Lecture 16: List and briefly explain the three alternative views of the role that the quantity of money plays in determining the level of economic activity, employment, and prices? Why did the classical economists believe that "money didn't count"? What is the "equation of exchange" and how does it work? What is the "velocity" of money? What determines the velocity of money?
What was Keynes' view of the role of money in determining and affecting macroeconomic activity? What did he mean by the expression "pushing on a string"? What is a "liquidity trap"? What role would it play in monetary policy?
What is the basic equation of the Keynesian model? What is the basic view that Milton Friedman holds relative to the importance of money? What characteristic of the money supply is most important to Friedman's view of the importance of money in determining the level of economic activity and prices? How do the Keynesians and Monetarist differ in their view of the velocity of money? List and explain the two major policy prescriptions that come out of the monetarist theory? List and explain the things that economists consider in determining if monetary policy is "tight" or "loose"? What is a "yield spread"? What is a "yield curve"? Draw and label a yield curve that would suggest an expansionary monetary policy. Draw and label a yield curve that would suggest a restrictive monetary policy? Explain how a monetary policy of "interest rate targeting" is carried out. Which school of economic thought is most influential in promoting this kind of policy?
Lecture 17: What is a "Phillips curve"? economy in the 1960s. Draw and label a Phillips curve for the U.S.
What implication does the existence of a Phillips curve have for macroeconomic policy makers? What begin to happen to the Phillips curve in the early 1970s? graphically. What is an "aggregate supply shock"? economy? Illustrate
What impact would it have on an
What is "stagflation"? How does it relate to the Phillips curve and aggregate supply shocks? List several factors that may have created "aggregate supply shocks" in the early 1970s. How would these aggregate supply shocks affect the aggregate supply curve for the U.S. economy? Illustrate graphically. How would these aggregate supply shocks affect the Phillips curve? Illustrate graphically. What is the "natural rate of unemployment"? List and explain the factors that can change the "natural rate of unemployment"? What is the "natural rate hypothesis"? the two variants of this theory. Who were its originators? List Draw
What is the "adaptive expectations theory"? Who was it originator? and label a graph to help you explain the concept. What are the macroeconomic policy implications of this theory? What is the "rational expectations theory"? Who was its originator? and label a graph to help you explain the concept. What are the macroeconomic policy implications of this theory? What is the "policy ineffectiveness theorem"? promotes it? What school of thought
What are the meaning and policy implications of a vertical long-run Phillips curve? What is a "Laffer curve"? Draw and label a graph to help your explanation. Who was its originator? What are the policy implications of this concept? 2
Keynesian economists believe our economy is currently operating in which section of the Laffer curve? Which section of the curve does supply-side economists believe our economy is operating? What are the policy implications of this difference? What is the basic idea of "real business cycle theory"? What is the basic idea of "coordination failures" as a cause of business cycles? Some economists believe that "policy mistakes" have been a major contributor to recessions since World War II. What are the events in a typical scenario that they would give to explain a post WWII recession and recovery? Lecture 18 List four ways economic growth can be measured. Which is the best? Why?
If real GDP increases 4% and population increases 1%, how much did per capita GDP increase? If real GDP increases 3% and population increases 1.5%, how much did per capita GDP increase? Describe the trend in the U.S. real GDP growth per person from the 1930s to the present. Describe the trend from 1800 to the present. What are the five basic supply ingredients that contribute to economic growth? Explain the difference between GDP growth per person and productivity growth. Suppose that Canada and Mexico have identically sized working-age populations but that annual hours of work are much greater in Canada than in Mexico. Provide two possible explanations. What are three ways that the application of labor can increase the output of goods and services? Suppose that work hours in Canada are 300 in 1999 and productivity is measured at $8.00. Canada increases the number of hours worked to 315 in the year 2000 and productivity rises to $8.20. What What What What was was was was Canada’s Canada’s the rate the rate GDP in 1999? $________ GDP in 2000? $________ of growth in GDP from 1999 to 2000? _______% of productivity growth from 1999 to 2000? _______% 3
What were the major factors that accounted for economic growth in the U.S. between 1929 and 2000? List and explain the reasons for the increase in labor productivity between 1929 and 2000? What was the “productivity slowdown”? When did it occur? What were the causes of this slowdown? What was the impact of this slowdown on the U.S. economy? Some economists believe the U.S. has entered into a “new economy.” What do they mean by this? What evidence do they have to support their belief?
Lecture 19 (topic not on final exam) What is meant by the federal deficit and the federal debt? two concepts related? How are these
Describe the history of the federal budget (deficit or surplus) from the early 1970s through 2001. What happened to the budget beginning in 1998? What factors help explain this change? What happened to the budget beginning in 2002? What factors help explain this change? Why do some economists think that federal deficits are overstated? some economists think that federal deficits are understated? Why do
How has the federal debt changed absolutely and relative to GDP between the early 1980s to the present? Why do some economists suggest that the public debt is less of a problem than it would appear to be? How does the social security program impact the federal deficit and the federal debt? List the historical reasons that have contributed to federal budget deficits? What is an entitlement? What has been the trend in entitlement programs?
List the factors that contributed to the federal budget surpluses from 1998 to 2001? What is the short-term prospect for the federal budget? term prospect for the federal budget? Explain why. What is the long-
List and explain the three budget philosophies that have emerged in the debate over the federal budget. 4
Are federal deficits harmful to our economy?
Explain why or why not. How will federal
What burdens do the federal debt impose on our society? budget debt impact future generations?
