StudyGuide1 - only way we can follow 4 The concept of...

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Prof. Andrea Civelli Principles of Macroeconomics Short Study Guide for the preparation of Test 1 The first test is going to cover the material presented in class during the first two weeks of the semester, which corresponds to the slides in Lecture 2 and 3. These refer to only two chapters of the book, Chapter 3 and 4. Presenting Chapter 3, I have focused on some basic economic concepts that we will use throughout the entire semester. This is a relative easy chapter. Make sure you know and understand: 1. The production possibilities frontier: meaning of the slope, definition of opportunity cost, the concept of efficiency, the difference between constant and increasing cost. 2. The production possibilities frontier for the whole society and the problem of making a choice when resources are scarce. 3. The role of markets in achieving efficiency and optimal production decision. Is this the
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Unformatted text preview: only way we can follow? 4. The concept of comparative advantage and the difference with the absolute advantage. Chapter 4 is all about the Phillips Curve. It’s a difficult chapter and requires you to read it and study over and over in order to fully master it. The essential points you have to know are: 1. The definition and construction of the demand curve. Why is the slope negative? 2. The definition and construction of the supply curve. Why is the slope positive? 3. Difference between demand/supply curve and quantity demanded/supplied. Difference between movements of the curve and movements along the curve. 4. The concept of Supply/Demand equilibrium. The equilibrium price and the equilibrium quantity. Shifts of the curves and effects on the equilibrium. 5. Price ceilings and price floors: what they are, how they work, their implications for the equilibrium quantity and price....
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