Semester Topics (1-17)

Topic 1:  Introductory Materials and Production Possibilities

·         For an economist, ­­­­­­­­­­__________ is scarce.

·         All decisions require an _____________ ______.

·         Most problems of predicting changes will require c_______   p________ assumptions.

·         The most common labels on the PPC are Y Axis = _________, X Axis = _________

·         Students must know the significance of points inside the Frontier, on the Frontier, and outside the Frontier.  They are equal to:  _______________, ___________, _________.

·         Students must understand that moving the Frontier requires more _______ __ _______.  Big Chart Graph:  Production Possibilities Curves/Frontiers (#1)

Topic 2:  Supply and Demand Basics and Currency Exchanges

·         When product prices are changed first, move points on the ______.      This is known as a __________ Change and this will create a surplus or a shortage.

·         When government steps in with artificial price floors and ceilings, they are trying to help suppliers with _________ and consumers with __________. 

·         Artificial floors always create greater ______________.

·         Artificial ceilings always create greater ______________.

·         When any other product factor changes first, move either the __ or __ _______.  This is known as a “Supply or Demand” Change.

·         This will create a new ___ and ___ for that market.

·         When the price of a good increases, a substitute’s demand will __________.

·         When the price of a good increases, a complement’s demand will _________.

·         Perfectly inelastic supply lines are __________________. (Elaticity)

·         For the rest of a macro course, skip discussions or lessons on elasticity.

·         Currencies are supply and demand products.

·         Demand for currencies will flow to the __________ economy.

·         If D changes for one currency, __ must change for the other currency.

·         The two currency graphs will move in ___ ________ direction.

·         One currency will always appreciate, the other will _________.

·         Appreciation of a currency hurts _________, depreciation helps make them cheaper.

·         Big Chart Graphs:  Dollar Graph, Other Currency Graph (#2, #3)

Topic 3: Goods and Government

·         Durable goods and non-durable goods are based on length of ________ _____.

·         Transfer payments are from government to _________.

·         Subsidies are payments from government to _________.

Topic 4:  GDP Accounting

·         The expenditure approach of __ + __ + __ + __ must be memorized.

·         The expenditure approach is equal to ____.

·         The expenditure approach is also equal to _______________.

·         __ is the most significant in the US, __ has no savings leak, __ is affected by interest rates (in an inverse way for the domestic market).

·         For GDP accounting, intermediate goods are ___ ________.

·         Unsold inventory is counted as __ at year’s end.

·         Used goods do ___ count in the year they re-sell.

·         Goods and  _________ both count as Consumption.

·         GDP to NDP accounts for Depreciation of Capital or Consumption of Fixed Capital (CFC).   This gives the _____ measure of growth.

·         Nominal minus Inflation = ____.

Topic 5:  Business Cycles

·         The up-sloping Secular Trend is a Classical Theory of gradual improvement of lifestyles over time.  It can be connected to_____ Law.

·         The minimum time span for a change in the cycle is ______________________.

·         The cycle is measured from ________ to _________.

·         _______ and _______ can only be recognized after they have occurred.

·         Expansions and Contractions/Recessions can be recognized as they occur.

·         The average cycle for the US has been about ________ (200 years of data).

·         Recessions have historically lasted about ___ months (20 century and beyond).

·         It will be assumed that Recession will have excess ______________.

·         It will be assumed that Expansions will have some excess _____________.

·         Big Chart Graph:  Business Cycles (#4)

Topic 6: Employment and Unemployment

·         Part time workers are ___________ as “employed”.

·         Discouraged workers are ____ ___________ as unemployed.

·         “Full Employment Unemployment” (FE) is the ________ ____ __ __________ for a country.

·         The differences between frictional and structural unemployment are important.

Topic 7:  CPI, GDP Deflators, Inflation

·         An Index Year is always made equal to _______.

·         Real change of values over time can always be calculated with the formula:  Later Year – Earlier Year/Earlier Year.  This = the Rate of Change.  The Rate x 100 = Inflation %. 

·         CPI measures monthly purchases by _______, the GDP deflator looks at the _____ ___________.

·         G spending changes are assumed to be more important that private C changes because C changes always have a __________ leak.

·         Demand Pull inflation is caused by excessive ____________________.  It can be manipulated by governmental policies.

·         Cost Push inflation is a _______ ___ _____________ and often can’t be corrected.

·         Stagflation is the presence of rising unemployment and rising inflation, and can be created by ___________ ______________.

Topic 8:  Spending Multipliers

·         Marginal Propensity to Consume or Marginal Propensity to Save are results of new money being given to citizens, or being taken away from citizens.

·         The MPC + MPS must always = ___.

·         The Spending Multiplier Formula is therefore a guess on how many times new income will be spent by a series of consumers.  The formula will be: 1/1-MPC or 1/MPS. 

·         Big Chart Graphs:  Consumption Function, Savings Function, Consumption and Savings Link (#5, #6, #7)

Topic 9:  Investment Demand

·         On the domestic market, interest rates (i) are a ____ of borrowing and have an inverse effect on the willingness to create Ig.

