This is not the best time to re-read the textbook or outside readings (unless you get stuck on something). At this point, you should be focusing on the lecture slides, and using the textbook/readings as back-up. Finally, questions that ask you to work through thought experiments “in reverse” are fair game: eg., if in class we work through the effects of an increase in inflation, then you should also be prepared to explain the effects of a decrease in inflation. This advice applies to all of the models that we have studied this semester. Checklist The following checklist is intended to be comprehensive: once the review sheet is labeled “Final” (as opposed to “Preliminary”) you can be sure that if a topic is not mentioned here, then it is not included on the exam. The Circular Flow Model □ Which Macroeconomic activities lead to flows into the financial market and which lead to flows out of the financial market? What has to be true about the relationship between National Saving, Private Saving, Government Saving, Trade Balance, and Investment, if flows into the Financial Market equal outflows? National Saving = Investment + Net Exports Investment = Private Saving – government deficit + trade deficit I/Y + X/Y = S/Y S/Y = 1 – C/Y – G/Y □ Given information about the same variables, can you draw a circular flow diagram? Measurement (GDP, Inflation, Labor Market Indicators)
The main focus of the exam questions on Measurement will be on knowing (and applying) the definitions of key macroeconomic variables and on knowing the limitations of these variables. On the final, I’m not going to ask any questions for which you will need to use the Spending Approach and Production (value-added) Approach to measuring GDP (“Farmer Brown” questions). I’m just tired of writing these kinds of questions. □ What was the growth rate of real GDP in the US, for 2013:I? 2.5 □ Review any old exam questions that dealt with whether a product should be counted as an intermediate good or as a final good, in computing GDP. I am especially interested in knowing whether a product could be counted as an intermediate good in some circumstances but as a final good in others. □ Can you define these terms: Current-dollar (Nominal) GDP: gross domestic product without correction for inflation Real GDP: measure of value of all final goods and services adjusted for inflation GNP: final goods and services produced by citizens all over the world Potential GDP: long-term growth trend for real GDP □ How does the US adjust GDP statistics for inflation? Fixed-Weight Approach- compute GDP in each year by using base year prices Growth Rate of Real GDP: new – old/ old x 100 Chain-weighted Real GDP: 1. Using prices of year 1 Calculate GDP growth, using prices of year 2 calculate GDP growth; 2. Average two growth rates 3. Year 1 (according to prices of year) x (1+ average growth rate) □ What is the role of the base year in aggregate macro statistics? Which statistics would have different values if the government changed the base year? To figure out the answer to this question, make a list of all of the
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- Spring '08
- Inflation, gross domestic product, Fed