Semester Topics and Graphs: Guide to Basics

Semester Topics and Graphs: Guide to Basics

Macro Economics: Possible Scope and Sequence

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 __________________.

· 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 15th) (#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.

1/rr

6 months

6 years

100

Absolute

along

asset

better (or stronger)

businesses

C, G

C, G, Ig

C + Ig + G + Xn

Capital/Financial

Capital Goods, Consumer

Goods

ceteris paribus

Comparative

consumers, entire economy

consumption

cost

counted

Current

cuts

cuts, increases, deficits

demand

Demand Deposits

decrease

depreciate

Easy

EP and EQ

entire, opposite

equal

everything

exports

Factors of Production

FED (Federal Reserve)

Fiscal, Congress

flawed

flexible

floors, ceilings

gain

GDP

good

increase

individuals

inflation

interest

inverse

inefficient, efficient, not

available yet

liability

line, quantity

loss of supply

LRAS

Misery

money supply

MV = PQ

Natural Rate of

Unemployment

Natural Rate of

Unemployment

not

not counted

opportunity cost

peaks, troughs

product life

Ratchet

real

S or D lines

savings

Say’s

services

shortages

SRAS

stable

Stagflation

supply

Supply Shocks

surpluses

the same

Tight

time

trough, trough

unemployment

vertical