What Else Do Econ 1 Students Need to Remember for the Final Exam? Macro

There are a number of concepts, capabilities, and observations that we do not expect you to remember and carry in the forefront of your brains long beyond the final exam. However, we do expect you to have them in the forefront of your brains at the time of the final exam.

We hope that thereafter they will live on as a neuronal ghost so that when you run across these issues again, you will say "oh yeah..."--and be able to relearn them quickly.

From the "macro" portion of the course, we would like you to be able to, on the final:

Explain the accounting system we use to assess the overall state of the economy, the National Income and Product Accounts, and use it.

Explain why real GDP per capita, the unemployment rate, and the inflation rate are economic variables of especial interest.

Explain why nominal interest rates, real interest rates, and stock prices are also key economic variables.

Explain why Jean-Baptiste Say was so confident in 1803 that a general glut--a situation in which there seemed to be deficient demand for pretty much every currently-produced commodity and excess demand for none, leading to high unemployment and idle factories--was impossible.

Explain what had made Jean-Baptiste Say change his mind and admit the possibility of a general glut of deficient economy-wide demand by 1829.

Explain the hole in Say's Law: how you can have deficient demand for pretty much every currently-produced commodity if you have excess demand for financial assets.

List the three types of excess demand for financial assets that have, historically, led to large downturns in employment and capacity utilization.

Explain how to use observations of the pattern of asset prices to understand what type of excess financial asset demand is generating any particular economic downturn.

Explain how the type of downturn determines the most effective cure--an excess demand for liquid cash money being best cured by a monetarist expansion of the money stock, an excess demand for bonds to serve as long-term savings vehicles being best cured by a Keynesian expansionary fiscal policy, and an excess demand for safety being best cured by banking policy that provides government guarantees to shaky private assets.

Explain the two parts of the "Bagehot rule" for dealing with a Minskyite excess-demand-for-safe-financial-assets downturn.

Evaluate the policies followed by the Bush and Obama administrations toward the current downturn in light of the "Bagehot rule."

Calculate the likely size of the deflationary gap produced by an excess demand for bonds in the Keynesian income-expenditure model.

Calculate the likely size of the deflationary gap produced by an excess demand for money in the monetarist quantity-theory-of-money model.

Calculate the likely size of the inflationary gap produced by an excess supply of money in the monetarist quantity-theory-of-money model.

Explain the reasons behind the Phillips Curve downward-sloping inverse relationship between inflation and unemployment.

Explain how changes in the natural rate of unemployment and expected inflation affect the position of the Phillips Curve.

List the three types of inflation expectations.

Calculate how the inflation rate will evolve over time in response to changes in the money stock under static, adaptive, and rational inflation expectations.

Explain the circumstances under which inflation expectations are likely to be static, adaptive, or rational.

Explain why, as far as the government is concerned, Milton Friedman always said: "To spend is to tax."

List and evaluate the arguments for running a government deficit and a government surplus.

Explain why the long-term budget outlook for the U.S. government looks grim.

Explain why the long-term budget outlook for the U.S. government looks a lot better after the passage of PPACA--the 2010 Health Care Reform.

Explain why the long-term budget outlook including the estimated effects of PPACA may well be overly rosy.

List the different paces of economic growth before the Neolithic Revolution, in the Agrarian Age, since the Commercial Revolution, and since the Industrial Revolution.

Explain why the pace of economic growth has sped up so much over time.

Explain why before the Industrial Revolution increases in GDP went essentially 100% into increases in population and not at all into increases in GDP per capita.

Explain why this pre-industrial pattern was broken by the Demographic Transition.

Project the population of the world forward.

Assess the relative importance of accumulation and innovation in accounting for economic growth.

Explain the sources of differences across countries in GDP per capita levels.

List factors and policies likely to accelerate economic growth.

List factors and policies likely to retard the pace of economic growth.