Lecture 20 List and describe the four types of trade barriers. List and explain the economic effects of trade barriers. Suppose initially the U.S. is a free-trading country. However, the U.S. decides to impose a tariff on automobiles imported from Japan. What is the effect of the tariff-rate increase on the following (increase/decrease/no change)? 1. The price of automobiles in the U.S. ___________ 2. The number of autos sold by U.S. firms ________ 3. The number of autos purchased by U.S. consumers _______ 4. The dollar revenue of U.S. firms ___________ 5. The number of autos sold by foreign firms in the U.S. _________ 6. The income earned by Japanese auto firms in the U.S. __________ 7. The taxes paid by Japanese auto firms to the U.S. Gov’t _________ 8. The Japanese demand for other U.S. goods _________ Suppose initially the U.S. is a free-trading country. However, the U.S. decides to impose a quota on automobiles imported from Japan. What is the effect of the quota on the following (increase/decrease/no change)? 1. The price of automobiles in the U.S. ___________ 2. The number of autos sold by U.S. firms ________ 3. The number of autos purchased by U.S. consumers _______ 4. The dollar revenue of U.S. firms ___________ 5. The number of autos sold by foreign firms in the U.S. _________ 6. The income earned by Japanese auto firms in the U.S. __________ 7. The taxes paid by Japanese auto firms to the U.S. Gov’t _________ 8. The Japanese demand for other U.S. goods _________ Given the option of imposing either a tariff or quota on a company’s product, which option would most likely be preferred by the company? Explain why? Explain the economic effects of a tariff and show them in a graph. Why do some economists believe that tariffs are regressive taxes? What were the basic features of the Reciprocal Trade Agreements Act? What was the General Agreement on Tariffs and Trade (GATT)?
What are the trade liberalization issues that are the focus of the World Trade Organization? What are some of the gains that economists claim that have resulted from trade agreements made by the nations of the world since World War II? What are the basic reasons many people are opposed to the expansion of free trade around the world? What is a free trade block? Give at least two examples. What are the advantages of free-trade blocks? Why do they concern some economists? Does the U.S economy need to shield domestic workers from competition from “cheap” foreign labor? Explain using the ideas of comparative advantage and standards of living. When the NAFTA was being debated in Congress in the early 1990s, some argued that broom workers in Alabama would be affected if the agreement were passed. How did they believe they would be affected? Now, ten years later, what has been the reality of the impact of NAFTA on the broom workers? Lecture 21 What is foreign exchange? What is a foreign exchange rate? Give an example. Who demands and supplies the Japanese yen? Who demands and supplies the American dollar? Why is a demander in the foreign exchange market also acting as a supplier? How does a nation pay for its imports? What is a balance of payments statement? What are the main sections of this statement? What other “balances” are found in this statement? What insures that the balance of payments always balances? What is the relationship between the current account balance and the capital balance? Why does this relationship occur? How can a nation finance a current account deficit? What does a nation do with a capital account surplus? Is it possible for a nation to have a surplus in the current and capital accounts? Explain your answer. What does it mean if the dollar increases in value in foreign exchange markets? List three events that could cause the dollar to increase in value in foreign exchange markets. Use a graph to explain at least one. What does it mean if the dollar decreases in value in foreign exchange markets? List three events that could cause the dollar to decrease in value in foreign exchange markets.
What is an exchange rate system? rate systems.
Briefly describe the two basic exchange
What is a freely floating exchange rate system? Under a freely floating exchange rate system how are balance of payments deficits and surpluses resolved? What is a fixed exchange rate system? Under a fixed exchange rate system how are balance of payments deficits and surpluses resolved? What is a gold standard? Is it a freely floating or fixed exchange rate system? List and describe the conditions trading nations of the world must meet to be on a gold standard? What was the Bretton Woods system? When and under what conditions was it founded? What type of exchange rate system was the Bretton Woods system? Why was the dollar used as international monetary reserves, and how could nations other than the U.S. get more dollars to use in trade? What two major institutions were founded at the Bretton Woods conference? What are the main functions of each? Why did the Bretton Woods system dissolve in 1971? rate system replaced the Bretton Woods system? What type of exchange
What are the advantages and disadvantages of a freely floating exchange rate system? What are the advantages and disadvantages of a fixed rate system?
Chapter 22 (topic not on final exam) Note: There will not be a lecture on this topic. You can find the answers to these questions in Chapter 22. This chapter can be downloaded from the instructor's download webpage. What is the degree of income inequality among nations of the world? Describe the basic paths of economic growth. IACs and DVCs? Do these paths differ for
Compare and contrast the traditional view of population and economic growth with the demographic transition view. What are the reasons for the low level of labor productivity in DVCs? Why is domestic capital accumulation difficult in DVCs? Answer in terms of both the saving side and investment side of capital accumulation. Is there capital flight from DVCs? 7
What is meant by the “will to develop”? institutional change in DVCs? What are three ways that IACs help DVCs?
How is it related to social and
List and describe three criticisms to foreign aid to DVCs. Chapter 23 (topic not on final exam) Note: There will not be a lecture on this topic. You can find the answers to these questions in Chapter 23. This chapter can be downloaded from the instructor's download webpage. What are the essential features of Marxian ideology on which the former Soviet Union was based? List and explain the five factors that contributed to the collapse of the Soviet economy? How did China’s approach to market reforms differ from that in Russia?
The Commanding Heights Video A video was shown in class called Commanding Heights: The Battle for the World Economy. The title of this episode was “The Battle of Ideas.” What were the ideas that were in conflict? Who were the two major intellectuals in this battle? Describe how this conflict played out in the 20th century. By the end of the 20th century, which idea appeared to have emerged as victorious? End of questions for exam 4 (final exam)