Econ 2305 midterm review spring 2010
1. Read this article:
a. Do you agree with the author about using cost-benefit analysis to decide whether or not to carry out an assassination?
b. Explain why or why not.
c. If you do not agree, explain how you would decide whether or not to carry out an assassination. Be sure that your method does not use cost-benefit analysis.
d. If we decide to kill an enemy of the U.S., should we do so by a military airstrike or by a classic assassination by the CIA? How would you decide which method to use?
2. Other topics covered on the midterm
Chapter 2
Law of increasing opportunity cost
Chapter 3
Everything, but especially you should be able to predict the effect on price and quantity of a change in a factor of supply or demand
Chapter 4
Describe the intended effect and the unintended effects of a price ceiling
Describe the intended effect and the unintended effects of a price floor
Give examples of price ceilings and price floors
You might want to read this if you haven’t already done so:
Chapter 5
What is included in “consumption expenditures”?
What is included in “investment expenditures”?
What is included in “government expenditures”?
What is included in “net exports”?
GDP versus real GDP
Tell where to find GDP and real GDP data
Use real GDP to figure out where we are in the business cycle
Chapter 6
What is the difference between the aggregate price level and a price index?
Tell where to find CPI data
Use a price index to measure the inflation rate
Compare inflation rates to tell whether the economy is experiencing inflation, disinflation, deflation, or price level stability
Use a price index to calculate how big a raise you need to maintain your purchasing power
Use a price index to compare wages or income or prices or output (economic growth rates) across time
Tell where to find unemployment data
Classify someone as “employed,” “unemployed,” or “not in the labor force”
Classify someone as “frictionally,” “structurally,” or “cyclically” unemployed
Chapter 7
Tell why economic growth matters
Name some things that drive economic growth
Use the circular flow chart to why the level of spending is important to the health of our economy
Tell why classical economists believe that the economy will operate near full employment (what’s flexible and adjusts rapidly?)
Chapter 8
Use the Keynesian Cross to show equilibrium
Use the Keynesian Cross to show what happens if the economy is not in equilibrium
Use the Keynesian Cross Diagram to show recessionary and inflationary gaps
Calculate the change in output that we can expect from an initial change in AE –multiplier effects