·         Big Chart Graph:  Investment Demand Graph (#8)

Topic 10:  Aggregate Analysis (AD and SRAS) (AD/AS)

·         Any change that can be connected to C + Ig + G + Xn will be a change in ____ first.  Students often miss the Ig part.

·         Any change that can be connected to input costs, resource availability, wage rates, or worker productivity will change the ________________

·         The LRAS is approximately equal to the PPF and Full Employment GDP.

·         Changes in basic factors of production can move the _____________.

·         Big Chart Graphs:  AD/AS (3 Versions while using McConnell 15^th) (#9, #10, #11)

Topic 11:  Schools of Economics

·         Classical economists believe that competition is ______ and the invisible hand will create better goods, cheaper goods, and more competition.

·         Classical economists believe in ________ prices and wages, long run balance near Full Employment GDP (Say’s Law).

·         Classical economists want government to promote competition, stop monopolies and cheating, stop actions that limit _____________ prices and wages.

·         Neo-classical economists like the idea of tax______ for trickle down growth.

·         Neo-classical economists also like the idea of tax ______ to starve government’s ability to interfere with competition.

·         Keynesians believe that competition is ________ and must be corrected in the Short Run. 

·         Keynesians believe that Fiscal Policies will focus on ______ and _________.

·         Keynesians believe that wages are sticky and prices are stuck by the ________ effect.

·         Monetary policy advocates don’t think Keynesians can _______ policy correctly.

·         Monetary policy advocates don’t think Keynesians can fight ___________.

·         Monetary policy advocates support fine tuning with ____________ rates.

Topic 12:  Countercyclical Policies:  Fiscal and Monetary

·         Always connect ______ Policies to Keynes and ______________.

·         Congress can change taxes and government spending and target ___ and ___ of AD.  Use the terms “expansionary and contractionary” policies

·         When in a recession, assume that tax _____ and spending __________will create ________ and that crowding out can occur.

·         Always connect Fiscal Policies to automatic stabilizers like Social Security and Unemployment Compensation.

·         Always connect Monetary Policies to the ______________________________

·         The Fed can control Bonds, target the Fed Fund Rate, change the Discount Rate, and change the Reserve Requirement.

·         When the Fed buys bonds it is “______ Money” policy (expansionary).  Remember BB = BB (Buy Bonds = Big Bucks).

·         When the Fed sells bonds it is “______ Money” policy (contractionary).

Remember SB = SB (Sell Bonds = Small Bucks).

·         The OMC (FOMC) is always connected to the bond markets.

·         Bond “prices” and interest rates are____________ in values.

·         All Fed policies target the Money Supply, interest rates, Ig, ______.

·         Big Chart Graphs:  Money Market, Loanable Funds/Private Savings Market, Versions of Crowding Out (#12, #13, #14).

Topic 13:  Banks Creating Money

·         The Money Multiplier formula is _____________________.

·         Demand Deposits (DD) are a bank __________ and must equal bank assets

·         Required Reserves (RR) are a bank ________ and are set by the rr.

·         Excess Reserves (ER) are the monies banks can lend from each DD.

·         RR and ER must _______ DD.

·         ER x the Loan Multiplier will equal to new loans for the economy which are assumed to be new ___________  ____________.

·         If someone is using cash to create a new DD, then the ER x Loan Multiplier will equal New Money Supply.

·         If the Fed is buying bonds that become DDs, then the ER x Loan Multiplier plus the original bond amount will equal New Money Supply.

Topic 14:  Phillips Curves

·         The relationship between inflation and unemployment is assumed to be _________.

·         Combining the inflation % and the unemployment % is known as the ________ Index.

·         The changes in the business cycle due to changes in AD will move points _____ the Short Run Phillips Curve (SRPC).

·         Changes in SRAS will move the _______ SRPC.  The two curves will move in ________ directions.

·         When the SRPC moves outward, it will usually be connected to __________.

·         The Long Run Phillips Curve (LRPC) is equated to the _________ _______ __ ______________ for a country. 

·         It is assumed by Classical Economists that the NRU is greater for countries that give the unemployed more help, or time to find a new job.

·         Big Chart Graphs:  Phillips Curve, Phillips-AD/AS Connection (#15, 16)

Topic 15:  Monetarism (Not the Same as Monetary Policy by the Fed!)

·         The Equation of Exchange is ____ = ____.

·         Monetarists assume that velocity is ___________.

·         The general assumption of this thinking is that most inflation can be controlled by limiting the growth of the ___________ ______________.

Topic 16:  International Comparative Advantages

·         If two countries have similar resources, the country that can produce the most has the _______________ Advantage.

·         The country with the lowest opportunity cost has ______________ Advantage.

·         Countries will trade to gain beyond their own domestic opportunity cost.

·         Both countries must gain for trade to occur, but both will _______ if they trade their own comparative advantage products.

Topic 17:  International Balance of Payments Accounting

·         BOP Assets (Credits) are ____________ for a country’s money and are “inflows”.

·         BOP Liabilities (Debits) are _____________ of a country’s money and are “outflows”.

·         ______________ Accounts are the transfer of money/wealth that is immediate.

·         ________________ Accounts are the transfer of money/wealth that occur between countries, but hope to create future revenue.

·         Reserves are used by countries if Current Accounts do not __________ Capital/Financial Accounts.