Macro Econ study guide
Review sheet for Exam 2 – Principles of Macroeconomics
What are the two focal areas of macroeconomics?
What are business fluctuations? The phases of a business cycle, and the characteristics of each phase. Business fluctuations in the growth rate of real GDP around its trend growth rate.
Employment and Labor force concepts including computations of these (e.g. unemployment rates, labor force participation rates, U-rates of labor underutilization etc.)
Categories of unemployment
Frictional- short term, Stuctural- long term, Cyclical- correlated with business cycle
The Natural rate of unemployment (both the basic and the formal model definitions)
Full employment of labor as a macroeconomic objective
Factors affecting the labor force participation
Problems associated with unemployment
Forms of price instability (inflation and deflation) including definitions of these and related concepts
The price level and how it is computed
Measures of the price level in practice (the CPI, the GDP Deflator etc.)
Computation of inflation (and deflation) rates and interpretations of these
Hyperinflation and disinflation
The Quantity Theory of Money (and the dynamic form of this expression)
The Monetarist position on the relationship between money and inflation
The Keynesian/ New Keynesian position on the usefulness of discretionary monetary policy
The Fisher Equation and effect
Fisher effect is the tendency of nominal interest rates to rise with expected inflation rate.
Equation: i=E +requilibrium
I= nominal interest rate, E =excepted inflation rate, requalilbrium= equalilibruim real rate of return
The long run neutrality of money
The problems associated with inflation and deflation
Aggregate Demand and its derivation from the Quantity theory of money equation
Movement along the AD and shifts in the AD function
Aggregate Supply (the Solow Growth Curve)
Shifts in the Solow Growth Curve
What are the two focal areas of macroeconomics?
What are business fluctuations? The phases of a business cycle, and the characteristics of each phase. Business fluctuations in the growth rate of real GDP around its trend growth rate.
Employment and Labor force concepts including computations of these (e.g. unemployment rates, labor force participation rates, U-rates of labor underutilization etc.)
Categories of unemployment
Frictional- short term, Stuctural- long term, Cyclical- correlated with business cycle
The Natural rate of unemployment (both the basic and the formal model definitions)
Full employment of labor as a macroeconomic objective
Factors affecting the labor force participation
Problems associated with unemployment
Forms of price instability (inflation and deflation) including definitions of these and related concepts
The price level and how it is computed
Measures of the price level in practice (the CPI, the GDP Deflator etc.)
Computation of inflation (and deflation) rates and interpretations of these
Hyperinflation and disinflation
The Quantity Theory of Money (and the dynamic form of this expression)
The Monetarist position on the relationship between money and inflation
The Keynesian/ New Keynesian position on the usefulness of discretionary monetary policy
The Fisher Equation and effect
Fisher effect is the tendency of nominal interest rates to rise with expected inflation rate.
Equation: i=E +requilibrium
I= nominal interest rate, E =excepted inflation rate, requalilbrium= equalilibruim real rate of return
The long run neutrality of money
The problems associated with inflation and deflation
Aggregate Demand and its derivation from the Quantity theory of money equation
Movement along the AD and shifts in the AD function
Aggregate Supply (the Solow Growth Curve)
Shifts in the Solow Growth Curve