StudyGuide_Exam2_Spring08 - Study Guide for Exam2 The exam2...

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Study Guide for Exam2: The exam2 will be for 35 multiple-choice questions Closed book and closed notes, but a 5X7 index card may be to use with formulae and concepts written on it The materials to cover the exam will be from Ch. 8 thru Ch. 11 in the textbook. The study guidelines to prepare for the exam will as follows outlined by chapters. Chapter 8: The following sub-topics of Ch. 8 will include in the exam Consumption and saving function with equations and conceptual understanding of the difference between C and S as follows: C = a + bY; S = -a +(1-b)Y; where a = intercept, b = MPC The explanation of MPC and its implication to understand the consumer behavior Concept of multiplier, 1/1-MPC, and its real world application to estimate Equilibrium GDP; Equilibrium condition: Y = C; S = Y- C AD = C+I; Where I = investment; Equilibrium condition Y = C+I; S = I; Inventory adjustment (actual vs. planned investment) Chapter 9: The following sub-topics to cover for the exam What is fiscal policy? What are the objectives and tools of fiscal policy?
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