds Market
• Bonds and interest rates relationship

Unit 5: Long-run Consequences

• Quantity Theory of Money
• Crowding out and economic growth

Unit 6: Open Economy

• Balance of Payments: Current vs. Capital Account
• Foreign Exchange Market and its shifters

Exam Strategy

• Practice drawing and analyzing key graphs
• Focus on understanding big ideas rather than memorizing every detail
• Use practice questions to reinforce learning

Conclusion

• Encouragement from the instructor to approach the exam with confidence
• Importance of understanding and reviewing key concepts for success

Note: Use this as a guide for final preparations and ensure you understand all key concepts covered.