1.Be able to calculate real interest rates and explain their importance. (Ch. 9.6 and notes)a.Real interest rates= Nominal - Inflationb.They are important because they provide a better measure of true cost of borrowing and lending money. 2.Be able to explain what economists mean by money -- both the definition and how money is measured in the U.S. (Ch. 14.1 & 14.2 and notes)a.Money is anything of value that can be used in exchange for goodsor services.3.Be able to explain why economic growth isn't "zero sum." (notes)a.An economic growth isn’t “zero sum” because they all act independently. In the graphs we studied, all of the countries eithergo up or down, not left and right, but in the data they all moved to the right since they all are acting independently. b.The growth of an economy doesn’t come at the expense of the growth of another economy4.Be able to explain the relationship between human health and economic growth. (Ch. 10.1)a.In high-income countries, human health is related to economic growth. They measure it in terms of life expectancy at birth, whichincreases as the economic growth of the country increases. Economist say that low-income countries need to reduce disease and increase nutrition as the first step to increasing economic growth. 5.Be able to explain how long run economic growth has dramatically changed life and how novel the last two centuries have been. (Ch. 10.1 and notes)a.In the last two centuries, with long run economic growth there have been new and improved products, new prescription drugs, better surgical techniques to overcome more diseases and increase in purchasing power. 6.Be able to calculate growth rates and doubling times with the Rule of 70. (Ch. 10.1 and notes)a.In order to find growth rates from year to year you use the percentchange formula. [(new-old)/old]*100i.For shorter time periods, where you are given more than twoyears, find the average of them and that will be the growth rate.ii.For longer time periods, use the average annual growth rate equation which would be g= [(Xn/Xo)^1/n]-1b.When looking to the double anything, use the Rule of 70. That is (70/growth rate)7.Be able to explain why small differences in growth rates matter dramatically over long periods. (Ch. 11.1 and notes)a.Over a long period of time, small difference in growth rates matterdramatically over long periods because compounding can occur,

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- Fall '10
- staff
- Economics, Macroeconomics, Inflation, Interest Rates