Study Guide for final exam in econ 304 - spring 2017
Material through exam 1: You need to be comfortable using the tools we acquired through exam 1: Price indexes, real wages, equilibrium real rates of interest, labor markets, the PF, two period consumption model, UC = MPK model, S = I, and the open economy model where savings does not have to equal investment which is same as Y doesn't have to equal C + I + G.
Material through exam 2: Quantity theory of money, intermediate target(s), the market for overnight reserves, open market operations, how the Fed used to target the federal funds rate, the zero bound, quantitative easing, the money multiplier during the Great Depression and during the Great Recession, limited balance sheet capacity and sterilization (including using the T-accounts from exam #2), unlimited balance sheet capacity and the retention pond...how the new system works, the IOR and iRRP, arbitrage, etc. The RRP facility, why it was needed and the pros and cons of a big or small RRP facility. The MP curve, the IS curve and the AD curve.
Last section of course: Know how to work with our complete model with the four diagrams: MP, IS, AD/AS and short- run and long run Phillips curves. How are the SRPC and SRAS curves related, how are the LRPC and LRAS curves related. What determines the slope of SRPC and SRAS curves. How does a fall in the labor force participation rate effect the slope of the SRPC and the slope of the SRAS? Be able to apply all the tools, especially from the very beginning of class that underlie our complete model.
Episodes to be familiar with using our complete model: The 1960s...the 'Keynesians' with the objective of getting the UR down to 3%...... Stagflation in the 1970s, temporary and permanent shocks to the aggregate supply curve.....the Volcker dis-inflation in the 1980s...... the new economy and positive supply and demand shocks together!.....the Great Recession......
Other - know what determines r* and how it changes through time and how it effects the neutral federal funds rate. Difference between an inflation hawk and an inflation dove - the importance of independent central banks - how rules may help with the inflation bias why the inflation bias exists in the first place. What the efficiency theory is and how it relates to the self correcting mechanism and the slope of the Phillips curve.
You do have many resources: your notes, previous HWs, previous exams and practice problems. Best of luck!
Exam 1 material including previous exams and keys are on Angel
Exam #2 Prep page
Practice Problem page